UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, |
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For the transition period from to |
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Commission File Number | Name of Registrant, Address of Principal Executive Offices and Telephone Number | State of Incorporation | I.R.S. Employer Identification Number | ||||
1-16681 | Spire Inc. 700 Market Street St. Louis, MO 63101 314-342-0500 | Missouri | 74-2976504 | ||||
1-1822 | Spire Missouri Inc. 700 Market Street St. Louis, MO 63101 314-342-0500 | Missouri | 43-0368139 | ||||
2-38960 | Spire Alabama Inc.
Birmingham, AL 35203 205-326-8100 | Alabama | 63-0022000 |
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Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (only applicable to Spire Inc.):
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock $1.00 par value | SR | New York Stock Exchange LLC | ||
Depositary Shares, each representing a 1/ 1,000thinterest in a share of 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, par value
| SR.PRA | New York Stock Exchange LLC |
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Securities registered pursuant to Section 12(g) of the Exchange Act: None
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Indicate by check mark whether each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933, as amended.
Spire Inc. | Yes | No |
Spire Missouri Inc. | Yes | No |
Spire Alabama Inc. | Yes | No |
Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Spire Inc. | Yes | No |
Spire Missouri Inc. | Yes | No |
Spire Alabama Inc. | Yes | No |
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Spire Inc. | Yes | No |
Spire Missouri Inc. | Yes | No |
Spire Alabama Inc. | Yes | No |
Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Spire Inc. | Yes | No |
Spire Missouri Inc. | Yes | No |
Spire Alabama Inc. | Yes | No |
Indicate by check mark whether theeach registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if theeach registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Spire Inc. |
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Spire Missouri Inc. |
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Spire Alabama Inc. |
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Indicate by check mark whether each registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Spire Inc. | ☒ | |
Spire Missouri Inc. | ☐ | |
Spire Alabama Inc. | ☐ |
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Spire Inc. | Yes | No |
Spire Missouri Inc. | Yes | No |
Spire Alabama Inc. | Yes | No |
The aggregate market value of the common equity held by non-affiliates of Spire Inc. amounted to $4,053,711,051$3,627,663,025 as of March 31, 2019.2022. All of Spire Missouri Inc.’s and Spire Alabama Inc.’s equity securities are owned by Spire Inc., their parent company and a reporting company under the Exchange Act.
The number of shares outstanding of each registrant’s common stock as of November 21, 201911, 2022, was as follows:
Spire Inc. | Common Stock, par value $1.00 per share |
| 52,499,844 | ||
Spire Missouri Inc. | Common Stock, par value $1.00 per share (all owned by Spire Inc.) |
| 25,325 | ||
Spire Alabama Inc. | Common Stock, par value $0.01 per share (all owned by Spire Inc.) | 1,972,052 |
This combined Form 10-K represents separate filings by Spire Inc., Spire Missouri Inc., and Spire Alabama Inc. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants, except that information relating to Spire Missouri Inc. and Spire Alabama Inc. is also attributed to Spire Inc.
Spire Missouri Inc. and Spire Alabama Inc. meet the conditions set forth in General Instructions I(1)(a) and (b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in General Instructions I(2) to Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of proxy statement for Spire Inc. to be filed on or about December 13, 201914, 2022 — Part III.
Certain exhibits as indicated in Part IV.
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Item 1 | 4 | ||
Item 1A | 11 | ||
Item 1B | 23 | ||
Item 2 | 24 | ||
Item 3 | 24 | ||
Item 4 | 24 | ||
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Information about our Executive Officers (Item 401(b) of Regulation S-K) |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 127 | ||
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Item 9B | 128 | ||
Item 9C | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 128 | |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Certain Relationships and Related Transactions, and Director Independence |
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GLOSSARY OF KEY TERMS AND ABBREVIATIONS
AOCI | Accumulated other comprehensive income or loss | NYMEX | New York Mercantile Exchange, Inc. | |||
APSC | Alabama Public Service Commission | NYSE | New York Stock Exchange | |||
ASC | Accounting Standards Codification | O&M | Operation and maintenance expense | |||
ASU | Accounting Standards Update | OCI | Other comprehensive income or loss | |||
CCF | A gas measurement which represents a unit of volume equal to one hundred cubic feet | OFO | Operational Flow Order | |||
CCM | Cost Control Measure | PGA | Purchased Gas Adjustment | |||
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| RSE | Rate Stabilization and Equalization | |||
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| SEC | U.S. Securities and Exchange Commission | |||
EPS | Earnings per share | Spire | Spire Inc. | |||
ESR | Enhanced Stability Reserve | Spire Alabama | Spire Alabama Inc. | |||
FASB | Financial Accounting Standards Board | Spire EnergySouth | Spire EnergySouth Inc., parent of Spire Gulf and Spire Mississippi | |||
FERC | Federal Energy Regulatory Commission | Spire Gulf | Spire Gulf Inc. | |||
GAAP | Accounting principles generally accepted in the United States of America | Spire Marketing | Spire Marketing Inc. | |||
Gas Marketing | Segment including Spire Marketing, which provides natural gas marketing services | Spire Mississippi | Spire Mississippi Inc. | |||
Gas Utility | Segment including the operations of the Utilities | Spire Missouri | Spire Missouri Inc. | |||
GSA | Gas Supply Adjustment | Spire STL Pipeline | Spire |
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ICE | Intercontinental Exchange | Spire |
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| The physical natural gas storage operations of Spire Storage West LLC | |||
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MMBtu | Million British thermal units |
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| Utilities | Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth | |||
MoPSC | Missouri Public Service Commission | |||||
MSPSC | Mississippi Public Service Commission |
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,” “target,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results or outcomes to differ materially from those contemplated in any forward-looking statement are:
• | Weather conditions and catastrophic events, particularly severe weather in |
• | Volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments, and the impact on our competitive position in relation to suppliers of alternative heating sources, such as electricity; |
• | Changes in gas supply and pipeline availability, including as a result of decisions by natural gas producers to reduce production or shut in producing natural gas wells and expiration or termination of existing supply and transportation arrangements that are not replaced with contracts with similar terms and pricing (including as a result of a failure of the Spire STL Pipeline to secure permanent authorization from the FERC), as well as other changes that impact supply for and access to the markets in which our subsidiaries transact business; |
• | Acquisitions may not achieve their intended results; |
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| Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting: |
• | allowed rates of return and recovery of prudent costs, |
• | incentive regulation, |
• | industry structure, |
• | purchased gas adjustment provisions, |
• | rate design structure and implementation, |
• | capital structures established for rate-setting purposes, |
• | regulatory assets, |
• | non-regulated and affiliate transactions, |
• | franchise renewals, |
• | authorization to operate facilities, | |
• | environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change and pipeline safety and security, |
• | taxes, |
• | pension and other postretirement benefit liabilities and funding obligations, or |
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• | The results of litigation; |
• | The availability of and access to, in general, funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital markets; |
• | Retention of, ability to attract, ability to collect from, and conservation efforts of, customers; |
• | Our ability to comply with all covenants in our indentures and credit facilities any violations of which, if not cured in a timely manner, could trigger a default of our |
• | Energy commodity market conditions; |
• | Discovery of material weakness in internal controls; |
• | The disruption, failure or malfunction of our operational and information technology systems, including due to cyberattacks; and |
• | Employee workforce issues, including but not limited to labor disputes, the inability to attract and retain key talent, and future wage and employee benefit costs, including costs resulting from changes in discount rates and returns on benefit plan assets. |
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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.
OVERVIEW
Spire Inc. (“Spire” or the “Company”) was formed in 2000 and is the holding company for Spire Missouri Inc. (“Spire Missouri”), Spire Alabama Inc. (“Spire Alabama”), other gas utilities, and gas-related businesses. Spire Missouri was formed in 1857 and Spire Alabama was formed in 1948 by the merger of two gas companies. Spire is committed to transforming its business and pursuing growth through growing organically, investing in infrastructure, and advancing through innovation. The Company has two key business segments: Gas Utility and Gas Marketing.
The Gas Utility segment includes the regulated operations of Spire Missouri, Spire Alabama, Spire Gulf Inc. (“Spire Gulf”) and Spire Mississippi Inc. (“Spire Mississippi”) (collectively, the “Utilities”). The business of the Utilities is subject to seasonal fluctuations with the peak period occurring in the winter heating season, typically November through April of each fiscal year. Spire Missouri is a public utility engaged in the purchase, retail distribution and sale of natural gas, with primary offices located in St. Louis, Missouri. Spire Missouri is the largest natural gas distribution utility system in Missouri, serving approximately 1.2 million residential, commercial and industrial customers. For utility regulatory purposes, Spire Missouri has two regions (the “Missouri Utilities”), one servingcustomers in St. Louis, and eastern Missouri (“Spire Missouri East”) and the other serving Kansas City, and western Missouri (“Spire Missouri West”).other areas in Missouri. Spire Alabama is a public utility engaged in the purchase, retail distribution and sale of natural gas principally in central and northern Alabama, serving more than 0.4 million residential, commercial and industrial customers with primary offices located in Birmingham, Alabama. Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas to 0.1 million customers in southernthe Mobile, Alabama area and south-central Mississippi.
The Gas Marketing segment includes Spire Marketing Inc. (“Spire Marketing”), a wholly owned subsidiary providing natural gas marketing services.
As of September 30, 2019,2022, Spire had 3,5363,584 employees, including 2,3892,347 for Spire Missouri and 9411,009 for Spire Alabama. We believe that:
1. | the safety and well-being of our employees is one of our most important responsibilities, |
2. | the development, education and advancement of employees is key to our sustainability, and |
3. | embracing an inclusive workforce full of diverse backgrounds and perspectives drives innovation. |
We continue to implement processes, procedures and programs that have helped us reduce our employee injury rate for the eighth fiscal year in a row, marking a 21% year-over-year improvement and an overall improvement of 67% since fiscal year 2015. We offer incentives for weight management and gym membership, as well as employee assistance programs to provide counseling services and emotional support, and we have a formalized comprehensive well-being program that focuses on the physical, emotional, social and financial health of every employee.
All employees have access to developmental assessments, customized training, specialized degree programs, and partnerships with best-in-class organizations related to industry courses, leadership and management workshops and computer application development seminars. In addition, all employees are eligible for up to $6,000 per year in tuition assistance and have access to the Spire Learning Center, our robust internal learning management system. In their first year, construction and maintenance employees and service employees receive 160–200 hours of technical and safety training. Field operations employees average 40 hours annually of training and Operator Qualification instruction.
We regularly review and adjust our affirmative action plans based on placement and utilization rates, and we strive to create an even more diverse and inclusive work environment by committing to and achieving the goals of the CEO Action for Diversity & Inclusion Pledge. Our Human Rights Policy demonstrates that Spire understands its universal responsibility to respect human rights and provides the basis for publicly affirming our values and embedding the responsibility into Spire’s operations and the way we do business.
Spire uses its website, SpireEnergy.com, as a routineits primary channel for distribution of important information including news releases, analyst presentations and financial information. The information Spire, Spire Missouri and Spire Alabama file or furnish to the United States (U.S.) Securities and Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and their amendments, and proxy statements are available free of charge under “Filings & reports” in the Investors section of Spire’s website, SpireEnergy.com, as soon as reasonably practical after the information is filed with or furnished to the SEC. Information contained on Spire’s website is not incorporated by reference in this report. The SEC also maintains a website that contains ourSpire’s SEC filings (sec.gov).
GAS UTILITY
Natural Gas Supply
The Utilities’ fundamental gas supply strategy is to meet the two-fold objective of 1) ensuring a dependable gas supply is available for delivery when needed and 2) insofar as is compatible with that dependability, purchasing gas that is economically priced. In structuring their natural gas supply portfolio, the Utilities focus on natural gas assets that are strategically positioned to meet the Utilities’ primary objectives.
Spire Missouri focuses its gas supply portfolio around a number of large natural gas suppliers with equity ownership or control of assets strategically situated to complement its regionally diverse firm transportation arrangements. Spire Missouri East utilizes both Mid-Continent andMidcontinent, Gulf Coast, Northeast, and Rocky Mountain gas sources to provide a level of supply diversity that facilitates the optimization of pricing differentials as well as protecting against the potential of regional supply disruptions. Further, Spire STL Pipeline LLC (“Spire STL Pipeline”), a wholly owned subsidiary of Spire, is capable of deliveringmay deliver up to 4400,000 million thermsBritish thermal units (MMBtu) per day of natural gas into eastern Missouri, of which Spire Missouri East is the foundation shipper with a contractual commitment of 3.5 million therms350,000 MMBtu per day. Spire Missouri West utilizes low costSee related discussion under the caption “—The Utilities’ ability to meet their customers’ natural gas supply fromrequirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner” under Item 1A, Risk Factors, and in Note 15, Regulatory Matters, of the Mid-Continent and Rocky Mountain producing regions.Notes to Financial Statements in Item 8.
In fiscal year 2019,2022, Spire Missouri purchased natural gas from 2624 different suppliers to meet its total service area current gas sales and storage injection requirements. Spire Missouri entered into firm agreements with suppliers including major producers and marketers providing flexibility to meet the temperature-sensitive needs of its customers. Natural gas purchased by Spire Missouri for delivery to its service areaareas included 48.3 billion cubic feet (Bcf) through the Southern Star Central Gas Pipeline, Inc. (Southern Star) system, 26.3 Bcf through the Spire STL Pipeline, 26.3 Bcf through the Enable Mississippi River Transmission LLC (MRT) system, totaled 50.7 billion cubic feet (Bcf).6.3 Bcf through the Panhandle Eastern Pipe Line Company, LP (PEPL) system, 5.5 Bcf through the Rockies Express Pipeline, LLC (REX) system, and 4.5 Bcf through the Tallgrass Interstate Gas Transmission, LLC (TIGT) system. Spire Missouri also holds firm transportation arrangements on several other interstate pipeline systems that provide access to gas supplies upstream of MRT. In addition to natural gas deliveries from MRT, 58.2 Bcf was purchased on the Southern Star Central Gas Pipeline, Inc. (“Southern Star”), 6.2 Bcf was purchased on the Tallgrass Interstate Gas Transmission, LLC (TIGT) system, 12.4 Bcf was purchased on the Panhandle Eastern Pipe Line Company, LP (PEPL) system, and 0.5 Bcf was purchased on the Rockies Express Pipeline, LLC (REX) system.upstream. Some of Spire Missouri’s commercial and industrial customers purchased their own gas with Spire Missouri transporting 47.352.0 Bcf to them through its distribution system.
The fiscal year 20192022 peak day send out of natural gas to Spire Missouri customers, including transportation customers, occurred on January 30, 2019.20, 2022. The average temperature was 511 degrees Fahrenheit in both St. Louis and 4 degrees Fahrenheit in Kansas City. On that day, the Missouri Utilities’Spire Missouri’s customers consumed 1.811.58 Bcf of natural gas. For eastern Missouri, this peak day demand was met with natural gas transported to St. Louis through the MRT, MoGasMissouri Gas Pipeline LLC, Spire STL Pipeline, and Southern Star transportation systems, and from Spire Missouri’s on-system storage and peak shaving resources.storage. For western Missouri, this peak day demand was met with natural gas transported to Kansas City through the Southern Star, PEPL, TIGT, and REX transportation systems.
Spire Alabama’s distribution system is connected to two major interstate natural gas pipeline systems, Southern Natural Gas Company, L.L.C. (“Southern(Southern Natural Gas”)Gas) and Transcontinental Gas Pipe Line Company, LLC (“Transco”)(Transco). It is also connected to two intrastate natural gas pipeline systems.
Spire Alabama purchases natural gas from various natural gas producers and marketers. Certain volumes are purchased under firm contractual commitments with other volumes purchased on a spot market basis. The purchased volumes are delivered to Spire Alabama’s system using a variety of firm transportation, interruptible transportation and storage capacity arrangements designed to meet the system’s varying levels of demand.
In fiscal 2019,2022, Spire Alabama purchased natural gas from 1527 different suppliers to meet current gas sales, storage injection, and liquefied natural gas (LNG) liquefaction requirements, of which five areone supplier is under a long-term supply agreements.agreement. Approximately 69.068.2 Bcf was transportedpurchased for delivery by Southern Natural Gas, 5.93.7 Bcf by Transco, and 6.511.0 Bcf through intrastate pipelines to the Spire Alabama delivery points for its residential, commercial, and industrial customers.
The fiscal 20192022 peak day send out for Spire Alabama was 0.5 Bcf on November 15, 2018,February 14, 2022, when the average temperature was 32 degrees Fahrenheit in Birmingham, of which 100% was met with supplies transported through Southern Natural Gas, Transco, and intrastate facilities, and one of the four LNG peak shaving facilities.
Spire Gulf’s distribution system is directly connected to interstate pipelines, natural gas processing plants and gas storage facilities. Spire Gulf buys from a variety of producers and marketers, with BP Energy Company being the primary supplier.
Natural Gas Storage
Spire Missouri believes that it currently has ample storage capacity to meet the demands of its distribution system, particularly to augment its supply during peak demand periods.periods; however, see related discussion of Spire STL Pipeline under the caption “—The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner” under Item 1A, Risk Factors, and in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. Spire Missouri has a contractual right to store 21.621.5 Bcf of gas in MRT’s storage facility located in Unionville, Louisiana, 16.3 Bcf of gas storage in Southern Star’s system storage facilities located in Kansas and Oklahoma, and 1.4 Bcf of firm storage on PEPL’s system storage. MRT’s tariffs allow injections into storage from May 161 through November 151 and require the withdrawal from storage of all but 2.14.3 Bcf from November 161 through May 15.1. Southern Star tariffs allow both injections and withdrawals into storage year roundyear-round with ratchets that restrict the associated flows dependent upon the underlying inventory level per the contracts.
In addition, Spire Missouri East supplements pipeline gas with natural gas withdrawn from its own underground storage field located in St. Louis and St. Charles Counties in Missouri. The field is designed to provide approximately 0.3 Bcf of natural gas withdrawals on a peak day, and provides the ability to reinject natural gas during the heating season to replenish or increase deliverability, subject to maximum annual net withdrawals of approximately 4.0 Bcf of natural gas based on the inventory level that Spire Missouri plans to maintain.
Spire Alabama has a contractual right to store 12.512.7 Bcf of gas with Southern Natural Gas, 0.5 Bcf of gas with Gulf South Pipeline, 0.2 Bcf of gas with Transco and 0.2 Bcf of gas with Tennessee Gas Pipeline. In addition, Spire Alabama has 1.82.0 Bcf of LNG storage that can provide the system with up to an additional 0.2 Bcf of natural gas daily to meet peak day demand.
Spire Gulf obtains adequate storage capacity through Gulf South Pipeline Company, LP, and Enstor Gas, LLC’s Bay Gas Storage.
Union Agreements
The Company believes labor relations with its employees are good. Should that condition change, the Company could experience labor disputes, work stoppages or other disruptions that could negatively impact the Company’s system operations, customer service, results of operations and cash flows.
The following table presents the Company’s various labor agreements as of September 30, 2022:
Employees | Contract Start | Contract End | ||
Union | Local | Covered | Date | Date |
Spire Missouri | ||||
United Steel, Paper and Forestry, Rubber Manufacturing, Allied-Industrial and Service Workers International Union (USW) | 884 | 68 | August 10, 2021 | July 31, 2024 |
USW | 11-6 | 843 | August 1, 2021 | July 31, 2024 |
USW | 11-6-03 | 101 | August 1, 2021 | July 31, 2024 |
USW | 12561 | 130 | August 1, 2022 | July 31, 2025 |
USW | 14228 | 44 | August 1, 2022 | July 31, 2025 |
USW | 11-267 | 28 | August 1, 2022 | July 31, 2025 |
International Brotherhood of Electrical Workers | 53 | 2 | October 1, 2022 | September 30, 2025 |
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada | 781-Kansas City | 216 | August 1, 2022 | July 31, 2025 |
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada | 781-Monett | 52 | August 1, 2022 | July 31, 2025 |
Total Spire Missouri | 1,484 | |||
Spire Alabama | ||||
USW | 12030 | 235 | May 1, 2020 | April 30, 2023 |
United Association of Gas Fitters | 548 | 221 | May 1, 2022 | April 30, 2025 |
Total Spire Alabama | 456 | |||
Spire Gulf | ||||
USW | 541 | 68 | August 1, 2020 | July 31, 2023 |
Total Spire | 2,008 |
Operating Revenues and Customer Information
The following tables present information on Spire’s revenues and volume sold and transported (before intersegment eliminations), and annual average numbers of customers for the three years ended September 30, 2022, 2021 and 2020.
Gas Utility Operating Revenues | ||||||||||||
(% of Total) | 2022 | 2021 | 2020 | |||||||||
Residential | 73 | % | 58 | % | 68 | % | ||||||
Commercial & Industrial | 17 | % | 28 | % | 22 | % | ||||||
Transportation | 6 | % | 6 | % | 6 | % | ||||||
Other | 4 | % | 8 | % | 4 | % | ||||||
Total | 100 | % | 100 | % | 100 | % |
Gas Utility Volume Sold and Transported | ||||||||||||
(In millions of CCF) | 2022 | 2021 | 2020 | |||||||||
Residential | 994.7 | 1,069.6 | 1,033.5 | |||||||||
Commercial & Industrial | 468.9 | 479.0 | 464.1 | |||||||||
Transportation | 1,617.6 | 1,614.7 | 1,637.8 | |||||||||
Interruptible | 11.8 | 15.0 | 14.5 | |||||||||
Total System | 3,093.0 | 3,178.3 | 3,149.9 | |||||||||
Off-System | 82.0 | 69.4 | 83.2 | |||||||||
Total | 3,175.0 | 3,247.7 | 3,233.1 |
Gas Utility Customers | 2022 | 2021 | 2020 | |||||||||
Residential | 1,618,515 | 1,612,385 | 1,599,693 | |||||||||
Commercial & Industrial | 113,077 | 112,635 | 112,566 | |||||||||
Transportation | 1,023 | 846 | 847 | |||||||||
Interruptible | 50 | 63 | 67 | |||||||||
Total | 1,732,665 | 1,725,929 | 1,713,173 |
Total annual average number of customers for Spire Missouri and Spire Alabama for fiscal 2022 was 1,199,932 and 430,137, respectively.
Regulatory Matters
For details on regulatory matters, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.
Other Pertinent Matters
Spire Missouri is the only distributor of natural gas within its franchised service areas, while Spire Alabama is the main distributor of natural gas in its service areas. Spire Missouri and Spire Alabama have franchises in nearly all the communities where they provide service with terms varying from five years to an indefinite duration. A franchise is essentially a municipal permit to install and maintain pipes and construct other facilities in the community. All of the franchises are free from unduly burdensome restrictions and are adequate for the conduct of Spire Missouri’s and Spire Alabama’s current public utility businesses in their respective states. In recent years, although certain franchise agreements have expired, Spire Missouri hasthe Utilities have continued to provide service in those communities without formal franchises.
The principal competition for the Utilities comes from the local electric companies. Other competitors in the service areas include suppliers of fuel oil, coal, and propane, as well as natural gas pipelines that can directly connect to large volume customers. Coal has been price competitive as a fuel source for very large boiler plant loads, but environmental requirements have shifted the economic advantage to natural gas. Oil and propane can be used to fuel boiler loads and certain direct-fired process applications, but these fuels require on-site storage, thus limiting their competitiveness. Competition also comes from district steam systems in the downtown areas of both St. Louis and Kansas City and from municipally or publicly owned natural gas distributors located adjacent to the Alabama service territory.territories. Direct use of renewables will continue to grow in the future and compete against distributed generation using natural gas.
Residential, commercial, and industrial customers represent approximately 95%94% and 81% of fiscal 20192022 operating revenues for Spire Missouri and Spire Alabama, respectively. Given the current level of natural gas supply and market conditions, the Utilities believe that the relative comparison of natural gas equipment and operating costs with those of competitive fuels will not change significantly in the foreseeable future, and that these markets will continue to be supplied by natural gas. In new multi-family and commercial rental markets, the Utilities’ competitive exposures are presently limited to space and water heating applications.
Spire Missouri and Spire Alabama offer gas transportation service to its large commercial and industrial customers. Transportation customers represent approximately 3% and 15% of fiscal 20192022 operating revenues for Spire Missouri and Spire Alabama, respectively. The Spire Missouri offers gas transportation service to its large-user industrial and commercial customers. The tariff approved for that type of service produces a margin similar to that which theSpire Missouri Utilities would have received under their regular sales rates. Similarly, Spire Alabama’s transportation tariff allows it to transport gas for large commercial and industrial customers rather than buying and reselling it to them and is based on Spire Alabama’s sales profit margin so that operating margins are unaffected. During fiscal 2019, substantially all of Spire Alabama’s large commercial and industrial customer deliveries involved the transportation of customer-owned gas.
The Utilities are subject to various environmental laws and regulations that, to date, have not materially affected the Utilities’ or the Company’s financial position and results of operations. For a detailed discussion of environmental matters, see Note 16, Commitment and Contingencies, of the Notes to Financial Statements in Item 8.
Union Agreements
The Company believes labor relations with its employees are good. Should that condition change, the Company could experience labor disputes, work stoppages or other disruptions that could negatively impact the Company’s results of operations and cash flows.
The following table presents the Company’s various labor agreements as of September 30, 2019:
Union |
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| Employees Covered |
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| Contract Start Date |
| Contract End Date | |
Spire Missouri |
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United Steel, Paper and Forestry, Rubber Manufacturing, Allied-Industrial and Service Workers International Union (USW) |
| 884 |
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| 66 |
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| August 1, 2018 |
| July 31, 2021 |
USW |
| 11-6 |
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| 957 |
|
| August 1, 2018 |
| July 31, 2021 |
USW |
| 11-194 |
|
| 61 |
|
| August 1, 2018 |
| July 31, 2021 |
USW |
| 12561 |
|
| 140 |
|
| October 9, 2019 |
| July 31, 2022 |
USW |
| 14228 |
|
| 41 |
|
| October 9, 2019 |
| July 31, 2022 |
USW |
| 11-267 |
|
| 30 |
|
| October 9, 2019 |
| July 31, 2022 |
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada |
| 781-Kansas City |
|
| 207 |
|
| September 21, 2019 |
| July 31, 2022 |
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada |
| 781-Monett |
|
| 57 |
|
| September 21, 2019 |
| July 31, 2022 |
Total Spire Missouri |
|
|
|
| 1,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Alabama |
|
|
|
|
|
|
|
|
|
|
USW |
| 12030 |
|
| 249 |
|
| May 1, 2017 |
| April 30, 2020 |
USW |
| 12030-A |
|
| 68 |
|
| May 1, 2017 |
| April 30, 2020 |
United Association of Gas Fitters |
| 548 |
|
| 124 |
|
| May 1, 2019 |
| April 30, 2022 |
Total Spire Alabama |
|
|
|
| 441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Gulf |
|
|
|
|
|
|
|
|
|
|
USW |
| 3-541 |
|
| 63 |
|
| October 1, 2017 |
| July 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
Total Spire |
|
|
|
| 2,063 |
|
|
|
|
|
Operating Revenues and Customer Information
The following tables present information on Spire’s revenues and therms sold and transported (before intersegment eliminations), and annual average numbers of customers for the three years ended September 30, 2019, 2018 and 2017.
Gas Utility Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
(% of Total) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Residential |
|
| 68 | % |
|
| 66 | % |
|
| 65 | % |
Commercial & Industrial |
|
| 23 | % |
|
| 24 | % |
|
| 23 | % |
Transportation |
|
| 6 | % |
|
| 6 | % |
|
| 6 | % |
Other |
|
| 3 | % |
|
| 4 | % |
|
| 6 | % |
Total |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Gas Utility Therms Sold and Transported |
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Residential |
|
| 1,132.9 |
|
|
| 1,095.8 |
|
|
| 866.2 |
|
Commercial & Industrial |
|
| 525.2 |
|
|
| 536.4 |
|
|
| 446.7 |
|
Transportation |
|
| 1,673.2 |
|
|
| 1,615.1 |
|
|
| 1,467.5 |
|
Interruptible |
|
| 16.2 |
|
|
| 14.5 |
|
|
| 12.6 |
|
Total System |
|
| 3,347.5 |
|
|
| 3,261.8 |
|
|
| 2,793.0 |
|
Off-System |
|
| 38.5 |
|
|
| 68.6 |
|
|
| 175.6 |
|
Total |
|
| 3,386.0 |
|
|
| 3,330.4 |
|
|
| 2,968.6 |
|
Gas Utility Customers |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Residential |
|
| 1,584,570 |
|
|
| 1,567,939 |
|
|
| 1,550,777 |
|
Commercial & Industrial |
|
| 112,561 |
|
|
| 123,982 |
|
|
| 133,864 |
|
Transportation |
|
| 842 |
|
|
| 835 |
|
|
| 827 |
|
Interruptible |
|
| 69 |
|
|
| 70 |
|
|
| 64 |
|
Total |
|
| 1,698,042 |
|
|
| 1,692,826 |
|
|
| 1,685,532 |
|
Total annual average number of customers for Spire Missouri and Spire Alabama for fiscal 2019 was 1,175,116 and 421,162, respectively.
GAS MARKETING
Spire Marketing is engaged in the marketing of natural gas and providing energyrelated services to both on-system utility transportationthroughout the United States, which includes customers within and customers outside of the Utilities’ traditional service areas. For fiscal 2022 and 2021, Spire Marketing volumes averaged 1.73 Bcf/day and 2.02 Bcf/day, respectively. The majority of Spire Marketing’s business is derived from the procurement and physical delivery of natural gas to a diverse customer base. During fiscal 2019, Spire Marketing utilized over 43 interstate and intrastate pipelines and over 125 suppliers to market natural gas to more than 250 retail customers and 120 wholesale customers,base, primarily in the central and southern U.S. Through its retail operations, Spire Marketing offers natural gas marketing services to large commercial and industrial customers, while its wholesale business consists of producers, pipelines, power generators, municipalities, storage operators, and utility companies. Wholesale activities currently represent a majority of the total Gas Marketing business. The Gas Marketing strategy is to leverage its market expertise and risk management skills to manage and optimize the value of its portfolio of commodity, transportation, park and loan, and storage contracts while controlling costs and acting on new marketplace opportunities.
In the course of its business, Spire Marketing enters into agreements to purchase natural gas at a future date in order to lock up supply to cover future sales commitments to its customers. To secure access to the markets it serves, Spire Marketing contracts for transportation capacity on various pipelines from both pipeline companies directly and from other parties through the secondary capacity market, third parties.market. Throughout fiscal 2019,2022, Spire Marketing held approximately 1.1 Bcf per day of firm transportation capacity. In addition, to ensure reliability of service and to provide operational flexibility, Spire Marketing enters into firm storage contracts and interruptible park and loan transactions with various companies, where it is able to buy and retain gas to be delivered at a future date, at which time it sells the natural gas to third parties. As of September 30, 2019,2022, Spire Marketing has contracted for approximately 20 Bcf28.2 Bcf of such storage and park and loan capacity for the 2019-20202022-2023 winter season.
The Gas Marketing strategy is to leverage its market expertise and risk management skills to manage and optimize the value of its portfolio of commodity, transportation, park and loan, and storage contracts while controlling costs and acting on new marketplace opportunities. Overall, Gas Marketing saw significant volume growth in fiscal 2019 primarily as a result of increased business with producers and integrated utilities, retail and wholesale customer growth, and increased optimization opportunities resulting from its overall portfolio of assets.
OTHER
Other components of the Company’s consolidated information include:
• |
|
|
| Spire's natural gas midstream operations consisting of Spire STL Pipeline |
• | Spire’s subsidiaries engaged in the operation of a propane pipeline | |
• | unallocated corporate items, including certain debt and associated interest costs. |
Spire STL Pipeline is a wholly owned subsidiary of Spire which owns and operates a 65-mile pipeline connecting the Rockies Express Pipeline in Scott County, Illinois, to delivery points in St. Louis County, Missouri, including Spire Missouri’s storage facility. Spire STL Pipeline’s operating revenue is derived primarily from Spire Missouri as its foundation shipper. The pipeline is under the jurisdiction of the Federal Energy Regulatory Commission (FERC) and is capable of delivering upcurrently permitted to 4 million therms per day ofdeliver natural gas supply into eastern Missouri. Spire Missouri isunder a temporary certificate authorization from FERC. See related discussion under the foundation shipper withcaption “—Failing to secure a contractual commitmentpermanent re-authorization of 3.5 million therms per day. The pipeline was primarily constructed during fiscal 2019. In November 2019,the Spire STL Pipeline received final authorization from FERCto operate could adversely affect the Company” under “Item 1A. Risk Factors” and placedin Note 15, Regulatory Matters, of the pipeline into service.Notes to Financial Statements in Item 8.
Spire Storage is engaged in the storage of natural gas in the Westernwestern region of the United States. ItThe facility consists of two adjacent storage facilities from the Ryckman Creek and Clear Creek purchases in December 2017 and May 2018, respectively. Spire Storage filed an application with thefields operating under one FERC market-based rate tariff currently authorized to operate both facilities in an integrated fashion under a single market rate-based tariff, which the FERC approved seven months later on January 25, 2019. The timingprovide up to 55 Bcf of FERC approvals and other regulatory approvals, our ongoing analysis of the fields’ geological capabilities and the investments we are making to ensure reliable operations for the upcoming winter, have lengthened the time required to finalize our development approach and achieve sustained profitability. We anticipate investing additional capital through the winter heating season of 2019-2020 as we complete those efforts and serve our existing customers. Future development of Spire Storage would entail additional investments to increase injection, withdrawal and storage capacity to customers. The actual storage capacity was 23 Bcf as of September 30, 2022, and enhance connectivity withinmanagement is in the facilities and with interconnected interstate pipelines.process of expanding it to 39 Bcf by 2025.
Spire’s and the Utilities’ business and financial results are subject to a number of risks and uncertainties, including those set forth below. The risks described below are those the Company and the Utilities consider to be material. When considering any investment in Spire or the Utilities’ securities, investors should carefully consider the following information, as well as information contained in the caption “Forward-Looking Statements,” Item 7A, and other documents Spire, Spire Missouri, and Spire Alabama file with the SEC. This list is not exhaustive, and Spire’s and the Utilities’ respective management places no priority or likelihood based on the risk descriptions, order of presentation or grouping by subsidiary. All references to dollar amounts are in millions.
RISKS AND UNCERTAINTIES THAT RELATE TO THE BUSINESS AND FINANCIAL RESULTS OF SPIRE AND ITS SUBSIDIARIES
Climate change and regulatory and legislative developments in the energy industry related to climate change may in the future adversely affect operations and financial results.
Climate change, and regulatory, public policy, or legislative changes to address the potential for climate change, could adversely affect operations and financial results of the Company. Management believes it is likely that any such resulting impacts would occur over a long period of time and thus would be difficult to quantify with any degree of specificity. To the extent climate change results in warmer temperatures, financial results could be adversely affected through lower gas volumes and revenues and reduced marketing opportunities. Another possible impact of climate change may be more frequent and more severe weather events, such as hurricanes and tornadoes, which could increase costs to repair damaged facilities and restore service to customers or result in lost revenues if the Company were unable to deliver natural gas to customers. Such weather events could also disrupt our usual gas supplies and make it impossible or extremely costly to find replacement gas for our customers. To the extent such impacts are not covered by insurance or recovered in rates, the foregoing events could have a material adverse effect on the Company’s financial condition and results of operations.
In addition, there have been a number of federal, state and local legislative and regulatory initiatives proposed in recent years in an attempt to control or limit the effects of global warming and overall climate change, including greenhouse gas emissions, such as methane and carbon dioxide. The adoption in the future of this type of legislation by Congress or similar legislation by states or localities, or the adoption of related regulations by federal, state or local governments mandating a substantial reduction in greenhouse gas emissions, restricting the use of fossil fuels, such as natural gas, or restricting the construction of infrastructure necessary to deliver natural gas to customers could have far-reaching and significant impacts on the energy industry. Such new legislation or regulations could result in increased compliance costs or additional operating restrictions, affect the demand for natural gas or impact the prices charged to customers. At this time, we cannot predict the potential impact of such laws or regulations that may be adopted on the Company’s and the Utilities’ future business, financial condition or financial results.
Failing to secure a permanent re-authorization of the Spire STL Pipeline to operate could adversely affect the Company.
On June 22, 2021, the U.S. Court of Appeals for the District of Columbia Circuit issued an order vacating the Spire STL Pipeline’s FERC certificates to operate and remanding the proceeding back to the FERC, which took effect on October 8, 2021. On September 14, 2021, and December 3, 2021, the FERC issued temporary certificates to allow the pipeline to continue operating indefinitely while it considers approval of a new permanent certificate.
The court decision to vacate the Spire STL Pipeline’s Certificate of Public Convenience and Necessity previously issued by the FERC in 2018 could, depending on the course of action the FERC takes, cause a temporary or permanent halt in the natural gas supply transported by the pipeline or result in new regulatory conditions imposed on the pipeline, any of which could adversely affect the Company (including Spire Missouri) and our customers.
Spire Missouri relies on the Spire STL Pipeline to transport natural gas into the St. Louis region. In the event the pipeline is taken out of service or even as a result of regulatory uncertainty and business constraints associated with ongoing temporary authorization of the pipeline, Spire Missouri’s customers, financial condition and results of operations may be adversely impacted, which could result in a material adverse effect on the Company’s financial condition and results of operations, as discussed under RISKS THAT RELATE TO THE GAS UTILITY SEGMENT below.
In addition, in the event the pipeline is taken out of service, the Company’s financial condition and results of operations may be adversely impacted by impairment of Spire STL Pipeline’s assets, currently carried at over $270 million, and other effects. Spire STL Pipeline will continue to pursue all legal and regulatory avenues to ensure its continued and future operation.
Reductions in capacity of interconnecting, third-party pipelines could cause a reduction in volumes transported by the Spire STL Pipeline, which could adversely affect the Company.
Spire STL Pipeline is dependent upon third-party pipelines and other facilities to provide delivery options to and from its pipeline. If any pipeline connection were to become unavailable for volumes of natural gas due to repairs, damage to the facility, lack of capacity or any other reason, Spire STL Pipeline’s ability to continue shipping natural gas to end markets could be restricted, and to the extent not mitigated by contractual indemnification, insurance or tariffs, would thereby reduce its revenues. Any permanent interruption at any key pipeline interconnect that causes a material reduction in volumes transported on its pipeline could result in an impairment loss that could have a material adverse effect on the Company’s financial condition and results of operations.
As a holding company, Spire depends on its operating subsidiaries to meet its financial obligations.
Spire is a holding company with no significant assets other than the stock of its operating subsidiaries and cash investments. Spire, and Spire Missouri prior to the holding company’s formation in 2000, has paid common stock dividends continuously since 1946. Spire’s ability to pay dividends to its shareholders is dependent on the ability of its subsidiaries to generate sufficient net income and cash flows to pay upstream dividends and make loans or loan repayments. In addition, because it is a holding company and the substantial portion of its assets are represented by its holdings in the Utilities, the risks faced by the Utilities as described below under RISKS THAT RELATE TO THE GAS UTILITY SEGMENT may also adversely affect Spire’s cash flows, liquidity, financial condition and results of operations.
A downgrade in Spire’sSpire’s and/or its subsidiaries’subsidiaries’ credit ratings may negatively affect its ability to access capital and its cost of capital.
Currently, Spire, Spire Missouri, and Spire Alabama have investment grade credit ratings. There is no assurance that such credit ratings for any of the Spire companies will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Spire has a working capital line of credit to meet its short-term liquidity needs. Spire’s line of credit may be used to meet the liquidity needs of any of its subsidiaries, subject to sublimits. If the rating agencies lowered the credit rating at any of these entities, particularly below investment grade, it might significantly limit that entity’s ability to secure new or additional credit facilities and would increase its costs of borrowing. Spire’s or the Utilities’ ability to borrow under current or new credit facilities and costs of that borrowing have a direct impact on their ability to execute their operating strategies.
Unexpected losses may adversely affect Spire’s or its subsidiaries’ financial condition and results of operations.
As with most businesses, there are operations and business risks inherent in the activities of Spire’s subsidiaries. If, in the normal course of business, Spire or any of its subsidiaries becomes a party to litigation, such litigation could result in substantial monetary judgments, fines, or penalties or be resolved on unfavorable terms. In accordance with customary practice, Spire and its subsidiaries maintain insurance against a significant portion of, but not all, risks and losses. In addition, in the normal course of its operations, Spire and its subsidiaries may be exposed to loss from other sources, such as bad debt expense or the failure of a counterparty to meet its financial obligations. Spire and its operating companies employ many strategies to gain assurance that such risks are appropriately managed, mitigated, or insured, as appropriate. To the extent a loss is not fully covered by insurance or other risk mitigation strategies, that loss could adversely affect the Company’s and/or its subsidiaries’ financial condition and results of operations.
Increased dependence on technology may hinder Spire’s and its subsidiaries’ business operations and adversely affect their financial condition and results of operations if such technologies fail.
Spire and its subsidiaries have implemented or acquired a variety of technological tools including both Company-owned information technology and technological services provided by outside parties. These tools and systems support critical functions including Spire and its subsidiaries’ integrated planning, scheduling and dispatching of field resources, its automated meter reading system, customer care and billing, procurement and accounts payable, operational plant logistics, management reporting, and external financial reporting. The failure of these or other similarly important technologies, or the Company’s or its subsidiaries’ inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder their business operations and, to the extent not covered by insurance, could adversely impact their financial condition and results of operations.
Although the Company and its subsidiaries have, when possible, developed alternative sources of technology and built redundancy into their computer networks and tools, there can be no assurance that these efforts to date would protect against all potential issues related to the loss of any such technologies or the Utilities’ use of such technologies.
A cyberattack may disrupt Spire’s operations or lead to a loss or misuse of confidential and proprietary information or potential liability.
The Company and its subsidiaries are subject to cybersecurity risks primarily related to breaches of security pertaining to sensitive customer, employee, and vendor information maintained by the Company, its subsidiaries, or its third-party vendors in the normal course of business, as well as breaches in the technology that manages natural gas distribution operations and other business processes. A loss of confidential or proprietary data or security breaches of other technology business tools could adversely affect the Company’s and its subsidiaries’ reputation, diminish customer confidence, disrupt operations, and subject the Company and its subsidiaries to possible financial liability, any of which could have a material effect on the Company’s and its subsidiaries’ financial condition and results of operations.
The Company acknowledges that increased dependence on technology increases the Company’s exposure to cyberattack. The Company and its subsidiaries closely monitor both preventive and detective measures to manage these risks and maintain cyber risk insurance to mitigate a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these cyber events is not fully covered by insurance, it could adversely affect the Company’s and its subsidiaries’ financial condition and results of operations.
Resources expended to pursue or integrate business acquisitions, investments or other business arrangements may adversely affect Spire’s financial position and results of operations and return on investments made may not meet the Company’s expectations.
From time to time, Spire may seek to grow through strategic acquisitions, investments or other business arrangements. Attractive acquisition and investment opportunities may be difficult to complete on economically acceptable terms. It is possible for Spire to expend considerable resources pursuing acquisitions and investments but, for a variety of reasons, decide not to move forward. Similarly, investment opportunities may be hindered or halted by regulatory or legal actions. To the extent that acquisitions or investments are made, such transactions involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of management’s attention from daily operations, difficulties in assimilation and retention of employees, securing adequate capital to support the transaction, and regulatory approval. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain businesses or assets and there is a possibility that anticipated operating and financial efficiencies expected to result from an acquisition or investment do not develop. Additionally, there are no assurances that resources expended will achieve their intended result.
The failure to complete an acquisition successfully or to integrate acquisitions or investments it may undertake could have an adverse effect on the Company’s financial condition and results of operations and the market’s perception of the Company’s execution of its strategy. To the extent Spire engages in any of the above activities together with or through one or more of its subsidiaries, including the Utilities, such subsidiaries may face the same risks.
Pipeline safety integrity programs and repairs may impose significant costs and liabilities on the Company.
The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) requires pipeline operators to develop integrity management programs to comprehensively evaluate certain areas along their pipelines and to take additional measures to protect pipeline segments located in “high consequence areas”areas where a leak or rupture could potentially do the most harm. PHMSA constantly updates its regulations to ensure the highest levels of pipeline safety. As the operator of the STL Pipeline, the Companypipelines, Spire is required to:
• | perform ongoing assessments of pipeline integrity; |
• | identify and characterize applicable threats to |
• | improve data collection, integration and analysis; |
• | repair and remediate the pipeline as necessary; and |
• |
|
|
The Company is required to maintain pipeline integrity testing programs that are intended to assess pipeline integrity. Any repair, remediation, preventative or mitigating actions may require significant capital and operating expenditures. Should the Company fail to comply with applicable statutes and the PHMSA Office of Pipeline Safety’s rules and related regulations and orders, it could be subject to significant penalties and fines.
Reductions in capacity
Spire Storage is subject to competition from similar services provided by pipelines and from competing independent storage providers capable of serving our customers. Natural gas storage is a competitive business, with competitors having the ability to expand or build new storage capacity. Increased competition in the natural gas storage business could reduce the demand for the Company’s natural gas storage services and drive rates down for its storage business.
Storage businesses are affected by various gas market fundamentals which impact the level of demand for storage services and the rates that can be charged for these services. These market fundamentals include: seasonal price spread; monthly, daily and hourly price volatility; locational basis for pricing points on pipelines connected to a storage facility; seasonal, daily and hourly weather; and operational impacts in supply and market areas served by a storage facility and its connected pipelines. These fundamentals have varying and potentially material adverse impacts on the various services offered by storage facilities and the rates that can be charged for these services in the market. These services include: long-term firm storage; short-term park and loan; wheeling; and optimization. Rates below the variable costs to operate a storage facility could result in a decision to not operate all of the capacity in the facility or to operate the facility at a loss if required to fulfill firm customer contract obligations. A sustained decline in these rates or a shut-in of all or a portion of one or more facilities’ capacity could have an adverse impact on our financial condition, results of operations and cash flows.
Transporting, distributing, and storing natural gas and propane involves numerous risks that may result in accidents and other operating risks and costs.
Natural gas transportation, distribution and storage activities inherently involve a variety of hazards and operations risks, such as leaks, accidental explosions, damage caused by third parties, and mechanical problems, which could cause substantial financial losses. In addition, these risks could result in serious injury to employees and non-employees, loss of human life, significant damage to property, environmental pollution, impairment of operations, and substantial losses to the Company and its subsidiaries. The location of pipelines and storage facilities near populated areas, including residential areas, commercial business centers, and industrial sites, could increase the level of damages resulting from these risks. Similar risks also exist for Spire Missouri’s propane storage, transmission and minor distribution operations. These activities may subject the Company to litigation or administrative proceedings. Such litigation or proceedings could result in substantial monetary judgments, fines, or penalties against the Company and its subsidiaries or be resolved on unfavorable terms. The Utilities and other Spire businesses are subject to federal and state laws and regulations requiring them to maintain certain safety and system integrity measures by identifying and managing storage and pipeline risks. Compliance with these laws and regulations, or future changes in these laws and regulations, may result in increased capital, operating and other costs which may not be recoverable in a timely manner from customers in rates. In accordance with customary industry practices, the Utilities and other Spire businesses maintain insurance against a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these events is not fully covered by insurance, it could adversely affect the financial condition and results of operations of the Company and its subsidiaries.
Workforce risks may affect the Company’s financial results.
The Company and its subsidiaries are subject to various workforce risks, including, but not limited to, the risk that it will be unable to attract and retain qualified personnel; that it will be unable to effectively transfer to new personnel the knowledge and expertise of an aging workforce as those workers retire; and that it will be unable to reach collective bargaining arrangements with the unions that represent certain of its workers, which could result in work stoppages.
In connection with acquisitions, Spire and Spire Missouri recorded goodwill and long-lived assets that could become impaired and adversely affect its financial condition and results of operations.
Spire and Spire Missouri assess goodwill for impairment annually or more frequently if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company and Spire Missouri assess their long-lived assets for impairment whenever events or circumstances indicate that an asset’s carrying amount may not be recoverable. To the extent the value of goodwill or long-lived assets becomes impaired, the Company and Spire Missouri may be required to incur impairment charges that could have a material impact on their results of operations.
Since interest rates are a key component, among other assumptions, in the models used to estimate the fair values of the Company’s reporting units, rises in interest rates would generally decrease the calculated fair values and future impairments may occur. Due to the subjectivity of the assumptions and estimates underlying the impairment analysis, Spire and Spire Missouri cannot provide assurance that future analyses will not result in impairment. These assumptions and estimates include projected cash flows, current and future rates for contracted capacity, growth rates, weighted average cost of capital and market multiples.
Changes in accounting standards may adversely impact the Company’s financial condition and results of operations.
Spire and its subsidiaries are subject to changes in U.S. generally accepted accounting principles (GAAP), SEC regulations and other interpretations of financial reporting requirements for public utilities. Neither the Company nor any of its subsidiaries have any control over the impact these changes may have on their financial condition or results of operations nor the timing of such changes. The potential issues associated with rate-regulated accounting, along with other potential changes to GAAP that the U.S. Financial Accounting Standards Board (FASB) continues to consider may be significant.
Climate change and regulatory and legislative developments in the energy industry related to climate change may in the future adversely affect operations and financial results.
Climate change, and the extent regulatory, public policy, or legislative changes occur to address the potential for climate change, could adversely affect operations and financial results of the Company. Management believes it is likely that any such resulting impacts would occur over a long period of time and thus would be difficult to quantify with any degree of specificity. To the extent climate change results in warmer temperatures, financial results could be adversely affected through lower gas volumes and revenues and lack of marketing opportunities. Another possible impact of climate change may be more frequent and more severe weather events, such as hurricanes and tornadoes, which could increase costs to repair damaged facilities and restore service to customers. If the Company were unable to deliver natural gas to customers, financial results would be impacted by lost revenues, and the Utilities generally would have to seek approval from regulators to recover restoration costs. To the extent the Utilities would be unable to recover those costs, or if higher rates resulting from recovery of such costs would result in reduced demand for the Company’s services, the Company’s and the Utilities’ future business, financial condition or financial results could be adversely impacted.
In addition, there have been a number of federal, state and local legislative and regulatory initiatives proposed in recent years in an attempt to control or limit the effects of global warming and overall climate change, including greenhouse gas emissions, such as methane and carbon dioxide. The adoption of this type of legislation by Congress or similar legislation by states or localities, or the adoption of related regulations by federal, state or local governments mandating a substantial reduction in greenhouse gas emissions or restricting the use of fossil fuels, such as natural gas, in the future could have far-reaching and significant impacts on the energy industry. Such new legislation or regulations could result in increased compliance costs or additional operating restrictions, affect the demand for natural gas or impact the prices charged to customers. At this time, we cannot predict the potential impact of such laws or regulations that may be adopted on the Company’s and the Utilities’ future business, financial condition or financial results.
Changes to income tax policy, certain tax elections, tax regulations and future taxable income could adversely impact the Company’sCompany’s financial condition and results of operations.
The Company has significantly reduced its current federal and state income tax obligations over the past few years through tax planning strategies andincluding the extensionuse of bonus depreciation deductions for certain expenditures for property. As a result, the Company has generated large annual taxable losses that have resulted in significant federal and state net operating losses. The Company plans to utilize these net operating losses in the future to reduce income tax obligations. The value of these net operating losses could be reduced if the Company cannot generate enough taxable income in the future to utilize all of the net operating losses generated prior to the Tax Cuts and Jobs Act of 2017 before they expire due to lower than expectedlower-than-expected financial performance or regulatory actions.
Changes to income tax policy, laws and regulations, including but not limited to changes in tax rates, the deductibility of certain expenses including interest and state and local income taxes and/or changes in the deductibility of certain expenditures for property, could adversely impact the Company. Those impacts could include reducing the value of its net operating losses and could result in material charges to earnings. Further, the Company’s financial condition and results of operations may be adversely impacted. Notably, the Inflation Reduction Act became effective on August 16, 2022. This new law provides various credits and incentives with respect to clean energy. The Company is evaluating the impact and applicability of these programs to its operations, but they are not expected to have a material impact on the Company.
Spire’s
Spire’s pension and other postretirement benefit plans are subject to investment and interest rate risk that could negatively impact its financial condition.
The Company and its subsidiaries have pension and other postretirement benefit plans that provide benefits to many of their employees and retirees. Costs of providing benefits and related funding requirements of these plans are subject to changes in the market value of the assets that fund the plans. The funded status of the plans and the related costs reflected in ourthe Company’s financial statements are affected by various factors, which are subject to an inherent degree of uncertainty, including economic conditions, financial market performance, interest rates, life expectancies and demographics. Recessions and volatility in the domestic and international financial markets have negatively affected the asset values of Spire’s pension plans at various times in the past. Poor investment returns or lower interest rates may necessitate accelerated funding of the plans to meet minimum federal government requirements, which could have an adverse impact on the Company’s and its subsidiaries’ financial condition and results of operations. For more information, including regulatory provisions affecting the Utilities’ plans, see Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements in Item 8.
Catastrophic events may adversely affect the Company’s facilities
The Company’s natural gas storage business includes inherent geologic and operations.
Catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes, tropical storms, terrorist acts, acts of civil unrest, pandemic illnesses or other similar occurrences could adversely affect the Utilities’ facilities and operations,operational risks, as well as thoserisks from competition and changes in market fundamentals.
The Company plans to continue to increase capacity, improve operating performance, and improve the integrity of its storage fields and associated above-ground facilities of Spire STL PipelineStorage. Construction of such assets is subject to various risks and uncertainties, including supply chain and labor disruptions, weather conditions during construction, equipment failures and construction quality issues. Any such disruptions, as well as any negative effects from the risks discussed below, could result in an impairment of Spire's investment in the project, and such impairment could have a material adverse effect on the Company's financial condition and results of operations.
Any damage to the Spire Storage. Storage facilities or pipelines, or lack of integrity to its storage fields, including damages caused by a blow-out, to the extent not covered by insurance, could have a material adverse effect on the Company’s financial condition and results of operations.
The Utilities have emergency planningCompany’s storage assets are connected to third-party-owned pipelines. The continuing operation of such third-party pipelines is not within its control. If any of these pipelines become unable to transport, treat or process natural gas or natural gas liquids, or if the volumes it gathers or transports do not meet the quality requirements of such pipelines, the Company’s revenues and training programscash flows could be adversely affected.
The Company does not own all the land on which its storage facilities were constructed, and it is, therefore, subject to the possibility of more onerous terms or increased costs to retain necessary land use, if and when applicable property rights expire or are renewed. Changes in place to respond to events thatthe terms of such land use could cause business interruptions. However, unanticipated events or a combination of events, failure in resources needed to respond to events, or slow or inadequate response to events may have an adverse impact on the operations, financial condition and results of operations of the CompanyCompany’s storage business.
Spire Storage is subject to competition from similar services provided by pipelines and from competing independent storage providers capable of serving its customers. Natural gas storage is a competitive business, with competitors having the ability to expand storage capacity. Increased competition in the natural gas storage business could reduce the demand and drive rates down for the Company’s natural gas storage services.
Storage businesses are affected by various gas market fundamentals which impact the level of demand for storage services and the rates that can be charged for these services. These market fundamentals include: seasonal price spread; monthly, daily and hourly price volatility; locational basis for pricing points on pipelines connected to a storage facility; seasonal, daily and hourly weather; and operational impacts in supply and market areas served by a storage facility and its subsidiaries. The availability of insurance covering catastrophic events mayconnected pipelines. These fundamentals have varying and potentially material adverse impacts on the various services offered by storage facilities and the rates that can be limited or maycharged for these services in the market. These services include long-term firm storage, short-term park and loan, wheeling, and optimization. Rates below the variable costs to operate a storage facility could result in higher deductibles, higher premiums,a decision to not operate all the capacity in the facility or to operate the facility at a loss if required to fulfill firm customer contract obligations. A sustained decline in these rates or a shut-in of all or a portion of one or more facilities’ capacity could have an adverse impact on the Company’s financial condition and more restrictive policy terms.results of operations.
RISKS THAT RELATE TO THE GAS UTILITY SEGMENT
Regulation of the Utilities’Utilities’ businesses may impact rates they are able to charge, costs, and profitability.
The Utilities are subject to regulation by federal, state and local authorities. At the state level, the Utilities are regulated in Missouri by the Missouri Public Service Commission (MoPSC), in Alabama by the Alabama Public Service Commission (APSC), and in Mississippi by the Mississippi Public Service Commission (MSPSC). These state public service commissions regulate many aspects of the Utilities’ distribution operations, including construction and maintenance of facilities, operations, safety, the rates the Utilities may charge customers, the terms of service to their customers, transactions with their affiliates, the rate of return they are allowed to realize, and the accounting treatment for certain aspects of their operations. For further discussion of these accounting matters, see Regulatory Accounting under Critical Accounting Estimates in Item 7.
Accounting for the economics of rate regulation affects multiple financial statement line items (such as property, plant, and equipment; regulatory assets and liabilities; operating revenues; and operating expenses) and affects multiple disclosures in the Company’s financial statements. There is a risk that the state public service commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. A material disallowance of deferred costs could adversely affect the Utilities’ results of operations.
The MoPSC also approves the Missouri Utilities’Spire Missouri’s Infrastructure System Replacement Surcharge (ISRS). The ISRS allows Spire Missouri expedited recovery for its investment to replaceupgrade its worn out or deteriorated infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Recently, Spire Missouri’s recovery of certain ISRS costs have been contested before the MoPSCSuch investments are subject to review, and the Missouri Court of Appeals. Therethere is risk that any material disallowance of costs under ISRS could adversely affect revenues.the timing of revenues and cash flows.
The Utilities’ ability to obtain and timely implement rate increases and rate supplements to maintain the current rate of return is subject to regulatory review and approval. There can be no assurance that they will be able to obtain rate increases or rate supplements or continue earning the current authorized rates of return. Spire Alabama’s and Spire Gulf’s rate setting process, Rate Stabilization and Equalization (RSE), is subject to regulation by the APSC and is implemented pursuant to APSC orders expiring September 30, 2022 and 2021, respectively.2025. RSE adjustments would continue after those datesthat date unless the APSC enters an order to the contrary in a manner consistent with the law. Spire Mississippi is subject to regulation by the MSPSC and utilizes the Rate Stabilization Adjustment (RSA) Rider. For further details, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.
The Utilities could incur additional costs if required to adjust to new laws or regulations, revisions to existing laws or regulations or changes in interpretations of existing laws or regulations such as the Dodd-Frank Act.regulations. In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent noncompliance could also increase. If the Utilities fail to comply with applicable laws and regulations, whether existing or new, they could be subject to fines, penalties or other enforcement action by the authorities that regulate the Utilities’ operations.
Significantly warmer-than-normal weather conditions, the effects of climate change, legislative and regulatory initiatives in response to climate change or in support of increased energy efficiency, and other factors that influence customer usage may affect the Utilities’ sale of heating energy and adversely impact their financial position and results of operations.
The Utilities’ earnings are primarily generated by the sale of heating energy. Spire Missouri and Spire Mississippi each have a Weather Normalization Adjustment rider, Spire Alabama has a Temperature Adjustment Rider, and Spire Gulf has a Weather Impact Normalization Factor. These mechanisms, approved by the respective state regulatory body, provide better assurance of the recovery of fixed costs and margins during winter months despite variations in sales volumes due to the impacts of weather, while the annual rate designs of Alabama and Mississippi help adjust for other factors that affect customer usage. However, significantly warmer-than-normal weather conditions in the Utilities’ service areas and other factors, such as climate change, alternative energy sources and increased efficiency of gas furnaces and other appliances, may result in reduced profitability and decreased cash flows attributable to lower gas sales. Furthermore, continuation of these adjustment factors is subject to regulatory discretion.
In addition, legislative and regulatory initiatives by the federal, state and local governments addressing greenhouse gas emissions or restricting the use of natural gas could adversely affect customer demand. The promulgation of regulations of the emissions of greenhouse gases and efficiency for residential gas furnaces and other gas appliances or the potential enactment of congressional legislation addressing global warming and climate change may decrease customer usage, encourage fuel switching from gas to other energy forms, and may result in future additional compliance costs that could impact the Utilities’ financial conditions and results of operations.
The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner.
In order to meet their customers’ annual and seasonal natural gas demands, the Utilities must obtain sufficient supplies, interstate pipeline capacity, and storage capacity. If they are unable to obtain these, either from their suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, to the extent not mitigated by tariffs, contractual indemnification or insurance, the Utilities’ financial condition and results of operations may be adversely impacted. If a substantial disruption in interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand, the Utilities’ financial results could be adversely impacted.
In particular, the natural gas supply provided to Spire Missouri by Spire STL Pipeline is at risk due to the order issued by the U.S. Court of Appeals for the District of Columbia Circuit vacating the Spire STL Pipeline’s Certificate of Public Convenience and Necessity previously issued by the FERC and remanding the matter back to the FERC for further action. The STL Pipeline is currently operating under temporary certificates. In the event this pipeline is taken out of service, either temporarily or permanently, Spire Missouri’s ability to secure new pipeline contracts on other systems serving the region may be significantly constrained, and Spire Missouri would not be able to replace that supply based on similar terms or at all over the short term based on current market and operating conditions. In the event that the Spire STL Pipeline is unavailable and an extreme weather event occurs, Spire Missouri would face heightened risks, including service outages and other disruptions; the need for service restoration, creating hazards for Spire Missouri, its employees, and its customers; the potential for loss of life and property in its service territory; and associated exposure to litigation or administrative proceedings. If this pipeline is taken out of service, Spire Missouri may need to design, construct, and place in service new facilities or modify existing facilities in order to receive gas from alternate sources, giving rise to additional regulatory and business risks and hazards.
Spire Missouri will continue to pursue all legal and regulatory avenues to ensure access to reliable, affordable and safe delivery of energy for eastern Missouri. If Spire Missouri is unable to obtain sufficient pipeline capacity to meet its customers’ annual and seasonal natural gas demands, Spire Missouri’s financial condition and results of operations may be adversely impacted which could result in a material adverse effect on the Company’s financial condition and results of operations.
The Utilities are involved in legal or administrative proceedings before various courts and governmental bodies that could adversely affect their results of operations cash flows and financial condition.
The Utilities are involved in legal or administrative proceedings before various courts and governmental bodies with respect to general claims, rates, environmental issues, gas cost prudence reviews and other matters. For further details, see Contingencies in Note 16 to the financial statements in Item 8. Adverse decisions regarding these matters, to the extent they require the Utilities to make payments in excess of amounts provided for in their financial statements, or to the extent they are not covered by insurance, could adversely affect the Utilities’ results of operations cash flows and financial condition.
The Utilities’Utilities’ liquidity may be adversely affected by delays in recovery of their costs, due to regulation.
In the normal course of business, there is a lag between when the Utilities incur increases in certain of their costs and the time in which those costs are considered for recovery in the ratemaking process. Cash requirements for increased operating costs, increased funding levels of defined benefit pension and postretirement costs, capital expenditures, and other increases in the costs of doing business can require outlays of cash prior to the authorization of increases in rates charged to customers, as approved by the MoPSC, APSC, and MSPSC. Accordingly, the Utilities’ liquidity can be adversely impacted to the extent higher costs are not timely recovered from their customers.
The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner.
In order to meet their customers’ annual and seasonal natural gas demands, the Utilities must obtain sufficient supplies, interstate pipeline capacity, and storage capacity. If they are unable to obtain these, either from their suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, to the extent not mitigated by tariffs, contractual indemnification or insurance, the Utilities’ financial condition and results of operations may be adversely impacted. If a substantial disruption in interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand, the Utilities’ financial results could be adversely impacted.
The Utilities’’ liquidity and, in certain circumstances, the Utilities’Utilities’ results of operations may be adversely affected by the cost of purchasing natural gas during periods in which natural gas prices are rising significantly.
The tariff rate schedules of theSpire Missouri, Utilities, Spire Gulf and Spire Mississippi contain Purchased Gas Adjustment (PGA) clauses and Spire Alabama’s tariff rate schedule contains a Gas Supply Adjustment (GSA) rider that permit the Utilities to file for rate adjustments to recover the cost of purchased gas. Changes in the cost of purchased gas are flowed through to customers and may affect uncollectible amounts and cash flows and can therefore impact the amount of capital resources.
Currently, theSpire Missouri Utilities areis allowed to adjust the gas cost component of rates up to four times each year while Spire Alabama and Spire Gulf (collectively, the “Alabama Utilities”) and Spire Mississippi may adjust the gas cost component of their rates on a monthly basis. TheSpire Missouri Utilities must make a mandatory gas cost adjustment at the beginning of the winter, in November, and during the next twelve months may make up to three additional discretionary gas cost adjustments, so long as each of these adjustments is separated by at least two months.
The MoPSC typically approves the Spire Missouri Utilities’ PGA changes on an interim basis, subject to refund and the outcome of a subsequent audit and prudence review. Due to such review process, there is a risk of a disallowance of full recovery of these costs. Any material disallowance of purchased gas costs would adversely affect revenues.results of operations. The Alabama Utilities’ gas supply charges are submitted for APSC review on a monthly basis, regardless of whether there is a request for a change, so prudence review occurs on an ongoing basis. Spire Mississippi’s PGA is adjusted on a monthly basis for the most recent charges and is filed at the MSPSC on a monthly basis.
Increases in the prices the Utilities charge for gas may also adversely affect revenues because they could lead customers to reduce usage and cause some customers to have trouble paying the resulting higher bills. These higher prices may increase bad debt expenses and ultimately reduce earnings. Rapid increases in the price of purchased gas may result in an increase in short-term debt.
To lower financial exposure to commodity price fluctuations, Spire Missouri enters into contracts to hedge the forward commodity price of its natural gas supplies. As part of this strategy, Spire Missouri may use fixed-price forward physical purchase contracts, swaps, futures, and option contracts. However, Spire Missouri does not hedge the entire exposure of energy assets or positions to market price volatility, and the coverage will vary over time. Any costs, gains, or losses experienced through hedging procedures, including carrying costs, generally flow through the PGA clause, thereby limiting the Missouri Utilities’Spire Missouri’s exposure to earnings volatility. However, variations in the timing of collections of such gas costs under the PGA clause and the effect of cash payments for margin deposits associated with the Missouri Utilities’Spire Missouri’s use of natural gas derivative instruments may cause short-term cash requirements to vary. These procedures remain subject to prudence review by the MoPSC.
Other than fixed-price forward physical purchase contracts, Spire Alabama, Spire Gulf, and Spire Mississippi currently doesdo not utilize risk mitigation strategies that incorporate commodity hedge instruments, but Spire Alabama has the ability to do so through its GSA. Spire Gulf hedges gas supply for up to 30 months in advance, and Spire Mississippi utilizes hedging for the upcoming heating season.
The Utilities’ business activities are concentrated in three states.
The Utilities provide natural gas distribution services to customers in Alabama, Mississippi, and Missouri. Changes in the regional economies, politics, regulations and weather patterns of these states could negatively impact the Utilities’ growth opportunities and the usage patterns and financial condition of customers and could adversely affect the Utilities’ earnings, cash flows, and financial position.
The Utilities may be adversely affected by economic conditions.
Periods of slowed economic activity generally result in decreased energy consumption, particularly by industrial and large commercial companies, a loss of existing customers, fewer new customers especially in newly constructed buildings. As a consequence, national or regional recessions or other downturns in economic activity could adversely affect the Utilities’ revenues and cash flows or restrict their future growth. Economic conditions in the Utilities’ service territories may also adversely impact the Utilities’ ability to collect accounts receivable, resulting in an increase in bad debt expense.
Environmental laws and regulations may require significant expenditures or increase operating costs.
The Utilities are subject to federal, state and local environmental laws and regulations affecting many aspects of their present and future operations. These laws and regulations require the Utilities to obtain and comply with a wide variety of environmental licenses, permits, inspections, and approvals. Failure to comply with these laws and regulations and failure to obtain any required permits and licenses may result in costs to the Utilities in the form of fines, penalties or business interruptions, which may be material. In addition, existing environmental laws and regulations could be revised or reinterpreted and/or new laws and regulations could be adopted or become applicable to the Utilities or their facilities, thereby impacting the Utilities’ cost of compliance. The discovery of presently unknown environmental conditions, including former manufactured gas plant sites, and claims against the Utilities under environmental laws and regulations may result in expenditures and liabilities, which could be material. To the extent environmental compliance costs are not fully covered by insurance or recovered in rates from customers, those costs may have an adverse effect on the Utilities’ financial condition and results of operations.
The Utilities’ business activities are concentrated in three states.
The Utilities provide natural gas distribution services to customers in Alabama, Mississippi, and Missouri. Changes in the regional economies, politics, regulations and weather patterns of these states could negatively impact the Utilities’ growth opportunities and the usage patterns and financial condition of customers and could adversely affect the Utilities’ earnings, cash flows, and financial position.
The Utilities may be adversely affected by economic conditions.
Periods of slowed economic activity generally result in decreased energy consumption, particularly by industrial and large commercial companies, a loss of existing customers, and fewer new customers especially in newly constructed buildings. As a consequence, national or regional recessions or other downturns in economic activity could adversely affect the Utilities’ revenues and cash flows or restrict their future growth. Economic conditions in the Utilities’ service territories may also adversely impact the Utilities’ ability to collect accounts receivable, resulting in an increase in bad debt expense.
Because of competition, the Utilities may not be able to retain existing customers or acquire new customers, which could have an adverse impact on their business, operating results of operations and financial condition.
The Utilities face the risk that larger commercial or industrial customers may bypass gas distribution services by gaining distribution directly from interstate pipelines or, in the case of Spire Alabama and Spire Gulf, also from municipally or publicly owned gas distributors located adjacent to its service territory. The Utilities cannot provide any assurance that increased competition will not have a material adverse effect on their business, financial condition or results of operations.
The Utilities compete with distributors offering a broad range of services and prices, from full-service distributors to those offering delivery only. The Utilities also compete for retail customers with suppliers of alternative energy products, principally propane and electricity.electricity, and to a growing extent, distributed sources of renewable energy. If they are unable to compete effectively, the Utilities may lose existing customers and/or fail to acquire new customers, which in the aggregate could have a material adverse effect on their business, operating results of operations and financial condition.
Changes in the wholesale costs of purchased natural gas supplies may adversely impact the Utilities’ competitive position compared with alternative energy sources.
Changes Along those lines, changes in wholesale natural gas prices compared with prices for electricity, fuel oil, coal, propane, or other energy sources can significantly impact the cost of delivered natural gas, which may affect the Utilities’ retention of natural gas customers and may adversely impact their financial condition and results of operations.
Significantly warmer-than-normal weather conditions, the effects of climate change, legislative and regulatory initiatives in response to climate change or in support of increased energy efficiency, and other factors that influence customer usage may affect the Utilities’ sale of heating energy and adversely impact their financial position and results of operations.
The Utilities’ earnings are primarily generated by the sale of heating energy. The Missouri Utilities and Spire Mississippi each have a Weather Normalization Adjustment rider, Spire Alabama has a Temperature Adjustment Rider, and Spire Gulf has a Weather Impact Normalization Factor. These mechanisms, approved by the respective state regulatory body, provide better assurance of the recovery of fixed costs and margins during winter months despite variations in sales volumes due to the impacts of weather, while the annual rate designs of Alabama and Mississippi help adjust for other factors that affect customer usage. However, significantly warmer-than-normal weather conditions in the Utilities’ service areas and other factors, such as climate change, alternative energy sources and increased efficiency of gas furnaces and other appliances, may result in reduced profitability and decreased cash flows attributable to lower gas sales. Furthermore, continuation of these adjustment factors is subject to regulatory discretion.
In addition, legislative and regulatory initiatives by the federal, state and local governments addressing greenhouse gas emissions or restricting the use of natural gas could adversely affect customer demand. The promulgation of regulations of the emissions of greenhouse gases and efficiency for residential gas furnaces and other gas appliances or the potential enactment of congressional legislation addressing global warming and climate change may decrease customer usage, encourage fuel switching from gas to other energy forms, and may result in future additional compliance costs that could impact the Utilities’ financial conditions and results of operations.
Regional supply/demand fluctuations and changes in national infrastructure, as well as regulatory discretion, may adversely affect the Missouri Utilities’Utilities’ ability to profit from off-system sales and capacity release.
The Missouri Utilities’
Spire Missouri’s and Spire Alabama’s income from off-system sales and capacity release is subject to fluctuations in market conditions and changing supply and demand conditions in areas the Missouri Utilities hold pipeline capacity rights. Specific factors impacting the Missouri Utilities’ income from off-system sales and capacity release include the availability of attractively priced natural gas supply, availability of pipeline capacity, and market demand. Income from off-system sales and capacity release is shared with customers. Effective April 19, 2018, theSpire Missouri Utilitiesand Spire Alabama are allowed to retain 25% of the net margins achieved as a result of such off-system sales and capacity releases.release. The Missouri Utilities’ ability to retain such income in the future is subject to regulatory discretion in a base rate proceeding.discretion. In fact, as of April 2022, Spire Alabama can only retain the 25% of capacity release after the first $1.6 million goes entirely to customers (while sharing remains immediate for off-system sales).
RISKS THAT RELATE TO THE GAS MARKETING SEGMENT
Increased competition, fluctuations in natural gas commodity prices, expiration of supply and transportation arrangements, and infrastructure projects may adversely impact the future profitability of Gas Marketing.
Competition in the marketplace and fluctuations in natural gas commodity prices have a direct impact on the Gas Marketing business. Changing market conditions and prices, the narrowing of regional and seasonal price differentials and limited future price volatility may adversely impact its sales margins or affect its ability to procure gas supplies and/or to serve certain customers, which may reduce sales profitability and/or increase certain credit requirements caused by reductions in netting capability. Also, Gas Marketing profitability may be impacted by the effects of the expiration, in the normal course of business, of certain of its natural gas supply contracts if those contracts cannot be replaced and/or renewed with arrangements with similar terms and pricing. Although the FERC regulates the interstate transportation of natural gas and establishes the general terms and conditions under which Spire Marketing may use interstate gas pipeline capacity to purchase and transport natural gas, itSpire Marketing must occasionally renegotiate its transportation agreements with a concentrated group of pipeline companies. Renegotiated terms of new agreements, or increases in FERC-authorized rates of existing agreements, may impact Gas Marketing’s future profitability. Profitability may also be adversely impacted if pipeline capacity or future storage capacity secured is not fully utilized.
Reduced access to credit and/or capital markets may prevent the Gas Marketing business from executing operating strategies.
The Gas Marketing segment relies on its cash flows, ability to effect net settlements with counterparties, parental guaranties, and access to Spire’s liquidity resources to satisfy its credit and working capital requirements. Spire Marketing’s ability to rely on parental guaranties is dependent upon Spire’s financial condition and credit ratings. If Spire’s credit ratings were lowered, particularly below investment grade, counterparty acceptance of parental guaranties may diminish, resulting in decreased availability of credit. Additionally, under such circumstances, certain counterparties may require Spire Marketing to provide prepayments or cash deposits, amounts of which would be dependent upon natural gas market conditions. Reduced access to credit or increased credit requirements, which may also be caused by factors such as higher overall natural gas prices, may limit Spire Marketing’s ability to enter into certain transactions. In addition, Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are with (or are associated with) energy producers, utility companies, and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry, or other conditions. Spire Marketing also has concentrations of credit risk in certain individually significant counterparties. Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations.
Risk management policies, including the use of derivative instruments, may not fully protect Spire Marketing’sMarketing’s sales and results of operations from volatility and may result in financial losses.
In the course of its business, Spire Marketing enters into contracts to purchase and sell natural gas at fixed prices and index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments.
Spire Marketing currently manages the commodity price risk associated with fixed-price commitments for the purchase or sale of natural gas by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of natural gas futures, options, and swap contracts traded on or cleared through the New York Mercantile Exchange, Inc. and/or the Intercontinental Exchange to lock in margins. These exchange-traded/cleared contracts may be designated as cash flow hedges of forecasted transactions. However, market conditions and regional price changes may cause ineffective portions of matched positions to result in financial losses. Additionally, to the extent that Spire Marketing’s natural gas contracts are classified as trading activities or do not otherwise qualify for the normal purchases or normal sales designation (or the designation is not elected), the contracts are recorded as derivatives at fair value each period. Accordingly, the associated gains and losses are reported directly in earnings and may cause volatility in results of operations. Gains or losses (realized and unrealized) on certain wholesale purchase and sale contracts, consisting of those classified as trading activities, are required to be presented on a net basis (instead of a gross basis) in the statements of consolidated income. Such presentation could result in volatility in the Company’s operating revenues.
As a natural gas market participant, Spire Marketing is subject to all applicable FERC- and Commodity Futures Trading Commission-Commission (CFTC) administered-administered statutes, rules, regulations and orders, including those directed generally to prevent manipulation of or fraud involving natural gas physical transactions and financial instruments, such as futures, options and swaps. Spire Marketing could be subject to substantial penalties and fines by the FERC or CFTC, or both, for failure to comply with such rules.
The Dodd-Frank Act’s swaps regulatory provisions and the related rules may adversely affect our existing derivative contracts and restrict our ability to monetize such contracts, cause us to restructure certain contracts, reduce the availability
Spire Marketing’sMarketing’s ability to meet its customers’customers’ natural gas requirements may be impaired if contracted gas supplies and interstate pipeline services are not available or delivered in a timely manner.
Spire Marketing’s ability to deliver natural gas to its customers is contingent upon the ability of natural gas producers, other gas marketers, and interstate pipelines to fulfill delivery obligations to Spire Marketing under firm contracts. To the extent that it is unable to obtain the necessary supplies, Spire Marketing’s financial position and results of operations may be adversely impacted.
Regulatory and legislative developments pertaining to the energy industry may adversely impact Gas Marketing’sMarketing’s results of operations and financial condition and cash flows.condition.
The Gas Marketing business is non-regulated, in that the rates it charges its customers are not currently established by or subject to approval by any regulatory body with jurisdiction over its business. However, it is subject to various laws and regulations affecting the energy industry. New regulatory and legislative actions may adversely impact Gas Marketing’s results of operations and financial condition and cash flows by potentially reducing customer growth opportunities and/or increasing the costs of doing business.
For example, Spire
Gas Marketing incurs additional costs to comply with new lawsuses bilateral contracts and regulations,derivative instruments such as the Dodd-Frank Act amendments to the Commodity Exchange Act, which authorizes the CFTC to regulate futures contracts, options and swaps. These derivative transactions include instruments and bilateral contracts that Spire Marketing usesswaps to hedge or mitigate ongoing commercial risks. TheMost standardized swaps, under the Dodd-Frank Act, contemplates that most standardized swaps will beare required to be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility, subject to certain exceptions. In addition, the CFTC’s rules require companies, including Spire Marketing, to maintain regulatory records of swap transactions, and to report swaps to centralized swap data repositories, among other new compliance obligations. Although Spire Marketing may qualify for exceptions to certain of the newthese CFTC rules, its derivatives counterparties are subject to new capital, margin, documentation and business conduct requirements imposed as a result of the Dodd-Frank Act. Such new rulesThese obligations may increase transaction costs and may make it more difficult for Spire Marketing to enter into hedging transactions on favorable terms or affect the number and/or creditworthiness of available swap counterparties. Spire Marketing’s inability to enter into derivatives instruments or other commercial risk hedging transactions on favorable terms, or at all, could increase operating expenses and expose it to unhedged commercial risks, including potential adverse changes in commodity prices.
The
In October 2020, the CFTC has re-proposedfinalized its position limits rules that would modify and expand the applicability of speculative position limits on the amounts of certain speculativefutures contracts (including options thereon), cash-settled “lookalike” contracts for or linked to the commodities underlying the foregoing futures contracts, as well as economically equivalent options, futuresswaps containing “identical material” contractual specifications, terms and swapsconditions as the foregoing contracts. While Spire Marketing anticipates qualifying for or linked to certain physical commodities that market participants may hold, subject to limited exemptions for certaina bona fide hedging positionsexemption from such limits, the CFTC’s final rules and other types of transactions. To the extent the revised CFTC position limits proposal becomes final, such positions will also be subject to theearlier adopted aggregation rules which the CFTC has adopted and the Company’s ability to executemay cause Spire Marketing’s hedging strategies described above couldto be limited if Spire Marketing is unable to qualify for an exemption. It is uncertain at this time whether, when and in what form the CFTC’s proposed new position limits rules may become final and effective.
The Federal Reserve Board also has proposed rules that would limit certain physical commodity activities of financial holding companies. Such rules, if adopted,
GENERAL RISK FACTORS
Unexpected losses may adversely affect Spire Marketing’s ability’s or its subsidiaries’ financial condition and results of operations.
As with most businesses, there are operations and business risks inherent in the activities of Spire’s subsidiaries. If, in the normal course of business, Spire or any of its subsidiaries becomes a party to executelitigation, such litigation could result in substantial monetary judgments, fines, or penalties or be resolved on unfavorable terms. In accordance with customary practice, Spire and its subsidiaries maintain insurance against a significant portion of, but not all, risks and losses. In addition, in the normal course of its operations, Spire and its subsidiaries may be exposed to loss from other sources, such as bad debt expense or the failure of a counterparty to meet its financial obligations. Spire and its operating companies employ many strategies to gain assurance that such risks are appropriately managed, mitigated, or insured, as appropriate. To the extent a loss is not fully covered by insurance or other risk mitigation strategies, that loss could adversely affect the Company’s strategiesand/or its subsidiaries’ financial condition and results of operations.
Catastrophic events may adversely affect the Company’s facilities and operations.
Catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes, tropical storms, winter storms, terrorist acts, acts of civil unrest, pandemic illnesses or other similar occurrences could adversely affect the Utilities’ facilities and operations, as well as those of Spire STL Pipeline and Spire Storage. The Utilities have emergency planning and training programs in place to respond to events that could cause business interruptions. However, unanticipated events or a combination of events, failure in resources needed to respond to events, or slow or inadequate response to events may have an adverse impact on the operations, financial condition, and results of operations of the Company and its subsidiaries. To the extent the impacts of such catastrophic events are not covered by restrictinginsurance or recovered in rates, this could have a material adverse effect on the Company's financial condition and results of operations.
Increased dependence on technology may hinder Spire’s and its subsidiaries’ business operations and adversely affect their financial condition and results of operations if such technologies fail.
Spire and its subsidiaries have implemented or acquired a variety of technological tools including both Company-owned information technology and technological services provided by outside parties. These tools and systems support critical functions including Spire and its subsidiaries’ integrated planning, scheduling and dispatching of field resources, its automated meter reading system, customer care and billing, procurement and accounts payable, operational plant logistics, management reporting, and external financial reporting. The failure of these or other similarly important technologies, or the Company’s available counterpartiesor its subsidiaries’ inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder their business operations and, to the extent not covered by insurance, could adversely impact their financial condition and results of operations.
Although the Company and its subsidiaries have, when possible, developed alternative sources of technology and built redundancy into their computer networks and tools, there can be no assurance that these efforts to date would protect against all potential issues related to the loss of any such technologies or the Utilities’ use of such technologies.
A cyberattack may disrupt Spire’s operations or lead to a loss or misuse of confidential and proprietary information or potential liability.
The Company and its subsidiaries are subject to cybersecurity risks primarily related to breaches of security pertaining to sensitive customer, employee, and vendor information maintained by the Company, its subsidiaries, or its third-party vendors in the normal course of business, as well as breaches in the technology that manages natural gas distribution operations and other business processes. A loss of confidential or proprietary data or security breaches of technology for certain types of transactions, limitingoperations or business processes could adversely affect the Company’s abilityand its subsidiaries’ reputation, diminish customer confidence, disrupt operations, and subject the Company and its subsidiaries to obtainpossible financial liability, any of which could have a material effect on the Company’s and its subsidiaries’ financial condition and results of operations.
The Company acknowledges that increased dependence on technology increases the Company’s exposure to cyberattack. The Company and its subsidiaries closely monitor both preventive and detective measures to manage these risks and maintain cyber risk insurance to mitigate a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these cyber events is not covered by insurance, it could adversely affect the Company’s and its subsidiaries’ financial condition and results of operations.
Workforce risks may affect the Company’s financial results.
The Company and its subsidiaries are subject to various workforce risks, including, but not limited to, the risk that it will be unable to attract and retain qualified personnel; that it will be unable to effectively transfer to new personnel the knowledge and expertise of an aging workforce as those workers retire; and that it will be unable to reach collective bargaining arrangements with the unions that represent certain services,of its workers, which could result in work stoppages.
Resources expended to pursue or integrate business acquisitions, investments or other business arrangements may adversely affect Spire’s financial position and reducing liquidityresults of operations and return on investments made may not meet the Company’s expectations.
From time to time, Spire may seek to grow through strategic acquisitions, investments or other business arrangements. Attractive acquisition and investment opportunities may be difficult to complete on economically acceptable terms. It is possible for Spire to expend considerable resources pursuing acquisitions and investments but, for a variety of reasons, decide not to move forward. Similarly, investment opportunities may be hindered or halted by regulatory or legal actions. To the extent that acquisitions or investments are made, such transactions involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of management’s attention from daily operations, difficulties in physicalassimilation and retention of employees, securing adequate capital to support the transaction, and regulatory approval. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain businesses or assets and there is a possibility that anticipated operating and financial markets. It is uncertain at this time whether, whenefficiencies expected to result from an acquisition or investment do not develop. Additionally, there are no assurances that resources expended will achieve their intended result.
The failure to complete an acquisition successfully or to integrate acquisitions or investments it may undertake could have an adverse effect on the Spire’s financial condition and results of operations and the market’s perception of the Company’s execution of its strategy. To the extent Spire engages in what formany of the Federal Reserve’s proposed rules regardingabove activities together with or through one or more of its subsidiaries, including the Utilities, such subsidiaries may face the same risks.
Changes in accounting standards may adversely impact the Company’s financial holding companiescondition and results of operations.
Spire and its subsidiaries are subject to changes in U.S. generally accepted accounting principles (GAAP), SEC regulations and other interpretations of financial reporting requirements for public utilities. Neither the Company nor any of its subsidiaries have any control over the impact these changes may become final and effective.have on their financial condition or results of operations nor the timing of such changes. The potential issues associated with rate-regulated accounting, along with other potential changes to GAAP that the U.S. Financial Accounting Standards Board (FASB) continues to consider may be significant.
Item 1B. Unresolved Staff Comments
None.
Spire
Refer to the information below about the principal properties of Spire Missouri and Spire Alabama. The Spire EnergySouth utilities own approximately 5,500more than 5,000 miles of pipelines. Other properties of Spire and its subsidiaries including Spire Marketing and Spire EnergySouth, do not constitute a significant portion of its properties. The current leases for office space in downtown St. Louis commenced in early 2015, with terms ranging from 10 to 20 years, with multiple renewal options. For further information on leases see Note 1617, Commitments and Contingencies,Leases, of the Notes to Financial Statements in Item 8.
Spire Missouri
The principal properties of Spire Missouri consist of its gas distribution system, which includes more than 30,00031,000 miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which we haveSpire Missouri has obtained the necessary legal rights to place and operate ourits facilities on such property. Spire Missouri has an underground natural gas storage facility, several operating centers, and other related properties. Substantially all of Spire Missouri’s utility plant is subject to the liens of its mortgage. All the properties of Spire Missouri are held in fee, by easement, or under lease agreements.
Spire Alabama
The properties of Spire Alabama consist primarily of its gas distribution system, which includes approximately 23,000more than 24,000 miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which we haveSpire Alabama has obtained the necessary legal rights to place and operate ourits facilities on such property. Spire Alabama also has four LNG facilities, several operating centers, and other related properties. All of the properties of Spire Alabama are held in fee, by easement, or under lease agreements.
For a description of pending regulatory matters of Spire, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. For a description of environmental and other legal matters, see Contingencies in Note 16 of the Notes to Financial Statements in Item 8.
Spire and its subsidiaries are involved in litigation, claims and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the consolidated financial position or results of operations reflected in the consolidated financial statements presented herein.
Item 4. Mine Safety Disclosures
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS – Listed below are executive officers as defined by the SEC for Spire, Spire Missouri and Spire Alabama.Spire. Their ages, at September 30, 2019,2022, and positions are listed below along with their business experience during the past five years.
Name | Age | Position with Company (1) | Appointed (2) | |||
S. Sitherwood |
|
| ||||
President and Chief Executive Officer | February 2012 | |||||
| ||||||
Chairman of the Board, Spire Missouri | January 2015 | |||||
Chairman of the Board, |
| |||||
Spire Alabama | ||||||
| September 2014 | |||||
S. L. Lindsey |
| Executive Vice President, Chief Operating Officer |
| January 2020 | ||
Executive Vice President, Chief Executive Officer of Gas Utilities and Distribution Operations (until December 2019) | October 2012 | |||||
| ||||||
Chief Executive Officer, Spire Missouri | December 2018 | |||||
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Chief Executive Officer, Spire Alabama | September 2014 | |||||
S. P. Rasche |
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| ||||
Executive Vice President and Chief Financial Officer | November 2013 | |||||
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Chief Financial Officer, Spire Missouri (until January 2020) | May 2012 | |||||
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Chief Financial Officer, Spire Alabama (until January 2020) | September 2014 | |||||
M. C. Darrell |
|
| ||||
Senior Vice President, Chief Legal and Compliance Officer | May 2012 | |||||
M. C. Geiselhart |
|
| ||||
Senior Vice President, Chief Strategy and Corporate Development Officer | January 2015 | |||||
|
| |||||
S. B. Carter |
| Senior Vice President, Chief Operating Officer of Distribution Operations |
| January 2019 | ||
Senior Vice President, Commercial Operations (until December 2018) | January 2017 | |||||
President, Spire Missouri | December 2018 |
(1) |
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| ||
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| The information provided relates to the Company and its principal subsidiaries. Many of the executive officers have served or currently serve as officers or directors for other subsidiaries of the Company. |
(2) | Officers of Spire are normally reappointed by its Board of Directors in November of each year. Officers of Spire Missouri and Spire Alabama are normally reappointed by |
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Item 5. Market for Registrant’sRegistrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Spire
Spire’s common stock trades on The New York Stock Exchange (NYSE) under the symbol “SR”. The number of holders of record as of November 21, 201911, 2022 was 2,946.2,636.
Dividends are payable on the Company’s common stock at the discretion of its Board of Directors (the “Board”). Spire, and Spire Missouri prior to the holding company’s formation in 2000, has paid common stock dividends continuously since 1946, with 20192022 marking the 16th19th consecutive year of increasing dividends on an annualized basis. Although the Board expects to continue paying dividends on the common stock for the foreseeable future, the declaration of dividends is not guaranteed. The amount of dividends on the common stock, if any, will depend upon the Company’s financial condition, results of operations, capital requirements, and other factors.
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
September 30 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| ||||||
Spire Inc. |
| $ | 100.00 |
| $ | 121.85 |
| $ | 146.88 |
| $ | 177.33 |
| $ | 180.23 |
| $ | 220.06 |
|
S&P Utilities Index |
|
| 100.00 |
|
| 106.57 |
|
| 125.08 |
|
| 140.12 |
|
| 144.22 |
|
| 183.31 |
|
S&P 500 Index |
|
| 100.00 |
|
| 99.39 |
|
| 114.72 |
|
| 136.07 |
|
| 160.44 |
|
| 167.27 |
|
September 30 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||||||||||||||||||
Spire Inc. | $ | 100.00 | $ | 101.64 | $ | 124.10 | $ | 78.42 | $ | 93.66 | $ | 99.28 | ||||||||||||
S&P 500 Utilities Index | 100.00 | 102.93 | 130.82 | 124.32 | 138.01 | 145.71 | ||||||||||||||||||
S&P 500 Index | 100.00 | 117.91 | 122.93 | 141.55 | 184.02 | 155.55 |
* | Cumulative total return is based on a $100 investment on September 30, |
The S&P 500 Utilities Index is comprised of 29 utilities heavily weighted to large capitalization (median market cap of $21.9 billion) electric utilities. In 2020, stocks of small and mid cap electric utilities and gas utility companies (like Spire) in general traded lower relative to the large cap electric sector. Since then, Spire has outperformed both the S&P 500 Utilities and the S&P 500 Indices.
For disclosures related to securities authorized for issuance under equity compensation plans, see Note 3, Stock-Based Compensation, of the Notes to Financial Statements in Item 8.
During the three months ended September 30, 2019,2022, the only repurchases of ourthe Company’s common stock were pursuant to elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the vesting of performance-based and time-vested restricted stock and stock units. The following table provides information on those repurchases:
Period |
| (a) Total Number of Shares Purchased |
|
| (b) Average Price Paid Per Share |
|
| (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| (d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs |
| ||||
July 1, 2019 - July 31, 2019 |
|
| 535 |
|
| $ | 85.07 |
|
|
| — |
|
|
| — |
|
August 1, 2019 - August 31, 2019 |
|
| 142 |
|
|
| 81.95 |
|
|
| — |
|
|
| — |
|
September 1, 2019 - September 30, 2019 |
|
| 53 |
|
|
| 85.31 |
|
|
| — |
|
|
| — |
|
Total |
|
| 730 |
|
| $ | 84.48 |
|
|
| — |
|
|
| — |
|
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid Per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
July 1, 2022 - July 31, 2022 | 182 | $76.32 | — | — | ||||||||||||
August 1, 2022 - August 31, 2022 | — | — | — | — | ||||||||||||
September 1, 2022 - September 30, 2022 | 340 | 68.87 | — | — | ||||||||||||
Total | 522 | $71.47 | — | — |
Spire Missouri
Spire Missouri common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange.
Spire Missouri’s mortgage contains restrictions on its ability to pay cash dividends on its common stock, as described in further detail in Note 5, Shareholders’ Equity, of the Notes to Financial Statements in Item 8. As of September 30, 20192022 and 2018,2021, the amount under the mortgage’s formula that was available to pay dividends was $1,182.4$1,579.4 million and $1,097.6$1,413.4 million, respectively.
Spire periodically purchases common stock of Spire Missouri with the price set at the book value of Spire Missouri common stock as of the most recently completed fiscal quarter. There were no sales of Spire Missouri common stock during the three most recent fiscal years.
Spire Alabama
Spire Alabama common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange.
Item 6. Selected Financial Data(Reserved)
Spire |
| Fiscal Years Ended September 30 |
| |||||||||||||||||
(In millions, except per share amounts) |
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016(1) |
|
| 2015 |
| |||||
Balance Sheet data at year end (2) |
|
|
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|
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|
|
|
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|
|
|
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|
Total Assets |
| $ | 7,619.2 |
|
| $ | 6,843.6 |
|
| $ | 6,546.7 |
|
| $ | 6,064.4 |
|
| $ | 5,277.6 |
|
Long-Term Debt (less current portion) |
|
| 2,082.6 |
|
|
| 1,900.1 |
|
|
| 1,995.0 |
|
|
| 1,820.7 |
|
|
| 1,758.9 |
|
Income data (3) |
|
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|
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|
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|
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|
|
|
|
Total Operating Revenues |
| $ | 1,952.4 |
|
| $ | 1,965.0 |
|
| $ | 1,740.7 |
|
| $ | 1,537.3 |
|
| $ | 1,976.4 |
|
Net Income [GAAP] |
| $ | 184.6 |
|
| $ | 214.2 |
|
| $ | 161.6 |
|
| $ | 144.2 |
|
| $ | 136.9 |
|
Missouri regulatory adjustments |
|
| 12.2 |
|
|
| 30.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Unrealized loss (gain) on energy-related derivatives |
|
| 1.2 |
|
|
| (4.0 | ) |
|
| 6.0 |
|
|
| (0.1 | ) |
|
| (2.8 | ) |
Lower of cost or market inventory adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.2 |
|
|
| 0.4 |
|
Realized (gain) loss on economic hedges prior to the sale of the physical commodity |
|
| — |
|
|
| (0.3 | ) |
|
| (0.3 | ) |
|
| (1.6 | ) |
|
| 2.4 |
|
Acquisition, divestiture and restructuring activities |
|
| 0.4 |
|
|
| 13.6 |
|
|
| 4.0 |
|
|
| 9.2 |
|
|
| 9.8 |
|
Gain on sale of property |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7.6 | ) |
Income tax effect of adjustments |
|
| (3.3 | ) |
|
| (10.3 | ) |
|
| (3.7 | ) |
|
| (2.8 | ) |
|
| (0.8 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| — |
|
|
| (60.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Net Economic Earnings [Non-GAAP] |
| $ | 195.1 |
|
| $ | 183.7 |
|
| $ | 167.6 |
|
| $ | 149.1 |
|
| $ | 138.3 |
|
Net Income Available to Common Shareholders |
| $ | 178.9 |
|
| $ | 213.7 |
|
| $ | 161.2 |
|
| $ | 143.7 |
|
| $ | 136.4 |
|
Diluted Earnings per Share of Common Stock: |
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income [GAAP] |
| $ | 3.52 |
|
| $ | 4.33 |
|
| $ | 3.43 |
|
| $ | 3.24 |
|
| $ | 3.16 |
|
Missouri regulatory adjustments |
|
| 0.23 |
|
|
| 0.62 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Unrealized loss (gain) on energy-related derivatives |
|
| 0.03 |
|
|
| (0.08 | ) |
|
| 0.13 |
|
|
| — |
|
|
| (0.07 | ) |
Lower of cost or market inventory adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.01 |
|
|
| 0.01 |
|
Realized (gain) loss on economic hedges prior to the sale of the physical commodity |
|
| — |
|
|
| (0.01 | ) |
|
| (0.01 | ) |
|
| (0.04 | ) |
|
| 0.06 |
|
Acquisition, divestiture and restructuring activities |
|
| 0.01 |
|
|
| 0.28 |
|
|
| 0.09 |
|
|
| 0.21 |
|
|
| 0.23 |
|
Gain on sale of property |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.18 | ) |
Income tax effect of adjustments |
|
| (0.06 | ) |
|
| (0.21 | ) |
|
| (0.08 | ) |
|
| (0.06 | ) |
|
| (0.02 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| — |
|
|
| (1.21 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Weighted average shares adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.06 |
|
|
| — |
|
Net Economic Earnings [Non-GAAP] |
| $ | 3.73 |
|
| $ | 3.72 |
|
| $ | 3.56 |
|
| $ | 3.42 |
|
| $ | 3.19 |
|
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Other data |
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Common Shares Outstanding at Year End |
|
| 51.0 |
|
|
| 50.7 |
|
|
| 48.3 |
|
|
| 45.6 |
|
|
| 43.3 |
|
Common Stock Dividends Declared Per Share |
| $ | 2.37 |
|
| $ | 2.25 |
|
| $ | 2.10 |
|
| $ | 1.96 |
|
| $ | 1.84 |
|
Preferred Stock Dividends Declared Per Depositary Share |
| $ | 0.344 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Capital Expenditures |
| $ | 823.3 |
|
| $ | 499.4 |
|
| $ | 438.1 |
|
| $ | 293.3 |
|
| $ | 289.8 |
|
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|
Item 7. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in millions, except per share and per unit amounts)
INTRODUCTION
This section analyzes the financial condition and results of operations of Spire Inc. (the “Company”), Spire Missouri Inc., and Spire Alabama Inc. Spire Missouri, Spire Alabama and Spire EnergySouth are wholly owned subsidiaries of the Company. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth are collectively referred to as the “Utilities.” The subsidiaries of Spire EnergySouth are Spire Gulf.Gulf and Spire Mississippi. This section includes management’s view of factors that affect the respective businesses of the Company, Spire Missouri and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods, and the effects of such factors on the Company’s, Spire Missouri’s and Spire Alabama’s overall financial condition and liquidity. Unless otherwise indicated, references to years herein are references to the fiscal years ending September 30 for the Company and its subsidiaries.
Reference is made to “Item 1A. Risk Factors” and “Forward-Looking Statements,” which describe important factors that could cause actual results to differ from expectations and non-historical information contained herein. In addition, the following discussion should be read in conjunction with the audited financial statements and accompanying notes thereto of Spire, Spire Missouri and Spire Alabama included in “Item 8. Financial Statements and Supplementary Data.”
OVERVIEW
The Company has two reportable business segments: Gas Utility and Gas Marketing. Nearly all of Spire’s earnings are derived from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the Utilities’ business and the volumetric Spire Missouri rate design, earnings of Spire and each of the Utilities are typically concentrated during the heating season of November through April each fiscal year.
Gas Utility - Spire Missouri
Spire Missouri is Missouri’s largest natural gas distribution utility and is regulated by the MoPSC. Spire Missouri serves St. Louis, and eastern Missouri through Spire Missouri East and serves Kansas City, and western Missouri through Spire Missouri West.other areas throughout the state. Spire Missouri purchases natural gas in the wholesale market from producers and marketers and ships the gas through interstate pipelines into ourits own distribution facilities for sale to residential, commercial and industrial customers. Spire Missouri also transports gas through its distribution system for certain larger customers who buy their own gas on the wholesale market. Spire Missouri delivers natural gas to customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Spire Missouri are primarily generated by the sale of heating energy. The rate design for each service territory serves to lessen the impact of weather volatility on its customers during cold winters and stabilize Spire Missouri’s earnings.
On November 19, 2019, the Missouri Western Court of Appeals issued rulings (“ISRS rulings”) that determined certain capital investments in 2016 through 2018 were not eligible for recovery under the Infrastructure System Replacement Surcharge. The ISRS rulings upheld appeals by the Office of Public Counsel that disallowed recovery of portions of Spire Missouri’s ISRS, overturned three prior MoPSC decisions, and ordered refunds to customers of certain amounts deemed not eligible for ISRS recovery. Ultimately, the MoPSC will define its process to enact the decision and the appropriate refund, if any, at a later date should the decision ultimately stand.
Spire Missouri strongly disagrees with the ISRS rulings, plans to vigorously defend its position, and is evaluating its legal and regulatory options in response. Spire Missouri has recorded an estimate of the maximum impact of the ISRS rulings based on its interpretation of the rulings and evidence available at the time of this filing. As of September 30, 2019, Spire Missouri recorded an estimated $12.2 regulatory liability for this matter by reducing revenue for the fiscal year ended 2019. There are two components of this provision. The first relates to a $4.2 refund ordered by the ISRS rulings for amounts collected prior to the last rate case, after which recoveries of related authorized revenues became part of base rates that went into effect in April 2018. The second component relates to an estimate of $8.0 for revenues associated with the June 2018 ISRS filing that was approved by the MoPSC in September 2018. The after-tax impact of the provision reduced net income by $9.3, or $0.18 per diluted share.
Additional ISRS revenues are currently under appeal related to the January 2019 ISRS filings with annual authorized revenue of $12.4. The estimated amount earned in fiscal year 2019 under this ISRS order was $4.6. Additionally, in future periods Spire Missouri will evaluate the need for an adjustment to the provision based upon new information and further developments.
Gas Utility - Spire Alabama
Spire Alabama is the largest natural gas distribution utility in the state of Alabama and is regulated by the APSC. Spire Alabama’s service territory is located in central and northern Alabama. Among the cities served by Spire Alabama are Birmingham, the center of the largest metropolitan area in the state, and Montgomery, the state capital. Spire Alabama purchases natural gas through interstate and intrastate suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial, and industrial customers and other end-users of natural gas. Spire Alabama also provides transportation services to large industrial and commercial customers located ontransports gas through its distribution system. Thesesystem for certain large commercial and industrial customers for a transportation fee. Effective December 1, 2020, for most of these transportation service customers, using Spire Alabama as their agent or actingalso purchases gas on their own, purchase gas directly from marketers or suppliers and arrangethe wholesale market for sale to the customer upon delivery of the gas intoto the Spire Alabama distribution system. All Spire Alabama charges a feeservices are provided to transport such customer-owned gas through its distribution system tocustomers at rates and in accordance with tariffs authorized by the customers’ facilities.APSC.
Gas Utility - Spire EnergySouth
Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas to approximately 100,000 customers in southern Alabama and south-central Mississippi. Spire Gulf is regulated by the APSC, and Spire Mississippi is regulated by the MSPSC.
Gas Marketing
Spire Marketing Inc. is engaged in the marketing of natural gas and related activities on a non-regulated basis and is reported in the Gas Marketing segment. Spire Marketing markets natural gas to customers across the centralU.S. (and into Canada), including customers inside and southern U.S.outside of the Utilities’ service areas. It holds firm transportation and storage contracts in order to effectively manage its transactions with counterparties, which primarily include producers, municipalities, electric and gas utility companies, and large commercial and industrial customers.
Other
Other components of the Company’s consolidated information include:
• |
|
| Spire STL Pipeline, a subsidiary of Spire |
• | Spire Storage, a subsidiary of Spire providing |
• | Spire’s subsidiaries engaged in the operation of a propane pipeline | |
• | unallocated corporate items, including certain debt and associated interest costs. |
Business Evaluation Factors
Based on the nature of the business of the Company and its subsidiaries, as well as current economic conditions, management focuses on several key variables in evaluating the financial condition and results of operations and managing the business.
For the Gas Utility segment, these include:
• | the Utilities’ ability to recover from their customers the costs of purchasing and distributing natural gas; |
• | the |
• |
|
| changes in the regulatory environment at the federal, state, and local levels, as well as decisions by regulators, that impact the Utilities’ ability to earn the authorized rate of return and recover prudent costs in each of the service territories they serve; |
• |
|
| the |
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|
In the Gas Marketing segment, these include:
• |
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|
|
|
|
|
|
|
|
| the effect of natural gas price volatility on the |
• | the ability to manage costs, integrate and standardize operations, and upgrade infrastructure. |
In the Gas Marketing segment, these include:
• | the risks of competition; |
• | fluctuations and volatility in natural gas prices; |
• | the changing flow and availability of natural gas; |
• | new national infrastructure projects; |
• | the ability to procure firm transportation and storage services at reasonable rates; |
• | credit and/or capital market access; and |
• | counterparty risks. |
Further information regarding how management seeks to manage these key variables is discussed below.
Gas Utility
The Utilities seek to provide reliable natural gas services at a reasonable cost, while maintaining and building secure and dependable infrastructures. The Utilities’ strategies focus on improving both performance and the ability to recover their authorized distribution costs and rates of return. The Utilities’ distribution costs are the essential, primarily fixed, expenditures they must incur to operate and maintain more than 58,00060,000 miles of mains and services comprising their natural gas distribution systems and related storage facilities.
The Utilities’ distribution costs include wages and employee benefit costs, depreciation and maintenance expenses, and other regulated utility operating expenses, excluding natural and propane gas expense. Distribution costs are considered in the rate-making process, and recovery of these types of costs is included in revenues generated through the Utilities’ tariff rates. Spire Missouri’s tariff rates are approved by the MoPSC, whereas Spire Alabama’s tariff rates are approved by the APSC. Spire Gulf and Spire Mississippi have tariff rates that are approved by the APSC and MSPSC, respectively.
Spire Missouri and Spire Alabama also has anhave off-system sales and capacity release income streamstreams that isare regulated by tariff but remainsremain subject to fluctuations in market conditions. Effective April 19, 2018, customers receive 75% and Spire Missouri receives 25% of the net margins achieved as a result of such off-system sales and capacity releases. Before April 19, 2018, the customer share of such income ranged from 70% to 85%.
Some of the factors impacting the level of off-system sales include the availability and cost of Spire Missouri’sSpire’s natural gas supply, the weather in its service areaareas and the weather in other markets. When Spire Missouri’sSpire’s service area experiencesareas experience warmer-than-normal weather while other markets experience colder weather or supply constraints, some of Spire Missouri’sSpire’s natural gas supply is available for off-system sales.sale to third parties not on Spire’s system.
The Utilities work actively to reduce the impact of wholesale natural gas price volatility on their costs by strategically structuring their natural gas supply portfolios to increase their gas supply availability and pricing alternatives. They may also use derivative instruments to hedge against significant changes in the commodity price of natural gas. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Purchased Gas Adjustment (PGA) clause of Spire Missouri, Spire Gulf and Spire Mississippi and the Gas Supply Adjustment (GSA) rider of Spire Alabama allow the Utilities to flow through to customers, subject to prudence review by the public service commissions, the cost of purchased gas supplies, including costs, cost reductions and related carrying costs associated with the use of derivative instruments to mitigate volatility in the cost of natural gas. As of September 30, 2019,2022, Spire Missouri had active derivative positions, but Spire Alabama has had no gas supply derivative instrument activity since 2010. Except in certain situations discussed under the caption “—The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner” under Item 1A, Risk Factors, and in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8, the Utilities believe they will continue to be able to obtain sufficient gas supply. The price of natural gas supplies and other economic conditions may 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.
The Utilities rely on short-term credit and long-term capital markets, as well as cash flows from operations, to satisfy their seasonal cash requirements and fund their capital expenditures. The Utilities access the commercial paper market through a program administered by the holding company, which then loans borrowed funds to the Utilities. The Utilities directly access the long-term bond market. Access to debt markets is dependent on current conditions in the credit and capital markets. Management focuses on maintaining a strong balance sheet and believes the Utilities currently have adequate access to credit and capital markets and will have sufficient capital resources to meet their foreseeable obligations. See the CAPITAL RESOURCES“Capital Resources” section for additional information.
Gas Marketing
Spire Marketing is engaged in the marketing of natural gas and providing energy services to both on-system utility transportation customers and customers outside of the Utilities’ traditional service areas.
Spire Marketing utilizes its natural gas supply agreements, transportation agreements, park and loan agreements, storage agreements and other executory contracts to support a variety of services to its customers at competitive prices. It closely monitors and manages the natural gas commodity price and volatility risks associated with providing such services to its customers through the use of a variety of risk management activities, including the use of exchange-traded/cleared derivative instruments and other contractual arrangements. Spire Marketing is committed to managing commodity price risk while it seeks to expand the services that it now provides. Nevertheless, income from the Gas Marketing operations is subject to more fluctuations in market conditions than the Utilities’ operations.
The Gas Marketing business is directly impacted by the effects of competition in the marketplace, the impacts of new infrastructure, surplus natural gas supplies, and the addition of new demand from exports, power generation and industrial load. Spire Marketing’s management expects a growing need for marketing services across the country as customers manage seasonal variability and marketplace volatility.
In addition to its own operating cash flows, Spire Marketing relies on Spire’s parental guaranties to secure its purchase and sales obligations of natural gas, and it also has access to Spire’s liquidity resources. A large portion of Spire Marketing’s receivables are from customers in the energy industry. It also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure. On a net dollar exposure basis, approximately 75%the majority of Spire Marketing’s customers are utilities or utility affiliates. Although Spire Marketing’s uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from customers are possible and could adversely affect GasSpire Marketing’s liquidity and results of operations.
Spire Marketing carefully monitors the creditworthiness of counterparties to its transactions. It performs in-house credit reviews of potential customers and may require credit assurances such as prepayments, letters of credit or parental guaranties when appropriate. Credit limits for customers are established and monitored.
As a result of infrastructure optimization activities and an abundance of natural gas supply,
Spire Marketing cannot be certain that all of its wholesale purchase and sale transactions will settle physically. As such, certainthese transactions are designated as trading activities for financial reporting purposes, due to their settlement characteristics. Results of operations from trading activities are reported on a net basis in Gas Marketing operating revenues (or expenses, if negative), which may cause volatility in the Company’s operating revenues, but have no effect on operating income or net income.natural gas expenses.
In the course of its business, Spire Marketing enters into commitments associated with the purchase or sale of natural gas. In accordance with U.S. GAAP, some of its purchase and sale transactions are not recognized in earnings until the natural gas is physically delivered, while other energy-related transactions, including those designated as trading activities, are required to be accounted for as derivatives with the changes in their fair value (representing unrealized gains or losses) recorded in earnings in periods prior to settlement. Because related transactions of a purchase and sale strategy may be accounted for differently, there may be timing differences in the recognition of earnings under GAAP and economic earnings realized upon settlement. The Company reports both GAAP and net economic earnings (non-GAAP), as discussed below.in the section “Non-GAAP Measures”.
NON-GAAP MEASURES
Net income, earnings per share and operating income reported by Spire, Spire Missouri and Spire Alabama are determined in accordance with GAAP. Spire, Spire Missouri and Spire Alabama also provide the non-GAAP financial measures of net economic earnings, net economic earnings per share and contribution margin. Management and the Board of Directors use non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting, to determine incentive compensation and to evaluate financial performance. These non-GAAP operating metrics should not be considered as alternatives to, or more meaningful than, the related GAAP measures. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are provided on the following pages.
Net Economic Earnings and Net Economic Earnings Per Share
Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income the impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In fiscal 2019, this included a provision for refunds to customers of amounts previously collected under MoPSC approved orders as a result of the November 2019 ISRS rulings against Spire Missouri. In fiscal 2018, these items included the revaluation of deferred tax assets and liabilities due to the federal Tax Cuts and Jobs Act and the write-off of certain long-standing assets as a result of disallowances in our Missouri rate proceedings. In addition, net economic earnings per share excludeswould exclude the impact, in the fiscal year of issuance, of any shares issued to finance acquisitions that have yet to be included in net economic earnings.
The fair value and timing adjustments are made in instances where the accounting treatment differs from what management considers the economic substance of the underlying transaction, including the following:
• |
| Net unrealized gains and losses on energy-related derivatives that are required by GAAP fair value accounting associated with current changes in the fair value of financial and physical transactions prior to their completion and settlement. These unrealized gains and losses |
1) | changes in the fair values of physical and/or financial derivatives prior to the period of settlement; and |
2) | ineffective portions of accounting hedges, required to be recorded in earnings prior to settlement, due to differences in commodity price changes between the locations of the forecasted physical purchase or sale transactions and the locations of the |
• | Lower of cost or |
• |
|
|
|
|
|
These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transactions occur. Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement and other timing differences associated with related purchase and sale transactions provides a useful representation of the economic effects of only the actual settled transactions and their effects on results of operations. While management uses these non-GAAP measures to evaluate both Spire’s Utilities andall of its other gas-related businesses, the net effect of these fair value and timing adjustments on the Utilities’ earnings is minimal because gains or losses on their natural gas derivative instruments are deferred pursuant to state regulation.
Contribution Margin
In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of contribution margin when evaluating results of operations. Contribution margin is defined as operating revenues less natural and propane gas costs and gross receipts tax expense. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC, APSC or MSPSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses or GSA riders. 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 and gross receipts tax expense (which are calculated as a percentage of revenues), with the same amount (excluding immaterial timing differences) included in revenues, have no direct effect on operating income. Therefore, management believes that contribution margin is a useful supplemental measure, along with the remaining operating expenses, for assessing the Company’s and the Utilities’ performance.
EARNINGS
This section contains discussion and analysis of the results for the year ended September 30, 20192022 compared to the results for the year ended September 30, 2018 and2021. The discussion and analysis of the results for the year ended September 30, 20182021 compared to the results forof the year ended September 30, 2017.2020 can be found in Part II, Item 7 of Spire Inc.’s fiscal 2021 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (SEC) on November 22, 2021.
Overview
The past two years have offered numerous challenges. During severe winter weather in fiscal 2021, we were successful in providing safe, reliable service for our service areas in addition to driving value from investments in transportation and storage capacity we made at Spire Marketing. With regard to the Spire STL Pipeline, while operating under a temporary certificate, we continue to work with regulators and constituents regarding obtaining a permanent certificate. As discussed in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8, we also received an order in our 2021 Missouri rate review which was inconsistent with precedent established by the MoPSC in prior rate cases.
Against this backdrop, the Company continued the important work of upgrading our Utilities’ infrastructure to make our system safer, more reliable and environmentally sustainable. We also further deployed technology, including ultrasonic meters, to improve our service operations and deliver on improved experience for the homes and business we serve.
On the Gas Utility regulatory front, we continue to make progress. Spire Missouri filed a new general rate case on April 1, 2022, seeking full recovery of its updated cost of service, deferred overhead costs, and increased capital investment, as well as a fair and reasonable rate of return. The filing requested a $152 million revenue increase, reflecting a $3.4 billion rate base and a rate of return based on a requested return on equity of 10.5% and a 55% equity capitalization. After local public hearings were completed, the parties reached a Full Unanimous Stipulation and Agreement to resolve all issues in the case which was filed with the MoPSC on November 4, 2022. A hearing regarding this stipulation is currently set for November 18.
This fiscal year also saw progress in Spire's midstream operations. Spire Storage received FERC approval to expand capacity and increase pipeline connectivity at certain of Spire Storage’s natural gas storage facilities in Wyoming. On August 26, 2022, the Company announced that capital expenditures in support of this project will total $195.0 through fiscal years 2023 into 2025.
The following sections present and discuss the financial metrics in total and by registrant and segment.
Spire
Net Income (Loss) and Net Economic Earnings (Loss)
The following tables reconcile the Company’s net economic earnings to the most comparable GAAP number, net income.
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Consol- idated |
|
| Per Diluted Share** |
| |||||
Year Ended September 30, 2019 |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) [GAAP] |
| $ | 190.5 |
|
| $ | 18.5 |
|
| $ | (24.4 | ) |
| $ | 184.6 |
|
| $ | 3.52 |
|
Adjustments, pre-tax: |
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Provision for ISRS rulings |
|
| 12.2 |
|
|
| — |
|
|
| — |
|
|
| 12.2 |
|
|
| 0.23 |
|
Unrealized loss on energy-related derivatives |
|
| — |
|
|
| 1.2 |
|
|
| — |
|
|
| 1.2 |
|
|
| 0.03 |
|
Acquisition, divestiture and restructuring activities |
|
| — |
|
|
| — |
|
|
| 0.4 |
|
|
| 0.4 |
|
|
| 0.01 |
|
Income tax effect of adjustments* |
|
| (2.9 | ) |
|
| (0.3 | ) |
|
| (0.1 | ) |
|
| (3.3 | ) |
|
| (0.06 | ) |
Net Economic Earnings (Loss) [Non-GAAP] |
| $ | 199.8 |
|
| $ | 19.4 |
|
| $ | (24.1 | ) |
| $ | 195.1 |
|
| $ | 3.73 |
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Year Ended September 30, 2018 |
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Net Income [GAAP] |
| $ | 144.4 |
|
| $ | 24.9 |
|
| $ | 44.9 |
|
| $ | 214.2 |
|
| $ | 4.33 |
|
Adjustments, pre-tax: |
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Missouri regulatory adjustments |
|
| 30.6 |
|
|
| — |
|
|
| — |
|
|
| 30.6 |
|
|
| 0.62 |
|
Unrealized gain on energy-related derivatives |
|
| — |
|
|
| (4.0 | ) |
|
| — |
|
|
| (4.0 | ) |
|
| (0.08 | ) |
Realized gain on economic hedges prior to the sale of the physical commodity |
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| (0.3 | ) |
|
| (0.01 | ) |
Acquisition, divestiture and restructuring activities |
|
| 0.2 |
|
|
| — |
|
|
| 13.4 |
|
|
| 13.6 |
|
|
| 0.28 |
|
Income tax effect of adjustments* |
|
| (9.1 | ) |
|
| 1.2 |
|
|
| (2.4 | ) |
|
| (10.3 | ) |
|
| (0.21 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| 17.0 |
|
|
| 1.1 |
|
|
| (78.2 | ) |
|
| (60.1 | ) |
|
| (1.21 | ) |
Net Economic Earnings (Loss) [Non-GAAP] |
| $ | 183.1 |
|
| $ | 22.9 |
|
| $ | (22.3 | ) |
| $ | 183.7 |
|
| $ | 3.72 |
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Year Ended September 30, 2017 |
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Net Income (Loss) [GAAP] |
| $ | 180.5 |
|
| $ | 3.4 |
|
| $ | (22.3 | ) |
| $ | 161.6 |
|
| $ | 3.43 |
|
Adjustments, pre-tax: |
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on energy-related derivatives |
|
| 0.1 |
|
|
| 5.9 |
|
|
| — |
|
|
| 6.0 |
|
|
| 0.13 |
|
Realized gain on economic hedges prior to the sale of the physical commodity |
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| (0.3 | ) |
|
| (0.01 | ) |
Acquisition, divestiture and restructuring activities |
|
| 1.5 |
|
|
| — |
|
|
| 2.5 |
|
|
| 4.0 |
|
|
| 0.09 |
|
Income tax effect of adjustments* |
|
| (0.6 | ) |
|
| (2.2 | ) |
|
| (0.9 | ) |
|
| (3.7 | ) |
|
| (0.08 | ) |
Net Economic Earnings (Loss) [Non-GAAP] |
| $ | 181.5 |
|
| $ | 6.8 |
|
| $ | (20.7 | ) |
| $ | 167.6 |
|
| $ | 3.56 |
|
Per | ||||||||||||||||||||
Gas | Gas | Consol- | Diluted | |||||||||||||||||
Utility | Marketing | Other | idated | Share** | ||||||||||||||||
Year Ended September 30, 2022 | ||||||||||||||||||||
Net Income (Loss) [GAAP] | $ | 198.6 | $ | 35.6 | $ | (13.4 | ) | $ | 220.8 | $ | 3.95 | |||||||||
Adjustments, pre-tax: | ||||||||||||||||||||
Fair value and timing adjustments | — | (11.4 | ) | — | (11.4 | ) | (0.22 | ) | ||||||||||||
Income tax effect of adjustments* | 4.1 | 2.8 | — | 6.9 | 0.13 | |||||||||||||||
Net Economic Earnings (Loss) [Non-GAAP] | $ | 202.7 | $ | 27.0 | $ | (13.4 | ) | $ | 216.3 | $ | 3.86 | |||||||||
Year Ended September 30, 2021 | ||||||||||||||||||||
Net Income (Loss) [GAAP] | $ | 237.2 | $ | 44.8 | $ | (10.3 | ) | $ | 271.7 | $ | 4.96 | |||||||||
Adjustments, pre-tax: | ||||||||||||||||||||
Missouri regulatory adjustments | (9.0 | ) | — | — | (9.0 | ) | (0.17 | ) | ||||||||||||
Fair value and timing adjustments | 0.3 | 3.0 | — | 3.3 | 0.06 | |||||||||||||||
Acquisition, divestiture and restructuring activities | — | — | (1.3 | ) | (1.3 | ) | (0.02 | ) | ||||||||||||
Income tax effect of adjustments* | 2.1 | (0.8 | ) | 0.3 | 1.6 | 0.03 | ||||||||||||||
Net Economic Earnings (Loss) [Non-GAAP] | $ | 230.6 | $ | 47.0 | $ | (11.3 | ) | $ | 266.3 | $ | 4.86 | |||||||||
Year Ended September 30, 2020 | ||||||||||||||||||||
Net Income (Loss) [GAAP] | $ | 213.6 | $ | 7.0 | $ | (132.0 | ) | $ | 88.6 | $ | 1.44 | |||||||||
Adjustments, pre-tax: | ||||||||||||||||||||
Impairments | — | — | 148.6 | 148.6 | 2.89 | |||||||||||||||
Fair value and timing adjustments | (0.3 | ) | 2.8 | — | 2.5 | 0.05 | ||||||||||||||
Income tax effect of adjustments* | 0.1 | (0.7 | ) | (31.3 | ) | (31.9 | ) | (0.62 | ) | |||||||||||
Net Economic Earnings (Loss) [Non-GAAP] | $ | 213.4 | $ | 9.1 | $ | (14.7 | ) | $ | 207.8 | $ | 3.76 |
* | Income tax effect is calculated by applying federal, state and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling items and then adding any estimated effects of enacted state or local income tax laws for periods before the related effective |
** | Net economic earnings per share is calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share |
2019 vs. 2018
Consolidated
Spire’s net income was $184.6 in fiscal 2019, compared with $214.2 in fiscal 2018. Basic and diluted earnings per share were $3.53 and $3.52, respectively, for fiscal 2019 compared with basic and diluted earnings per share of $4.35 and $4.33, respectively, for fiscal 2018. The decrease in net income of $29.6 reflects a $12.2 pre-tax ($9.3 after-tax) reduction in the current year due to ISRS rulings against Spire Missouri, and a $60.1 prior year income benefit relating to the implementation of the Tax Cuts and Jobs Act (TCJA), partly offset by $38.4 in pre-tax ($23.6 after-tax) expense for Missouri rate case write-offs recorded in the prior year. The TCJA is further described in Note 12, Income Taxes, of the Notes to Financial Statements in Item 8.
Excluding these amounts, net income growth was $16.2, driven by higher operating results of the Gas Utility segment primarily attributable to Spire Missouri’s new rate design, higher ISRS charges, higher volumes, and customer growth.
The Gas Marketing segment also experienced strong operating results, as the benefits of geographic expansion have mostly offset the return of more normal market conditions and higher operating expenses.
Net economic earnings were $195.1 ($3.73 per diluted share) for the twelve months ended September 30, 2019, up from $183.7 ($3.72 per diluted share) for the same period last year. Earnings reflect a $16.7 increase for Gas Utility, partly offset by a $3.5 net economic earnings decrease experienced by Gas Marketing and by a $1.8 higher net economic loss in Other. These fluctuations are described in more detail below. Earnings per share and net economic earnings per share were further impacted by the issuance of 2.3 million common shares in May 2018, and the dividends earned from the $250.0 in preferred shares issued in May 2019. Dividends earned on cumulative preferred shares are deducted from net income in the calculation of earnings per share.
Gas Utility
Gas Utility net income increased by $46.1, while net economic earnings increased $16.7 in fiscal 2019 compared to fiscal 2018. Both measures benefited from the 2018 rate case redesign at Spire Missouri, and from weather patterns that were favorable compared to the prior year. Current year net income was negatively impacted by $9.3 in after-tax impacts relating to ISRS rulings against Spire Missouri. Prior-year net income was negatively impacted by the $23.6 after-tax expense related to Missouri rate case write-offs and by a $17.0 one-time tax expense related to the implementation of the TCJA.
Gas Marketing
The Gas Marketing segment reported net income totaling $18.5 for the twelve months ended September 30, 2019, versus net income of $24.9 during the same period last year, with the prior-year period benefitting from favorable fair value mark-to-market valuations and unusually favorable market conditions. Net economic earnings for the twelve months ended September 30, 2019, was $19.4, a decrease of $3.5 from the same period last year as the benefits of geographic expansion were more than offset by a return of more normal market conditions and higher operating expenses.
Other
The Company’s other non-utility activities generated a net loss of $24.4 for fiscal 2019, compared to net income of $44.9 for the same period last year. Fiscal 2018 reflects a $78.2 tax benefit resulting from the implementation of the TCJA, partly offset by higher acquisition and restructuring activities. Net economic loss was $24.1 for fiscal 2019, an increase of $1.8 compared to fiscal 2018. The increased loss reflects higher corporate interest costs and a $15.4 loss from Spire Storage, partially offset by increased allowance for funds used during construction (AFUDC) income for Spire STL Pipeline.
Operating Revenues and Operating Expenses
Reconciliations of contribution margin to the most directly comparable GAAP measure are shown below.
Gas | Gas | |||||||||||||||||||
Utility | Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
Year Ended September 30, 2022 | ||||||||||||||||||||
Operating Income | $ | 339.9 | $ | 46.9 | $ | 21.4 | $ | — | $ | 408.2 | ||||||||||
Operation and maintenance expenses | 413.3 | 14.6 | 37.1 | (15.4 | ) | 449.6 | ||||||||||||||
Depreciation and amortization | 227.9 | 1.4 | 8.0 | — | 237.3 | |||||||||||||||
Taxes, other than income taxes | 176.2 | 0.6 | 2.7 | — | 179.5 | |||||||||||||||
Less: Gross receipts tax expense | (109.6 | ) | (0.2 | ) | — | — | (109.8 | ) | ||||||||||||
Contribution Margin [Non-GAAP] | 1,047.7 | 63.3 | 69.2 | (15.4 | ) | 1,164.8 | ||||||||||||||
Natural gas costs | 788.8 | 171.4 | — | (36.3 | ) | 923.9 | ||||||||||||||
Gross receipts tax expense | 109.6 | 0.2 | — | — | 109.8 | |||||||||||||||
Operating Revenues | $ | 1,946.1 | $ | 234.9 | $ | 69.2 | $ | (51.7 | ) | $ | 2,198.5 |
Gas | Gas | |||||||||||||||||||
Utility | Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
Year Ended September 30, 2021 | ||||||||||||||||||||
Operating Income | $ | 374.0 | $ | 58.5 | $ | 17.7 | $ | — | $ | 450.2 | ||||||||||
Operation and maintenance expenses | 422.2 | 17.1 | 40.2 | (13.7 | ) | 465.8 | ||||||||||||||
Depreciation and amortization | 204.4 | 1.2 | 7.5 | — | 213.1 | |||||||||||||||
Taxes, other than income taxes | 157.0 | 0.9 | 2.2 | — | 160.1 | |||||||||||||||
Less: Gross receipts tax expense | (93.9 | ) | (0.1 | ) | — | — | (94.0 | ) | ||||||||||||
Contribution Margin [Non-GAAP] | 1,063.7 | 77.6 | 67.6 | (13.7 | ) | 1,195.2 | ||||||||||||||
Natural gas costs | 961.7 | 18.8 | 0.1 | (34.3 | ) | 946.3 | ||||||||||||||
Gross receipts tax expense | 93.9 | 0.1 | — | — | 94.0 | |||||||||||||||
Operating Revenues | $ | 2,119.3 | $ | 96.5 | $ | 67.7 | $ | (48.0 | ) | $ | 2,235.5 |
Gas | Gas | |||||||||||||||||||
Utility | Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
Year Ended September 30, 2020 | ||||||||||||||||||||
Operating Income (Loss) | $ | 334.3 | $ | 9.3 | $ | (137.2 | ) | $ | — | $ | 206.4 | |||||||||
Operation and maintenance expenses | 421.3 | 11.8 | 38.2 | (12.7 | ) | 458.6 | ||||||||||||||
Depreciation and amortization | 189.7 | 0.6 | 7.0 | — | 197.3 | |||||||||||||||
Taxes, other than income taxes | 146.5 | 1.1 | 0.8 | — | 148.4 | |||||||||||||||
Impairment loss | — | — | 148.6 | — | 148.6 | |||||||||||||||
Less: Gross receipts tax expense | (91.1 | ) | (0.4 | ) | — | — | (91.5 | ) | ||||||||||||
Contribution Margin [Non-GAAP] | 1,000.7 | 22.4 | 57.4 | (12.7 | ) | 1,067.8 | ||||||||||||||
Natural gas costs | 660.2 | 65.1 | 0.4 | (29.6 | ) | 696.1 | ||||||||||||||
Gross receipts tax expense | 91.1 | 0.4 | — | — | 91.5 | |||||||||||||||
Operating Revenues | $ | 1,752.0 | $ | 87.9 | $ | 57.8 | $ | (42.3 | ) | $ | 1,855.4 |
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Year Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
| $ | 293.4 |
|
| $ | 23.2 |
|
| $ | (14.3 | ) |
| $ | — |
|
| $ | 302.3 |
|
Operation and maintenance expenses |
|
| 441.7 |
|
|
| 11.7 |
|
|
| 31.6 |
|
|
| (10.9 | ) |
|
| 474.1 |
|
Depreciation and amortization |
|
| 179.4 |
|
|
| 0.1 |
|
|
| 2.2 |
|
|
| — |
|
|
| 181.7 |
|
Taxes, other than income taxes |
|
| 151.7 |
|
|
| 0.8 |
|
|
| 1.5 |
|
|
| — |
|
|
| 154.0 |
|
Less: Gross receipts tax expense |
|
| (99.1 | ) |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| (99.3 | ) |
Contribution Margin [Non-GAAP] |
|
| 967.1 |
|
|
| 35.6 |
|
|
| 21.0 |
|
|
| (10.9 | ) |
|
| 1,012.8 |
|
Natural and propane gas costs |
|
| 794.6 |
|
|
| 47.9 |
|
|
| 0.5 |
|
|
| (2.7 | ) |
|
| 840.3 |
|
Gross receipts tax expense |
|
| 99.1 |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 99.3 |
|
Operating Revenues |
| $ | 1,860.8 |
|
| $ | 83.7 |
|
| $ | 21.5 |
|
| $ | (13.6 | ) |
| $ | 1,952.4 |
|
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Year Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
| $ | 276.6 |
|
| $ | 33.8 |
|
| $ | (16.3 | ) |
| $ | — |
|
| $ | 294.1 |
|
Operation and maintenance expenses |
|
| 449.7 |
|
|
| 7.4 |
|
|
| 30.3 |
|
|
| (10.1 | ) |
|
| 477.3 |
|
Depreciation and amortization |
|
| 167.0 |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
| 168.4 |
|
Taxes, other than income taxes |
|
| 152.5 |
|
|
| 0.2 |
|
|
| 0.8 |
|
|
| — |
|
|
| 153.5 |
|
Less: Gross receipts tax expense |
|
| (98.3 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| (98.4 | ) |
Contribution Margin [Non-GAAP] |
|
| 947.5 |
|
|
| 41.3 |
|
|
| 16.2 |
|
|
| (10.1 | ) |
|
| 994.9 |
|
Natural and propane gas costs |
|
| 842.6 |
|
|
| 30.2 |
|
|
| 0.3 |
|
|
| (1.4 | ) |
|
| 871.7 |
|
Gross receipts tax expense |
|
| 98.3 |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 98.4 |
|
Operating Revenues |
| $ | 1,888.4 |
|
| $ | 71.6 |
|
| $ | 16.5 |
|
| $ | (11.5 | ) |
| $ | 1,965.0 |
|
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Year Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
| $ | 340.8 |
|
| $ | 5.2 |
|
| $ | (5.1 | ) |
| $ | — |
|
| $ | 340.9 |
|
Operation and maintenance expenses |
|
| 389.9 |
|
|
| 5.9 |
|
|
| 11.8 |
|
|
| (5.5 | ) |
|
| 402.1 |
|
Depreciation and amortization |
|
| 153.5 |
|
|
| 0.1 |
|
|
| 0.5 |
|
|
| — |
|
|
| 154.1 |
|
Taxes, other than income taxes |
|
| 137.8 |
|
|
| 0.5 |
|
|
| 0.2 |
|
|
| — |
|
|
| 138.5 |
|
Less: Gross receipts tax expense |
|
| (83.0 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| (83.1 | ) |
Contribution Margin [Non-GAAP] |
|
| 939.0 |
|
|
| 11.6 |
|
|
| 7.4 |
|
|
| (5.5 | ) |
|
| 952.5 |
|
Natural and propane gas costs |
|
| 645.9 |
|
|
| 67.6 |
|
|
| 0.3 |
|
|
| (8.7 | ) |
|
| 705.1 |
|
Gross receipts tax expense |
|
| 83.0 |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 83.1 |
|
Operating Revenues |
| $ | 1,667.9 |
|
| $ | 79.3 |
|
| $ | 7.7 |
|
| $ | (14.2 | ) |
| $ | 1,740.7 |
|
Consolidated
Spire’s operating revenues forSelect changes from the twelve monthsyear ended September 30, 2019 were $12.6 lower than2021 to the same periodyear ended September 30, 2022 are summarized in the prior year. Operating revenues decreased by $27.6 at the Gas Utility segmentfollowing table and were $12.1 higherdiscussed below.
Gas | Gas | Other, Net of | ||||||||||||||
Changes from FY21 to FY22 | Utility | Marketing | Eliminations | Consolidated | ||||||||||||
Net Income | $ | (38.6 | ) | $ | (9.2 | ) | $ | (3.1 | ) | $ | (50.9 | ) | ||||
Net Economic Earnings [Non-GAAP] | (27.9 | ) | (20.0 | ) | (2.1 | ) | (50.0 | ) | ||||||||
Operating Revenues | (173.2 | ) | 138.4 | (2.2 | ) | (37.0 | ) | |||||||||
Contribution Margin [Non-GAAP] | (16.0 | ) | (14.3 | ) | (0.1 | ) | (30.4 | ) | ||||||||
Operating Expenses | (8.9 | ) | (2.5 | ) | (4.8 | ) | (16.2 | ) | ||||||||
Interest Expense | 13.2 | |||||||||||||||
Income Tax | (9.6 | ) |
The increase in the Gas Marketing segment. The Gas Utility decrease was due principally to lower gas cost recoveries, rate case TCJA customer givebacks, impacts at Spire Missouri relating to ISRS rulings, and weather/volumetric impacts (net of volume mitigation) that were only partly offset by Missouri rate design changes, higher ISRS, and favorable Spire Alabama Rate Stabilization and Equalization (RSE) renewal and giveback. The Gas Marketing increaseinterest expense was primarily due todriven by higher volumes that offsetlevels of short-term borrowings in fiscal 2022, combined with the impact of slightly lower pricing.
Spire’s contribution margin increased $17.9net long-term debt issuances and higher average short-term interest rates. Short-term rates averaged 1.1% in fiscal 2022 compared with the same twelve-month period last year. to 0.4% for fiscal 2021.
The growthreduction in contribution marginincome taxes was primarily attributable to the Gas Utility segment, up $19.6, with the Missouri Utilities up $11.0 and Spire Alabama up $7.0, with remaining growth from the utilities of Spire EnergySouth. Gas Marketing’s contribution margin was down $5.7, reflecting a declinelower pre-tax book income in basis differentials that was only2022, partly offset by higher volumes combined with geographic expansion. Depreciationa $4.1 charge resulting from Tax Cuts and amortization expenses were higherJobs Act (TCJA) reconciliations from the 2021 Missouri rate order that was issued late in the Gas Utility segment, driven principally by continued infrastructure investment in both the Missouri Utilities and Spire Alabama. Gas Utility operation and maintenance (“O&M”) expenses were lower in the current year driven primarily by the Missouri rate case write-offs in the prior year. These fluctuations are described in more detail below.first quarter of fiscal 2022.
Gas Utility
Operating Revenues –
The $38.6 decrease in Gas Utility net income primarily reflects decreases of $29.2 and $5.3 at Spire Missouri and Spire Alabama, respectively, while the $27.9 decrease in net economic earnings for the segment reflects decreases of $18.5 and $5.3 at Spire Missouri and Spire Alabama, respectively. These results are described in further detail below.
The decrease in Gas Utility operating revenues for fiscal 2019 decreased $27.6 compared to fiscal 2018, and2022 was attributable to the following factors:
Missouri Utilities and Spire Alabama – Lower PGA/GSA gas cost recoveries |
| $ | (30.2 | ) |
Missouri Utilities and Spire Alabama – Rate case TCJA customer giveback |
|
| (24.3 | ) |
Missouri Utilities and Spire Alabama – Volumetric usage |
|
| (12.4 | ) |
Missouri Utilities – Provision for ISRS rulings |
|
| (12.2 | ) |
Missouri Utilities – 2018 rate case resets |
|
| 32.2 |
|
Missouri Utilities – Higher ISRS |
|
| 8.7 |
|
Spire Alabama – RSE: net renewal and giveback |
|
| 4.6 |
|
Customer growth |
|
| 2.7 |
|
All other factors |
|
| 3.3 |
|
Total Variation |
| $ | (27.6 | ) |
Spire Missouri – Fiscal 2021 OFO charges | $ | (195.8 | ) | |
Spire Missouri – Off-system sales and capacity release | (120.1 | ) | ||
Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation) | (9.9 | ) | ||
Spire Missouri and Spire Alabama – Higher PGA/GSA gas cost recoveries | 99.9 | |||
Spire Missouri – 2021 rate order effects | 18.1 | |||
Spire Missouri and Spire Alabama – Higher gross receipts taxes | 15.7 | |||
Spire Alabama – Off-system sales and capacity release | 9.8 | |||
Spire Alabama – RSE: net adjustments | 4.3 | |||
All other factors | 4.8 | |||
Total Variation | $ | (173.2 | ) |
As shown in the table above, theThe decrease in revenues was driven primarily by a $30.2 reduction$199.8 decrease in Spire Missouri gas costs (including $195.8 of cover charges and OFO penalties to certain wholesale customers in the prior year), a $120.1 decrease in Spire Missouri off-system sales, and higher segment weather/volumetric impacts of $9.9. These negative impacts were partly offset by higher PGA/GSA gas cost recoveries of $99.9, an $18.1 increase in revenues as a result of the Spire Missouri 2021 rate case TCJA customer givebacks totaling $24.3, $12.4 attributable to volumetric usage,order, higher segment gross receipts taxes of $15.7, a $9.8 increase in Spire Alabama off-system sales, and a $12.2 impact due to ISRS rulings. These impacts were only partly offset by an increase of $32.2 relating to the rate design changes at Spire Missouri, an$4.3 increase in ISRS of $8.7, a $4.6 increase relatingrevenues due to Spire Alabama’s rate adjustments under the RSE renewal and giveback, and $2.7 attributable to customer growth.mechanism.
Contribution Margin –
The year-over-year decrease in Gas Utility contribution margin was $967.1 for fiscal 2019, a $19.6 increase over the same period last year. The increase was attributable to the following factors:
Missouri Utilities – 2018 rate case resets |
| $ | 32.2 |
|
Missouri Utilities – Higher ISRS |
|
| 8.7 |
|
Missouri Utilities and Spire Alabama – Volumetric usage |
|
| 5.1 |
|
Spire Alabama – RSE: net renewal and giveback |
|
| 4.6 |
|
Customer growth |
|
| 2.7 |
|
Missouri Utilities and Spire Alabama – Rate case TCJA customer giveback |
|
| (24.3 | ) |
Missouri Utilities – Provision for ISRS rulings |
|
| (12.2 | ) |
All other factors |
|
| 2.8 |
|
Total Variation |
| $ | 19.6 |
|
Spire Missouri – Off-system sales and capacity release | $ | (26.3 | ) | |
Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation) | (9.2 | ) | ||
Spire Missouri – 2021 rate order effects | 18.1 | |||
Spire Alabama – RSE: net adjustments | 3.8 | |||
Spire Alabama – Off-system and capacity release | 1.5 | |||
All other factors | (3.9 | ) | ||
Total Variation | $ | (16.0 | ) |
The increase wascontribution margin decrease resulted primarily attributable to the $32.2 increase resulting from the 2018lower Missouri rate cases resets. Contribution margin also benefited from $8.7 higher ISRS charges, $5.1 due to volumes and colder weather in the current year (net of weather mitigation), a $4.6 increase relating to Spire Alabama’s RSE renewal and giveback, and $2.7 attributable to customer growth. These positive impacts were only partly offset by rate case TCJA customer givebacks totaling $24.3 from bothoff-system sales, Spire Missouri and Spire Alabama volumetric impacts of $9.2, partly offset by an $18.1 increase resulting from the 2021 Missouri rate order, Spire Alabama rate adjustments under the RSE mechanism, and $12.2higher volumetric margins. The lower off-system sales and volumetric impacts were primarily the result of the extreme weather conditions from Winter Storm Uri in February 2021.
Reported O&M expenses decreased $8.9. O&M decreased by $9.8 after excluding the impacts of the Non-service Cost Transfer of $4.4, the $9.0 attributable to the Missouri Supreme Court ruling that partially reversed 2018 rate order pension cost disallowances, and $3.7 due to one-time cost adjustments relating to ISRS rulings againststipulations settled in the 2021 Spire Missouri.
Operating Expenses – Gas Utility O&M expenses for the twelve months ended September 30, 2019 decreased $8.0 from last year. Removing last year’s $38.4 of Missouri rate case write-offs,order. This decrease is due primarily to lower employee-related costs and the $19.6 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $10.8. Of this increase, $9.0 relates to higher employee benefits and energy efficiency costs that resulted from the 2018 Missouri rate cases.lower bad debt expense. Depreciation and amortization expenses for the twelve monthsyear ended September 30, 20192022 increased $12.4$24.2 from the same period lastprior year, principally the result of continued infrastructure capital spending, with $8.7$16.1 of the increase attributable to Spire Missouri and $3.0$4.7 attributable to Spire Alabama. Included in the Spire Missouri increase is a $3.4 charge pertaining to meter cost recovery that was disallowed by the MoPSC. Taxes, other than income taxes, increased $19.2, and were driven by the higher pass-through gross receipts taxes mentioned earlier, combined with higher property taxes resulting from the continued infrastructure build-out by the utilities.
Gas Marketing
Operating Revenues –
Both net income and net economic earnings reflect the strong operating results in the prior year, driven by storage positions that resulted in optimization of market conditions in the second quarter of fiscal 2021 due to extreme weather as a result of Winter Storm Uri. Current year incremental optimization of storage and transportation assets in the Southeast during the third and fourth quarters of fiscal 2022 and favorable fair value adjustments only partly offset the benefits from the extreme weather in the prior year.
The variance in revenues primarily reflects higher commodity pricing in fiscal 2022.
Gas Marketing contribution margin decreased $14.3 from the same period last year, driven principally by strong second quarter results in fiscal 2021. During the second quarter of fiscal 2021, the February cold weather events drove significantly higher regional basis differentials and volumes, which were only partly offset by favorable year-over-year fair value adjustments of $14.4 and incremental optimization of storage and transportation assets in the Southeast during the third and fourth quarters of fiscal 2022.
Other
The Company’s other non-utility activities generated a $3.1 higher net loss for fiscal 2022. Included in those results were higher interest and corporate costs in the current year. Other operating revenue increased $1.5, driven principally by Spire STL Pipeline and Spire Storage. Other operating expenses were $3.1 lower than the prior year, primarily reflecting lower current year operating expenses at Spire Storage and STL Pipeline.
Spire Missouri
Year Ended September 30, | ||||||||
2022 | 2021 | |||||||
Operating Income | $ | 204.0 | $ | 228.6 | ||||
Operation and maintenance expenses | 255.7 | 261.1 | ||||||
Depreciation and amortization | 145.3 | 129.2 | ||||||
Taxes, other than income taxes | 129.0 | 110.9 | ||||||
Less: Gross receipts tax expense | (79.6 | ) | (64.3 | ) | ||||
Contribution Margin [Non-GAAP] | 654.4 | 665.5 | ||||||
Natural gas costs | 587.0 | 786.8 | ||||||
Gross receipts tax expense | 79.6 | 64.3 | ||||||
Operating Revenues | $ | 1,321.0 | $ | 1,516.6 | ||||
Net Income | $ | 114.9 | $ | 144.1 |
The $195.6 decrease in operating revenues reflects a $120.1 decrease in 0ff-system sales and lower gas costs of $109.5 (as commodity cost recovery increases in the current year of $86.3 were more than offset by last year's $195.8 of cover charges and OFO penalties to certain wholesale customers). Partly offsetting these negative impacts were an $18.1 increase in operating revenues due to the 2021 Missouri rate order, a $15.3 increase in gross receipts taxes, and a $3.4 increase in volumetric impacts as underlying increases in economic activity more than offset the impact of warmer weather in the current year.
Temperatures in Spire Missouri’s service areas during fiscal 2022 were 5.7% warmer than during fiscal 2021 and 9.5% warmer than normal. The Spire Missouri total system volume sold and transported was 1,602.8 million centum of cubic feet (CCF) for the year ended September 30, 2019 increased $12.12022, compared with 1,666.9 million CCF last year. Total off-system volume sold and transported was 19.1 million CCF for fiscal 2022, compared with 21.9 million for fiscal 2021.
Contribution margin decreased $11.1 from the prior year. The variance was attributable to a $26.3 decrease in revenues reflectsoff-system sales and $2.0 lower volumetric margins (both principally due to the effectextreme weather in February of a $9.3 favorable mark-to-market adjustment on derivatives combined with higher total volumes,the prior year), which were only partly offset by the impact of marginally lower general pricing levels. Average commodity pricing for the year ended September 30, 2019 was approximately $2.670/MMBtu versus approximately $2.681/MMBtu for fiscal 2018, a decrease of $0.011/MMBtu.
Contribution Margin – Gas Marketing contribution margin was $35.6 for fiscal 2019, a $5.7 decrease comparedpreviously mentioned $18.1 increase relating to the same period last year. This reflects geographic expansion that created additional opportunities2021 Missouri rate order.
Excluding the Non-service Cost Transfer of $3.5, the Missouri Supreme Court ruling totaling $9.0 and the $3.7 due to optimize the segment’s supply, transportation and storage portfolio that was more than offset by a returnone-time cost adjustments relating to more normal market conditions, reflectedstipulations settled in the narrowed basis differentials in the current year.
Other
Other operating revenue increased $5.0 for the year ended September 30, 2019 compared to 2018, driven principally by gas storage revenues and slightly higher reinsurance premiums. Other operating2021 Spire Missouri rate order discussed above, O&M expenses were $1.3 higher than the prior year primarily due to gas storage operations.
Interest Charges
Consolidated interest charges during the year ended September 30, 2019 increased $6.0 versus the prior2022, decreased $7.2 from last year. The increasedecrease in O&M was primarily driven by netlower employee-related costs. Depreciation increased by $16.1 as a result of continuing capital investment and a $3.4 charge pertaining to disallowed meter cost recovery by the MoPSC. Taxes, other than income taxes, increased $18.1, driven by the higher pass-through gross receipts taxes and higher property taxes resulting from the continued infrastructure build-out.
Spire Missouri’s other expense was $2.0 lower, as the increase of $3.5 due primarily to the Non-service Cost Transfer expense and decreases in the fair value of investments associated with non-qualified employee benefit plans reflecting market conditions were more than offset by miscellaneous income. Interest expense increased $10.6, reflecting higher levels of long-term debt issuances and higher rates and levelsshort-term interest rates. Income tax expense for the current year was lower by $4.0, as the impact of short-term borrowings. Short-term rates averaged 2.7%lower pre-tax book income was partly offset by a $4.1 charge resulting from TCJA reconciliations from the 2021 Missouri rate order that was completed late in the first quarter of fiscal 2022.
Spire Alabama
Year Ended September 30, | ||||||||
2022 | 2021 | |||||||
Operating Income | $ | 112.6 | $ | 117.0 | ||||
Operation and maintenance expenses | 130.1 | 132.5 | ||||||
Depreciation and amortization | 66.8 | 62.1 | ||||||
Taxes, other than income taxes | 38.1 | 37.1 | ||||||
Less: Gross receipts tax expense | (25.5 | ) | (25.1 | ) | ||||
Contribution Margin [Non-GAAP] | 322.1 | 323.6 | ||||||
Natural gas costs | 161.5 | 145.3 | ||||||
Gross receipts tax expense | 25.5 | 25.1 | ||||||
Operating Revenues | $ | 509.1 | $ | 494.0 | ||||
Net Income | $ | 68.5 | $ | 73.8 |
The $15.1 increase in operating revenues reflects a $13.6 increase in gas cost recoveries pursuant to the GSA mechanism, off-system sales in the current year versus 2.0% forcontributing $9.8 to revenue growth, and $4.3 higher net rate adjustments under the prior year and, for the years ended September 30, 2019 and 2018, average short-term borrowings were $574.5 and $408.6, respectively. Partly offsetting these factors was an increase in the non-cash AFUDC income for Spire STL Pipeline compared to the prior year.
Income Taxes
Consolidated income tax expense during the year ended September 30, 2019 was $34.5, compared to a $26.5 tax benefit for fiscal 2018. This increase of $61.0 is primarily the result of the $60.1 fiscal 2018 revaluation benefit of deferred tax assets and liabilities on the balance sheet that were not reflected in net economic earnings. The remaining increase in income tax is primarily the result of the effects of higher pre-tax book income in the current year, partly offset by an increase in amortization of excess deferred income taxes.
Spire Missouri
Summary Operating Results
|
| Year ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Operating Income |
| $ | 174.8 |
|
| $ | 158.5 |
|
Operation and maintenance expenses |
|
| 268.1 |
|
|
| 279.1 |
|
Depreciation and amortization |
|
| 111.5 |
|
|
| 102.8 |
|
Taxes, other than income taxes |
|
| 107.6 |
|
|
| 108.4 |
|
Less: Gross receipts tax expense |
|
| (71.1 | ) |
|
| (68.9 | ) |
Contribution Margin [Non-GAAP] |
|
| 590.9 |
|
|
| 579.9 |
|
Natural and propane gas costs |
|
| 629.8 |
|
|
| 636.8 |
|
Gross receipts tax expense |
|
| 71.1 |
|
|
| 68.9 |
|
Operating Revenues |
| $ | 1,291.8 |
|
| $ | 1,285.6 |
|
Net Income |
| $ | 115.0 |
|
| $ | 129.3 |
|
Operating revenues during the year ended September 30, 2019 increased $6.2 from the same period last year. Revenues were impacted primarily by the $9.4 increase attributable to the new rate design (net of TCJA giveback), combined with higher ISRS charges of $8.7, and customer growth of $2.7.RSE mechanism. These positivefavorable impacts on the revenue growth were partly offset by $12.2 in impacts relating to ISRS rulings and volume impacts (net of weather mitigation) of $3.6.
Contribution margin for the year ended September 30, 2019 increased $11.0 from the prior year. Contribution margin benefited from the $9.4 increasea $13.3 reduction attributable to the new rate design (net of TCJA giveback), combined with higher ISRS charges of $8.7, customer growth of $2.7, and the $2.8 increase due to the combined impacts of volumetric usage and higher off-system sales. These positive impacts were only partly offset by the $12.2 in adjustments relating to the ISRS rulings.
O&M expenses for the year ended September 30, 2019 were $11.0 lower than the prior year. Removing last year’s $38.4 of Missouri rate case write-offs, and the $16.9 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $10.5. Of this increase, $9.0 relates to higher employee benefits and energy efficiency costs that resulted from the 2018 Missouri rate cases. Depreciation and amortization increased $8.7, reflecting continued infrastructure investments throughout Missouri. Interest expense in the current year was $2.8 greater than prior year, the result of higher short-term borrowings and higher average effective interest rates. Income taxes were $45.9 higher for the year ended September 30, 2019 versus the prior year. This increase is primarily the result of the $45.2 fiscal 2018 revaluation benefit of deferred tax assets and liabilities on the balance sheet.
Temperatures experienced in the Missouri Utilities’ service area during fiscal 2019 were 5% colder than the prior year and 8% colder than normal. Total system therms sold and transported were 1,805.7 million for fiscal 2019 compared with 1,759.8 million for fiscal 2018, an increase of 3%. Total off-system therms sold and transported outside of Spire Missouri’s service area decreased 44% to 38.5 million for fiscal 2019 compared with 68.6 million for fiscal 2018. The decrease in off-system therms was the direct result of the increase in demand experienced for system therms.
Spire Alabama
Summary Operating Results
|
| Year ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Operating Income |
| $ | 95.5 |
|
| $ | 96.6 |
|
Operation and maintenance expenses |
|
| 142.6 |
|
|
| 138.8 |
|
Depreciation and amortization |
|
| 56.2 |
|
|
| 53.2 |
|
Taxes, other than income taxes |
|
| 35.7 |
|
|
| 36.1 |
|
Less: Gross receipts tax expense |
|
| (23.7 | ) |
|
| (25.4 | ) |
Contribution Margin [Non-GAAP] |
|
| 306.3 |
|
|
| 299.3 |
|
Natural and propane gas costs |
|
| 135.5 |
|
|
| 176.0 |
|
Gross receipts tax expense |
|
| 23.7 |
|
|
| 25.4 |
|
Operating Revenues |
| $ | 465.5 |
|
| $ | 500.7 |
|
Net Income |
| $ | 60.3 |
|
| $ | 1.3 |
|
Operating revenues for the year ended September 30, 2019 decreased $35.2 versus the comparable period ended September 30, 2018. Of the decrease, $27.8 related to lower gas cost recoveries, $8.8 was the result of weather and usage impacts, $1.7 was attributable to lower gross receipt taxes, along with approximately $1.5 associated with rate reductions to customers due to tax savings from the TCJA. Partly offsetting these negative impacts was a $4.6 increase relating to favorable RSE renewal and giveback.
Contribution margin increased $7.0 versus the prior year, as a favorable RSE adjustment of approximately $4.6 and a $3.9 increase due to weather/volumetric impacts (net ofthat were impacted by weather mitigation) were only slightly offset by the $1.5 impact of the customer rate reduction resulting from the TCJA.mitigation.
O&M expenses for the year ended September 30, 2019 increased $3.8 versus the year ended September 30, 2018. Removing the $2.4 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $1.4. Depreciation and amortization was $3.0 higher versus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory.
Interest expense increased $4.4. The increase was primarily driven by net long-term debt issuances and higher rates and levels of short-term borrowings. Income tax expense is $61.1 lower than the prior year, primarily the result of 2018 being burdened with the $60.7 deferred tax revaluation impact resulting from the implementation of the TCJA.
Temperatures in Spire Alabama’s service area during fiscal 2022 were 4.1% warmer than during fiscal 2021 and 9.7% warmer than normal. Spire Alabama’s total system volume sold and transported was 1,010.8 million CCF during the year ended September 30, 2019 were 6% warmer than last year, and approximately 6% warmer than historical norms. Spire Alabama’s total therms sold and transported were 1,083.1 million for the year ended September 30, 2019,2022, compared with 1,020.81,009.4 million last year, a 6% increase.CCF during the prior year. Off-system sales volume for fiscal 2022 totaled 63.1 million CCF compared with 47.5 million CCF for fiscal 2021.
2018 vs. 2017
Consolidated
Spire’s net incomeContribution margin decreased $1.5, which was $214.2 in fiscal 2018, compared with $161.6 in fiscal 2017. Basic and diluted earnings per share were $4.35 and $4.33, respectively, for fiscal 2018 compared with basic and diluted earnings per share of $3.44 and $3.43, respectively, for fiscal 2017. Net economic earnings were $183.7 (or $3.72 per share) in fiscal 2018, compared with $167.6 (or $3.56 per share) in fiscal 2017, an increase of $16.1. Net income increased in fiscal 2018 compared to fiscal 2017 primarily due to a $67.2 expense decrease from other activities, a $21.5 net income increase in the Gas Marketing segment, offset by a $36.1 net income decline in the Gas Utility segment. For the current year, both net income per share and net economic earnings per share were impacted by 2.3 million shares that were issued May 10, 2018. The key drivers of variances are discussed in detail below.
Gas Utility
Gas Utility net income decreased by $36.1, while net economic earnings increased $1.6 in fiscal 2018 compared to fiscal 2017. Both measures benefited from weather patterns that were significantly favorable to the prior year, with temperatures in the Utilities’ territories being near normal, versus 28% warmer than normal in the prior year, combined with a lower federal tax rate resulting from the implementation of the TCJA net of amounts reflected in lower customer rates. These favorable impacts were partly offset by the rates changes in the Missouri Utilities effective during the third quarter asprincipally a result of two rate cases. Net incomeunfavorable weather/volumetric impacts totaling $7.2. This negative impact was further negatively impacted by the $23.6 after-tax charge related to certain recoveries being disallowed by the MoPSC as a result of those rate case proceedings.
Gas Marketing
Gas Marketing reported net income totaling $24.9, an increase of $21.5 compared with the same period last year. Net economic earnings for fiscal 2018 increased $16.1 from fiscal 2017. The increase in both net income and net economic earnings was attributable to improved market conditions resulting from colder weather and increased temperature volatility in the current year that increased value from regional basis differentials (spreads) and storage and transportation optimization. Net income also benefited from favorable mark-to-market fair value adjustments and the implementation of the TCJA. Further details are discussed in the Gas Marketing section below.
Other
The Company’s other non-utility activities generated net income of $44.9 for fiscal 2018, compared to a $22.3 net loss for the same period last year. This favorable variance was driven primarily by a $78.2 tax benefit resulting from the implementation of the TCJA, partlymostly offset by higher acquisitionnet favorable RSE adjustments of $3.8 and restructuring activities. Net economic loss was $22.3 for fiscal 2018, an increase of $1.6 compared to fiscal 2017. The increased loss reflects higher after-tax interest and other corporate costs, partially offset by an increase in non-cash earnings related to STL Pipeline.
Operating Revenues and Operating Expenses
Consolidated
Spire reported operating revenues of $1,965.0 for the year ended September 30, 2018 compared with $1,740.7 for the year-ended September 30, 2017. The increase was driven primarily by the Utilities, the result of higher gas costs passed on to customers in both Missouri and Alabama, higher volumetric demand driven principally by colder weather, higher gross receipt taxes, and higher ISRS charges at Spire Missouri. These positive drivers were partly offset by the negative impact of new rates implemented in the Spire Missouri territory in April 2018, lower off-system sales at Spire Missouri, and the timing of return of tax savings to Spire Alabama customers. Spire’s contribution margin increased $42.4 for the year ended September 30, 2018, compared to the prior year. The increase was primarily due to higher contribution margincontributing $1.5 in the Gas Marketing and Gas Utility segments of $29.7 and $8.5, respectively, combined with an $8.8 increase in contribution margin from the Company’s other non-utility activities. O&M expenses increased $75.2 for the year ended September 30, 2018 as compared to the prior year, as discussed below. Depreciation and amortization expenses increased $14.3, driven principally by continued infrastructure investment at Spire Missouri and Spire Alabamagrowth in fiscal 2018.
Gas Utility
Operating Revenues – Gas Utility operating revenues for fiscal 2018 increased $220.5 compared to fiscal 2017, and was attributable to the following factors:
Missouri Utilities and Spire Alabama – Higher PGA/GSA gas cost recoveries | $ | 149.2 |
|
Missouri Utilities and Spire Alabama – Volumetric usage | 99.3 |
| |
Missouri Utilities and Spire Alabama – Higher gross receipts taxes | 14.9 |
| |
Spire EnergySouth revenue growth | 6.6 |
| |
Missouri Utilities – Higher ISRS | 5.2 |
| |
Missouri Utilities – Customer growth | 2.6 |
| |
Missouri Utilities – Off-system sales and capacity release | (28.3 | ) | |
Missouri Utilities – New rate design implementation | (20.6 | ) | |
Spire Alabama – Customer rate reductions resulting from TCJA | (11.2 | ) | |
All other factors | 2.8 |
| |
Total Variation | $ | 220.5 |
|
As shown in the table above, Gas Utility revenue posted a year-over-year increase of $220.5. The growth was driven by $149.2 higher gas cost recoveries at both Spire Missouri and Spire Alabama, $99.3 due to volumetric usage primarily related to colder weather in fiscal 2018, higher gross receipt taxes resulting from the higher current year revenues, growth at Spire EnergySouth and increases due to Spire Missouri customer growth. Partly offsetting these gains were $28.3 in lower off-system sales at Spire Missouri as higher demand for system sales reduced gas availability, the new rate design implementation at Spire Missouri, and customer rate reductions at Spire Alabama due to tax savings from the TCJA.
Contribution Margin – Gas Utility contribution margin was $947.5 for fiscal 2018, a $8.5 increase over the same period last year. The increase was attributable to the following factors:
Missouri Utilities and Spire Alabama – Volumetric usage | $ | 29.2 |
|
Missouri Utilities – Higher ISRS | 5.2 |
| |
Missouri Utilities – Customer growth | 2.6 |
| |
Missouri Utilities – New rate design implementation | (20.6 | ) | |
Spire Alabama – Customer rate reductions resulting from TCJA | (11.2 | ) | |
All other factors | 3.3 |
| |
Total Variation | $ | 8.5 |
|
The increase was primarily attributable to the $29.2 increase resulting from higher volumetric usage. Temperatures in the Spire Missouri territory experienced heating degree days that were 29% colder than last year and 3% colder than normal. Heating degree days in the Spire Alabama service areas in fiscal 2018 were 51% colder than the prior year and were close to normal. Contribution margin also benefited from higher ISRS charges and customer growth at Spire Missouri. These positive impacts were partly offset by a $20.6 reduction at the Missouri Utilities due to the April 2018 implementation of new rates that lowered the fixed monthly charge and increased the volumetric component. This results in the shifting of revenues from the April through October time period to November through March, the period when the highest volume of gas is used by customers. At Spire Alabama, contribution margin was negatively impacted by $11.2 resulting from the timing of rate reductions to customers due to tax savings from the TCJA.
Operating Expenses – O&M expenses increased $59.8 for the year ended September 30, 2018 compared to the prior year.2022. Excluding the impact of the $36.6Non-Service Cost Transfer of disallowed recoveries at Spire Missouri resulting from$0.9, the MoPSC rulingsdecrease in O&M of $1.5 was driven by lower operations and employee-related costs. Depreciation expense was up $4.7 reflecting the continued infrastructure investments being made in the rate cases completedterritory.
LIQUIDITY AND CAPITAL RESOURCES
Recent Cash Flows
2022 | 2021 | 2020 | ||||||||||
Net cash provided by operating activities | $ | 55.0 | $ | 249.8 | $ | 469.9 | ||||||
Net cash used in investing activities | (546.7 | ) | (622.0 | ) | (631.6 | ) | ||||||
Net cash provided by financing activities | 500.9 | 379.4 | 160.0 |
Net cash provided by operating activities decreased $194.8 from 2021 to 2022 and decreased $220.1 from 2020 to 2021. In addition to the changes in March 2018, O&M expensesnet income between the respective periods (discussed above), the remaining changes were $23.2 above prior year levels due primarilyrelated to $15.9 growth at Spire Missouriregulatory timing and $10.6 growth at Spire Alabama, partly offset by a $3.3 reduction experienced by Spire EnergySouth. The O&M growthfluctuations in working capital items, as discussed below in the Future Cash Requirements section. More specifically, when looking at the Missouri Utilities and Spire Alabama were attributablechange from 2020 to 2021, the large increase in accounts receivable was due to the colderFebruary 2021 cold weather with higher employee-relatedevent and the related delayed collections. In addition, this significant cold weather event impacted other areas, including increased inventories to ensure supply and increased accounts payable as related gas costs and bad debt expense at both Spire Missouri and Spire Alabama in the current year. Spire Missouri was also impacted by a $5.8 increase in pension and postretirement amortization expenses resulting from the rate cases.had risen. For more information, aboutsee the Missouri rate cases, see discussion of Spire Missouri’s Operational Flow Order in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. Taxes other
In fiscal 2022, the Company's net cash used in investing activities was $75.3 less than income taxes were $14.7 higher in the current year,fiscal 2021, primarily driven by a $15.3 increase related to higher gross receipt taxes due to$72.6 decrease in capital expenditures. The drivers of the higher revenues. Depreciationlower capital expenditures were a $61.8 spending decline in the Utilities, a $8.1 decline for Spire Storage, and amortization expenses fora slight decline at Spire STL Pipeline.
In fiscal 2021, the year ended September 30, 2018 increased $13.5 from the prior year, $9.7 due to Spire Missouri and $3.3 relating to Spire Alabama, principally the result of continued infrastructure capital spendingCompany used $9.6 less cash in investing activities than in fiscal 2018.
Gas Marketing
Operating Revenues – Gas Marketing operating revenue for the year ended September 30, 2018 decreased $7.7 from the prior year. The variance in revenues reflects the impact of lower general pricing levels, partly offset by the effect of favorable $10.5 mark-to-market adjustments on derivatives and slightly higher total volumes. Average commodity pricing for the year ended September 30, 2018 was approximately $2.680/MMBtu versus approximately $2.897/MMBtu for fiscal 2017, a decrease of $0.217/MMBtu.
Contribution Margin – Gas Marketing contribution margin was $41.3 for fiscal 2018, a $29.7 increase compared to the same period last year, with that variance significantly impacted by favorable fair value adjustments on derivative holdings in the current year, and unfavorable adjustments in the prior year. Removing these fair value adjustments from both periods, contribution margin is $19.8 higher than last year, reflecting higher storage and transportation optimization, and capturing large basis differentials (spreads) during the cold weather in the current year.
Other
Other operating revenue increased $8.8 for the year ended September 30, 2018 compared to 2017, driven by higher reinsurance premiums and gas storage revenues. Other operating expenses were $19.9 higher than the prior year, with $15.7 of the increase driven by acquisitions of gas storage operations, and the remaining increase due to costs related to the reinsurance premiums.
Interest Charges
Consolidated interest charges during the year ended September 30, 2018 increased $9.3 versus the prior year. The increase was2020, primarily driven by a $13.6 decrease in capital expenditures. The primary driver of the lower capital expenditures was a $53.3 decline related to Spire Missouri’s issuance of $170.0 in long-term debt in September 2017,STL Pipeline and Spire Alabama’s issuance of $75.0 of long-term debt: $30.0 on December 1, 2017, and $45.0 on January 12, 2018. Also, short-term rates averaged 2.0% in the current year versus 1.2% for the prior year, which was only partly offset with lower average borrowings outstanding. For the years ended September 30, 2018 and 2017, average short-term borrowings were $408.6 and $485.8, respectively.
Income Taxes
Consolidated income tax expense during the year ended September 30, 2018, decreased $104.1, primarily as a result of the TCJA enacted in December 2017. Of the decrease, $60.1 is the result of the revaluation of deferred tax assets and liabilities on the balance sheet that were not reflected in net economic earnings. The remaining reduction in income tax is primarily the result of a decrease in current year federal income tax rate due to tax reform, combined with the effects of lower pre-tax book income. The effective tax rate in fiscal 2018 was (14.1%) compared to 32.4% in fiscal 2017.
Spire Missouri
Summary Operating Results
Year ended September 30, | 2018 |
| 2017 | ||||
Operating Income | $ | 158.5 |
|
| $ | 214.1 |
|
Operation and maintenance expenses | 279.1 |
|
| 226.6 |
| ||
Depreciation and amortization | 102.8 |
|
| 93.1 |
| ||
Taxes, other than income taxes | 108.4 |
|
| 99.8 |
| ||
Less: Gross receipts tax expense | (68.9 | ) |
| (60.0 | ) | ||
Contribution Margin (non-GAAP) | 579.9 |
|
| 573.6 |
| ||
Natural and propane gas costs | 636.8 |
|
| 538.3 |
| ||
Gross receipts tax expense | 68.9 |
|
| 60.0 |
| ||
Operating Revenues | $ | 1,285.6 |
|
| $ | 1,171.9 |
|
Net Income | $ | 129.3 |
|
| $ | 113.0 |
|
Operating revenues during the year ended September 30, 2018 increased $113.7 from the same period last year. Revenues were impacted primarily by higher gas costs of $83.7 passed on to customers, a $61.1 increase due to weather and volumetric impacts, higher gross receipts taxes of $8.9, higher ISRS charges of $5.2, and customer growth of $2.6. These positive impacts on the revenue growth were partlyStorage, largely offset by a $28.3 reduction$42.6 capital spending increase at Gas Utility, where the focus remained on infrastructure upgrades and new business development.
Net cash provided by financing activities was up $121.5 in off-system sales and a $20.6 reduction duefiscal 2022 compared to the implementation of the two Missouri rate cases thatfiscal 2021. Current year short-term debt, net issuances were resolved in March 2018.
Contribution margin for the year ended September 30, 2018 increased $6.3 from the prior year. Higher volumetric/weather impacts and ISRS charges of $17.0 and $5.2, respectively, combined with customer growth impacts of $2.6, were partly offset by a $20.6 reduction due to two Missouri rate cases (as noted above).
O&M for the year ended September 30, 2018 were $52.5$365.5, or $341.5 higher than in fiscal 2021. In addition, the prior year. Of this increase, $36.6 was due to disallowed recoveries resultingcombination of lower net repayments of long-term debt ($59.6) and higher cash generated from the MoPSC rulings in the rate cases completed in March 2018, and $7.0 was primarily related to an increase in the amount of amortization for pension and postretirement costs resulting from those rate cases. Excluding these rate case impacts, O&M increased $8.9, attributable to the colder weather, with higher employee-related costs and bad debt expense in the current year. Depreciation and amortization increased $9.7, reflecting continued infrastructure investments throughout Missouri. Interest expense in the current year was $7.3 greater than prior year, the result of the issuance of $170.0common stock ($50.9) in fiscal 2022 contributed $110.5 to the year-over-year increase. A significant offset to these increases was a $329.1 decline in cash generated from the issuance of long-term debt, coupled with $8.7 higher common stock dividend payments.
Net cash provided by financing activities was up $219.4 in September 2017,fiscal 2021 compared to fiscal 2020. In fiscal 2021, long-term debt issuances were $629.1, or $119.1 higher than in fiscal 2020, and the combination of lower net repayments of both long-term and short-term debt in fiscal 2021 contributed $150.8 to the year-over-year increase. Partially offsetting these increases was a $40.1 decline in cash generated from common stock issuances and $5.2 higher common stock dividend payments.
Future Cash Requirements
The Company’s short-term borrowingsborrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when they purchase natural gas and higher average effective interest rates. Income taxes were $80.1 lowerwhen their customers pay for the year ended September 30, 2018 versus the prior year, as described earlier.
Temperatures experiencedthat gas. Changes in the Missouri Utilities’ service area during fiscal 2018 were 29% colder than they prior year and 3% colder than normal. Total system therms sold and transported were 1,759.8 millionwholesale cost of natural gas (including cash payments for fiscal 2018 comparedmargin deposits associated with 1,482.1 million for fiscal 2017, an increase of 19%. Total off-system therms sold and transported outside of Spire Missouri’s service area decreased 61% to 68.6 million for fiscal 2018 compared with 175.6 million for fiscal 2017. The decreaseuse of natural gas derivative instruments), variations in off-system therms was the direct result of the increase in demand experienced for system therms.
Spire Alabama
Summary Operating Results
Year ended September 30, | 2018 |
| 2017 | ||||
Operating Income | $ | 96.6 |
|
| $ | 108.0 |
|
Operation and maintenance expenses | 138.8 |
|
| 128.2 |
| ||
Depreciation and amortization | 53.2 |
|
| 49.9 |
| ||
Taxes, other than income taxes | 36.1 |
|
| 29.9 |
| ||
Less: Gross receipts tax expense | (25.4 | ) |
| (19.5 | ) | ||
Contribution Margin (Non-GAAP) | 299.3 |
|
| 296.5 |
| ||
Natural and propane gas costs | 176.0 |
|
| 84.5 |
| ||
Gross receipts tax expense | 25.4 |
|
| 19.5 |
| ||
Operating Revenues | $ | 500.7 |
|
| $ | 400.5 |
|
Net Income | $ | 1.3 |
|
| $ | 58.1 |
|
Operating revenues for the year ended September 30, 2018 increased $100.2 versus the comparable period ended September 30, 2017. Of the increase, $65.5 related to higher gas cost recoveries, $38.2 was the result of weather and usage impacts, $6.0 was attributable to higher gross receipt taxes, along with approximately $1.7 associated with lower RSE return on equity revenue adjustments in the current year. Partly offsetting these positive impacts was a $11.2 revenue reduction resulting from the timing of rate reductionscollections of gas cost under the Utilities’ PGA clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to customers due to tax savings from the TCJA.
Contribution margin increased $2.8 versus the prior year, as $12.2 in higher weather/volumetric impacts and a favorable RSE adjustment of approximately $1.7 were offset by the $11.2 impact of the customer rate reduction resulting from the TCJA.
O&M expenses for the year ended September 30, 2018 increased $10.6 versus the year ended September 30, 2017. The increase in other operating expenses was driven primarily by higher employee-related costs and bad debt, which were unfavorably impacted by the colder weather in the current year and a $4.2 mix impact relating to the transfer of non-service postretirement benefits costs to other income and expense. Depreciation and amortization was $3.3 higher versus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory.
Temperatures in Spire Alabama’s service areavary during the year endedand from year to year, and may cause significant variations in the Company’s cash provided by or used in operating activities.
Spire’s material cash requirements as of September 30, 2018 were 51% colder than last year,2022, are related to capital expenditures, principal and approximately equalinterest payments on long-term debt, natural gas purchase obligations, and dividends.
Total Company capital expenditures are planned to historical norms.be $700 for fiscal 2023, though Spire Alabama’s total therms sold and transported were 1,020.8 millionhad purchase commitments for the year endedonly a small portion of these as of September 30, 2018, compared with 900.6 million last year, a 13% increase.2022.
For further information on the GSA, RSE and CCM mechanisms, see
As detailed in Note 156, Regulatory Matters,Long-Term Debt, of the Notes to Financial Statements in Item 8, $281.2 of the total $3,258.9 principal amount is due in fiscal 2023. Using each long-term debt instrument’s stated maturity and fixed rates or variable rates as of September 30, 2022, interest payments are projected to total $1,560.2, of which $116.2 is due in fiscal 2023.
Spire’s natural gas purchase obligations totaled $2,107.1, including $946.8 for fiscal 2023, representing the minimum payments required under existing natural gas transportation and storage contracts and natural gas supply agreements. The amounts reflect fixed obligations as well as obligations to purchase natural gas at future market prices, calculated using forward market prices as of September 30, 2022. Each of the Utilities generally recovers costs related to its purchases, transportation and storage of natural gas through the operation of its PGA clause or GSA rider, subject to prudence review by the appropriate regional public service commission. Additional contractual commitments are generally entered into prior to or during the heating season.
Spire dividends declared and payable as of September 30, 2022, totaled $41.2, while annualized dividends based on the regular quarterly amounts declared on November 10, 2022, are estimated at $165.9.
Source of Funds
It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated requirements.
The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. Their debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of September 30, 2022, the debt ratings of the Company, Spire Missouri and Spire Alabama (shown in the following table) remain at investment grade with a stable outlook (other than Moody's negative outlook for Spire Missouri debt).
S&P | Moody’s | |||
Spire Inc. senior unsecured long-term debt | BBB+ | Baa2 | ||
Spire Inc. preferred stock | BBB | Ba1 | ||
Spire Inc. short-term debt | A-2 | P-2 | ||
Spire Missouri senior secured long-term debt | A | A1 | ||
Spire Alabama senior unsecured long-term debt | A- | A2 |
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of September 30, 2022 or 2021.
Short-term Debt
The Company’s short-term cash requirements can be met through the sale of commercial paper or the use of a revolving credit facility. For information about these resources, see Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.
Long-term Debt and Equity
At September 30, 2022, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $3,258.9, of which $1,648.0 was issued by Spire Missouri, $575.0 was issued by Spire Alabama, and $205.9 was issued by other subsidiaries. For more information about long-term debt, see Note 6 of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.
On December 7, 2021, pursuant to its registration statement on Form S-3 filed with the SEC, Spire Missouri issued $300.0 of first mortgage bonds due December 2, 2024, secured equally with all its other first mortgage bonds. Interest is payable quarterly in arrears at a floating rate based on the compounded secured overnight financing rate plus 50 basis points, with a maximum rate of the lesser of 8% or the maximum rate then permitted by applicable law.
Effective March 5, 2022, Spire Missouri was authorized by the MoPSC to issue conventional term loans, first mortgage bonds, unsecured debt, preferred stock and common stock in an aggregate amount of up to $800.0 for financings placed any time before December 31, 2024. As of September 30, 2022, the entire amount remained available under this authorization. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance.
After fiscal year end, on October 13, 2022, Spire Alabama issued $90.0 of notes due October 15, 2029, bearing interest at 5.32% and $85.0 of notes due October 15, 2032, bearing interest at 5.41%. Interest is payable semi-annually. The notes are senior unsecured obligations and rank equal in right to payment with all other senior unsecured indebtedness of Spire Alabama. Also on October 13, 2022, Spire Gulf issued $30.0 of first mortgage bonds due October 15, 2037, bearing interest at 5.61% payable semi-annually. The bonds rank equal in right to payment with the other first mortgage bonds issued by Spire Gulf. The bonds were issued under a supplemental indenture with collateral fall away provisions whereby, under certain conditions, Spire Gulf may elect to exchange the bonds, which are secured, for unsecured notes.
Spire has a shelf registration statement on Form S-3 on file with the SEC for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 158,535 and153,190 shares at September 30, 2022 and November 11, 2022, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 9, 2025.
On February 6, 2019, Spire entered into an “at-the-market” (ATM) equity distribution agreement pursuant to which the Company may offer and sell, from time to time, shares of its common stock pursuant to Spire’s universal shelf registration statement and a prospectus supplement. Under this program, a total of 626,249 shares with an aggregate offering price of $47.8 were issued in fiscal 2019 and 2020, and 354,000 shares with an aggregate offering price of $23.5 were issued in the second quarter of fiscal 2022. On April 28, 2022, Spire’s Board of Directors approved a new authorization for the sale of additional shares with an aggregate offering price of up to $200.0 before the May 2025 expiration of the new universal shelf registration statement on Form S-3 filed in May 2022, under which a total of 365,625 shares with an aggregate offering price of $27.7 were issued in the third quarter of fiscal 2022.
In February 2021, Spire issued 3.5 million equity units for an aggregate stated amount of $175.0, resulting in net proceeds of $169.3 after underwriting fees and other issuance costs. See Note 5, Shareholders’ Equity, of the Notes to Financial Statements in Item 8 for additional discussion of these equity units.
Including the current portion of long-term debt, the Company’s long-term consolidated capitalization consisted of 46% equity at September 30, 2022 and 47% equity at September 30, 2021. For more information about equity, see Note 5 of the Notes to Financial Statements in Item 8.
ENVIRONMENTAL MATTERS
The Utilities and other Spire subsidiaries own and operate 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, Spire Missouri’s or Spire Alabama’s financial position and results of operations. As environmental laws, regulations and their interpretations change, however, the Company and the Utilities may be required to incur additional costs. For information relative to environmental matters, see Contingencies in Note 16 of the Notes to Financial Statements in Item 8.
REGULATORY MATTERS
In May and July 2021, the U.S. Department of Homeland Security’s Transportation Security Administration issued security directives that included several new cybersecurity requirements for critical pipeline owners and operators. Among these requirements is the implementation of specific mitigation measures to protect against ransomware attacks and other known threats to information and operational technology systems; development and implementation of a cybersecurity contingency and recovery plan; and performance of a cybersecurity architecture design review. We are currently implementing several of these directives and evaluating the potential effect of several others on our operations and facilities, as well as the potential cost of implementation, and will continue to monitor for any clarifications or amendments to these directives. We are also engaged in a continuous program of testing and updating our cybersecurity measures.
For discussions of other regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. Those discussions include more information about the Utilities’ recent rate proceedings and updates on FERC proceedings related to Spire STL Pipeline and Spire Storage.
ACCOUNTING PRONOUNCEMENTS
The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the impact that recently issued accounting standards and concluded that none will have a material impact on their financial position or results of operations upon adoption. For disclosures related to the adoption
INFLATION
The accompanying financial statements reflect the historical costs of events and transactions, regardless of the purchasing power of the dollar at the time. Due to the capital-intensive nature of the businesses of the Company, Spire Missouri and Spire Alabama, the most significant impact of inflation is on the depreciation of utility plant. Rate regulation, to which the Utilities are subject, allows recovery through its rates of only the historical cost of utility plant as depreciation. The Utilities expect to incur significant capital expenditures in future years, primarily related to the planned increased replacements of distribution plant. The Utilities believe any higher costs experienced upon replacement of existing facilities will be recovered through the normal regulatory process.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires 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 financial statements:
Regulatory Accounting – The Utilities account for their regulated operations in accordance with FASB Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-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-rate-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 these regulatory accounting principles and that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process. For Spire Missouri and Spire Alabama, management believes the following represent the more significant items recorded through the application of this accounting guidance:
PGA Clause – Spire Missouri’s PGA clauses allows the Missouri Utilitiesit to flow through to customers, subject to a prudence review by the MoPSC, the cost of purchased gas supplies, including the costs, cost reductions and related carrying costs associated with the Missouri Utilities’ use of natural gas derivative instruments to hedge the purchase price of natural gas. The difference between actual costs incurred and costs recovered through the application of the PGA clauses are recorded as regulatory assets and regulatory liabilities that are recovered or refunded in a subsequent period. The PGA clauses also permit the application of carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions associated with the use of derivative instruments, and also provide for a portion of income from off-system sales and capacity release revenues to be flowed through to customers.
GSA Rider –Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider, established in 1993, which permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA, that is designed to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily to residential, small commercial and small industrial customers. Other non-temperature weather related conditions that may affect customer usage are not included in the temperature adjustment. In prior years, Spire Alabama entered into cash flow derivative commodity instruments to hedge its exposure to price fluctuations on its gas supply. Spire Alabama recognizes all derivatives at fair value as either assets or liabilities on the balance sheet. Any realized gains or losses are passed through to customers using the mechanisms of the GSA rider in accordance with Spire Alabama’s APSC approved tariff and are recognized as a
regulatory asset or regulatory liability. All derivative commodity instruments in a gain position are valued on a discounted basis incorporating an estimate of performance risk specific to each related counterparty. Derivative commodity instruments in a loss position are valued on a discounted basis incorporating an estimate of performance risk specific to Spire Alabama. Spire Alabama currently has no active gas supply derivative positions.
ISRS –The – The ISRS allows Spire Missouri expedited recovery for its investment to replaceupgrade its worn out or deteriorated infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Recently, Spire Missouri’s recovery of certain ISRS costs have been contested before the MoPSC and the Missouri Court of Appeals. Spire Missouri records ISRS revenues as authorized by the MoPSC and estimates the probability and amount of any refunds based on commission precedent, current legal rulings, the opinion of legal counsel, and other considerations.
Non-operational Overhead Costs – As a result of certain MoPSC orders, Spire Missouri ceased capitalization of non-operational overhead costs but deferred such costs into a regulatory asset for future review by the MoPSC. Management believes it is probable that Spire Missouri will ultimately be allowed to recover these deferred costs.
For more information, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.
Employee Benefits and Postretirement Obligations – Pension and postretirement obligations are calculated by actuarial consultants that utilize several statistical factors and other assumptions provided by management related to future events, such as discount rates, returns on plan assets, compensation increases, and mortality rates. For the Utilities, 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.
The amount of net periodic pension and other postretirement benefit costs recognized in the financial statements related to the Utilities’ qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC (for Spire Missouri) and as approved by the APSC (for Spire Alabama). The allowances 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. GAAP also 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 costs, be reflected in other comprehensive income. For the Utilities’ 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.
For more information, see Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements in Item 8.
The tables below reflect the sensitivity of Spire’s plans to potential changes in key assumptions:
Pension Plan Benefits: | Estimated Increase/ | |||||||||||
(Decrease) to | Estimated Increase/ | |||||||||||
Increase/ | Projected | (Decrease) to Annual | ||||||||||
Actuarial Assumptions | (Decrease) | Benefit Obligation | Net Pension Cost* | |||||||||
Discount Rate | 0.25 | % | $ | (10.6 | ) | $ | 0.4 | |||||
(0.25 | )% | 11.1 | (0.4 | ) | ||||||||
Expected Return on Plan Assets | 0.25 | % | — | (1.2 | ) | |||||||
(0.25 | )% | — | 1.2 | |||||||||
Rate of Future Compensation Increase | 0.25 | % | 0.7 | 0.2 | ||||||||
(0.25 | )% | (0.7 | ) | (0.2 | ) |
Postretirement Benefits: | Estimated Increase/ | |||||||||||
(Decrease) to | Estimated Increase/ | |||||||||||
Projected | (Decrease) to Annual | |||||||||||
Increase/ | Postretirement | Net Postretirement | ||||||||||
Actuarial Assumptions | (Decrease) | Benefit Obligation | Benefit Cost* | |||||||||
Discount Rate | 0.25 | % | $ | (2.8 | ) | $ | 0.1 | |||||
(0.25 | )% | 2.9 | (0.1 | ) | ||||||||
Expected Return on Plan Assets | 0.25 | % | — | (0.7 | ) | |||||||
(0.25 | )% | — | 0.7 |
* | Excludes the impact of regulatory deferral mechanism. See Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements in Item 8 for information regarding the regulatory treatment of these costs. |
Impairment of Long-lived Assets –Long-lived assets classified as held and used are evaluated for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Whether impairment has occurred is determined by comparing the estimated undiscounted cash flows attributable to the assets with the carrying value of the assets. If the carrying value exceeds the undiscounted cash flows, the Company recognizes an impairment charge equal to the amount of the carrying value that exceeds the estimated fair value of the assets. In the period in which the Company determines an asset meets held-for-sale criteria, an impairment charge is recorded to the extent the book value exceeds its fair value less cost to sell.
Pension Plan Benefits:
Actuarial Assumptions |
| Increase/ (Decrease) |
| Estimated Increase/ (Decrease) to Projected Benefit Obligation |
| Estimated Increase/ (Decrease) to Annual Net Pension Cost* | ||||||||||||
Discount Rate |
|
|
| 0.25 | % |
|
|
| $ | (22.5 | ) |
|
|
| $ | 0.4 |
|
|
|
|
|
| (0.25 | )% |
|
|
|
| 23.4 |
|
|
|
|
| (0.5 | ) |
|
Expected Return on Plan Assets |
|
|
| 0.25 | % |
|
|
|
| — |
|
|
|
|
| (1.2 | ) |
|
|
|
|
| (0.25 | )% |
|
|
|
| — |
|
|
|
|
| 1.2 |
|
|
Rate of Future Compensation Increase |
|
|
| 0.25 | % |
|
|
|
| 4.1 |
|
|
|
|
| 0.3 |
|
|
|
|
|
| (0.25 | )% |
|
|
|
| (4.0 | ) |
|
|
|
| (0.3 | ) |
|
Postretirement Benefits:
Actuarial Assumptions |
| Increase/ (Decrease) |
| Estimated Increase/ (Decrease) to Projected Postretirement Benefit Obligation |
| Estimated Increase/ (Decrease) to Annual Net Postretirement Benefit Cost* | ||||||||||||
Discount Rate |
|
|
| 0.25 | % |
|
|
| $ | (4.3 | ) |
|
|
| $ | 0.1 |
|
|
|
|
|
| (0.25 | )% |
|
|
|
| 4.5 |
|
|
|
|
| (0.1 | ) |
|
Expected Return on Plan Assets |
|
|
| 0.25 | % |
|
|
|
| — |
|
|
|
|
| (0.7 | ) |
|
|
|
|
| (0.25 | )% |
|
|
|
| — |
|
|
|
|
| 0.7 |
|
|
Annual Medical Cost Trend |
|
|
| 1.00 | % |
|
|
|
| 7.2 |
|
|
|
|
| 1.1 |
|
|
|
|
|
| (1.00 | )% |
|
|
|
| (6.5 | ) |
|
|
|
| (1.0 | ) |
|
On July 1, 2020, Spire’s Board of Directors, based upon the recommendation of senior management, revised the development plan for Spire Storage, resulting in an impairment charge of $140.8 related to Spire Storage assets in the quarter ended June 30, 2020. The revision was driven by the realization that a longer time horizon will be required for optimization and positioning of the storage facility to serve energy markets in the western United States. Among other factors, evaluations of the continuing evolution of market dynamics in the region led management to update models of various development alternatives. Separately in the quarter ended June 30, 2020, Spire recorded impairment charges totaling $7.8 related to two commercial compressed natural gas fueling stations as a result of revised projections reflecting lower diesel prices and slower conversions of Class 8 vehicles. The fair values used in measuring the impairment charges were determined with an expected present value technique using a discounted cash flow method under an income approach. Our impairment loss calculations required management to make assumptions and to apply judgment in order to estimate fair values of the assets. This involved estimating cash flows, useful lives, and current market value for similar assets and selecting a discount rate that reflects the risk inherent in future cash flows. Cash flow projections were based on assumptions about future market demand and achievement of certain operational capabilities. Assumptions were selected from a range of reasonably possible amounts and were supported by relevant and reliable data. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to additional impairments that could be material. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate asset impairment losses.
|
|
As discussed in Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8, the Spire STL Pipeline is operating under temporary certificates while the FERC considers approval of a new permanent certificate. While uncertainty exists, management has evaluated the facts in accordance with ASC 360 and concluded that the related assets have not become impaired.
Income Taxes – Income tax calculations require estimates due to book-tax differences, estimates with respect to regulatory treatment of certain items, and uncertainty in the interpretation of tax laws and regulations. Critical assumptions and judgments also include projections of future taxable income to determine the ability to utilize net operating losses and credit carryforwards prior to their expiration. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in regulatory treatment or tax related estimates and assumptions that could have a material impact on cash flows, financial position and/or results of operations. For more information, see Note 12, Income Taxes, of the Notes to Financial Statements in Item 8.
For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements in Item 8.
LIQUIDITY
The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when they purchase natural gas and when their customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with Spire Missouri’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utilities’ PGA clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and may cause significant variations in the Company’s cash provided by or used in operating activities.MARKET RISK
Cash Flow Summary |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Net cash provided by operating activities |
| $ | 450.9 |
|
| $ | 456.6 |
|
| $ | 288.3 |
|
Net cash used in investing activities |
|
| (838.3 | ) |
|
| (531.7 | ) |
|
| (433.5 | ) |
Net cash provided by financing activities |
|
| 371.8 |
|
|
| 89.1 |
|
|
| 147.4 |
|
Net cash provided by operating activities decreased $5.7 from 2018 to 2019, primarily driven by fluctuations in working capital items. Net cash provided by operating activities increased $168.3 from fiscal 2017 to 2018 due to working capital fluctuations largely driven by the relative weather conditions and gas prices during the periods.
In fiscal 2019, the Company used $306.6 more cash in investing activities than in 2018 and $98.2 more in 2018 than in 2017. Capital expenditures increased $323.9 from fiscal 2018 to 2019, primarily as a result of $110.5 higher expenditures for the Spire STL Pipeline project and a $118.9 increase in infrastructure upgrades, new business development and investment to support customer growth across Missouri and Alabama. A further $89.9 in expenditures related to the development of Spire Storage. Spire estimates its capital expenditures for fiscal 2020 will be approximately $590, including $520 for the Utilities and $70 for Spire Storage and completion expenditures on Spire STL Pipeline.
Net cash provided by financing activities increased $282.7 from 2018 to 2019 after decreasing $58.3 from fiscal 2017 to 2018. The increase in 2019 versus 2018 was primarily due to the issuance of preferred shares for $242.0 and an increase in net debt issuance of $189.2. These increases were only partly offset by the $135.2 reduction in funds received from common stock issuances in 2019 versus 2018. Cash provided by financing activities decreased $58.3 from 2017 to 2018, reflecting changes in the net issuance or repayment of long-term debt, with a $30.0 net repayment in 2018 and a $26.2 net issuance in 2017. Short-term borrowings and dividends paid trended higher over the three years.
CAPITAL RESOURCES
The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. Our debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of September 30, 2019, the debt ratings of the Company, Spire Missouri and Spire Alabama, shown in the following table, remain at investment grade with a stable outlook.
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| ||
|
|
| ||
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|
| ||
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| ||
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It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements, which primarily include capital expenditures, interest payments on long-term debt, scheduled maturities of long-term debt, short-term seasonal needs and dividends.
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of September 30, 2019 or 2018. Due to lower yields available to Spire on short-term investments, the Company elected to provide all of Spire Missouri’s and Spire Alabama’s short-term funding through intercompany lending during the past fiscal year.
Short-term Debt
The Utilities’ short-term borrowing requirements typically peak during the colder months, while most of the Company’s other needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper or through the use of a revolving credit facility. For information about these resources, see Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “MARKET RISK” below.
Long-term Debt and Equity
At September 30, 2019, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $2,137.0, of which $930.0 was issued by Spire Missouri, $415.0 was issued by Spire Alabama, and $102.0 was issued by other subsidiaries. For more information about long-term debt, see Note 6 of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “MARKET RISK” below.
Spire Missouri was authorized by the MoPSC to issue registered securities (first mortgage bonds, unsecured debt and preferred stock), common stock, and private placement debt in an aggregate amount of up to $500.0 for financings placed any time before September 30, 2021. As of September 30, 2019, $400.0 remained available under this authorization. Spire Missouri issued an additional $275.0 of bonds on November 12, 2019. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance. On July 9, 2019, the APSC approved $100.0 of additional long-term financing.
Spire has a shelf registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (SEC) for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 158,373 and 154,316 shares at September 30, 2019 and November 21, 2019, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 14, 2022.
On February 6, 2019, Spire entered into an “at-the-market” equity distribution agreement, supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $150.0. Those shares are issued pursuant to Spire’s universal shelf registration statement referenced above and a prospectus supplement dated May 14, 2019. In the year ended September 30, 2019, Spire issued 179,630 shares under this program, generating $14.4 of proceeds net of issuance costs.
On May 21, 2019, Spire issued 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, resulting in $242.0 of proceeds net of issuance costs.
Including the current portion of long-term debt, the Company’s long-term consolidated capitalization at September 30, 2019 consisted of 55% equity, compared to 52% equity at September 30, 2018. For more information about equity, see Note 5 of the Notes to Financial Statements in Item 8.
CONTRACTUAL OBLIGATIONS
As of September 30, 2019, Spire had contractual obligations with payments due as summarized below:
|
|
|
|
|
| Payments due by period |
| |||||||||||||
Contractual Obligations |
| Total |
|
| Less than 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than 5 Years |
| |||||
Principal Payments on Long-term Debt |
| $ | 2,137.0 |
|
| $ | 40.0 |
|
| $ | 205.0 |
|
| $ | 480.0 |
|
| $ | 1,412.0 |
|
Interest Payments on Long-term Debt (a) |
|
| 1,339.4 |
|
|
| 88.7 |
|
|
| 162.6 |
|
|
| 138.1 |
|
|
| 950.0 |
|
Operating Leases (b) |
|
| 69.4 |
|
|
| 8.2 |
|
|
| 13.8 |
|
|
| 10.9 |
|
|
| 36.5 |
|
Purchase Obligations – Natural Gas (c) |
|
| 1,495.0 |
|
|
| 759.6 |
|
|
| 459.9 |
|
|
| 182.2 |
|
|
| 93.3 |
|
Purchase Obligations – Other (d) |
|
| 51.1 |
|
|
| 41.2 |
|
|
| 5.8 |
|
|
| 2.5 |
|
|
| 1.6 |
|
Asset Retirement Obligations |
|
| 337.6 |
|
|
| 10.6 |
|
|
| 11.4 |
|
|
| 10.8 |
|
|
| 304.8 |
|
Total (e) |
| $ | 5,429.5 |
|
| $ | 948.3 |
|
| $ | 858.5 |
|
| $ | 824.5 |
|
| $ | 2,798.2 |
|
|
|
|
|
|
|
|
|
|
|
ENVIRONMENTAL MATTERS
The Utilities and other Spire subsidiaries own and operate 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, Spire Missouri’s or Spire Alabama’s financial position and results of operations. As environmental laws, regulations and their interpretations change, however, the Company and the Utilities may be required to incur additional costs. For information relative to environmental matters, see Contingencies in Note 16 of the Notes to Financial Statements in Item 8.
OFF-BALANCE SHEET ARRANGEMENTS
At September 30, 2019, the Company had no off-balance sheet financing arrangements, other than operating leases, surety bonds, and letters of credit entered into in the ordinary course of business. The Company does not expect to engage in any significant off-balance sheet financing arrangements in the near future.
MARKET RISK
Commodity Price Risk
Gas Utility
The Utilities’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of the Missouri Utilities’Spire Missouri’s PGA clauses and Spire Alabama’s GSA rider. The PGA clauses and GSA rider allows the Utilities to flow through to customers, subject to prudence review by the MoPSC and APSC, the cost of purchased gas supplies. Spire Missouri is allowed the flexibility to make up to three discretionary PGA changes during each year, in addition to its mandatory November PGA change, so long as such changes are separated by at least two months. Spire Missouri is able to mitigate, to some extent, changes in commodity prices through the use of physical storage supplies and regional supply diversity. Spire Alabama is allowed to make monthly changes to the GSA rate, but increases cannot exceed a 5% increase over the prior effective residential billing rate. The Utilities also have risk management policies that allow for the purchase of natural gas derivative instruments with the goal of managing its price risk associated with purchasing natural gas on behalf of its customers. These policies prohibit speculation. As of September 30, 2019,2022, Spire Missouri had active natural gas derivative positions, but Spire Alabama did not. Costs and cost reduction, including carrying costs, associated with the use of natural gas derivative instruments are allowed to be passed on to customers through the operation of the PGA clauses or GSA rider. Accordingly, the Utilities do not expect any adverse earnings impact as a result of the use of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements may cause short-term cash requirements to vary. For more information about the Utilities’ natural gas derivative instruments, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8.
Gas Marketing
In the course of its business, Spire’s non-regulated gas marketing subsidiary, Spire Marketing, enters into contracts to purchase and sell natural gas at fixed prices and natural gas index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments. In accordance with the risk management policy, Spire Marketing manages the price risk associated with its fixed price commitments. This risk is currently managed either by closely matching the offsetting physical purchase or sale of natural gas at fixed-prices or through the use of natural gas futures, options and swap contracts traded on or cleared through the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) to lock in margins. At September 30, 20192022 and 2018,2021, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations.
As mentioned above, Spire Marketing uses natural gas futures, options and swap contracts traded on or cleared through the NYMEX and ICE to manage the commodity price risk associated with its fixed-price natural gas purchase and sale commitments. These derivative instruments may be designated as cash flow hedges of forecasted purchases or sales. Such accounting treatment, if elected, generally permits a substantial portion of the gain or loss to be deferred from recognition in earnings until the period that the associated forecasted purchase or sale is recognized in earnings. To the extent a hedge is effective, gains or losses on the derivatives will be offset by changes in the value of the hedged forecasted transactions. At September 30, 2022 and 2021, Spire Marketing had no designated cash flow hedges. Information about the fair values of Spire Marketing’s exchange-traded/cleared natural gas derivative instruments is presented below:
|
| Derivative Fair Values |
|
| Cash Margin |
|
| Derivatives and Cash Margin |
| Derivative | Derivatives | |||||||||||||
Net balance of derivative assets at September 30, 2018 |
| $ | (7.2 | ) |
| $ | 11.2 |
|
| $ | 4.0 |
| ||||||||||||
Fair | Cash | and Cash | ||||||||||||||||||||||
Values | Margin | Margin | ||||||||||||||||||||||
Net balance of derivative assets at September 30, 2021 | $ | 52.1 | $ | (39.3 | ) | $ | 12.8 | |||||||||||||||||
Changes in fair value |
|
| 1.0 |
|
|
| — |
|
|
| 1.0 |
| 43.3 | — | 43.3 | |||||||||
Settlements/purchases - net |
|
| 4.8 |
|
|
| — |
|
|
| 4.8 |
| (84.8 | ) | — | (84.8 | ) | |||||||
Changes in cash margin |
|
| — |
|
|
| (6.4 | ) |
|
| (6.4 | ) | — | 54.5 | 54.5 | |||||||||
Net balance of derivative assets at September 30, 2019 |
| $ | (1.4 | ) |
| $ | 4.8 |
|
| $ | 3.4 |
| ||||||||||||
Net balance of derivative assets at September 30, 2022 | $ | 10.6 | $ | 15.2 | $ | 25.8 |
|
| As of September 30, 2019 |
| As of September 30, 2022 | ||||||||||||||||||||||||||||||||||||
Maturity by Fiscal Year |
| Total |
|
| 2020 |
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| 2021 |
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| 2022 |
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| 2023 |
| Total | 2023 | 2024 | 2025 | 2026 | ||||||||||||||||||||
Fair values of exchange-traded/cleared natural gas derivatives - net |
| $ | (0.4 | ) |
| $ | 0.6 |
|
| $ | (0.8 | ) |
| $ | (0.2 | ) |
| $ | — |
| $ | 14.7 | $ | 12.5 | $ | 2.5 | $ | (0.3 | ) | $ | — | |||||||||
Fair values of basis swaps - net |
|
| (0.8 | ) |
|
| (0.8 | ) |
|
| (0.1 | ) |
|
| 0.1 |
|
|
| — |
| (3.2 | ) | (2.9 | ) | (0.2 | ) | (0.1 | ) | — | |||||||||||
Fair values of puts and calls - net |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
| (1.9 | ) | (1.9 | ) | — | — | — | |||||||||||||
|
|
|
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| ||||||||||||||||||||
Position volumes: |
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| ||||||||||||||||||||
MMBtu - net (short) long futures/swap/option positions |
|
| 11.4 |
|
|
| (0.5 | ) |
|
| 8.2 |
|
|
| 3.1 |
|
|
| 0.6 |
| 84.1 | 50.3 | 19.5 | 13.0 | 1.3 | |||||||||||||||
MMBtu - net (short) long basis swap positions |
|
| (5.7 | ) |
|
| (5.9 | ) |
|
| 0.7 |
|
|
| (0.4 | ) |
|
| (0.1 | ) | (16.0 | ) | (13.6 | ) | (1.8 | ) | (0.6 | ) | — | |||||||||||
MMBtu - net (short) puts and calls positions |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
| (1.4 | ) | (1.4 | ) | — | — | — |
Certain of Spire Marketing’s physical natural gas derivative contracts are designated as normal purchases or normal sales, as permitted by GAAP. This election permits the Company to account for the contract in the period the natural gas is delivered. Contracts not designated as normal purchases or normal sales, including those designated as trading activities, are accounted for as derivatives with changes in fair value recognized in earnings in the periods prior to settlement.
Below is a reconciliation of the beginning and ending balances for physical natural gas contracts accounted for as derivatives, none of which will settle beyond fiscal 2021:2023:
Net balance of derivative liabilities at September 30, 2021 | $ | (61.5 | ) | |
Changes in fair value | 101.0 | |||
Settlements | (48.4 | ) | ||
Net balance of derivative liabilities at September 30, 2022 | $ | (8.9 | ) |
Net balance of derivative assets at September 30, 2018 |
| $ | 9.8 |
|
Changes in fair value |
|
| 15.4 |
|
Settlements |
|
| (22.2 | ) |
Net balance of derivative liabilities at September 30, 2019 |
| $ | 3.0 |
|
For further details related to Spire Marketing’s derivatives and hedging activities, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8.
Counterparty Credit Risk
Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are with energy producers, utility companies and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry or other conditions. Spire Marketing also has concentrations of credit risk with certain individually significant counterparties. To the extent possible, Spire Marketing enters into netting arrangements with its counterparties to mitigate exposure to credit risk. It is also exposed to credit risk associated with its derivative contracts designated as normal purchases and normal sales. Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations. For more information on these and other concentrations of credit risk, including how Spire Marketing manages these risks, seeNote 11,Concentrations of Credit Risk, of the Notes to Financial Statements in Item 8.
Interest Rate Risk
The Company is subject to interest rate risk associated with its short-term debt issuances. Based on average short-term borrowings during fiscal 2019,2022, an increase of 100 basis points in the underlying average interest rate for short-term debt would have caused an increase in interest expense (and a decrease in pre-tax earnings and cash flows) of approximately $5.7$7.5 on an annual basis. Portions of such an increase may be offset through the Utilities’ application of PGA and GSA carrying costs. At September 30, 2019,2022, Spire had $100.0 of variable rate long-term debt outstanding and had fixed-rate long-term debt totaling $2,037.0.$2,958.9, of which $1,348.0 was issued by Spire Missouri, had $100.0 of variable rate long-term debt outstanding and had fixed-rate long-term debt totaling $830.0 and$575.0 was issued by Spire Alabama, had fixed-rate long-term debt of $415.0, all included in Spire’s total long-term debt.and $1,035.9 was issued by Spire and other subsidiaries. While the 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 the Company were to reacquire any of these issues in the open market prior to maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemptions of long-term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future period.
During the second quarter of fiscal 2017, Spire entered into an interest rate swap with a fixed interest rate of 2.658% and a notional amount of $60.0 to protect itself against adverse movements in interest rates on future interest rate payments. In September 2019, this hedge was settled, resulting in a loss of $6.1 which will be amortized over the hedged periods. In August 2018, Spire entered into a three-year interest rate swap with a fixed interest rate of 2.7675% and a notional amount of $100.0 to protect itself against adverse movements in interest rates on future variable interest rate payments. The Company recorded a $2.9 mark-to-market loss on this swap as part of other comprehensive income for the year ended September 30, 2019. During the first quarter of fiscal 2019, the Company entered into a thirty-year interest rate swap with a fixed interest rate of 3.250% expiring in three years and a notional amount of $100.0 to protect itself against adverse movements in future interest rates on future interest rate payments. The Company recorded a $34.4 mark-to-market loss on this swap as part of other comprehensive income for the year ended September 30, 2019.
Refer to Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8 for additional details on thesethe Company’s interest rate swap transactions.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
For this discussion, see “Market Risk” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Operations.
Item 8. Financial Statements and Supplementary Data
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Management Reports on Internal Control over Financial Reporting |
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Management Reports on Internal Control over Financial Reporting
Spire Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Inc.’s management, including ourits Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Inc.’s internal control over financial reporting as of September 30, 2019.2022. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Inc.’s internal control over financial reporting was effective as of September 30, 2019.2022. Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on Spire Inc.’s internal control over financial reporting, which is included herein.
Spire Missouri Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Missouri Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Missouri Inc.’s management, including ourits Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Missouri Inc.’s internal control over financial reporting as of September 30, 2019.2022. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Missouri Inc.’s internal control over financial reporting was effective as of September 30, 2019.2022.
Spire Alabama Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Alabama Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Alabama Inc.’s management, including ourits Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Alabama Inc.’s internal control over financial reporting as of September 30, 2019.2022. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Alabama Inc.’s internal control over financial reporting was effective as of September 30, 2019.2022.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Spire Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2019,2022, based on criteria established in Internal Control – —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2019,2022, based on criteria established in Internal Control – —Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2019,2022, of the Company and our report dated November 26, 2019,16, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for itstheir assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Reports on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 26, 201916, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Spire Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Spire Inc. and subsidiaries (the “Company”) as of September 30, 20192022 and 2018,2021, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2019,2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 20192022 and 2018,2021, and the results of itstheir operations and itstheir cash flows for each of the three years in the period ended September 30, 2019,2022, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2019,2022, based on criteria established in Internal Control – —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 26, 2019,16, 2022, expressed an unqualified opinion on the Company'sCompany’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters –Impact of Rate Regulation on the Financial Statements – Refer to Note 15 and Note 18 to the financial statements
Critical Audit Matter Description
The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-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-rate-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).
The Company is subject to rate regulation by the Missouri, Alabama, and Mississippi Public Service Commissions (the “Commissions”), which have jurisdiction with respect to the rates of natural gas companies within their respective geographies. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.
Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2019,2022, and the judgments made by management to support its assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. These judgments included assessing the likelihood and amount of potential refunds that may be required by the Missouri Public Service Commission related to previously recovered capital investments as a result of the November 2019 Missouri Western District Court rulings. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:
• |
| We tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. |
• |
| We evaluated the |
• |
| We read relevant regulatory orders issued by the Commissions for the Company in Missouri, Alabama, and Mississippi; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. |
• |
| We obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. |
|
|
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 26, 201916, 2022
We have served as the Company’s auditor since 1953.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Spire Missouri Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Spire Missouri Inc. (a wholly owned subsidiary of Spire Inc.) (the "Company"“Company”)as of September 30, 20192022 and 2018,2021, the related statements of comprehensive income, shareholder’s equity, and cash flows, for each of the three years in the period ended September 30, 2019,2022, and the related notes (collectively referred to as the "financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 20192022 and 2018,2021, and the results of itstheir operations and itstheir cash flows for each of the three years in the period ended September 30, 2019,2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of itstheir internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements
Critical Audit Matter Description
The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-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-rate-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).
The Company is subject to rate regulation by the Missouri Public Service Commission (the “Commission”), which has jurisdiction with respect to the rates of natural gas companies within Missouri's geography. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.
Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commission will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2022, and the judgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertainty of future decisions by the Commission included the following, among others:
• | We tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. |
• | We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. |
• | We read relevant regulatory orders issued by the Commission for the Company in Missouri; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. |
• | We obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. |
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 26, 201916, 2022
We have served as the Company’s auditor since 1953.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Spire Alabama Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Spire Alabama Inc. (a wholly owned subsidiary of Spire Inc.) (the "Company"“Company”) as of September 30, 20192022 and 2018,2021, the related statements of income, shareholder’s equity, and cash flows, for each of the three years in the period ended September 30, 2019,2022, and the related notes (collectively referred to as the "financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 20192022 and 2018,2021, and the results of itstheir operations and itstheir cash flows for each of the three years in the period ended September 30, 2019,2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of itstheir internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements
Critical Audit Matter Description
The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-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-rate-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).
The Company is subject to rate regulation by the Alabama Public Service Commission (the “Commission”), which has jurisdiction with respect to the rates of natural gas companies within Alabama's geography. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.
Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commission will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2022, and the judgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertainty of future decisions by the Commission included the following, among others:
• | We tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. | |
• | We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. | |
• | We read relevant regulatory orders issued by the Commission for the Company in Alabama; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. | |
• | We obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. |
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 26, 201916, 2022
We have served as the Company’s auditor since 2014.
CONSOLIDATED STATEMENTS OF INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions, except per share amounts) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility |
| $ | 1,859.2 |
|
| $ | 1,888.0 |
|
| $ | 1,660.0 |
|
Gas Marketing and other |
|
| 93.2 |
|
|
| 77.0 |
|
|
| 80.7 |
|
Total Operating Revenues |
|
| 1,952.4 |
|
|
| 1,965.0 |
|
|
| 1,740.7 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility |
|
|
|
|
|
|
|
|
|
|
|
|
Natural and propane gas |
|
| 698.2 |
|
|
| 770.1 |
|
|
| 570.5 |
|
Operation and maintenance |
|
| 432.3 |
|
|
| 441.2 |
|
|
| 385.8 |
|
Depreciation and amortization |
|
| 179.4 |
|
|
| 167.0 |
|
|
| 153.5 |
|
Taxes, other than income taxes |
|
| 151.7 |
|
|
| 152.5 |
|
|
| 137.8 |
|
Total Gas Utility Operating Expenses |
|
| 1,461.6 |
|
|
| 1,530.8 |
|
|
| 1,247.6 |
|
Gas Marketing and other |
|
| 188.5 |
|
|
| 140.1 |
|
|
| 152.2 |
|
Total Operating Expenses |
|
| 1,650.1 |
|
|
| 1,670.9 |
|
|
| 1,399.8 |
|
Operating Income |
|
| 302.3 |
|
|
| 294.1 |
|
|
| 340.9 |
|
Interest Expense, Net |
|
| 104.4 |
|
|
| 98.4 |
|
|
| 89.1 |
|
Other Income (Expense), Net |
|
| 21.2 |
|
|
| (8.0 | ) |
|
| (12.6 | ) |
Income Before Income Taxes |
|
| 219.1 |
|
|
| 187.7 |
|
|
| 239.2 |
|
Income Tax Expense (Benefit) |
|
| 34.5 |
|
|
| (26.5 | ) |
|
| 77.6 |
|
Net Income |
|
| 184.6 |
|
|
| 214.2 |
|
|
| 161.6 |
|
Provision for preferred dividends |
|
| 5.3 |
|
|
| — |
|
|
| — |
|
Income allocated to participating securities |
|
| 0.4 |
|
|
| 0.5 |
|
|
| 0.4 |
|
Net Income Available to Common Shareholders |
| $ | 178.9 |
|
| $ | 213.7 |
|
| $ | 161.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 50.7 |
|
|
| 49.1 |
|
|
| 46.9 |
|
Diluted |
|
| 50.8 |
|
|
| 49.3 |
|
|
| 47.0 |
|
Basic Earnings Per Share of Common Stock |
| $ | 3.53 |
|
| $ | 4.35 |
|
| $ | 3.44 |
|
Diluted Earnings Per Share of Common Stock |
| $ | 3.52 |
|
| $ | 4.33 |
|
| $ | 3.43 |
|
See the accompanying Notes to Financial Statements.
SPIRE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Net Income |
| $ | 184.6 |
|
| $ | 214.2 |
|
| $ | 161.6 |
|
Other Comprehensive (Loss) Income, Before Tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging derivative instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Net hedging (loss) gain arising during the period |
|
| (46.4 | ) |
|
| 3.9 |
|
|
| 11.5 |
|
Amounts reclassified into net income |
|
| (1.3 | ) |
|
| (1.5 | ) |
|
| — |
|
Net (loss) gain on cash flow hedging derivative instruments |
|
| (47.7 | ) |
|
| 2.4 |
|
|
| 11.5 |
|
Defined benefit pension and other postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial (gain) loss included in net periodic pension and postretirement benefit cost |
|
| (0.9 | ) |
|
| 0.4 |
|
|
| 0.4 |
|
Net defined benefit pension and other postretirement benefit plans |
|
| (0.9 | ) |
|
| 0.4 |
|
|
| 0.4 |
|
Net unrealized gain (loss) on available-for-sale debt securities |
|
| 0.1 |
|
|
| 0.3 |
|
|
| (0.1 | ) |
Other Comprehensive (Loss) Income, Before Tax |
|
| (48.5 | ) |
|
| 3.1 |
|
|
| 11.8 |
|
Income Tax (Benefit) Expense Related to Items of Other Comprehensive (Loss) Income |
|
| (10.8 | ) |
|
| 0.6 |
|
|
| 4.4 |
|
Other Comprehensive (Loss) Income, Net of Tax |
|
| (37.7 | ) |
|
| 2.5 |
|
|
| 7.4 |
|
Comprehensive Income |
| $ | 146.9 |
|
| $ | 216.7 |
|
| $ | 169.0 |
|
See the accompanying Notes to Financial Statements.
SPIRE INC.
CONSOLIDATED BALANCE SHEETS
|
| September 30 |
| |||||
(In millions) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility Plant |
| $ | 6,146.5 |
|
| $ | 5,653.3 |
|
Less: Accumulated depreciation and amortization |
|
| 1,794.5 |
|
|
| 1,682.8 |
|
Net Utility Plant |
|
| 4,352.0 |
|
|
| 3,970.5 |
|
Non-utility Property (net of accumulated depreciation and amortization of $12.7 and $10.4 at September 30, 2019 and 2018, respectively) |
|
| 477.8 |
|
|
| 174.5 |
|
Other Investments |
|
| 72.3 |
|
|
| 68.7 |
|
Total Other Property and Investments |
|
| 550.1 |
|
|
| 243.2 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 5.8 |
|
|
| 4.4 |
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Utility |
|
| 139.8 |
|
|
| 151.9 |
|
Other |
|
| 172.8 |
|
|
| 167.3 |
|
Allowance for doubtful accounts |
|
| (23.0 | ) |
|
| (22.4 | ) |
Delayed customer billings |
|
| 4.3 |
|
|
| 6.9 |
|
Inventories: |
|
|
|
|
|
|
|
|
Natural gas |
|
| 162.6 |
|
|
| 175.2 |
|
Propane gas |
|
| 10.7 |
|
|
| 12.0 |
|
Materials and supplies |
|
| 23.3 |
|
|
| 23.1 |
|
Regulatory assets |
|
| 78.6 |
|
|
| 72.8 |
|
Prepayments |
|
| 29.1 |
|
|
| 31.0 |
|
Other |
|
| 10.5 |
|
|
| 37.4 |
|
Total Current Assets |
|
| 614.5 |
|
|
| 659.6 |
|
Deferred Charges and Other Assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
| 1,171.6 |
|
|
| 1,171.6 |
|
Regulatory assets |
|
| 767.6 |
|
|
| 669.8 |
|
Other |
|
| 163.4 |
|
|
| 128.9 |
|
Total Deferred Charges and Other Assets |
|
| 2,102.6 |
|
|
| 1,970.3 |
|
Total Assets |
| $ | 7,619.2 |
|
| $ | 6,843.6 |
|
SPIRE INC.
CONSOLIDATED BALANCE SHEETS (Continued)
|
| September 30 |
| |||||
|
| 2019 |
|
| 2018 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Preferred stock ($25.00 par value per share; 10.0 million depositary shares authorized, issued and outstanding at September 30, 2019) |
| $ | 242.0 |
|
| $ | — |
|
Common stock (par value $1.00 per share; 70.0 million shares authorized; 51.0 million issued and outstanding at September 30, 2019, and 50.7 million shares issued and outstanding September 30, 2018) |
|
| 51.0 |
|
|
| 50.7 |
|
Paid-in capital |
|
| 1,505.8 |
|
|
| 1,482.7 |
|
Retained earnings |
|
| 775.5 |
|
|
| 715.6 |
|
Accumulated other comprehensive (loss) income |
|
| (31.3 | ) |
|
| 6.4 |
|
Total Shareholders' Equity |
|
| 2,543.0 |
|
|
| 2,255.4 |
|
Temporary equity |
|
| 3.4 |
|
|
| 7.9 |
|
Long-term debt (less current portion) |
|
| 2,082.6 |
|
|
| 1,900.1 |
|
Total Capitalization |
|
| 4,629.0 |
|
|
| 4,163.4 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
| 40.0 |
|
|
| 175.5 |
|
Notes payable |
|
| 743.2 |
|
|
| 553.6 |
|
Accounts payable |
|
| 301.5 |
|
|
| 290.1 |
|
Advance customer billings |
|
| 32.6 |
|
|
| 22.7 |
|
Wages and compensation accrued |
|
| 45.7 |
|
|
| 39.7 |
|
Customer deposits |
|
| 35.6 |
|
|
| 35.5 |
|
Taxes accrued |
|
| 68.5 |
|
|
| 65.4 |
|
Regulatory liabilities |
|
| 60.8 |
|
|
| 35.7 |
|
Other |
|
| 140.9 |
|
|
| 103.5 |
|
Total Current Liabilities |
|
| 1,468.8 |
|
|
| 1,321.7 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
| 451.4 |
|
|
| 435.8 |
|
Pension and postretirement benefit costs |
|
| 264.8 |
|
|
| 180.2 |
|
Asset retirement obligations |
|
| 337.6 |
|
|
| 321.1 |
|
Regulatory liabilities |
|
| 399.0 |
|
|
| 354.6 |
|
Other |
|
| 68.6 |
|
|
| 66.8 |
|
Total Deferred Credits and Other Liabilities |
|
| 1,521.4 |
|
|
| 1,358.5 |
|
Commitments and Contingencies (Note 16) |
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities |
| $ | 7,619.2 |
|
| $ | 6,843.6 |
|
Years Ended September 30 | ||||||||||||
(In millions, except per share amounts) | 2022 | 2021 | 2020 | |||||||||
Operating Revenues | $ | 2,198.5 | $ | 2,235.5 | $ | 1,855.4 | ||||||
Operating Expenses: | ||||||||||||
Natural gas | 923.9 | 946.3 | 696.1 | |||||||||
Operation and maintenance | 449.6 | 465.8 | 458.6 | |||||||||
Depreciation and amortization | 237.3 | 213.1 | 197.3 | |||||||||
Taxes, other than income taxes | 179.5 | 160.1 | 148.4 | |||||||||
Impairments | — | — | 148.6 | |||||||||
Total Operating Expenses | 1,790.3 | 1,785.3 | 1,649.0 | |||||||||
Operating Income | 408.2 | 450.2 | 206.4 | |||||||||
Interest Expense, Net | 119.8 | 106.6 | 105.5 | |||||||||
Other (Expense) Income, Net | (8.7 | ) | (3.4 | ) | 0.1 | |||||||
Income Before Income Taxes | 279.7 | 340.2 | 101.0 | |||||||||
Income Tax Expense | 58.9 | 68.5 | 12.4 | |||||||||
Net Income | 220.8 | 271.7 | 88.6 | |||||||||
Provision for preferred dividends | 14.8 | 14.8 | 14.8 | |||||||||
Income allocated to participating securities | 0.3 | 0.4 | 0.1 | |||||||||
Net Income Available to Common Shareholders | $ | 205.7 | $ | 256.5 | $ | 73.7 | ||||||
Weighted Average Number of Common Shares Outstanding: | ||||||||||||
Basic | 52.0 | 51.6 | 51.2 | |||||||||
Diluted | 52.1 | 51.7 | 51.3 | |||||||||
Basic Earnings Per Share of Common Stock | $ | 3.96 | $ | 4.97 | $ | 1.44 | ||||||
Diluted Earnings Per Share of Common Stock | $ | 3.95 | $ | 4.96 | $ | 1.44 |
See the accompanying Notes to Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in millions, |
| Common Stock |
|
| Preferred |
|
| Paid-in |
|
| Retained |
|
|
|
|
|
|
|
|
| ||||||||
except per share amounts) |
| Shares |
|
| Par |
|
| Stock |
|
| Capital |
|
| Earnings |
|
| AOCI* |
|
| Total |
| |||||||
Balance at September 30, 2016 |
|
| 45,650,642 |
|
| $ | 45.6 |
|
| $ | — |
|
| $ | 1,175.9 |
|
| $ | 550.9 |
|
| $ | (4.2 | ) |
| $ | 1,768.2 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 161.6 |
|
|
| — |
|
|
| 161.6 |
|
Common stock issued |
|
| 2,504,684 |
|
|
| 2.5 |
|
|
| — |
|
|
| 143.0 |
|
|
| — |
|
|
| — |
|
|
| 145.5 |
|
Dividend reinvestment plan |
|
| 23,731 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.4 |
|
|
| 0.9 |
|
|
| — |
|
|
| 8.3 |
|
Stock issued under stock-based compensation plans |
|
| 119,700 |
|
|
| 0.2 |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| 0.1 |
|
Employees’ tax withholding for stock-based compensation |
|
| (35,514 | ) |
|
| — |
|
|
| — |
|
|
| (2.2 | ) |
|
| — |
|
|
| — |
|
|
| (2.2 | ) |
Dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($2.10 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99.2 | ) |
|
| — |
|
|
| (99.2 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.4 |
|
|
| 7.4 |
|
Balance at September 30, 2017 |
|
| 48,263,243 |
|
| $ | 48.3 |
|
| $ | — |
|
| $ | 1,325.6 |
|
| $ | 614.2 |
|
| $ | 3.2 |
|
| $ | 1,991.3 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 214.2 |
|
|
| — |
|
|
| 214.2 |
|
Common stock issued |
|
| 2,300,000 |
|
|
| 2.3 |
|
|
| — |
|
|
| 150.7 |
|
|
| — |
|
|
| — |
|
|
| 153.0 |
|
Dividend reinvestment plan |
|
| 23,023 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.7 |
|
|
| — |
|
|
| — |
|
|
| 7.7 |
|
Stock issued under stock-based compensation plans |
|
| 119,592 |
|
|
| 0.1 |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Employees’ tax withholding for stock-based compensation |
|
| (33,955 | ) |
|
| — |
|
|
| — |
|
|
| (2.8 | ) |
|
| — |
|
|
| — |
|
|
| (2.8 | ) |
Dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($2.25 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (112.1 | ) |
|
| — |
|
|
| (112.1 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2.5 |
|
|
| 2.5 |
|
Reclassification of certain income tax effects |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.7 | ) |
|
| 0.7 |
|
|
| — |
|
Balance at September 30, 2018 |
|
| 50,671,903 |
|
| $ | 50.7 |
|
| $ | — |
|
| $ | 1,482.7 |
|
| $ | 715.6 |
|
| $ | 6.4 |
|
| $ | 2,255.4 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 184.6 |
|
|
| — |
|
|
| 184.6 |
|
Common stock issued |
|
| 179,630 |
|
|
| 0.2 |
|
|
| — |
|
|
| 14.2 |
|
|
| — |
|
|
| — |
|
|
| 14.4 |
|
Dividend reinvestment plan |
|
| 62,735 |
|
|
| — |
|
|
| — |
|
|
| 5.1 |
|
|
| — |
|
|
| — |
|
|
| 5.1 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6.2 |
|
|
| — |
|
|
| — |
|
|
| 6.2 |
|
Stock issued under stock-based compensation plans |
|
| 87,978 |
|
|
| 0.1 |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Employees’ tax withholding for stock-based compensation |
|
| (28,731 | ) |
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
Temporary equity adjustment to redemption value |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
|
| — |
|
|
| (0.8 | ) |
Preferred stock issued |
|
| — |
|
|
| — |
|
|
| 242.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 242.0 |
|
Dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($2.37 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (120.5 | ) |
|
| — |
|
|
| (120.5 | ) |
Preferred stock ($0.344 per depositary share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.4 | ) |
|
| — |
|
|
| (3.4 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37.7 | ) |
|
| (37.7 | ) |
Balance at September 30, 2019 |
|
| 50,973,515 |
|
| $ | 51.0 |
|
| $ | 242.0 |
|
| $ | 1,505.8 |
|
| $ | 775.5 |
|
| $ | (31.3 | ) |
| $ | 2,543.0 |
|
*Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
SPIRE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 184.6 |
|
| $ | 214.2 |
|
| $ | 161.6 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 181.7 |
|
|
| 168.4 |
|
|
| 154.1 |
|
Deferred income taxes and investment tax credits |
|
| 31.8 |
|
|
| (28.7 | ) |
|
| 77.0 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 2.7 |
|
|
| (32.7 | ) |
|
| (63.0 | ) |
Inventories |
|
| 13.6 |
|
|
| 15.5 |
|
|
| (23.5 | ) |
Regulatory assets and liabilities |
|
| — |
|
|
| 191.0 |
|
|
| 5.6 |
|
Accounts payable |
|
| (6.4 | ) |
|
| 12.6 |
|
|
| 51.1 |
|
Delayed/advance customer billings, net |
|
| 12.4 |
|
|
| (12.8 | ) |
|
| (40.0 | ) |
Taxes accrued |
|
| 3.5 |
|
|
| 6.4 |
|
|
| 5.8 |
|
Other assets and liabilities |
|
| 31.0 |
|
|
| (121.2 | ) |
|
| (45.8 | ) |
Other |
|
| (4.0 | ) |
|
| 43.9 |
|
|
| 5.4 |
|
Net cash provided by operating activities |
|
| 450.9 |
|
|
| 456.6 |
|
|
| 288.3 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (823.3 | ) |
|
| (499.4 | ) |
|
| (438.1 | ) |
Final settlement of 2016 acquisition of Spire EnergySouth (net of $2.0 cash acquired) |
|
| — |
|
|
| — |
|
|
| 3.8 |
|
Other business acquisitions |
|
| (7.9 | ) |
|
| (28.1 | ) |
|
| — |
|
Other |
|
| (7.1 | ) |
|
| (4.2 | ) |
|
| 0.8 |
|
Net cash used in investing activities |
|
| (838.3 | ) |
|
| (531.7 | ) |
|
| (433.5 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock |
|
| 242.0 |
|
|
| — |
|
|
| — |
|
Issuance of long-term debt |
|
| 230.0 |
|
|
| 75.0 |
|
|
| 420.0 |
|
Repayment of long-term debt |
|
| (184.1 | ) |
|
| (105.0 | ) |
|
| (393.8 | ) |
Issuance of short-term debt, net |
|
| 189.6 |
|
|
| 76.3 |
|
|
| 78.6 |
|
Issuance of common stock |
|
| 19.5 |
|
|
| 154.7 |
|
|
| 146.9 |
|
Dividends paid on common stock |
|
| (119.0 | ) |
|
| (108.7 | ) |
|
| (96.2 | ) |
Dividends paid on preferred stock |
|
| (3.4 | ) |
|
| — |
|
|
| — |
|
Other |
|
| (2.8 | ) |
|
| (3.2 | ) |
|
| (8.1 | ) |
Net cash provided by financing activities |
|
| 371.8 |
|
|
| 89.1 |
|
|
| 147.4 |
|
Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash |
|
| (15.6 | ) |
|
| 14.0 |
|
|
| 2.2 |
|
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year |
|
| 21.4 |
|
|
| 7.4 |
|
|
| 5.2 |
|
Cash, Cash Equivalents, and Restricted Cash at End of Year |
| $ | 5.8 |
|
| $ | 21.4 |
|
| $ | 7.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
| $ | (102.4 | ) |
| $ | (95.1 | ) |
| $ | (85.5 | ) |
Income taxes |
|
| (2.7 | ) |
|
| (1.5 | ) |
|
| (1.3 | ) |
See the accompanying Notes to Financial Statements.
SPIRE MISSOURI INC.
STATEMENTS OF COMPREHENSIVE INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Utility |
| $ | 1,291.8 |
|
| $ | 1,285.6 |
|
| $ | 1,171.9 |
|
Total Operating Revenues |
|
| 1,291.8 |
|
|
| 1,285.6 |
|
|
| 1,171.9 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Utility |
|
|
|
|
|
|
|
|
|
|
|
|
Natural and propane gas |
|
| 629.8 |
|
|
| 636.8 |
|
|
| 538.3 |
|
Operation and maintenance |
|
| 268.1 |
|
|
| 279.1 |
|
|
| 226.6 |
|
Depreciation and amortization |
|
| 111.5 |
|
|
| 102.8 |
|
|
| 93.1 |
|
Taxes, other than income taxes |
|
| 107.6 |
|
|
| 108.4 |
|
|
| 99.8 |
|
Total Operating Expenses |
|
| 1,117.0 |
|
|
| 1,127.1 |
|
|
| 957.8 |
|
Operating Income |
|
| 174.8 |
|
|
| 158.5 |
|
|
| 214.1 |
|
Interest Expense, Net |
|
| 49.2 |
|
|
| 46.4 |
|
|
| 39.1 |
|
Other Income (Expense), Net |
|
| 2.7 |
|
|
| (15.4 | ) |
|
| (14.5 | ) |
Income Before Income Taxes |
|
| 128.3 |
|
|
| 96.7 |
|
|
| 160.5 |
|
Income Tax Expense (Benefit) |
|
| 13.3 |
|
|
| (32.6 | ) |
|
| 47.5 |
|
Net Income |
|
| 115.0 |
|
|
| 129.3 |
|
|
| 113.0 |
|
Other Comprehensive (Loss) Income, Net of Tax |
|
| (0.8 | ) |
|
| 0.4 |
|
|
| 0.1 |
|
Comprehensive Income |
| $ | 114.2 |
|
| $ | 129.7 |
|
| $ | 113.1 |
|
See the accompanying Notes to Financial Statements.
SPIRE MISSOURI INC.
BALANCE SHEETS
|
| September 30 |
| |||||
(In millions) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility Plant |
| $ | 3,643.2 |
|
| $ | 3,331.0 |
|
Less: Accumulated depreciation and amortization |
|
| 764.1 |
|
|
| 705.8 |
|
Net Utility Plant |
|
| 2,879.1 |
|
|
| 2,625.2 |
|
Other Property and Investments |
|
| 53.3 |
|
|
| 55.0 |
|
Other Property and Investments |
|
| 53.3 |
|
|
| 55.0 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 2.6 |
|
|
| 2.0 |
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Utility |
|
| 94.6 |
|
|
| 103.9 |
|
Associated companies |
|
| 1.4 |
|
|
| 2.7 |
|
Other |
|
| 26.5 |
|
|
| 16.6 |
|
Allowance for doubtful accounts |
|
| (14.9 | ) |
|
| (16.0 | ) |
Delayed customer billings |
|
| 4.3 |
|
|
| 6.9 |
|
Inventories: |
|
|
|
|
|
|
|
|
Natural gas |
|
| 100.1 |
|
|
| 127.9 |
|
Propane gas |
|
| 10.7 |
|
|
| 12.0 |
|
Materials and supplies |
|
| 13.3 |
|
|
| 13.2 |
|
Regulatory assets |
|
| 29.4 |
|
|
| 30.7 |
|
Prepayments |
|
| 18.2 |
|
|
| 19.1 |
|
Total Current Assets |
|
| 286.2 |
|
|
| 319.0 |
|
Deferred Charges and Other Assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
| 210.2 |
|
|
| 210.2 |
|
Regulatory assets |
|
| 507.5 |
|
|
| 441.1 |
|
Other |
|
| 85.6 |
|
|
| 50.8 |
|
Total Deferred Charges and Other Assets |
|
| 803.3 |
|
|
| 702.1 |
|
Total Assets |
| $ | 4,021.9 |
|
| $ | 3,701.3 |
|
SPIRE MISSOURI INC.
BALANCE SHEETS (continued)
|
| September 30 |
| |||||
|
| 2019 |
|
| 2018 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Common stock (par value $1.00 per share; 50.0 million shares authorized; 24,577 issued and outstanding at September 30, 2019 and 2018) |
| $ | 0.1 |
|
| $ | 0.1 |
|
Paid-in capital |
|
| 765.0 |
|
|
| 760.3 |
|
Retained earnings |
|
| 576.6 |
|
|
| 501.1 |
|
Accumulated other comprehensive loss |
|
| (2.4 | ) |
|
| (1.6 | ) |
Total Shareholders' Equity |
|
| 1,339.3 |
|
|
| 1,259.9 |
|
Long-term debt (less current portion) |
|
| 925.0 |
|
|
| 824.4 |
|
Total Capitalization |
|
| 2,264.3 |
|
|
| 2,084.3 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
| — |
|
|
| 50.0 |
|
Notes payable – associated companies |
|
| 386.4 |
|
|
| 345.3 |
|
Accounts payable |
|
| 75.7 |
|
|
| 81.7 |
|
Accounts payable – associated companies |
|
| 5.5 |
|
|
| 5.8 |
|
Advance customer billings |
|
| 20.8 |
|
|
| 9.5 |
|
Wages and compensation accrued |
|
| 34.5 |
|
|
| 31.3 |
|
Customer deposits |
|
| 13.4 |
|
|
| 13.1 |
|
Taxes accrued |
|
| 36.4 |
|
|
| 32.0 |
|
Regulatory liabilities |
|
| 52.3 |
|
|
| 16.7 |
|
Other |
|
| 26.4 |
|
|
| 36.9 |
|
Total Current Liabilities |
|
| 651.4 |
|
|
| 622.3 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
| 364.6 |
|
|
| 361.0 |
|
Pension and postretirement benefit costs |
|
| 192.4 |
|
|
| 136.9 |
|
Asset retirement obligations |
|
| 173.5 |
|
|
| 174.1 |
|
Regulatory liabilities |
|
| 326.5 |
|
|
| 274.9 |
|
Other |
|
| 49.2 |
|
|
| 47.8 |
|
Total Deferred Credits and Other Liabilities |
|
| 1,106.2 |
|
|
| 994.7 |
|
Commitments and Contingencies (Note 16) |
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities |
| $ | 4,021.9 |
|
| $ | 3,701.3 |
|
Years Ended September 30 | ||||||||||||
(In millions) | 2022 | 2021 | 2020 | |||||||||
Net Income | $ | 220.8 | $ | 271.7 | $ | 88.6 | ||||||
Other Comprehensive Income (Loss), Before Tax: | ||||||||||||
Cash flow hedging derivative instruments: | ||||||||||||
Net hedging gain (loss) arising during the period | 56.7 | 61.2 | (8.9 | ) | ||||||||
Amounts reclassified into net income | (1.2 | ) | (1.3 | ) | (3.2 | ) | ||||||
Net gain (loss) on cash flow hedging derivative instruments | 55.5 | 59.9 | (12.1 | ) | ||||||||
Net gain (loss) on defined benefit pension and other postretirement plans | 1.5 | (1.3 | ) | (0.5 | ) | |||||||
Net unrealized loss on available-for-sale debt securities | (0.4 | ) | (0.2 | ) | — | |||||||
Other Comprehensive Income (Loss), Before Tax | 56.6 | 58.4 | (12.6 | ) | ||||||||
Income Tax Expense (Benefit) Related to Items of Other Comprehensive Income (Loss) | 13.0 | 13.6 | (2.7 | ) | ||||||||
Other Comprehensive Income (Loss), Net of Tax | 43.6 | 44.8 | (9.9 | ) | ||||||||
Comprehensive Income | $ | 264.4 | $ | 316.5 | $ | 78.7 |
See the accompanying Notes to Financial Statements.
STATEMENTS OF SHAREHOLDER’S EQUITYCONSOLIDATED BALANCE SHEETS
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
|
|
|
|
|
|
|
| |||||||
(Dollars in millions) |
| Shares |
|
| Par |
|
| Capital |
|
| Earnings |
|
| AOCI* |
|
| Total |
| ||||||
Balance at September 30, 2016 |
|
| 24,577 |
|
| $ | 0.1 |
|
| $ | 751.9 |
|
| $ | 318.3 |
|
| $ | (1.8 | ) |
| $ | 1,068.5 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 113.0 |
|
|
| — |
|
|
| 113.0 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| 4.2 |
|
|
| — |
|
|
| — |
|
|
| 4.2 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14.8 | ) |
|
| — |
|
|
| (14.8 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| 0.1 |
|
Balance at September 30, 2017 |
|
| 24,577 |
|
|
| 0.1 |
|
|
| 756.1 |
|
|
| 416.5 |
|
|
| (1.7 | ) |
|
| 1,171.0 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129.3 |
|
|
| — |
|
|
| 129.3 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| 4.2 |
|
|
| — |
|
|
| — |
|
|
| 4.2 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (45.0 | ) |
|
| — |
|
|
| (45.0 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.4 |
|
|
| 0.4 |
|
Reclassification of certain income tax effects |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
|
| (0.3 | ) |
|
| — |
|
Balance at September 30, 2018 |
|
| 24,577 |
|
|
| 0.1 |
|
|
| 760.3 |
|
|
| 501.1 |
|
|
| (1.6 | ) |
|
| 1,259.9 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 115.0 |
|
|
| — |
|
|
| 115.0 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| 4.7 |
|
|
| — |
|
|
| — |
|
|
| 4.7 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (39.5 | ) |
|
| — |
|
|
| (39.5 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
|
| (0.8 | ) |
Balance at September 30, 2019 |
|
| 24,577 |
|
| $ | 0.1 |
|
| $ | 765.0 |
|
| $ | 576.6 |
|
| $ | (2.4 | ) |
| $ | 1,339.3 |
|
September 30 | ||||||||
(In millions) | 2022 | 2021 | ||||||
ASSETS | ||||||||
Utility Plant | $ | 7,664.9 | $ | 7,225.0 | ||||
Less: Accumulated depreciation and amortization | 2,294.5 | 2,169.3 | ||||||
Net Utility Plant | 5,370.4 | 5,055.7 | ||||||
Non-utility Property (net of accumulated depreciation and amortization of $50.7 and $32.1 at September 30, 2022 and 2021, respectively) | 491.4 | 471.1 | ||||||
Other Investments | 87.8 | 83.1 | ||||||
Total Other Property and Investments | 579.2 | 554.2 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | 6.5 | 4.3 | ||||||
Accounts receivable: | ||||||||
Utility | 210.8 | 338.4 | ||||||
Other | 443.8 | 288.2 | ||||||
Allowance for credit losses | (31.9 | ) | (30.3 | ) | ||||
Delayed customer billings | 21.3 | 9.2 | ||||||
Inventories: | ||||||||
Natural gas | 371.8 | 267.7 | ||||||
Propane gas | 8.6 | 8.7 | ||||||
Materials and supplies | 41.9 | 28.6 | ||||||
Regulatory assets | 355.4 | 306.5 | ||||||
Prepayments | 41.1 | 29.0 | ||||||
Other | 122.7 | 66.2 | ||||||
Total Current Assets | 1,592.0 | 1,316.5 | ||||||
Deferred Charges and Other Assets: | ||||||||
Goodwill | 1,171.6 | 1,171.6 | ||||||
Regulatory assets | 1,112.4 | 993.5 | ||||||
Other | 258.1 | 264.9 | ||||||
Total Deferred Charges and Other Assets | 2,542.1 | 2,430.0 | ||||||
Total Assets | $ | 10,083.7 | $ | 9,356.4 |
* Accumulated other comprehensive income (loss)SPIRE INC.
See the accompanying Notes to Financial Statements.
SPIRE MISSOURI INC.
STATEMENTS OF CASH FLOWSCONSOLIDATED BALANCE SHEETS (Continued)
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 115.0 |
|
| $ | 129.3 |
|
| $ | 113.0 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 111.5 |
|
|
| 102.8 |
|
|
| 93.1 |
|
Deferred income taxes and investment tax credits |
|
| 13.2 |
|
|
| (32.6 | ) |
|
| 47.5 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (0.3 | ) |
|
| (2.0 | ) |
|
| (20.5 | ) |
Inventories |
|
| 29.0 |
|
|
| 8.4 |
|
|
| (13.0 | ) |
Regulatory assets and liabilities |
|
| 32.7 |
|
|
| 141.5 |
|
|
| 37.7 |
|
Accounts payable |
|
| (8.4 | ) |
|
| (14.8 | ) |
|
| 16.8 |
|
Delayed/advance customer billings, net |
|
| 13.9 |
|
|
| (7.4 | ) |
|
| (37.6 | ) |
Taxes accrued |
|
| 4.4 |
|
|
| (2.1 | ) |
|
| 5.0 |
|
Other assets and liabilities |
|
| (2.6 | ) |
|
| (83.9 | ) |
|
| (62.0 | ) |
Other |
|
| 5.2 |
|
|
| 45.0 |
|
|
| 2.7 |
|
Net cash provided by operating activities |
|
| 313.6 |
|
|
| 284.2 |
|
|
| 182.7 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (356.9 | ) |
|
| (295.8 | ) |
|
| (282.2 | ) |
Other |
|
| 1.3 |
|
|
| 4.8 |
|
|
| 1.1 |
|
Net cash used in investing activities |
|
| (355.6 | ) |
|
| (291.0 | ) |
|
| (281.1 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of first mortgage bonds |
|
| 100.0 |
|
|
| — |
|
|
| 170.0 |
|
Repayment of short-term debt, net |
|
| (50.0 | ) |
|
| (100.0 | ) |
|
| (243.7 | ) |
Borrowings from Spire |
|
| 41.1 |
|
|
| 142.3 |
|
|
| 203.0 |
|
Dividends paid on common stock |
|
| (48.5 | ) |
|
| (36.0 | ) |
|
| (28.7 | ) |
Other |
|
| — |
|
|
| — |
|
|
| (1.8 | ) |
Net cash provided by financing activities |
|
| 42.6 |
|
|
| 6.3 |
|
|
| 98.8 |
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| 0.6 |
|
|
| (0.5 | ) |
|
| 0.4 |
|
Cash and Cash Equivalents at Beginning of Year |
|
| 2.0 |
|
|
| 2.5 |
|
|
| 2.1 |
|
Cash and Cash Equivalents at End of Year |
| $ | 2.6 |
|
| $ | 2.0 |
|
| $ | 2.5 |
|
Supplemental disclosure of cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
| $ | (48.7 | ) |
| $ | (45.6 | ) |
| $ | (38.6 | ) |
Income taxes |
|
| — |
|
|
| — |
|
|
| — |
|
See the accompanying Notes to Financial Statements.
SPIRE ALABAMA INC.
STATEMENTS OF INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Utility |
| $ | 465.5 |
|
| $ | 500.7 |
|
| $ | 400.5 |
|
Total Operating Revenues |
|
| 465.5 |
|
|
| 500.7 |
|
|
| 400.5 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Utility |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 135.5 |
|
|
| 176.0 |
|
|
| 84.5 |
|
Operation and maintenance |
|
| 142.6 |
|
|
| 138.8 |
|
|
| 128.2 |
|
Depreciation and amortization |
|
| 56.2 |
|
|
| 53.2 |
|
|
| 49.9 |
|
Taxes, other than income taxes |
|
| 35.7 |
|
|
| 36.1 |
|
|
| 29.9 |
|
Total Operating Expenses |
|
| 370.0 |
|
|
| 404.1 |
|
|
| 292.5 |
|
Operating Income |
|
| 95.5 |
|
|
| 96.6 |
|
|
| 108.0 |
|
Interest Expense, Net |
|
| 21.7 |
|
|
| 17.3 |
|
|
| 14.4 |
|
Other Income, Net |
|
| 7.0 |
|
|
| 3.6 |
|
|
| 0.3 |
|
Income Before Income Taxes |
|
| 80.8 |
|
|
| 82.9 |
|
|
| 93.9 |
|
Income Tax Expense |
|
| 20.5 |
|
|
| 81.6 |
|
|
| 35.8 |
|
Net Income |
| $ | 60.3 |
|
| $ | 1.3 |
|
| $ | 58.1 |
|
September 30 | ||||||||
2022 | 2021 | |||||||
CAPITALIZATION AND LIABILITIES | ||||||||
Capitalization: | ||||||||
Preferred stock ($25.00 par value per share; 10.0 million depositary shares authorized, issued and outstanding at September 30, 2022 and 2021) | $ | 242.0 | $ | 242.0 | ||||
Common stock (par value $1.00 per share; 70.0 million shares authorized; 52.5 million issued and outstanding at September 30, 2022, and 51.7 million shares issued and outstanding at September 30, 2021) | 52.5 | 51.7 | ||||||
Paid-in capital | 1,571.3 | 1,517.9 | ||||||
Retained earnings | 905.5 | 843.0 | ||||||
Accumulated other comprehensive income | 47.2 | 3.6 | ||||||
Total Shareholders' Equity | 2,818.5 | 2,658.2 | ||||||
Temporary equity | 13.1 | 9.8 | ||||||
Long-term debt (less current portion) | 2,958.5 | 2,939.1 | ||||||
Total Capitalization | 5,790.1 | 5,607.1 | ||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | 281.2 | 55.8 | ||||||
Notes payable | 1,037.5 | 672.0 | ||||||
Accounts payable | 617.4 | 409.9 | ||||||
Advance customer billings | 18.7 | 32.1 | ||||||
Wages and compensation accrued | 50.2 | 59.5 | ||||||
Customer deposits | 28.2 | 28.9 | ||||||
Taxes accrued | 90.1 | 78.8 | ||||||
Regulatory liabilities | 3.7 | 34.6 | ||||||
Other | 226.6 | 236.7 | ||||||
Total Current Liabilities | 2,353.6 | 1,608.3 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes | 675.1 | 612.3 | ||||||
Pension and postretirement benefit costs | 163.0 | 235.9 | ||||||
Asset retirement obligations | 520.9 | 519.6 | ||||||
Regulatory liabilities | 418.2 | 620.9 | ||||||
Other | 162.8 | 152.3 | ||||||
Total Deferred Credits and Other Liabilities | 1,940.0 | 2,141.0 | ||||||
Commitments and Contingencies (Note 16) | ||||||||
Total Capitalization and Liabilities | $ | 10,083.7 | $ | 9,356.4 |
See the accompanying Notes to Financial Statements.
BALANCE SHEETSCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
| September 30 |
| |||||
(In millions) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility Plant |
| $ | 2,138.0 |
|
| $ | 1,964.3 |
|
Less: Accumulated depreciation and amortization |
|
| 882.1 |
|
|
| 830.2 |
|
Net Utility Plant |
|
| 1,255.9 |
|
|
| 1,134.1 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Utility |
|
| 37.5 |
|
|
| 39.6 |
|
Associated companies |
|
| — |
|
|
| 0.5 |
|
Other |
|
| 8.5 |
|
|
| 8.5 |
|
Allowance for doubtful accounts |
|
| (6.3 | ) |
|
| (3.9 | ) |
Inventories: |
|
|
|
|
|
|
|
|
Natural gas |
|
| 35.1 |
|
|
| 33.9 |
|
Materials and supplies |
|
| 7.8 |
|
|
| 7.8 |
|
Regulatory assets |
|
| 33.9 |
|
|
| 26.2 |
|
Prepayments |
|
| 5.3 |
|
|
| 6.0 |
|
Other |
|
| 0.4 |
|
|
| 2.4 |
|
Total Current Assets |
|
| 122.2 |
|
|
| 121.0 |
|
Deferred Charges and Other Assets: |
|
|
|
|
|
|
|
|
Regulatory assets |
|
| 231.2 |
|
|
| 201.5 |
|
Deferred income tax |
|
| 81.3 |
|
|
| 101.8 |
|
Other |
|
| 53.0 |
|
|
| 57.8 |
|
Total Deferred Charges and Other Assets |
|
| 365.5 |
|
|
| 361.1 |
|
Total Assets |
| $ | 1,743.6 |
|
| $ | 1,616.2 |
|
(Dollars in millions, | Common Stock | Preferred | Paid-in | Retained | ||||||||||||||||||||||||
except per share amounts) | Shares | Par | Stock | Capital | Earnings | AOCI* | Total | |||||||||||||||||||||
Balance at September 30, 2019 | 50,973,515 | $ | 51.0 | $ | 242.0 | $ | 1,505.8 | $ | 775.5 | $ | (31.3 | ) | $ | 2,543.0 | ||||||||||||||
Net income | — | — | — | — | 88.6 | — | 88.6 | |||||||||||||||||||||
Common stock issued | 446,619 | 0.4 | — | 31.6 | — | — | 32.0 | |||||||||||||||||||||
Dividend reinvestment plan | 122,545 | 0.1 | — | 9.1 | — | — | 9.2 | |||||||||||||||||||||
Stock-based compensation costs | — | — | — | 6.0 | — | — | 6.0 | |||||||||||||||||||||
Stock issued under stock-based compensation plans | 110,463 | 0.1 | — | (0.1 | ) | — | — | — | ||||||||||||||||||||
Employees’ tax withholding for stock-based compensation | (41,353 | ) | — | — | (3.2 | ) | — | — | (3.2 | ) | ||||||||||||||||||
Temporary equity adjustment to redemption value | — | — | — | — | 3.4 | — | 3.4 | |||||||||||||||||||||
Dividends declared: | ||||||||||||||||||||||||||||
Common stock ($2.49 per share) | — | — | — | — | (128.4 | ) | — | (128.4 | ) | |||||||||||||||||||
Preferred stock ($1.84375 per depositary share) | — | — | — | — | (18.4 | ) | — | (18.4 | ) | |||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | (9.9 | ) | (9.9 | ) | |||||||||||||||||||
Balance at September 30, 2020 | 51,611,789 | $ | 51.6 | $ | 242.0 | $ | 1,549.2 | $ | 720.7 | $ | (41.2 | ) | $ | 2,522.3 | ||||||||||||||
Net income | — | — | — | — | 271.7 | — | 271.7 | |||||||||||||||||||||
Dividend reinvestment plan | 24,565 | — | — | 1.6 | — | — | 1.6 | |||||||||||||||||||||
Stock-based compensation costs | — | — | — | 9.1 | — | — | 9.1 | |||||||||||||||||||||
Stock issued under stock-based compensation plans | 65,316 | 0.1 | — | (0.1 | ) | — | — | — | ||||||||||||||||||||
Employees’ tax withholding for stock-based compensation | (16,787 | ) | — | — | (1.1 | ) | — | — | (1.1 | ) | ||||||||||||||||||
Equity units issued | — | — | — | (40.8 | ) | — | — | (40.8 | ) | |||||||||||||||||||
Temporary equity adjustment to redemption value | — | — | — | — | 1.3 | — | 1.3 | |||||||||||||||||||||
Dividends declared: | ||||||||||||||||||||||||||||
Common stock ($2.60 per share) | — | — | — | — | (135.9 | ) | — | (135.9 | ) | |||||||||||||||||||
Preferred stock ($1.475 per depositary share) | — | — | — | — | (14.8 | ) | — | (14.8 | ) | |||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | 44.8 | 44.8 | |||||||||||||||||||||
Balance at September 30, 2021 | 51,684,883 | $ | 51.7 | $ | 242.0 | $ | 1,517.9 | $ | 843.0 | $ | 3.6 | $ | 2,658.2 | |||||||||||||||
Net income | — | — | — | — | 220.8 | — | 220.8 | |||||||||||||||||||||
Common stock issued | 719,625 | 0.7 | — | 49.6 | — | — | 50.3 | |||||||||||||||||||||
Dividend reinvestment plan | 24,154 | — | — | 1.6 | — | — | 1.6 | |||||||||||||||||||||
Stock-based compensation costs | — | — | — | 4.1 | — | — | 4.1 | |||||||||||||||||||||
Stock issued under stock-based compensation plans | 93,936 | 0.1 | — | (0.1 | ) | — | — | — | ||||||||||||||||||||
Employees’ tax withholding for stock-based compensation | (28,055 | ) | — | — | (1.8 | ) | — | — | (1.8 | ) | ||||||||||||||||||
Dividends declared: | ||||||||||||||||||||||||||||
Common stock ($2.74 per share) | — | — | — | — | (143.5 | ) | — | (143.5 | ) | |||||||||||||||||||
Preferred stock ($1.475 per depositary share) | — | — | — | — | (14.8 | ) | — | (14.8 | ) | |||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | 43.6 | 43.6 | |||||||||||||||||||||
Balance at September 30, 2022 | 52,494,543 | $ | 52.5 | $ | 242.0 | $ | 1,571.3 | $ | 905.5 | $ | 47.2 | $ | 2,818.5 |
SPIRE ALABAMA INC.
BALANCE SHEETS (continued)* Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
|
| September 30 |
| |||||
|
| 2019 |
|
| 2018 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Common stock and paid-in capital (par value $0.01 per share; 3,000,000 shares authorized; 1,972,052 issued and outstanding at September 30, 2019 and 2018) |
| $ | 370.9 |
|
| $ | 390.9 |
|
Retained earnings |
|
| 459.1 |
|
|
| 417.8 |
|
Total Shareholders' Equity |
|
| 830.0 |
|
|
| 808.7 |
|
Long-term debt (less current portion) |
|
| 372.2 |
|
|
| 322.6 |
|
Total Capitalization |
|
| 1,202.2 |
|
|
| 1,131.3 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
| 40.0 |
|
|
| — |
|
Notes payable – associated companies |
|
| 128.7 |
|
|
| 142.5 |
|
Accounts payable |
|
| 56.2 |
|
|
| 48.4 |
|
Accounts payable – associated companies |
|
| 1.6 |
|
|
| 2.1 |
|
Advance customer billings |
|
| 10.6 |
|
|
| 13.1 |
|
Wages and compensation accrued |
|
| 8.0 |
|
|
| 6.7 |
|
Customer deposits |
|
| 19.5 |
|
|
| 18.6 |
|
Taxes accrued |
|
| 27.4 |
|
|
| 28.3 |
|
Regulatory liabilities |
|
| 3.4 |
|
|
| 7.6 |
|
Other |
|
| 9.2 |
|
|
| 7.1 |
|
Total Current Liabilities |
|
| 304.6 |
|
|
| 274.4 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Pension and postretirement benefit costs |
|
| 59.2 |
|
|
| 35.0 |
|
Asset retirement obligations |
|
| 148.7 |
|
|
| 135.7 |
|
Regulatory liabilities |
|
| 23.0 |
|
|
| 31.3 |
|
Other |
|
| 5.9 |
|
|
| 8.5 |
|
Total Deferred Credits and Other Liabilities |
|
| 236.8 |
|
|
| 210.5 |
|
Commitments and Contingencies (Note 16) |
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities |
| $ | 1,743.6 |
|
| $ | 1,616.2 |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30 | ||||||||||||
(In millions) | 2022 | 2021 | 2020 | |||||||||
Operating Activities: | ||||||||||||
Net Income | $ | 220.8 | $ | 271.7 | $ | 88.6 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 237.3 | 213.1 | 197.3 | |||||||||
Impairments | — | — | 148.6 | |||||||||
Deferred income taxes and investment tax credits | 57.9 | 67.0 | 9.0 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (26.5 | ) | (343.0 | ) | 36.2 | |||||||
Inventories | (117.2 | ) | (111.0 | ) | 2.6 | |||||||
Regulatory assets and liabilities | (409.0 | ) | 76.6 | 0.6 | ||||||||
Accounts payable | 190.7 | 177.7 | (43.1 | ) | ||||||||
Delayed/advance customer billings, net | (25.5 | ) | (12.4 | ) | 7.0 | |||||||
Taxes accrued | 11.2 | 8.9 | 2.9 | |||||||||
Other assets and liabilities | (93.5 | ) | (116.1 | ) | 12.0 | |||||||
Other | 8.8 | 17.3 | 8.2 | |||||||||
Net cash provided by operating activities | 55.0 | 249.8 | 469.9 | |||||||||
Investing Activities: | ||||||||||||
Capital expenditures | (552.2 | ) | (624.8 | ) | (638.4 | ) | ||||||
Other | 5.5 | 2.8 | 6.8 | |||||||||
Net cash used in investing activities | (546.7 | ) | (622.0 | ) | (631.6 | ) | ||||||
Financing Activities: | ||||||||||||
Issuance of long-term debt | 300.0 | 629.1 | 510.0 | |||||||||
Repayment of long-term debt | (55.8 | ) | (115.4 | ) | (147.0 | ) | ||||||
Issuance (repayment) of short-term debt, net | 365.5 | 24.0 | (95.2 | ) | ||||||||
Issuance of common stock | 51.9 | 1.0 | 41.1 | |||||||||
Dividends paid on common stock | (141.9 | ) | (133.2 | ) | (128.0 | ) | ||||||
Dividends paid on preferred stock | (14.8 | ) | (14.8 | ) | (14.8 | ) | ||||||
Other | (4.0 | ) | (11.3 | ) | (6.1 | ) | ||||||
Net cash provided by financing activities | 500.9 | 379.4 | 160.0 | |||||||||
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 9.2 | 7.2 | (1.7 | ) | ||||||||
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year | 11.3 | 4.1 | 5.8 | |||||||||
Cash, Cash Equivalents, and Restricted Cash at End of Year | $ | 20.5 | $ | 11.3 | $ | 4.1 | ||||||
Supplemental disclosure of cash paid for: | ||||||||||||
Interest, net of amounts capitalized | $ | (119.9 | ) | $ | (98.7 | ) | $ | (100.0 | ) | |||
Income taxes | (1.8 | ) | (1.5 | ) | (2.9 | ) |
See the accompanying Notes to Financial Statements.
STATEMENTS OF SHAREHOLDER’S EQUITYCOMPREHENSIVE INCOME
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
|
|
|
| |||||||
(Dollars in millions) |
| Shares |
|
| Par |
|
| Capital |
|
| Earnings |
|
| Total |
| |||||
Balance at September 30, 2016 |
|
| 1,972,052 |
|
| $ | — |
|
| $ | 451.9 |
|
| $ | 415.4 |
|
| $ | 867.3 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 58.1 |
|
|
| 58.1 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27.0 | ) |
|
| (27.0 | ) |
Return of capital to Spire |
|
| — |
|
|
| — |
|
|
| (31.0 | ) |
|
| — |
|
|
| (31.0 | ) |
Balance at September 30, 2017 |
|
| 1,972,052 |
|
|
| — |
|
|
| 420.9 |
|
|
| 446.5 |
|
|
| 867.4 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.3 |
|
|
| 1.3 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30.0 | ) |
|
| (30.0 | ) |
Return of capital to Spire |
|
| — |
|
|
| — |
|
|
| (30.0 | ) |
|
| — |
|
|
| (30.0 | ) |
Balance at September 30, 2018 |
|
| 1,972,052 |
|
|
| — |
|
|
| 390.9 |
|
|
| 417.8 |
|
|
| 808.7 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60.3 |
|
|
| 60.3 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19.0 | ) |
|
| (19.0 | ) |
Return of capital to Spire |
|
| — |
|
|
| — |
|
|
| (20.0 | ) |
|
| — |
|
|
| (20.0 | ) |
Balance at September 30, 2019 |
|
| 1,972,052 |
|
| $ | — |
|
| $ | 370.9 |
|
| $ | 459.1 |
|
| $ | 830.0 |
|
Years Ended September 30 | ||||||||||||
(In millions) | 2022 | 2021 | 2020 | |||||||||
Operating Revenues | $ | 1,321.0 | $ | 1,516.6 | $ | 1,193.6 | ||||||
Operating Expenses: | ||||||||||||
Natural gas | 587.0 | 786.8 | 515.8 | |||||||||
Operation and maintenance | 255.7 | 261.1 | 251.0 | |||||||||
Depreciation and amortization | 145.3 | 129.2 | 118.0 | |||||||||
Taxes, other than income taxes | 129.0 | 110.9 | 103.2 | |||||||||
Total Operating Expenses | 1,117.0 | 1,288.0 | 988.0 | |||||||||
Operating Income | 204.0 | 228.6 | 205.6 | |||||||||
Interest Expense, Net | 60.9 | 50.3 | 49.4 | |||||||||
Other Expense, Net | (6.9 | ) | (8.9 | ) | (8.7 | ) | ||||||
Income Before Income Taxes | 136.2 | 169.4 | 147.5 | |||||||||
Income Tax Expense | 21.3 | 25.3 | 17.3 | |||||||||
Net Income | 114.9 | 144.1 | 130.2 | |||||||||
Other Comprehensive Income (Loss), Net of Tax | 1.5 | (1.3 | ) | (0.5 | ) | |||||||
Comprehensive Income | $ | 116.4 | $ | 142.8 | $ | 129.7 |
See the accompanying Notes to Financial Statements.
STATEMENTS OF CASH FLOWSBALANCE SHEETS
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 60.3 |
|
| $ | 1.3 |
|
| $ | 58.1 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 56.2 |
|
|
| 53.2 |
|
|
| 49.9 |
|
Deferred income taxes |
|
| 20.5 |
|
|
| 81.6 |
|
|
| 35.8 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 0.8 |
|
|
| (16.2 | ) |
|
| (10.0 | ) |
Inventories |
|
| (1.2 | ) |
|
| (1.2 | ) |
|
| 0.1 |
|
Regulatory assets and liabilities |
|
| (28.2 | ) |
|
| 40.7 |
|
|
| (18.3 | ) |
Accounts payable |
|
| 4.5 |
|
|
| 4.7 |
|
|
| 8.8 |
|
Advance customer billings |
|
| (2.5 | ) |
|
| (5.5 | ) |
|
| (2.5 | ) |
Taxes accrued |
|
| (0.9 | ) |
|
| 4.9 |
|
|
| 1.8 |
|
Other assets and liabilities |
|
| 34.8 |
|
|
| (16.7 | ) |
|
| (38.0 | ) |
Other |
|
| (3.2 | ) |
|
| (0.7 | ) |
|
| (1.2 | ) |
Net cash provided by operating activities |
|
| 141.1 |
|
|
| 146.1 |
|
|
| 84.5 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (174.5 | ) |
|
| (131.7 | ) |
|
| (113.9 | ) |
Other |
|
| (3.3 | ) |
|
| (1.6 | ) |
|
| (0.4 | ) |
Net cash used in investing activities |
|
| (177.8 | ) |
|
| (133.3 | ) |
|
| (114.3 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt |
|
| 90.0 |
|
|
| 75.0 |
|
|
| — |
|
Repayment of short-term debt, net |
|
| — |
|
|
| — |
|
|
| (82.0 | ) |
(Repayments of) borrowings from Spire |
|
| (13.8 | ) |
|
| (27.4 | ) |
|
| 169.9 |
|
Return of capital to Spire |
|
| (20.0 | ) |
|
| (30.0 | ) |
|
| (31.0 | ) |
Dividends paid |
|
| (19.0 | ) |
|
| (30.0 | ) |
|
| (27.0 | ) |
Other |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 36.7 |
|
|
| (12.9 | ) |
|
| 29.9 |
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
| — |
|
|
| (0.1 | ) |
|
| 0.1 |
|
Cash and Cash Equivalents at Beginning of Year |
|
| — |
|
|
| 0.1 |
|
|
| — |
|
Cash and Cash Equivalents at End of Year |
| $ | — |
|
| $ | — |
|
| $ | 0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
| $ | (19.2 | ) |
| $ | (15.1 | ) |
| $ | (12.8 | ) |
Income taxes |
|
| — |
|
|
| — |
|
|
| — |
|
September 30 | ||||||||
(In millions) | 2022 | 2021 | ||||||
ASSETS | ||||||||
Utility Plant | $ | 4,550.4 | $ | 4,266.6 | ||||
Less: Accumulated depreciation and amortization | 982.1 | 905.1 | ||||||
Net Utility Plant | 3,568.3 | 3,361.5 | ||||||
Other Property and Investments | 58.9 | 60.2 | ||||||
Current Assets: | ||||||||
Accounts receivable: | ||||||||
Utility | 131.5 | 279.0 | ||||||
Associated companies | 3.7 | 4.7 | ||||||
Other | 44.5 | 57.5 | ||||||
Allowance for credit losses | (24.9 | ) | (22.6 | ) | ||||
Delayed customer billings | 16.1 | 2.4 | ||||||
Inventories: | ||||||||
Natural gas | 215.3 | 176.7 | ||||||
Propane gas | 8.6 | 8.7 | ||||||
Materials and supplies | 22.0 | 15.0 | ||||||
Regulatory assets | 288.1 | 276.3 | ||||||
Prepayments | 23.3 | 19.7 | ||||||
Other | — | 0.1 | ||||||
Total Current Assets | 728.2 | 817.5 | ||||||
Deferred Charges and Other Assets: | ||||||||
Goodwill | 210.2 | 210.2 | ||||||
Regulatory assets | 547.6 | 483.1 | ||||||
Other | 105.0 | 125.6 | ||||||
Total Deferred Charges and Other Assets | 862.8 | 818.9 | ||||||
Total Assets | $ | 5,218.2 | $ | 5,058.1 |
BALANCE SHEETS (continued)
September 30 | ||||||||
2022 | 2021 | |||||||
CAPITALIZATION AND LIABILITIES | ||||||||
Capitalization: | ||||||||
Common stock (par value $1.00 per share; 50.0 million shares authorized; 25,325 issued and outstanding at September 30, 2022 and 24,577 issued and outstanding at 2021) | $ | 0.1 | $ | 0.1 | ||||
Paid-in capital | 816.1 | 765.0 | ||||||
Retained earnings | 931.9 | 817.0 | ||||||
Accumulated other comprehensive loss | (2.7 | ) | (4.2 | ) | ||||
Total Shareholder's Equity | 1,745.4 | 1,577.9 | ||||||
Long-term debt (less current portion) | 1,387.7 | 1,338.4 | ||||||
Total Capitalization | 3,133.1 | 2,916.3 | ||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | 250.0 | — | ||||||
Notes payable | — | 250.0 | ||||||
Notes payable – associated companies | 445.3 | 240.9 | ||||||
Accounts payable | 119.0 | 89.7 | ||||||
Accounts payable – associated companies | 13.3 | 10.2 | ||||||
Advance customer billings | 7.0 | 19.7 | ||||||
Wages and compensation accrued | 33.8 | 40.3 | ||||||
Customer deposits | 6.5 | 8.0 | ||||||
Taxes accrued | 50.4 | 41.2 | ||||||
Regulatory liabilities | — | 17.1 | ||||||
Other | 45.6 | 47.4 | ||||||
Total Current Liabilities | 970.9 | 764.5 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Deferred income taxes | 500.1 | 480.0 | ||||||
Pension and postretirement benefit costs | 115.5 | 159.5 | ||||||
Asset retirement obligations | 110.6 | 143.4 | ||||||
Regulatory liabilities | 331.8 | 538.8 | ||||||
Other | 56.2 | 55.6 | ||||||
Total Deferred Credits and Other Liabilities | 1,114.2 | 1,377.3 | ||||||
Commitments and Contingencies (Note 16) | ||||||||
Total Capitalization and Liabilities | $ | 5,218.2 | $ | 5,058.1 |
See the accompanying Notes to Financial Statements.
STATEMENTS OF SHAREHOLDER’S EQUITY
Common Stock | Paid-in | Retained | ||||||||||||||||||||||
(Dollars in millions) | Shares | Par | Capital | Earnings | AOCI* | Total | ||||||||||||||||||
Balance at September 30, 2019 | 24,577 | $ | 0.1 | $ | 765.0 | $ | 576.6 | $ | (2.4 | ) | $ | 1,339.3 | ||||||||||||
Net income | — | — | — | 130.2 | — | 130.2 | ||||||||||||||||||
Dividends declared | — | — | — | (33.9 | ) | — | (33.9 | ) | ||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | (0.5 | ) | (0.5 | ) | ||||||||||||||||
Balance at September 30, 2020 | 24,577 | 0.1 | 765.0 | 672.9 | (2.9 | ) | 1,435.1 | |||||||||||||||||
Net income | — | — | — | 144.1 | — | 144.1 | ||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | (1.3 | ) | (1.3 | ) | ||||||||||||||||
Balance at September 30, 2021 | 24,577 | 0.1 | 765.0 | 817.0 | (4.2 | ) | 1,577.9 | |||||||||||||||||
Net income | — | — | — | 114.9 | — | 114.9 | ||||||||||||||||||
Common stock issued to Spire Inc. | 748 | — | 51.1 | — | — | 51.1 | ||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | 1.5 | 1.5 | ||||||||||||||||||
Balance at September 30, 2022 | 25,325 | $ | 0.1 | $ | 816.1 | $ | 931.9 | $ | (2.7 | ) | $ | 1,745.4 |
* Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
STATEMENTS OF CASH FLOWS
Years Ended September 30 | ||||||||||||
(In millions) | 2022 | 2021 | 2020 | |||||||||
Operating Activities: | ||||||||||||
Net Income | $ | 114.9 | $ | 144.1 | $ | 130.2 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 145.3 | 129.2 | 118.0 | |||||||||
Deferred income taxes and investment tax credits | 21.3 | 25.3 | 17.1 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | 163.8 | (207.4 | ) | (3.7 | ) | |||||||
Inventories | (45.4 | ) | (79.0 | ) | 2.7 | |||||||
Regulatory assets and liabilities | (314.3 | ) | 35.9 | 27.3 | ||||||||
Accounts payable | 25.3 | 23.1 | 2.3 | |||||||||
Delayed/advance customer billings, net | (26.4 | ) | (13.0 | ) | 13.7 | |||||||
Taxes accrued | 9.3 | 2.1 | 2.7 | |||||||||
Other assets and liabilities | (48.0 | ) | (115.0 | ) | (6.1 | ) | ||||||
Other | 1.4 | 0.7 | 0.6 | |||||||||
Net cash provided by (used in) operating activities | 47.2 | (54.0 | ) | 304.8 | ||||||||
Investing Activities: | ||||||||||||
Capital expenditures | (354.1 | ) | (382.6 | ) | (356.0 | ) | ||||||
Other | 3.6 | 1.3 | 1.3 | |||||||||
Net cash used in investing activities | (350.5 | ) | (381.3 | ) | (354.7 | ) | ||||||
Financing Activities: | ||||||||||||
Issuance of long-term debt | 300.0 | 304.1 | 275.0 | |||||||||
Repayment of long-term debt | — | (55.0 | ) | (107.0 | ) | |||||||
(Repayment) issuance of short-term debt, net | (250.0 | ) | 250.0 | — | ||||||||
Borrowings from (repayments to) Spire, net | 204.4 | (60.3 | ) | (85.2 | ) | |||||||
Issuance of common stock | 51.1 | — | — | |||||||||
Dividends paid | — | — | (33.9 | ) | ||||||||
Other | (2.2 | ) | (3.5 | ) | (1.6 | ) | ||||||
Net cash provided by financing activities | 303.3 | 435.3 | 47.3 | |||||||||
Net Decrease in Cash and Cash Equivalents | — | — | (2.6 | ) | ||||||||
Cash and Cash Equivalents at Beginning of Year | — | — | 2.6 | |||||||||
Cash and Cash Equivalents at End of Year | $ | — | $ | — | $ | — | ||||||
Supplemental disclosure of cash paid for: | ||||||||||||
Interest, net of amounts capitalized | $ | (58.9 | ) | $ | (45.9 | ) | $ | (46.0 | ) | |||
Income taxes | — | — | — |
See the accompanying Notes to Financial Statements.
STATEMENTS OF INCOME
Years Ended September 30 | ||||||||||||
(In millions) | 2022 | 2021 | 2020 | |||||||||
Operating Revenues | $ | 509.1 | $ | 494.0 | $ | 455.0 | ||||||
Operating Expenses: | ||||||||||||
Natural gas | 161.5 | 145.3 | 118.9 | |||||||||
Operation and maintenance | 130.1 | 132.5 | 139.1 | |||||||||
Depreciation and amortization | 66.8 | 62.1 | 59.3 | |||||||||
Taxes, other than income taxes | 38.1 | 37.1 | 34.8 | |||||||||
Total Operating Expenses | 396.5 | 377.0 | 352.1 | |||||||||
Operating Income | 112.6 | 117.0 | 102.9 | |||||||||
Interest Expense, Net | 21.3 | 20.2 | 20.6 | |||||||||
Other Income, Net | 0.4 | 2.0 | 5.4 | |||||||||
Income Before Income Taxes | 91.7 | 98.8 | 87.7 | |||||||||
Income Tax Expense | 23.2 | 25.0 | 22.0 | |||||||||
Net Income | $ | 68.5 | $ | 73.8 | $ | 65.7 |
See the accompanying Notes to Financial Statements.
BALANCE SHEETS
September 30 | ||||||||
(In millions) | 2022 | 2021 | ||||||
ASSETS | ||||||||
Utility Plant | $ | 2,732.6 | $ | 2,586.5 | ||||
Less: Accumulated depreciation and amortization | 1,184.1 | 1,124.8 | ||||||
Net Utility Plant | 1,548.5 | 1,461.7 | ||||||
Current Assets: | ||||||||
Cash and cash equivalents | 2.4 | — | ||||||
Accounts receivable: | ||||||||
Utility | 69.9 | 49.8 | ||||||
Associated companies | 1.3 | 0.6 | ||||||
Other | 6.5 | 6.4 | ||||||
Allowance for credit losses | (6.3 | ) | (6.6 | ) | ||||
Delayed customer billings | 4.8 | 6.7 | ||||||
Inventories: | ||||||||
Natural gas | 72.5 | 35.5 | ||||||
Materials and supplies | 16.3 | 10.8 | ||||||
Regulatory assets | 56.9 | 18.8 | ||||||
Prepayments | 5.8 | 5.4 | ||||||
Total Current Assets | 230.1 | 127.4 | ||||||
Deferred Charges and Other Assets: | ||||||||
Regulatory assets | 538.2 | 483.3 | ||||||
Deferred income tax | 11.0 | 34.2 | ||||||
Other | 81.3 | 63.9 | ||||||
Total Deferred Charges and Other Assets | 630.5 | 581.4 | ||||||
Total Assets | $ | 2,409.1 | $ | 2,170.5 |
BALANCE SHEETS (continued)
September 30 | ||||||||
2022 | 2021 | |||||||
CAPITALIZATION AND LIABILITIES | ||||||||
Capitalization: | ||||||||
Common stock and paid-in capital (par value $0.01 per share; 3,000,000 shares authorized; 1,972,052 issued and outstanding at September 30, 2022 and 2021) | $ | 316.9 | $ | 328.9 | ||||
Retained earnings | 589.1 | 552.6 | ||||||
Total Shareholder's Equity | 906.0 | 881.5 | ||||||
Long-term debt (less current portion) | 571.5 | 571.2 | ||||||
Total Capitalization | 1,477.5 | 1,452.7 | ||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | — | 50.0 | ||||||
Notes payable – associated companies | 260.9 | 49.0 | ||||||
Accounts payable | 85.6 | 52.3 | ||||||
Accounts payable – associated companies | 4.4 | 6.0 | ||||||
Advance customer billings | 9.9 | 11.2 | ||||||
Wages and compensation accrued | 7.6 | 9.3 | ||||||
Customer deposits | 19.0 | 18.4 | ||||||
Taxes accrued | 31.3 | 30.4 | ||||||
Regulatory liabilities | — | 13.4 | ||||||
Other | 22.4 | 17.3 | ||||||
Total Current Liabilities | 441.1 | 257.3 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
Pension and postretirement benefit costs | 40.5 | 66.7 | ||||||
Asset retirement obligations | 398.7 | 362.8 | ||||||
Regulatory liabilities | 23.0 | 23.4 | ||||||
Other | 28.3 | 7.6 | ||||||
Total Deferred Credits and Other Liabilities | 490.5 | 460.5 | ||||||
Commitments and Contingencies (Note 16) | ||||||||
Total Capitalization and Liabilities | $ | 2,409.1 | $ | 2,170.5 |
See the accompanying Notes to Financial Statements.
STATEMENTS OF SHAREHOLDER’S EQUITY
Common Stock | Paid-in | Retained | ||||||||||||||||||
(Dollars in millions) | Shares | Par | Capital | Earnings | Total | |||||||||||||||
Balance at September 30, 2019 | 1,972,052 | $ | — | $ | 370.9 | $ | 459.1 | $ | 830.0 | |||||||||||
Net income | — | — | — | 65.7 | 65.7 | |||||||||||||||
Dividends declared | — | — | — | (24.0 | ) | (24.0 | ) | |||||||||||||
Return of capital to Spire | — | — | (20.0 | ) | — | (20.0 | ) | |||||||||||||
Balance at September 30, 2020 | 1,972,052 | — | 350.9 | 500.8 | 851.7 | |||||||||||||||
Net income | — | — | — | 73.8 | 73.8 | |||||||||||||||
Dividends declared | — | — | — | (22.0 | ) | (22.0 | ) | |||||||||||||
Return of capital to Spire | — | — | (22.0 | ) | — | (22.0 | ) | |||||||||||||
Balance at September 30, 2021 | 1,972,052 | — | 328.9 | 552.6 | 881.5 | |||||||||||||||
Net income | — | — | — | 68.5 | 68.5 | |||||||||||||||
Dividends declared | — | — | — | (32.0 | ) | (32.0 | ) | |||||||||||||
Return of capital to Spire | — | — | (12.0 | ) | — | (12.0 | ) | |||||||||||||
Balance at September 30, 2022 | 1,972,052 | $ | — | $ | 316.9 | $ | 589.1 | $ | 906.0 |
See the accompanying Notes to Financial Statements.
STATEMENTS OF CASH FLOWS
Years Ended September 30 | ||||||||||||
(In millions) | 2022 | 2021 | 2020 | |||||||||
Operating Activities: | ||||||||||||
Net Income | $ | 68.5 | $ | 73.8 | $ | 65.7 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 66.8 | 62.1 | 59.3 | |||||||||
Deferred income taxes | 23.2 | 25.0 | 22.0 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (21.2 | ) | (17.8 | ) | 7.3 | |||||||
Inventories | (42.5 | ) | (15.4 | ) | 11.9 | |||||||
Regulatory assets and liabilities | (101.7 | ) | 29.2 | (23.5 | ) | |||||||
Accounts payable | 26.3 | 14.0 | (15.1 | ) | ||||||||
Delayed/advance customer billings | 0.5 | 0.5 | (6.6 | ) | ||||||||
Taxes accrued | 0.8 | 2.5 | 0.6 | |||||||||
Other assets and liabilities | (3.7 | ) | (37.8 | ) | 18.9 | |||||||
Other | 0.2 | 0.3 | 0.2 | |||||||||
Net cash provided by operating activities | 17.2 | 136.4 | 140.7 | |||||||||
Investing Activities: | ||||||||||||
Capital expenditures | (141.5 | ) | (169.8 | ) | (150.4 | ) | ||||||
Other | 0.8 | 0.7 | 1.6 | |||||||||
Net cash used in investing activities | (140.7 | ) | (169.1 | ) | (148.8 | ) | ||||||
Financing Activities: | ||||||||||||
Issuance of long-term debt | — | 150.0 | 100.0 | |||||||||
Repayment of long-term debt | (50.0 | ) | — | (40.0 | ) | |||||||
Borrowings from (repayments to) Spire, net | 211.9 | (72.4 | ) | (7.4 | ) | |||||||
Return of capital to Spire | (12.0 | ) | (22.0 | ) | (20.0 | ) | ||||||
Dividends paid | (24.0 | ) | (22.0 | ) | (24.0 | ) | ||||||
Other | — | (0.9 | ) | (0.5 | ) | |||||||
Net cash provided by financing activities | 125.9 | 32.7 | 8.1 | |||||||||
Net Increase in Cash and Cash Equivalents | 2.4 | — | — | |||||||||
Cash and Cash Equivalents at Beginning of Year | — | — | — | |||||||||
Cash and Cash Equivalents at End of Year | $ | 2.4 | $ | — | $ | — | ||||||
Supplemental disclosure of cash paid for: | ||||||||||||
Interest, net of amounts capitalized | $ | (21.0 | ) | $ | (17.9 | ) | $ | (19.0 | ) | |||
Income taxes | — | — | — |
See the accompanying Notes to Financial Statements.
SPIRE INC., SPIRE MISSOURI INC., AND SPIRE ALABAMA INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share, per unit and per gallon amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION –These notes are an integral part of the accompanying audited financial statements of Spire Inc. (“Spire” or the “Company”) presented on a consolidated basis, (“Spire” or the “Company”), Spire Missouri Inc. (“Spire Missouri” or the “Missouri Utilities”) and Spire Alabama Inc. (“Spire Alabama”). Spire Missouri, Spire Alabama and Spire AlabamaEnergySouth Inc. (“Spire EnergySouth”) are wholly owned subsidiaries of the Company.Spire. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth (Spire Gulf Inc. (“and Spire EnergySouth”Mississippi Inc.) are collectively referred to as “the Utilities.the “Utilities.” The subsidiaries of Spire EnergySouthUnless otherwise indicated, references to years herein are Spire Gulf Inc.references to the fiscal years ending September 30 for the Company and Spire Mississippi Inc. its subsidiaries.
The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Unless otherwise indicated, references to years herein are references to the fiscal years ending September 30 for the Company and its subsidiaries.
The consolidated financial position, results of operations and cash flows of Spire include the accounts of the Company and all its subsidiaries. Transactions and balances between consolidated entities have been eliminated from the consolidated financial statements of Spire. In compliance with GAAP, transactions between Spire Missouri and Spire Alabama and their affiliates, as well as intercompany balances on their balance sheets, have not been eliminated from their separate financial statements.
NATURE OF OPERATIONS – Spire (NYSE: SR) has 2two reportable segments: Gas Utility and Gas Marketing. The Gas Utility segment consists of the regulated natural gas distribution operations of the Company and is the core business segment of Spire in terms of revenue and earnings generation.earnings. The Gas Utility segment is comprised of the operations of: theSpire Missouri, Utilities, serving St. Louis, and eastern Missouri (“Spire Missouri East”) and Kansas City, and western Missouri (“Spire Missouri West”);other areas in Missouri; Spire Alabama, serving central and northern Alabama; and the subsidiaries of Spire EnergySouth, serving southernthe Mobile, Alabama area and south-central Mississippi. The Gas Marketing Segmentsegment includes Spire’s primary non-utilitygas-related business, Spire Marketing Inc. (“Spire Marketing”), which provides non-regulated natural gas services primarily inthroughout the central and southern United States (U.S.). The activities of the Company’s other subsidiaries are reported as Other and are described in Note 14, Information by Operating Segment. Spire Missouri and Spire Alabama each have a single reportable segment.
USE OF ESTIMATES – The preparation of 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 periods. Actual results could differ from those estimates.
SYSTEM OF ACCOUNTS – The accounts of the Utilities are maintained in accordance with the Uniform System of Accounts prescribed by the applicable state public service commissions, which systems substantially conform to that prescribed by the Federal Energy Regulatory Commission (FERC).
REGULATED OPERATIONS – The Utilities account for their regulated operations in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980,Regulated Operations. This topic sets forth the application of GAAP for those companies whose rates are established by or are subject to approval by an independent third-party regulator. The provisions of this accounting guidance 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. In addition, 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 these regulatory accounting principles and that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process. See additional discussion on regulated operations in Note 15, Regulatory Matters.
PROPERTY, PLANT, AND EQUIPMENT –
Utility Plant – Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct labor and materials, allocable overheads and an allowance for funds used during construction. The costs of units of property retired, replaced or renewed are removed from utility plant and are charged to accumulated depreciation. Maintenance and repairs of property and replacement and renewal of items determined to be less than units of property are charged to maintenance expenses.
For Spire Missouri, utility
Utility plant is depreciated using the composite method on a straight-line basis at rates based onover the estimated service lives of the various classes of property. In fiscal years 2019, 2018property at rates approved by the applicable regulatory commission. For Spire Missouri and 2017,for Spire Alabama, the annual depreciation and amortization expense in fiscal years 2022, 2021 and 2020averaged 3.0%approximately 3% of the original cost of depreciable and amortizable property.
For Spire Alabama, depreciation is provided using the composite method of depreciation on a straight-line basis over the estimated useful lives of utility property at rates approved by the Alabama Public Service Commission (APSC). The composite depreciation rate in fiscal years 2019, 2018 and 2017 was approximately 3.1%.
Non-utility Property – Non-utility property is recorded at the original cost of acquisition or construction, which includes material, labor, contractor services and, for FERC-regulated projects, an allowance for funds used during construction. Repairs, replacements and renewals of items of property determined to be less than a unit of property or that do not increase the property’s life or functionality are charged to maintenance expense. Upon retirement or sale of non-utility property, the original cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the income statements. Costs related to software developed or obtained for internal use are capitalized and amortized on a straight-line basis over the estimated useful life of the related software. If software is retired prior to being fully amortized, the difference is recorded as a loss in the income statements.
Accrued Capital Expenditures – Accrued capital expenditures, shown in the following table, are excluded from capital expenditures in the statements of cash flows until paid.
September 30 | 2022 | 2021 | 2020 | |||||||||
Spire | $ | 77.8 | $ | 59.5 | $ | 67.6 | ||||||
Spire Missouri | 45.6 | 37.1 | 34.3 | |||||||||
Spire Alabama | 19.2 | 13.6 | 17.0 |
September 30 |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Spire |
| $ | 80.6 |
|
| $ | 62.1 |
|
| $ | 41.0 |
|
Spire Missouri |
|
| 40.1 |
|
|
| 36.7 |
|
|
| 28.9 |
|
Spire Alabama |
|
| 11.9 |
|
|
| 8.9 |
|
|
| 9.4 |
|
ASSET RETIREMENT OBLIGATIONS – Spire, Spire Missouri and Spire Alabama record legal obligations associated with the retirement of long-lived assets in the period in which the obligations are incurred, if sufficient information exists to reasonably estimate the fair value of the obligations. Obligations are recorded as both a cost of the related long-lived asset and as a corresponding liability. Subsequently, the asset retirement costs are depreciated over the life of the asset and the asset retirement obligations are accreted to the expected settlement amounts. The Company, Spire Missouri and Spire Alabama record asset retirement obligations associated with certain safety requirements to purge and seal gas distribution mains upon retirement, the plugging and abandonment of storage wells and other storage facilities, specific service line obligations, and certain removal and disposal obligations related to components of Spire Missouri’s, Spire Alabama’s and Spire Gulf’s distribution systems and general plant. Asset retirement obligations recorded by Spire’s other subsidiaries are not material. As authorized by the Missouri Public Service Commission (MoPSC) and APSC,the Alabama Public Service Commission (APSC), Spire Missouri, Spire Alabama and Spire Gulf accrue future asset removal costs associated with their property, plant and equipment even if a legal obligation does not exist. Such accruals are provided for through depreciation expense and are recorded with corresponding credits to regulatory liabilities or regulatory assets. When those utilities retire depreciable utility plant and equipment, they charge the associated original costs to accumulated depreciation and amortization, and any related removal costs incurred are charged to regulatory liabilities or regulatory assets. The difference between removal costs recognized in depreciation rates and the accretion expense and depreciation expense recognized for financial reporting purposes is a timing difference between recovery of these costs in rates and their recognition for financial reporting purposes. Accordingly, these differences are deferred as regulatory liabilities or regulatory assets. In the rate setting process, the regulatory liabilities or regulatory assets are excluded from the rate base upon which those utilities have the opportunity to earn their allowed rates of return. The costs associated with asset retirement obligations
The following table presents a reconciliation of the beginning and ending balances of asset retirement obligations at September 30, as reported in the balance sheets.
Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Asset retirement obligations, beginning of year | $ | 519.6 | $ | 540.1 | $ | 143.4 | $ | 153.4 | $ | 362.8 | $ | 374.3 | ||||||||||||
Liabilities incurred during the period | 3.2 | 11.1 | 1.2 | 1.4 | 0.5 | 7.4 | ||||||||||||||||||
Liabilities settled during the period | (9.2 | ) | (21.9 | ) | (4.1 | ) | (9.7 | ) | (2.0 | ) | (10.7 | ) | ||||||||||||
Accretion | 21.1 | 21.8 | 5.9 | 6.2 | 14.7 | 15.0 | ||||||||||||||||||
Revisions in estimated cash flows | (13.8 | ) | (31.5 | ) | (35.8 | ) | (7.9 | ) | 22.7 | (23.2 | ) | |||||||||||||
Asset retirement obligations, end of year | $ | 520.9 | $ | 519.6 | $ | 110.6 | $ | 143.4 | $ | 398.7 | $ | 362.8 |
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||
Asset retirement obligations, beginning of year |
| $ | 321.1 |
|
| $ | 296.6 |
|
| $ | 174.1 |
|
| $ | 158.6 |
|
| $ | 135.7 |
|
| $ | 128.4 |
|
Liabilities incurred during the period |
|
| 10.8 |
|
|
| 5.5 |
|
|
| 1.6 |
|
|
| 0.6 |
|
|
| 8.8 |
|
|
| 3.5 |
|
Liabilities settled during the period |
|
| (8.3 | ) |
|
| (11.2 | ) |
|
| (6.8 | ) |
|
| (8.9 | ) |
|
| (0.8 | ) |
|
| (1.8 | ) |
Accretion |
|
| 13.0 |
|
|
| 12.7 |
|
|
| 7.4 |
|
|
| 6.6 |
|
|
| 5.0 |
|
|
| 5.6 |
|
Revisions in estimated cash flows |
|
| 1.0 |
|
|
| 16.9 |
|
|
| (2.8 | ) |
|
| 17.2 |
|
|
| — |
|
|
| — |
|
Business combinations |
|
| — |
|
|
| 0.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Asset retirement obligations, end of year |
| $ | 337.6 |
|
| $ | 321.1 |
|
| $ | 173.5 |
|
| $ | 174.1 |
|
| $ | 148.7 |
|
| $ | 135.7 |
|
REGULATED OPERATIONS – The Utilities account for their regulated operations in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980, Regulated Operations. This Topic sets forth the application of GAAP for those companies whose rates are established by or are subject to approval by an independent third-party regulator. The provisions of this accounting guidance 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. In addition, 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 these regulatory accounting principles and that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process. See additional discussion on regulated operations in Note 15, Regulatory Matters.
NATURAL GAS AND PROPANE GAS – For Spire Missouri East,Missouri’s eastern region, inventory of natural gas in storage is priced on a last in, first out (LIFO) basis and inventory of propane gas in storage is priced on a first in, first out (FIFO) basis. For the rest of the Gas Utility segment, inventory of natural gas in storage is priced on the weighted average cost basis. The replacement cost of Spire Missouri’s natural gas for current use in eastern Missouri at September 30, 2019 and 2022 was more than the LIFO cost by $37.3. The replacement cost of Spire Missouri’s natural gas for current use in eastern Missouri at September 30, 20182021 was less than the LIFO cost by $17.0 and $14.5, respectively.$14.0. The carrying value of the Utilities’ inventory is never adjusted to a lower net realizable value or market value because, pursuant to Purchased Gas Adjustment (PGA) clauses or a Gas Supply Adjustment (GSA) rider, actual gas costs are recovered in customer rates. Natural gas and propane gas storage inventory in Spire’s other operating segments is recorded at the lower of average cost or net realizable value.
BUSINESS COMBINATIONS AND GOODWILL – Spire’s acquisitions were accounted for using business combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets acquired and liabilities assumed as of the acquisition date based on their fair value.
In December 2017, the Company acquired an 80% voting interest in a natural gas storage facility in Wyoming. The transaction was valued at $24.8, consisting of $16.0 in cash and a $10.0 non-interest-bearing note valued at $8.8. In October 2018, the Company completed the exercise of its right to call the remaining 20% voting interest in that facility and settled the related note for a combined total of $17.0. In May 2018, the Company expanded its operations by acquiring 100% of a neighboring natural gas storage facility for $12.2 in cash. Together, these storage operations are referred to herein as “Spire Storage.”
GOODWILL – Goodwill is measured as the excess of the acquisition-date fair value of the consideration transferred over the amount of acquisition-date identifiable assets acquired net of assumed liabilities. At September 30, 2022, goodwill included in Spire’s Gas Utility and Gas Marketing segments was $210.2 and zero, respectively, with the remainder held at the corporate level. Goodwill amounts have not changed since fiscal 2017, and there are no accumulated impairment losses. Spire and Spire Missouri evaluate goodwill for impairment as of July 1 of each year, or more frequently if events and circumstances indicate that goodwill might be impaired. At July 1, 2018 and 2017, Spire and Spire Missouri each applied a quantitative goodwill evaluation model to their reporting units andtest date, the assessments concluded that goodwill was not impaired because impaired. The Company updated the assessments as of September 30, 2022, determining that it remained more likely than not that the fair value of each reporting unit exceeded theits carrying amount. At July 1, 2019, Spire and Spire Missouri conducted a qualitative assessment and determined goodwill was not more likely than not impaired. At September 30, 2019, goodwill included in Spire’s Gas Utility and Gas Marketing segments was $210.2 and 0, respectively, with the remainder held at the corporate level. Goodwill amounts have not changed since fiscal 2017, and there are 0 accumulated impairment losses.value.
IMPAIRMENT OF LONG-LIVED ASSETS – Long-lived assets classified as held and used are evaluated for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Whether impairment has occurred is determined by comparing the estimated undiscounted cash flows attributable to the assets with the carrying value of the assets. If the carrying value exceeds the undiscounted cash flows, the Company recognizes an impairment charge equal to the amount of the carrying value that exceeds the estimated fair value of the assets. In the period in which the Company determines an asset meets held-for-sale criteria, an impairment charge is recorded to the extent the book value exceeds its fair value less cost to sell.
On July 1, 2020, Spire’s Board of Directors, based upon the recommendation of senior management, revised the development plan for Spire Storage, resulting in an impairment charge of $140.8 related to Spire Storage assets (non-utility property on the balance sheet) in the quarter ended June 30, 2020. The revision was driven by the realization that a longer time horizon will be required for optimization and positioning of the storage facility to serve energy markets in the western United States. Among other factors, evaluations of the continuing evolution of market dynamics in the region led management to update models of various development alternatives. Separately in the quarter ended June 30, 2020, Spire recorded impairment charges totaling $7.8 related to two commercial compressed natural gas fueling stations (also non-utility property) as a result of revised projections reflecting lower diesel prices and slower conversions of Class 8 vehicles. The fair values used in measuring the impairment charges were determined with an expected present value technique using a discounted cash flow method under an income approach. In the quarter ended September 30, 2021, Spire sold one of the fueling stations and recorded a gain of $1.3.
DERIVATIVES – In the course of their business, certain subsidiaries of Spire enter into commitments associated with the purchase or sale of natural gas. Certain of their derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of FASB ASC Topic 815,Derivatives and Hedging. Those contracts are accounted for as executory contracts and recorded on an accrual basis. Revenues and expenses from such contracts are recorded gross. Contracts not designated as normal purchases or normal sales are recorded as derivatives with changes in fair value recognized in earnings in the periods prior to physical delivery. Certain of Spire Marketing’s wholesale purchase and sale transactions are classified as trading activities for financial reporting purposes. Under GAAP, revenuespurposes, with income and expenses associated with trading activities are presented on a net basis in Gas Marketing operating revenues (ornatural gas expenses if negative) in the Condensed Consolidated Statements of Income. This net presentation has no effect on operating income or net income.Spire also enters into cash flow hedges through execution of interest rate swap contracts to protect itself against adverse movements in interest rates. Refer to Note 10, Derivative Instruments and Hedging Activities, for more information about derivatives.
INCOME TAXES – Spire and its subsidiaries account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and the respective tax basis and for tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effects on deferred tax assets and liabilities of a change in enacted tax rates is recognized in income or loss for non-regulated operations, and in a regulatory asset or regulatory liability for regulated operations. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with authoritative guidance. The authoritative guidance addresses the determination of whether tax benefits claimed, or expected to be claimed, on a tax return should be recorded in the financial statements. Spire may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained upon examination by the taxing authority, based on the technical merits of the position. Tax-related interest and penalties, if any, are classified as a liability on the balance sheets. For additional information on the accounting for income taxes, refer to Note 12, Income Taxes.
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH – All highly liquid debt instruments purchased with original maturities of three months or less are considered to be cash equivalents. Such instruments are carried at cost, which approximates market value. Outstanding checks on the Company’s and Utilities’ bank accounts in excess of funds on deposit create book overdrafts (which are funded at the time checks are presented for payment) and are classified as Other in the Current Liabilities section of the balance sheets. Changes in book overdrafts are reflected as Operating Activities in the statements of cash flows. In Spire’s statements of cash flows, total cash, cash equivalents,Cash, Cash Equivalents, and restricted cashRestricted Cash included $17.0$14.0 and $7.0 of restricted cash reported in “Other” current assets“Other Investments” on Spire’sthe Company’s balance sheet as of September 30, 20182022 and 2021, respectively (in addition to amounts shown as “Cash and cash equivalents”). This restricted cash was an escrow deposit for the purchase of the remaining 20% interesthas been segregated and invested in debt securities in a natural gas storage business and the settlement of the related note payable, and the transaction was completedtrust account based on October 25, 2018.collateral requirements for reinsurance at Spire’s risk management company.
NATURAL GAS RECEIVABLE – Spire Marketing enters into natural gas transactions with natural gas pipeline and storage companies known as park and loan arrangements. Under the terms of the arrangements, Spire Marketing purchases natural gas from a third party and delivers that natural gas to the pipeline or storage company for the right to receive the same quantity of natural gas from that company at the same location in a future period. These arrangements are accounted for as non-monetary transactions under GAAP and are recorded at the carrying amount. As such, natural gas receivables are reflected in “Other” current assets on the Consolidated Balance Sheets at cost, which includes related fees associated with the transactions. In the period that the natural gas is returned to Spire Marketing, concurrent with the sale of the natural gas to a third party, the related natural gas receivable is expensed in the Consolidated Statements of Income. In conjunction with these transactions, Spire Marketing usually enters into New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) natural gas futures, options, and swap contracts or fixed price sales agreements to protect against market changes in future sales prices.
EARNINGS PER COMMON SHARE – GAAP requires dual presentation of basic and diluted earnings per share (EPS). EPS is computed using the two-classtwo-class method, which is an earnings allocation method for computing EPS that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders. Certain of the Company’s stock-based compensation awards pay non-forfeitable dividends to the participants during the vesting period and, as such, are deemed participating securities. Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding that are increased for additional shares that would be outstanding if potentially dilutive non-participating securities were converted to common shares, pursuant to the treasury stock method. Shares attributable to equity units, non-participating stock options and time-vested restricted stock/units are excluded from the calculation of diluted earnings per share if the effect would be antidilutive. Shares attributable to non-participating performance-contingent restricted stock awards are only included in the calculation of diluted earnings per share to the extent the underlying performance and/or market 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. The Company’s EPS computations are presented in Note 4, Earnings Per Common Share.
TRANSACTIONS WITH AFFILIATES –Transactions between affiliates of the Company have been eliminated from the consolidated financial statements of Spire. Spire Missouri and Spire Alabama borrowed funds from the Company and incurred related interest, as reflected in their separate financial statements, and they participated in normal intercompany shared services transactions. In addition, Spire Missouri’s and Spire Alabama’s other transactions with affiliates included:
Spire Missouri | Spire Alabama | |||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | 2020 | |||||||||||||||||||
Natural gas purchases from Spire Marketing | $ | 86.3 | $ | 92.5 | $ | 56.9 | $ | 3.2 | $ | 10.4 | $ | 6.3 | ||||||||||||
Natural gas sales to Spire Marketing | — | 1.1 | 0.1 | 0.5 | 0.1 | 0.3 | ||||||||||||||||||
Transportation services from Spire STL Pipeline LLC | 32.0 | 32.0 | 27.9 | — | — | — | ||||||||||||||||||
Transportation services from Spire NGL Inc. | — | 0.5 | 1.0 | — | — | — |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Purchases of natural gas from Spire Marketing |
| $ | 95.3 |
|
| $ | 71.5 |
|
| $ | 74.4 |
|
Sales of natural gas to Spire Marketing |
|
| 1.7 |
|
|
| 0.3 |
|
|
| 7.8 |
|
Transportation services received from Spire NGL Inc. |
|
| 1.0 |
|
|
| 1.0 |
|
|
| 1.0 |
|
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTSCREDIT LOSSES – Trade accounts receivable are recorded at the amounts due from customers, including unbilled amounts. Estimates of the collectability of trade accounts receivable are based on historical trends, age of receivables, economic conditions, credit risk of specific customers, and other factors. Accounts receivable are written off against the allowance for doubtful accounts when they are deemed to be uncollectible. An allowance for expected credit losses is estimated and updated based on relevant data and trends such as accounts receivable aging, historical write-off experience, current write-off trends, economic conditions, and the impact of weather and availability of customer payment assistance on collection trends. For the Utilities, net write-offs as a percentage of revenue has historically been the best predictor of base net write-off experience over time. Management judgment is applied in the development of the allowance due to the complexity of variables and subjective nature of certain relevant factors. The estimates for expected credit losses were increased as a result of considerations related to the outbreak of COVID-19 in 2020, including trends from previous economic downturns, the effects of moratoriums on gas service cutoffs, and the effects of slower-than-normal disconnection activity in general, offset by the amount subject to specific recovery under Missouri’s deferral order (see Note 15, Regulatory Matters). The accounts receivable of Spire’s non-utility businesses are evaluated separately from those of the Utilities. The allowance for credit losses for those other businesses is based on a continuous evaluation of the individual counterparty risk and is not significant for the periods presented. Activity in the allowance for credit losses is shown in the following table.
Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||
Allowance at beginning of year | $ | 30.3 | $ | 24.9 | $ | 23.0 | $ | 22.6 | $ | 18.1 | $ | 14.9 | $ | 6.6 | $ | 5.5 | $ | 6.3 | ||||||||||||||||||
Provision for expected credit losses | 11.6 | 14.7 | 14.0 | 11.2 | 11.1 | 12.7 | 0.3 | 3.1 | 0.9 | |||||||||||||||||||||||||||
Write-offs, net of recoveries | (10.0 | ) | (9.3 | ) | (12.1 | ) | (8.9 | ) | (6.6 | ) | (9.5 | ) | (0.6 | ) | (2.0 | ) | (1.7 | ) | ||||||||||||||||||
Allowance at end of year | $ | 31.9 | $ | 30.3 | $ | 24.9 | $ | 24.9 | $ | 22.6 | $ | 18.1 | $ | 6.3 | $ | 6.6 | $ | 5.5 |
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| |||||||||
Allowance at beginning of year |
| $ | 22.4 |
|
| $ | 18.3 |
|
| $ | 20.5 |
|
| $ | 16.0 |
|
| $ | 14.1 |
|
| $ | 16.1 |
|
| $ | 3.9 |
|
| $ | 2.6 |
|
| $ | 3.3 |
|
Additions charged to expense |
|
| 16.9 |
|
|
| 14.6 |
|
|
| 10.6 |
|
|
| 12.3 |
|
|
| 11.9 |
|
|
| 10.1 |
|
|
| 4.7 |
|
|
| 2.1 |
|
|
| 0.2 |
|
Net deductions |
|
| (16.3 | ) |
|
| (10.5 | ) |
|
| (12.8 | ) |
|
| (13.4 | ) |
|
| (10.0 | ) |
|
| (12.1 | ) |
|
| (2.3 | ) |
|
| (0.8 | ) |
|
| (0.9 | ) |
Allowance at end of year |
| $ | 23.0 |
|
| $ | 22.4 |
|
| $ | 18.3 |
|
| $ | 14.9 |
|
| $ | 16.0 |
|
| $ | 14.1 |
|
| $ | 6.3 |
|
| $ | 3.9 |
|
| $ | 2.6 |
|
FINANCE RECEIVABLES – Spire Alabama finances third party contractor sales of merchandise including gas furnaces and appliances. At September 30, 20192022 and September 30, 2018, the Company’s2021, Spire Alabama’s finance receivable totaled approximately $11.7$7.1 and $13.1,$7.8, respectively. Financing is available only to qualified customers who meet creditworthiness thresholds for customer payment history and external agency credit reports. Spire Alabama relies upon ongoing payments as the primary indicator of credit quality during the term of each contract. The allowance for credit losses is recognized using an estimate of write-off percentages based on historical experience. Delinquent accounts are evaluated on a case-by-case basis and, absent evidence of debt repayment, after 90 days are due in full and assigned to a third-partythird-party collection agency. The remaining finance receivable is written off approximately 12 months after being assigned to the third-partythird-party collection agency. Spire Alabama had finance receivables past due 90 days or more of $0.4$0.3 at September 30, 20192022 and September 30, 2018.2021.
GROUP MEDICAL AND WORKERS’WORKERS’ COMPENSATION RESERVES – The Company self-insures its group medical and workers’ compensation costs and carries stop-loss coverage in relation to medical claims and workers’ compensation claims. Reserves for amounts incurred but not reported are established based on historical cost levels and lags between occurrences and reporting.
FAIR VALUE MEASUREMENTS – Certain assets and liabilities are recognized or disclosed at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.
The levels of the hierarchy are described below:
• |
| Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. |
• |
| Level 2 – Pricing inputs other than quoted prices included within Level 1, which are either directly or indirectly observable for the asset or liability as of the reporting date. These inputs are derived principally from, or corroborated by, observable market data. |
• |
| Level 3 – Pricing that is based upon inputs that are generally unobservable that are based on the best information available and reflect management’s assumptions about how market participants would price the asset or liability. |
Assessment of the significance of a particular input to the fair value measurements may require judgment and may affect the valuation of the asset or liability and its placement within the fair value hierarchy. Additional information about fair value measurements is provided in Note 8, Fair Value of Financial Instruments, Note 9, Fair Value Measurements, and Note 13, Pension Plans and Other Postretirement Benefits.
STOCK-BASED COMPENSATION – The Company accounts for share-based compensation arrangements in accordance with ASC Topic 718,Compensation - Stock Compensation. The Company measures stock-based compensation awards at fair value at the date of grant and recognizes the compensation cost of the awards over the requisite service period. Forfeitures are recognized in the period they occur. Refer to Note 3, Stock-Based Compensation, for further discussion of the accounting for the Company’s stock-based compensation plans.
NEW ACCOUNTING PRONOUNCEMENTS – Spire, Spire Missouri and Spire Alabama adopted the guidance in ASU No. 2014-09, Revenue from Contracts with Customers, and related amendments (collectively, “ASC 606”), in the first quarter of fiscal year 2019 using the modified retrospective method applied to all contracts at October 1, 2018. The core principle of ASC 606 is that revenue should be recognized to depict the transfer of control of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under the new standard, an entity must identify the performance obligations in a contract, determine the transaction price and allocate the price to specific performance obligations to recognize revenue when the obligation is completed. In addition, ASC 606 requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The adoption of ASC 606 resulted in no change to how Spire, Spire Missouri and Spire Alabama recognize revenue, and therefore, no cumulative effect adjustment to the opening balance of retained earnings was required, and there was no significant impact to financial results after adoption. The adoption did result in changes to the disclosures about revenue, which are included in Note 2, Revenue. Some revenue arrangements, such as alternative revenue programs and certain derivative contracts, are excluded from the scope of ASC 606 and, therefore, are presented separately in disclosures.2. REVENUE
Also effective October 1, 2018, Spire, Spire Missouri and Spire Alabama adopted ASU No. 2017-07, Compensation – Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, with no material impact on interim or annual financial statements. The amended guidance requires that the service cost component of net periodic pension and postretirement benefit costs be presented within the same line item in the income statement as other compensation costs (except for the amount being capitalized), while other components are to be presented outside the subtotal of operating income and are no longer eligible for capitalization (e.g., as part of utility plant). The amended guidance is applied retrospectively for income statement presentation and prospectively for capitalization. The Company, Spire Missouri and Spire Alabama elected the practical expedient permitting the use of the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Accordingly, for the year ended September 30, 2018, the Company, Spire Missouri and Spire Alabama reclassified net benefit costs (income) of $14.4, $17.2 and $(2.0), respectively, from “operation and maintenance” to “other income (expense), net.” The corresponding amounts for the year ended September 30, 2017 were $19.2, $17.2 and $2.2, respectively. For Spire Missouri, Spire Alabama, and the Company’s other rate-regulated entities, all components of net benefit cost have historically been recovered from customers as a component of utility plant and will continue to be recovered in the same manner over the depreciable lives of the related plant assets; therefore, for those entities, the components that are no longer eligible to be capitalized as a component of plant under GAAP will be reported as regulatory assets.
Effective January 1, 2019, the Company, Spire Missouri and Spire Alabama adopted ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. Previous GAAP did not specifically address the accounting for implementation costs of a hosting arrangement that is a service contract. The amendments in this update clarify that accounting and align the accounting for implementation costs for hosting arrangements, regardless of whether they convey a license to the hosted software. As a result, certain categories of implementation costs that previously would have been charged to expense as incurred are now capitalized as prepayments and amortized over the term of the arrangement. The new guidance is being applied prospectively to implementation costs incurred after adoption. Related amounts capitalized were not material.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash. This guidance requires the statement of cash flows to present changes in the total of cash, cash equivalents and restricted cash. Prior to the adoption of this ASU, the relevant accounting guidance did not require the statement of cash flows to include changes in restricted cash. The Company, Spire Missouri and Spire Alabama adopted the standard retrospectively in 2018 with no impact to 2017.
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This guidance permits companies to make an election to reclassify stranded income tax effects from the recently enacted Tax Cuts and Jobs Act included in accumulated other comprehensive income or loss (AOCI) to retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company, Spire Missouri and Spire Alabama elected to early adopt this guidance in the quarter ended September 30, 2018. The reclassifications from the adoption of this standard are shown on the statements of shareholders’ equity of the Company and Spire Missouri. There was no effect for Spire Alabama.
The Company, Spire Missouri and Spire Alabama adopted ASU No. 2016-02, Leases, along with related ASU Nos. 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively, “ASC 842”), using a modified retrospective transition method for leases existing at, or entered into after, October 1, 2019. Under the selected transition method, comparative periods in the financial statements will be presented under ASC 840 (previous lease accounting guidance). ASC 842 requires lessees to recognize a right-of-use asset and lease liability for almost all lease contracts based on the present value of lease payments. It provides new guidelines for identifying and classifying a lease, and classification affects the pattern and income statement line item for the related expense. The Company and its subsidiaries elected to a package of three practical expedients permitted by the standard, allowing them not to reassess existing contracts for (1) whether it is or contains a lease, (2) lease classification and (3) initial direct costs. They also elected to use the benefit of hindsight in determining both the lease term and impairments associated with any existing leases, which resulted in lease terms that best represent management’s expectations with respect to use of the underlying asset but did not result in recognition of any impairment. Finally, they elected not to assess whether existing land easements are leases under ASC 842. The adoption of ASC 842 will impact the balance sheets through recognition of approximately $71.1 of right-of-use assets and lease liabilities for operating leases (including approximately $1.9 and $10.0 for Spire Missouri and Spire Alabama, respectively) but will not result in a cumulative effect adjustment or significant impacts to income or cash flows.
In August 2018, the FASB issued ASU No. 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU more closely align the results of hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The Company, Spire Missouri and Spire Alabama do not expect the adoption of this new guidance in the first quarter of fiscal 2020 to have a significant impact on the financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which was later supplemented by ASU Nos. 2018-19, 2019-04 and 2019-05. The standard introduces new guidance for the accounting for credit losses on instruments within its scope, including trade receivables. The new guidance will be initially applied through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company, Spire Missouri and Spire Alabama are currently assessing the impacts of adopting this standard in the first quarter of fiscal 2021.
2. REVENUE
The following tables show revenue disaggregated by source and customer type.
|
| 2019 |
| 2022 | 2021 | 2020 | ||||||||||
Spire |
|
|
|
| ||||||||||||
Gas Utility: |
|
|
|
| ||||||||||||
Residential |
| $ | 1,267.3 |
| $ | 1,416.6 | $ | 1,234.0 | $ | 1,184.3 | ||||||
Commercial & industrial |
|
| 433.9 |
| 338.9 | 586.0 | 383.0 | |||||||||
Transportation |
|
| 112.1 |
| 118.0 | 122.9 | 115.8 | |||||||||
Off-system & other incentive |
|
| 41.9 |
| 42.0 | 152.7 | 38.4 | |||||||||
Other customer revenue |
|
| 22.5 |
| 19.9 | 22.2 | 26.2 | |||||||||
Total revenue from contracts with customers |
|
| 1,877.7 |
| 1,935.4 | 2,117.8 | 1,747.7 | |||||||||
Changes in accrued revenue under alternative revenue programs |
|
| (16.9 | ) | 10.7 | 1.5 | 4.3 | |||||||||
Total Gas Utility operating revenues |
|
| 1,860.8 |
| 1,946.1 | 2,119.3 | 1,752.0 | |||||||||
Gas Marketing: |
|
|
|
| ||||||||||||
Revenue from contracts with retail customers |
|
| 83.7 |
| ||||||||||||
Revenue from wholesale derivative contracts |
|
| — |
| ||||||||||||
Total Gas Marketing operating revenues |
|
| 83.7 |
| ||||||||||||
Gas Marketing | 234.9 | 96.5 | 87.9 | |||||||||||||
Other |
|
| 21.5 |
| 69.2 | 67.7 | 57.8 | |||||||||
Total before eliminations |
|
| 1,966.0 |
| 2,250.2 | 2,283.5 | 1,897.7 | |||||||||
Intersegment eliminations (see Note 14, Information by Operating Segment) |
|
| (13.6 | ) | (51.7 | ) | (48.0 | ) | (42.3 | ) | ||||||
Total Operating Revenues |
| $ | 1,952.4 |
| $ | 2,198.5 | $ | 2,235.5 | $ | 1,855.4 | ||||||
Spire Missouri |
|
|
|
| ||||||||||||
Residential |
| $ | 945.9 |
| $ | 1,061.4 | $ | 882.1 | $ | 859.6 | ||||||
Commercial & industrial |
|
| 283.8 |
| 177.2 | 436.1 | 241.4 | |||||||||
Transportation |
|
| 33.1 |
| 33.3 | 33.5 | 32.9 | |||||||||
Off-system & other incentive |
|
| 41.9 |
| 25.2 | 145.6 | 35.1 | |||||||||
Other customer revenue | 11.1 | 16.3 | 22.3 | |||||||||||||
Total revenue from contracts with customers |
|
| 1,304.7 |
| 1,308.2 | 1,513.6 | 1,191.3 | |||||||||
Changes in accrued revenue under alternative revenue programs |
|
| (12.9 | ) | 12.8 | 3.0 | 2.3 | |||||||||
Total Operating Revenues |
| $ | 1,291.8 |
| $ | 1,321.0 | $ | 1,516.6 | $ | 1,193.6 | ||||||
Spire Alabama |
|
|
|
| ||||||||||||
Residential |
| $ | 265.3 |
| $ | 291.6 | $ | 288.0 | $ | 267.8 | ||||||
Commercial & industrial |
|
| 113.5 |
| 119.1 | 114.9 | 109.4 | |||||||||
Transportation |
|
| 69.5 |
| 74.4 | 78.7 | 72.9 | |||||||||
Off-system & other incentive | 16.8 | 7.1 | 3.2 | |||||||||||||
Other customer revenue |
|
| 20.7 |
| 5.5 | 1.9 | 1.9 | |||||||||
Total revenue from contracts with customers |
|
| 469.0 |
| 507.4 | 490.6 | 455.2 | |||||||||
Changes in accrued revenue under alternative revenue programs |
|
| (3.5 | ) | 1.7 | 3.4 | (0.2 | ) | ||||||||
Total Operating Revenues |
| $ | 465.5 |
| $ | 509.1 | $ | 494.0 | $ | 455.0 |
The Utilities sell natural gas to residential and other customers. The sale of natural gas is governed by the various state utility commissions, which set rates, charges, and terms and conditions of service, collectively included in a “tariff.” The performance obligation, which relates to the promise to provide natural gas, is satisfied over time as the customer simultaneously receives and consumes the natural gas, and revenue is recognized accordingly.
The Utilities’ transportation revenue relates to the promise to transport the specified quantities of natural gas at tariff rates. This performance obligation is satisfied over time as the gas is transported, and revenue is recognized as invoiced monthly.
The Utilities have alternative revenue programs (ARPs), which represent an agreement between the utility and its regulator, currently consisting of decoupling mechanisms (also known as weather normalization adjustments) and incentive programs (primarily Alabama’s Cost Control Measure). When the criteria to recognize additional (or reduced) revenue from ARPs have been met, the Utilities establish a regulatory asset (or liability). When amounts previously recognized for ARPs are billed, the Utilities reduce the regulatory asset (or liability) and increase (or decrease) accounts receivable. Billed amounts, which are part of the overall tariff paid by customers, are included in revenue from contracts with customers, while the change in the related regulatory asset or liability is presented as revenue from ARPs. Depending on whether the beginning accrued ARP balance was a regulatory asset or liability and depending on the size and direction of the current period accrual, the amount presented as revenue from ARPs could be negative.
The Utilities read meters and bill customers on monthly cycles. TheSpire Missouri, Utilities, Spire Gulf and Spire Mississippi record their gas utility 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. Spire Alabama records natural gas distribution revenues in accordance with the tariff established by the APSC. Unbilled revenue is accrued in an amount equal to the related gas cost, as profit margin is not considered earned until billed. Spire’s other subsidiaries, including Spire Marketing, record revenues when earned, as the product is delivered or as services are performed.
Gas Marketing’s contracts are derivatives. The wholesaleWholesale contracts (with producers, municipalities, and utility companies) are subject to derivative accounting. The retailRetail contracts (with large commercial and industrial customers) are designated as “normal purchase, normal sale” arrangements and are therefore accounted for as revenue from contracts with customers. The performance obligation is satisfied over time by the transfer of control of natural gas to the customer, and revenue is recognized as invoiced monthly.
Payments are generally required within 30 days of billing, and contracts generally do not have a significant financing component. Spire’s revenues are not subject to significant returns, refunds, or warranty obligations.
Spire, Spire Missouri, and Spire Alabama have elected to apply a “right to invoice” practical expedient, recognizing revenue for volumes delivered for which they have a right to invoice, as long as that amount corresponds with the value to the customer. Disclosures about remaining performance obligations are not required because either contracts have an original expected duration of one year or less, or revenue is recognized under the right to invoice practical expedient, or both.
Sales taxes imposed on applicable Spire Alabama and Spire Missouri sales are billed to customers. These amounts are not recorded in the statements of income but are recorded as tax collections payable and included in the “Other” line of the Current Liabilities section of the balance sheets.
Gross receipts taxes associated with the Company’s natural gas utility services are imposed on the Company, Spire Missouri, and Spire Alabama and billed to its customers. The expense amounts (shown in the table below) are reported gross in the “Taxes, other than income taxes” line in the statements of income, and corresponding revenues are reported in “Operating Revenues.”
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | ||||||||||||
Spire |
| $ | 99.3 |
|
| $ | 98.4 |
|
| $ | 83.1 |
| $ | 109.8 | $ | 94.0 | $ | 91.5 | ||||||
Spire Missouri |
|
| 71.1 |
|
|
| 68.9 |
|
|
| 60.0 |
| 79.6 | 64.3 | 63.5 | |||||||||
Spire Alabama |
|
| 23.7 |
|
|
| 25.4 |
|
|
| 19.5 |
| 25.5 | 25.1 | 23.3 |
The Spire 2015 Equity Incentive Plan (EIP) was approved by shareholders of Spire on January 29,2015 and amended on November 9, 2018. The purpose of the EIP is to encourage directors, officers, and key employees of the Company and its subsidiaries to contribute to the Company’s success and align their interests with that of shareholders. To accomplish this purpose, the Compensation Committee (“Committee”) of Spire’s Board of Directors (the “Board”) may grant awards under the EIP that may be earned by achieving performance objectives and/or other criteria as determined by the Committee. Under the terms of the EIP, officers and employees of the Company and its subsidiaries, as determined by the Committee, are eligible to be selected for awards. The EIP provides for restricted stock, restricted stock units, qualified and non-qualified stock options, stock appreciation rights, and performance shares payable in stock, cash, or a combination of both. The EIP generally provides a minimum vesting period of at least three years for each type of award, with pro rata vesting permitted during the minimum three-yearthree-year vesting period. The maximum number of shares reserved for issuance under the EIP is 1,000,000.
The Company issues new shares to satisfy employee restricted stock awards.
Restricted Stock Awards
During fiscal 2019,2022, the Company granted 99,260128,396 performance-contingent restricted share units to executive officers and key employees at a weighted average grant date fair value of $80.72$67.43 per share. This number represents the target shares that can be earned pursuant to the terms of the awards. The share units have a performance period ending September 30, 2022.2025. While the participants have no interim voting rights on these share units, dividends accrue during the performance period and are paid to the participants upon vesting but are subject to forfeiture if the underlying share units do not vest.
The number of share units that will ultimately vest is dependent upon the attainment of certain levels of earnings and other strategic goals, as well as the Company’s level of total shareholder return (TSR) during the performance period relative to a comparator group of peer companies. This TSR provision is considered a market condition under GAAP and is discussed further below. The maximum amount of shares that can be earned pursuant to the terms of the awards is 200% of the target units granted.
The weighted average grant date fair value of performance-contingent restricted share units granted during fiscal years 20182021 and 20172020 was $79.88$68.69 and $58.45$76.19 per share, respectively.
Fiscal 20192022 activity of restricted stock units subject to performance and/or market conditions is presented below:
|
| Units |
|
| Weighted Average Grant Date Fair Value Per Unit |
| Weighted | |||||||||
Nonvested at September 30, 2018 |
|
| 266,082 |
|
| $ | 66.69 |
| ||||||||
Average | ||||||||||||||||
Grant Date | ||||||||||||||||
Fair Value | ||||||||||||||||
Units | Per Unit | |||||||||||||||
Nonvested at September 30, 2021 | 312,596 | $ | 74.33 | |||||||||||||
Granted |
|
| 99,260 |
|
| $ | 80.72 |
| 128,396 | $ | 67.43 | |||||
Vested |
|
| (45,157 | ) |
| $ | 62.39 |
| (91,111 | ) | $ | 79.40 | ||||
Forfeited |
|
| (56,275 | ) |
| $ | 64.74 |
| (6,357 | ) | $ | 69.43 | ||||
Nonvested at September 30, 2019 |
|
| 263,910 |
|
| $ | 73.11 |
| ||||||||
Nonvested at September 30, 2022 | 343,524 | $ | 70.14 |
For the year ended September 30, 2019,2022, the total number of shares that could be issued if all outstanding award grants attain maximum performance payout is 527,820. In fiscal 2019, the Company gave participants in the EIP the ability to defer a portion or all687,048.
During fiscal 2019,2022, the Company granted 37,58062,945 shares of time-vested restricted stock to executive officers and key employees at a weighted average grant date fair value of $76.66$63.57 per share. Unless forfeited based on terms of the agreements, these shares will vest in fiscal 2021.2025. In the interim, participants receive full voting rights and dividends, which are not subject to forfeiture. The weighted average grant date fair value of time-vested restricted stock and restricted stock units awarded to employees during fiscal years 20182021 and 20172020 was $76.60$64.29 and $63.05$76.13 per share, respectively.
During fiscal 2019,2022, the Company granted 11,76016,290 shares of time-vested restricted stock to non-employee directors at a weighted average grant date fair value of $78.69$66.31 per share. These shares vested in fiscal 2019, 2022, six months after the grant date. The weighted average grant date fair value of restricted stock awarded to non-employee directors during fiscal years 20182021 and 20172020 was $63.20$62.35 and $63.45$84.58 per share, respectively.
Time-vested restricted stock and stock unit activity for fiscal 20192022 is presented below:
|
| Shares/ Units |
|
| Weighted Average Grant Date Fair Value Per Share |
| Weighted | |||||||||
Nonvested at September 30, 2018 |
|
| 103,600 |
|
| $ | 64.60 |
| ||||||||
Average | ||||||||||||||||
Grant Date | ||||||||||||||||
Shares/ | Fair Value | |||||||||||||||
Units | Per Share | |||||||||||||||
Nonvested at September 30, 2021 | 110,300 | $ | 70.98 | |||||||||||||
Granted |
|
| 49,340 |
|
| $ | 77.14 |
| 62,945 | $ | 63.57 | |||||
Vested |
|
| (50,013 | ) |
| $ | 60.45 |
| (46,970 | ) | $ | 72.67 | ||||
Forfeited |
|
| (6,650 | ) |
| $ | 69.64 |
| (4,030 | ) | $ | 68.62 | ||||
Nonvested at September 30, 2019 |
|
| 96,277 |
|
| $ | 72.83 |
| ||||||||
Nonvested at September 30, 2022 | 122,245 | $ | 66.60 |
For restricted stock and stock units (performance-contingent and time-vested) that vested during fiscal years 2019, 2018,2022, 2021, and 2017,2020, the Company withheld 28,73128,055 shares, 34,92216,787 shares, and 35,51441,353 shares, respectively, at weighted average prices of $79.23, $81.65$63.97, $65.99 and $63.83$77.07 per share, respectively, pursuant to elections by employees to satisfy tax withholding obligations. The total fair value of restricted stock (performance-contingent and time-vested) that vested during fiscal years 2019, 2018,2022, 2021, and 20172020 was $7.6, $10.5,$10.1, $6.5, and $8.9,$9.8, respectively, and the related tax benefit was $2.9, $4.0,$3.8, $2.5, and $3.3,$3.7, respectively. None of the tax benefits have been realized.
The Company allows participants in the EIP the ability to defer a portion or all of their award. As at September 30, 2022, a total of 228,988 shares (at target payout) have been deferred by Participants.
Equity Compensation Costs
Compensation cost for performance-contingent restricted stock and stock unit awards is based upon the probable outcome of the performance conditions. For shares or units that do not vest or that are not expected to vest due to the outcome of the performance conditions (excluding market 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, are estimated using the closing price of the Company’s stock on the grant date. 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 below the level specified in the award agreements, 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 of the awards subject to the TSR provision awarded during fiscal years 2019, 20182022, 2021 and 20172020 was valued by a Monte Carlo simulation model that assessed the probabilities of various TSR outcomes. The significant assumptions used in the Monte Carlo simulations are as follows:
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | ||||||||||||
Risk-free interest rate |
| 2.88% |
|
| 1.76% |
|
| 1.39% |
| 0.79% | 0.22% | 1.57% | ||||||||||||
Expected dividend yield of stock |
|
| — |
|
|
| — |
|
|
| — |
| — | — | — | |||||||||
Expected volatility of stock |
| 17.0% |
|
| 16.0% |
|
| 16.3% |
| 32.2% | 31.4% | 16.8% | ||||||||||||
Vesting period |
| 3.0 years |
|
| 2.9 years |
|
| 2.8 years |
| |||||||||||||||
Vesting period (in years) | 3.0 | 3.0 | 3.0 |
The risk-free interest rate was based on the yield on U.S. Treasury securities matching the vesting period. A 0 percentzero-percent dividend yield was used, which is mathematically equivalent to the assumption that dividends are reinvested as they are paid. The expected volatility is based on the historical volatility of the Company’s stock. Volatility assumptions were also made for each of the companies included in the comparator group. The vesting period is equal to the performance period set forth in the terms of the award.
The amounts of compensation cost recognized for share-based compensation arrangements are presented below:
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | ||||||||||||
Total compensation cost |
| $ | 8.6 |
|
| $ | 6.9 |
|
| $ | 7.4 |
| $ | 7.5 | $ | 16.6 | $ | 9.4 | ||||||
Compensation cost capitalized |
|
| (1.4 | ) |
|
| (1.3 | ) |
|
| (3.3 | ) | (1.1 | ) | (2.7 | ) | (0.6 | ) | ||||||
Prior period disallowed stock compensation capitalization |
|
| — |
|
|
| 6.9 |
|
|
| — |
| ||||||||||||
Compensation cost recognized in net income |
|
| 7.2 |
|
|
| 12.5 |
|
|
| 4.1 |
| 6.4 | 13.9 | 8.8 | |||||||||
Income tax benefit recognized in net income |
|
| (1.7 | ) |
|
| (4.0 | ) |
|
| (1.5 | ) | (1.5 | ) | (3.2 | ) | (2.1 | ) | ||||||
Compensation cost recognized in net income, net of income tax |
| $ | 5.5 |
|
| $ | 8.5 |
|
| $ | 2.6 |
| $ | 4.9 | $ | 10.7 | $ | 6.7 |
As of September 30, 2019,2022, there was $10.9$11.2 of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted average period of 1.81.7 years.
2022 | 2021 | 2020 | ||||||||||
Basic Earnings Per Common Share: | ||||||||||||
Net Income | $ | 220.8 | $ | 271.7 | $ | 88.6 | ||||||
Less: Provision for preferred dividends | 14.8 | 14.8 | 14.8 | |||||||||
Income allocated to participating securities | 0.3 | 0.4 | 0.1 | |||||||||
Net Income Available to Common Shareholders | $ | 205.7 | $ | 256.5 | $ | 73.7 | ||||||
Weighted Average Common Shares Outstanding (in millions) | 52.0 | 51.6 | 51.2 | |||||||||
Basic Earnings Per Share of Common Stock | $ | 3.96 | $ | 4.97 | $ | 1.44 | ||||||
Diluted Earnings per Common Share: | ||||||||||||
Net Income | $ | 220.8 | $ | 271.7 | $ | 88.6 | ||||||
Less: Provision for preferred dividends | 14.8 | 14.8 | 14.8 | |||||||||
Income allocated to participating securities | 0.3 | 0.4 | 0.1 | |||||||||
Net Income Available to Common Shareholders | $ | 205.7 | $ | 256.5 | $ | 73.7 | ||||||
Weighted Average Common Shares Outstanding (in millions) | 52.0 | 51.6 | 51.2 | |||||||||
Dilutive Effect of Restricted Stock and Restricted Stock Units (in millions)* | 0.1 | 0.1 | 0.1 | |||||||||
Weighted Average Diluted Common Shares (in millions) | 52.1 | 51.7 | 51.3 | |||||||||
Diluted Earnings Per Share of Common Stock | $ | 3.95 | $ | 4.96 | $ | 1.44 | ||||||
* Calculation excludes certain outstanding common shares (shown in millions by period at the right) attributable to stock units subject to performance or market conditions and restricted stock, which could have a dilutive effect in the future | 0.1 | 0.1 | 0.1 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Basic Earnings Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 184.6 |
|
| $ | 214.2 |
|
| $ | 161.6 |
|
Less: Provision for preferred dividends |
|
| 5.3 |
|
|
| — |
|
|
| — |
|
Income allocated to participating securities |
|
| 0.4 |
|
|
| 0.5 |
|
|
| 0.4 |
|
Net Income Available to Common Shareholders |
| $ | 178.9 |
|
| $ | 213.7 |
|
| $ | 161.2 |
|
Weighted Average Common Shares Outstanding (in millions) |
|
| 50.7 |
|
|
| 49.1 |
|
|
| 46.9 |
|
Basic Earnings Per Share of Common Stock |
| $ | 3.53 |
|
| $ | 4.35 |
|
| $ | 3.44 |
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 184.6 |
|
| $ | 214.2 |
|
| $ | 161.6 |
|
Less: Provision for preferred dividends |
|
| 5.3 |
|
|
| — |
|
|
| — |
|
Income allocated to participating securities |
|
| 0.4 |
|
|
| 0.5 |
|
|
| 0.4 |
|
Net Income Available to Common Shareholders |
| $ | 178.9 |
|
| $ | 213.7 |
|
| $ | 161.2 |
|
Weighted Average Common Shares Outstanding (in millions) |
|
| 50.7 |
|
|
| 49.1 |
|
|
| 46.9 |
|
Dilutive Effect of Restricted Stock and Restricted Stock Units (in millions)* |
|
| 0.1 |
|
|
| 0.2 |
|
|
| 0.1 |
|
Weighted Average Diluted Common Shares (in millions) |
|
| 50.8 |
|
|
| 49.3 |
|
|
| 47.0 |
|
Diluted Earnings Per Share of Common Stock |
| $ | 3.52 |
|
| $ | 4.33 |
|
| $ | 3.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation excludes certain outstanding common shares (shown in millions by period at the right) attributable to stock units subject to performance or market conditions and restricted stock, which could have a dilutive effect in the future |
|
| 0.1 |
|
|
| 0.4 |
|
|
| 0.5 |
|
5. SHAREHOLDERS’ EQUITY
Spire
Preferred Stock
At September 30, 20192022 and 2018,2021, Spire had authorized 5,000,000 shares of preferred stock.
On May 21, 2019, Spire completed the public offering of 10,000,000 depositary shares (the “Depositary Shares”), each representing a 1/1,000th interest in a share of the Company’s 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $25.00 per share, with a liquidation preference of $25,000 per share (the “Preferred Stock”). The transaction resulted in $242.0 of net proceeds, after deducting commissions and sale expenses, which proceeds were used to (i) refinance long-term and short-term Spire debt and (ii) fund capital expenditures at both the Utilities and Spire’s gas-related businesses.
Dividends on the Preferred Stock, when declared by the Board, will beare payable on the liquidation preference amount, on a cumulative basis, quarterly in arrears on the 15th day of February, May, August and November of each year, beginning on August 15, 2019. Dividends will beare payable out of amounts legally available for the payment of dividends at an annual rate equal to 5.90% of the liquidation preference per share of Preferred Stock (equivalent to $25.00 per Depositary Share). Dividends will accumulate daily and beare cumulative from May 21, 2019.
Under the terms of the Preferred Stock, the Company’s ability to declare or pay dividends on, or purchase or redeem, shares of its common stock or any class or series of capital stock of the Company that rank junior to the Preferred Stock will beare subject to certain restrictions in the event that the Company does not declare and pay the full cumulative dividends on the Preferred Stock through the most recently completed quarterly dividend period.
Spire may, at its option, redeem the Preferred Stock (i) in whole, but not in part, at any time prior to August 15, 2024, within 120 days after a ratings event where a rating agency amends, clarifies or changes the criteria it uses to assign equity credit for securities such as the Preferred Stock, at a redemption price in cash equal to $25,500 per share, or (ii) in whole or in part, from time to time, on or after August 15, 2024, at a redemption price in cash equal to $25,000 per share, plus, in each case, all accumulated and unpaid dividends (whether declared or not)not) up to such redemption date.
Shareholders of the Preferred Stock generally have no voting rights with respect to matters that generally require the approval of voting stockholders. The limited voting rights of holders of the Preferred Stock include the right to vote on certain matters that may affect the preference or special rights of the Preferred Stock. In addition, if and whenever dividends on any shares of Preferred Stock have not been declared and paid for at least six dividend periods, whether or not consecutive, the number of directors then constituting the Board shall automatically be increased by two (to be elected by the holders of the Preferred Stock) until all accumulated and unpaid dividends on the Preferred Stock have been paid in full.
Equity Units
In February 2021, Spire issued 3.5 million equity units, initially in the form of Corporate Units, for an aggregate stated amount of $175.0, resulting in net proceeds (after underwriting fees and other issuance costs) of $169.3. Each “Corporate Unit” has a stated amount of fifty dollars and consists of (i) a stock purchase contract and (ii) a 1/20, or 5%, undivided beneficial ownership interest in one thousand dollars principal amount of Spire’s 2021 Series A 0.75% Remarketable Senior Notes due March 1, 2026 (RSNs). The RSNs are pledged as collateral to secure the holder’s obligation under the related stock purchase contracts. Each stock purchase contract obligates the holder to purchase, and Spire to issue and deliver, on March 1, 2024, for a price of fifty dollars in cash, a variable number of shares of its common stock as follows (subject to anti-dilution adjustments).
If the applicable market value*per share | Number of shares to be purchased per | |
of Spire common stock is: | stock purchase contract is: | |
Equal to or greater than $78.6906 (“threshold appreciation price”) | 0.6354 (“minimum settlement rate”) | |
Less than $78.6906, but greater than $64.24 | $50.00 ÷ applicable market value* | |
Less than or equal to $64.24 (“reference price”) | 0.7783 (“maximum settlement rate”) |
*Based on the volume-weighted average price of Spire common stock during the 20 trading days before settlement.
If a holder elects to settle purchase contracts early, the holder would pay fifty dollars per unit and receive 0.6354 shares per unit.
The Company makes quarterly interest payments on the RSNs at the rate of 0.75% per year and quarterly contract adjustment payments on the stock purchase contracts at the rate of 6.75%. The RSNs and the contract adjustment payments are structurally subordinated to all liabilities of Spire’s subsidiaries.
At issuance, the Company recorded the $35.0 present value of the stock purchase contract payments as a liability (reflected in “Other” current and noncurrent liabilities on the balance sheet) offset by a charge to additional paid-in capital in equity. This noncash financing activity has been excluded from the statement of cash flows. Interest payments on the RSNs are recorded as interest expense and stock purchase contract payments are charged against the liability. Accretion of the stock purchase contract liability is recorded as imputed interest expense. In calculating diluted EPS, the Company applies the treasury stock method to the Corporate Units. These securities have not had an effect on diluted EPS.
In order to secure funds necessary for the holders to pay the purchase price of the common stock on the purchase contract settlement date, the remarketing agent will remarket the RSNs on behalf of the current holders to new third-party investors. Following any successful remarketing of the RSNs, the interest rate on the RSNs will be reset, interest will be payable on a semi-annual basis, and Spire will cease to have the option to redeem the RSNs, other than in connection with the occurrence or continuance of certain special events.
ATM Program
On February 6, 2019, Spire entered into an at-the-market“at-the-market” (ATM) equity distribution agreement supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock havingpursuant to Spire’s universal shelf registration statement and a prospectus supplement. Under this program, a total of 626,249 shares with an aggregate offering price of $47.8 were issued in fiscal 2019 and 2020, and 354,000 shares with an aggregate offering price of $23.5 were issued in the second quarter of fiscal 2022. On April 28, 2022, Spire’s Board of Directors approved a new authorization for the sale of additional shares with an aggregate offering price of up to $150.0. Proceeds from this program are intended to be used (i) to fund,$200.0 before the May 2025 expiration of the new universal shelf registration statement on Form S-3 filed in part, investments related to the constructionMay 2022, under which a total of infrastructure and infrastructure improvements365,625 shares with an aggregate offering price of $27.7 were issued in the Utilities, as well as pipelines and storage, and (ii) for general corporate purposes, including repaymentthird quarter of short-term debt and the adjustment from time to time of the Company’s capital structure.fiscal 2022.
In the year ended September 30, 2019, Spire issued 179,630 shares under this program, generating $14.4 of proceeds net of issuance costs.
Other Equity Information
Spire has a shelf registration statement on Form S-3S-3 on file with the U.S. Securities and Exchange Commission (SEC) for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 158,373158,535 and 154,316153,190 shares at September 30, 20192022 and November 21, 2019, 11, 2022, respectively, remaining available for issuance under this Form S-3.S-3. Spire also has a universal shelf registration statement on Form S-3S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 14, 2022.9, 2025.
Spire Missouri
Substantially all of Spire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains several restrictions on Spire Missouri’s ability to pay cash dividends on its common stock or to make loans to its parent company. These mortgage restrictions are applicable regardless of whether the stock is publicly held or held solely by Spire Missouri’s parent company. Under the most restrictive of these provisions, no cash dividend may be declared or paid if, after the dividend, the aggregate net amount spent for all dividends after September 30,1953 would exceed a maximum amount determined by a formula set out in the mortgage. Under that formula, the maximum amount is the sum of $8.0 plus earnings applicable to common stock (adjusted for stock repurchases and issuances) for the period from September 30,1953 to the last day of the quarter before the declaration or payment date for the dividends. As of September 30, 20192022 and 2018,2021, the amount under the mortgage’s formula that was available to pay dividends was $1,182.4$1,579.4 and $1,097.6,$1,413.4, respectively. Thus, all of Spire Missouri’s retained earnings were free from such dividend restrictions as of those dates.
Spire Missouri has a universal shelf registration statement on Form S-3S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 14, 2022. 9, 2025. Effective March 5, 2022, Spire Missouri was authorized by the MoPSC to issue registered securities (firstconventional term loans, first mortgage bonds, unsecured debt, and preferred stock),stock and common stock and private placement debt in an aggregate amount of up to $500.0$800.0 for financings placed any time before December 31, 2024. As of September 30, 2021. As of September 30, 2019, $400.02022, the entire amount remained available under this authorization, subsequently reduced by Spire Missouri’s issuance of $275.0 of first mortgage bonds on November 12, 2019.authorization.
At September 30, 20192022 and 2018,2021, Spire Missouri had authorized 1,480,000 shares of preferred stock, but NaNnone were issued and outstanding.
Spire Alabama
At September 30, 20192022 and 2018,2021, Spire Alabama had authorized 120,000 shares of preferred stock, but NaNnone were issued and outstanding.
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income (AOCI), net of income taxes, recognized in the balance sheets at September 30 were as follows:
|
| Net Unrealized Gains (Losses) on Cash Flow Hedges |
|
| Defined Benefit Pension and Other Postretirement Benefit Plans |
|
| Net Unrealized Losses on Available-for- Sale Debt Securities |
|
| Total |
| ||||
Spire |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017 |
| $ | 4.9 |
|
| $ | (1.5 | ) |
| $ | (0.2 | ) |
| $ | 3.2 |
|
Other comprehensive income |
|
| 2.0 |
|
|
| 0.3 |
|
|
| 0.2 |
|
|
| 2.5 |
|
Reclassification of certain income tax effects |
|
| 1.0 |
|
|
| (0.3 | ) |
|
| — |
|
|
| 0.7 |
|
Balance at September 30, 2018 |
|
| 7.9 |
|
|
| (1.5 | ) |
|
| — |
|
|
| 6.4 |
|
Other comprehensive (loss) income |
|
| (36.9 | ) |
|
| (0.9 | ) |
|
| 0.1 |
|
|
| (37.7 | ) |
Balance at September 30, 2019 |
| $ | (29.0 | ) |
| $ | (2.4 | ) |
| $ | 0.1 |
|
| $ | (31.3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2017 |
| $ | 0.1 |
|
| $ | (1.6 | ) |
| $ | (0.2 | ) |
| $ | (1.7 | ) |
Other comprehensive (loss) income |
|
| (0.1 | ) |
|
| 0.3 |
|
|
| 0.2 |
|
|
| 0.4 |
|
Reclassification of certain income tax effects |
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| (0.3 | ) |
Balance at September 30, 2018 |
|
| — |
|
|
| (1.6 | ) |
|
| — |
|
|
| (1.6 | ) |
Other comprehensive loss |
|
| — |
|
|
| (0.8 | ) |
|
| — |
|
|
| (0.8 | ) |
Balance at September 30, 2019 |
| $ | — |
|
| $ | (2.4 | ) |
| $ | — |
|
| $ | (2.4 | ) |
Net | Defined Benefit | Net Unrealized | ||||||||||||||
Unrealized | Pension and | Gain (Loss) on | ||||||||||||||
Gain (Loss) | Other | Available-for- | ||||||||||||||
on Cash Flow | Postretirement | Sale Debt | ||||||||||||||
Hedges | Benefit Plans | Securities | Total | |||||||||||||
Spire | ||||||||||||||||
Balance at September 30, 2020 | $ | (38.4 | ) | $ | (2.9 | ) | $ | 0.1 | $ | (41.2 | ) | |||||
Other comprehensive income (loss) | 46.3 | (1.3 | ) | (0.2 | ) | 44.8 | ||||||||||
Balance at September 30, 2021 | 7.9 | (4.2 | ) | (0.1 | ) | 3.6 | ||||||||||
Other comprehensive income (loss) | 42.5 | 1.5 | (0.4 | ) | 43.6 | |||||||||||
Balance at September 30, 2022 | $ | 50.4 | $ | (2.7 | ) | $ | (0.5 | ) | $ | 47.2 | ||||||
Spire Missouri | ||||||||||||||||
Balance at September 30, 2020 | $ | — | $ | (2.9 | ) | $ | — | $ | (2.9 | ) | ||||||
Other comprehensive loss | — | (1.3 | ) | — | (1.3 | ) | ||||||||||
Balance at September 30, 2021 | — | (4.2 | ) | — | (4.2 | ) | ||||||||||
Other comprehensive income | — | 1.5 | — | 1.5 | ||||||||||||
Balance at September 30, 2022 | $ | — | $ | (2.7 | ) | $ | — | $ | (2.7 | ) |
Income tax expense (benefit) recorded for items of other comprehensive income (loss) reported in the statements of comprehensive income is calculated by applying statutory federal, state, and local income tax rates applicable to ordinary income. The tax rates applied to individual items of other comprehensive income (loss) are similar within each reporting period. For the periods presented, Spire Alabama had no AOCI balances.
The composition of long-term debt as of September 30 is shown in the following tables.
2022 | 2021 | |||||||
Spire | ||||||||
3.31% Notes Payable, due December 15, 2022 | $ | 25.0 | $ | 25.0 | ||||
3.54% Senior Notes, due February 27, 2024 | 150.0 | 150.0 | ||||||
0.75% Remarketable Senior Notes, due March 1, 2026 | 175.0 | 175.0 | ||||||
3.13% Senior Notes, due September 1, 2026 | 130.0 | 130.0 | ||||||
3.93% Senior Notes, due March 15, 2027 | 100.0 | 100.0 | ||||||
4.70% Senior Notes, due August 15, 2044 | 250.0 | 250.0 | ||||||
Total principal of Spire Missouri long-term debt (see below) | 1,648.0 | 1,348.0 | ||||||
Total principal of Spire Alabama long-term debt (see below) | 575.0 | 625.0 | ||||||
Other subsidiaries' long-term debt: | ||||||||
5.00% First Mortgage Bonds, due September 30, 2031 | 42.0 | 42.0 | ||||||
2.95% Notes, with annual principal payments through December 2034 | 123.9 | 129.6 | ||||||
3.52% First Mortgage Bonds, due September 30, 2049 | 40.0 | 40.0 | ||||||
Total principal of long-term debt | 3,258.9 | 3,014.6 | ||||||
Less: Unamortized discounts and debt issuance costs | (19.2 | ) | (19.7 | ) | ||||
Less: Current portion | (281.2 | ) | (55.8 | ) | ||||
Long-term debt, excluding current portion | $ | 2,958.5 | $ | 2,939.1 | ||||
Spire Missouri | ||||||||
First Mortgage Bonds: | ||||||||
3.40% Series, due August 15, 2023 | $ | 250.0 | $ | 250.0 | ||||
Floating Rate Series, due December 2, 2024 | 300.0 | — | ||||||
3.40% Series, due March 15, 2028 | 45.0 | 45.0 | ||||||
7.00% Series, due June 1, 2029 | 19.3 | 19.3 | ||||||
2.84% Series, due November 15, 2029 | 275.0 | 275.0 | ||||||
7.90% Series, due September 15, 2030 | 30.0 | 30.0 | ||||||
3.68% Series, due September 15, 2032 | 50.0 | 50.0 | ||||||
6.00% Series, due May 1, 2034 | 99.3 | 99.3 | ||||||
6.15% Series, due June 1, 2036 | 54.5 | 54.5 | ||||||
4.63% Series, due August 15, 2043 | 99.9 | 99.9 | ||||||
4.23% Series, due September 15, 2047 | 70.0 | 70.0 | ||||||
3.30% Series, due June 1, 2051 | 305.0 | 305.0 | ||||||
4.38% Series, due September 15, 2057 | 50.0 | 50.0 | ||||||
Total principal of Spire Missouri long-term debt | 1,648.0 | 1,348.0 | ||||||
Less: Unamortized discounts and debt issuance costs | (10.3 | ) | (9.6 | ) | ||||
Less: Current portion | (250.0 | ) | — | |||||
Spire Missouri long-term debt, excluding current portion | $ | 1,387.7 | $ | 1,338.4 | ||||
Spire Alabama | ||||||||
3.86% Notes, due December 22, 2021 | $ | — | $ | 50.0 | ||||
3.21% Notes, due September 15, 2025 | 35.0 | 35.0 | ||||||
2.88% Notes, due December 1, 2029 | 100.0 | 100.0 | ||||||
2.04% Notes, due December 15, 2030 | 150.0 | 150.0 | ||||||
5.90% Notes, due January 15, 2037 | 45.0 | 45.0 | ||||||
4.31% Notes, due December 1, 2045 | 80.0 | 80.0 | ||||||
3.92% Notes, due January 15, 2048 | 45.0 | 45.0 | ||||||
4.64% Notes, due January 15, 2049 | 90.0 | 90.0 | ||||||
4.02% Notes, due January 15, 2058 | 30.0 | 30.0 | ||||||
Total principal of Spire Alabama long-term debt | 575.0 | 625.0 | ||||||
Less: Unamortized discounts and debt issuance costs | (3.5 | ) | (3.8 | ) | ||||
Less: Current portion | — | (50.0 | ) | |||||
Spire Alabama long-term debt, excluding current portion | $ | 571.5 | $ | 571.2 |
|
| 2019 |
|
| 2018 |
| ||
Spire |
|
|
|
|
|
|
|
|
2.55% Senior Notes, due August 15, 2019 |
| $ | — |
|
| $ | 125.0 |
|
2.52% Senior Notes, due September 1, 2021 |
|
| 35.0 |
|
|
| 35.0 |
|
3.31% Notes Payable, due December 15, 2022 |
|
| 25.0 |
|
|
| 25.0 |
|
3.54% Senior Notes, due February 27, 2024 |
|
| 150.0 |
|
|
| 150.0 |
|
3.13% Senior Notes, due September 1, 2026 |
|
| 130.0 |
|
|
| 130.0 |
|
3.93% Senior Notes, due March 15, 2027 |
|
| 100.0 |
|
|
| 100.0 |
|
4.70% Senior Notes, due August 15, 2044 |
|
| 250.0 |
|
|
| 250.0 |
|
Total principal of Spire Missouri long-term debt (see below) |
|
| 930.0 |
|
|
| 880.0 |
|
Total principal of Spire Alabama long-term debt (see below) |
|
| 415.0 |
|
|
| 325.0 |
|
Other subsidiaries' long-term debt: |
|
|
|
|
|
|
|
|
4.14% First Mortgage Bonds, due September 30, 2021 |
|
| 20.0 |
|
|
| 20.0 |
|
5.00% First Mortgage Bonds, due September 30, 2031 |
|
| 42.0 |
|
|
| 42.0 |
|
3.52% First Mortgage Bonds, due September 30, 2049 |
|
| 40.0 |
|
|
| — |
|
Non-interest-bearing Note, due December 27, 2022 |
|
| — |
|
|
| 10.0 |
|
Total principal of long-term debt |
|
| 2,137.0 |
|
|
| 2,092.0 |
|
Less: Unamortized discounts and debt issuance costs |
|
| (14.4 | ) |
|
| (16.4 | ) |
Less: Current portion |
|
| (40.0 | ) |
|
| (175.5 | ) |
Long-term debt, excluding current portion |
| $ | 2,082.6 |
|
| $ | 1,900.1 |
|
Spire Missouri |
|
|
|
|
|
|
|
|
Floating-rate note due December 1, 2021 |
| $ | 100.0 |
|
| $ | — |
|
First Mortgage Bonds: |
|
|
|
|
|
|
|
|
5.5% Series, due May 1, 2019 |
|
| — |
|
|
| 50.0 |
|
3.0% Series, due March 15, 2023 |
|
| 55.0 |
|
|
| 55.0 |
|
3.4% Series, due August 15, 2023 |
|
| 250.0 |
|
|
| 250.0 |
|
3.4% Series, due March 15, 2028 |
|
| 45.0 |
|
|
| 45.0 |
|
7.0% Series, due June 1, 2029 |
|
| 25.0 |
|
|
| 25.0 |
|
7.9% Series, due September 15, 2030 |
|
| 30.0 |
|
|
| 30.0 |
|
3.68% Series, due September 15, 2032 |
|
| 50.0 |
|
|
| 50.0 |
|
6.0% Series, due May 1, 2034 |
|
| 100.0 |
|
|
| 100.0 |
|
6.15% Series, due June 1, 2036 |
|
| 55.0 |
|
|
| 55.0 |
|
4.625% Series, due August 15, 2043 |
|
| 100.0 |
|
|
| 100.0 |
|
4.23% Series, due September 15, 2047 |
|
| 70.0 |
|
|
| 70.0 |
|
4.38% Series, due September 15, 2057 |
|
| 50.0 |
|
|
| 50.0 |
|
Total principal of Spire Missouri long-term debt |
|
| 930.0 |
|
|
| 880.0 |
|
Less: Unamortized discounts and debt issuance costs |
|
| (5.0 | ) |
|
| (5.6 | ) |
Less: Current portion |
|
| — |
|
|
| (50.0 | ) |
Spire Missouri long-term debt, excluding current portion |
| $ | 925.0 |
|
| $ | 824.4 |
|
Spire Alabama |
|
|
|
|
|
|
|
|
5.20% Notes, due January 15, 2020 |
| $ | 40.0 |
|
| $ | 40.0 |
|
3.86% Notes, due December 22, 2021 |
|
| 50.0 |
|
|
| 50.0 |
|
3.21% Notes, due September 15, 2025 |
|
| 35.0 |
|
|
| 35.0 |
|
5.90% Notes, due January 15, 2037 |
|
| 45.0 |
|
|
| 45.0 |
|
4.31% Notes, due December 1, 2045 |
|
| 80.0 |
|
|
| 80.0 |
|
3.92% Notes, due January 15, 2048 |
|
| 45.0 |
|
|
| 45.0 |
|
4.64% Notes, due January 15, 2049 |
|
| 90.0 |
|
|
| — |
|
4.02% Notes, due January 15, 2058 |
|
| 30.0 |
|
|
| 30.0 |
|
Total principal of Spire Alabama long-term debt |
|
| 415.0 |
|
|
| 325.0 |
|
Less: Unamortized discounts and debt issuance costs |
|
| (2.8 | ) |
|
| (2.4 | ) |
Less: Current portion |
|
| (40.0 | ) |
|
| — |
|
Spire Alabama long-term debt, excluding current portion |
| $ | 372.2 |
|
| $ | 322.6 |
|
Spire Missouri's $300.0 of first mortgage bonds due December 2, 2024 are secured equally with all its other first mortgage bonds. Interest is payable quarterly in arrears at a floating rate based on the compounded secured overnight financing rate plus 50 basis points, with a maximum rate of the lesser of 8% or the maximum rate then permitted by applicable law.
Maturities of long-term debt for Spire on a consolidated basis, Spire Missouri and Spire Alabama for the five fiscal years after September 30, 20192022 are as follows:
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
| 2023 | 2024 | 2025 | 2026 | 2027 | ||||||||||||||||||||
Spire |
| $ | 40.0 |
|
| $ | 55.0 |
|
| $ | 150.0 |
|
| $ | 330.0 |
|
| $ | 150.0 |
| $ | 281.2 | $ | 156.6 | $ | 342.0 | $ | 312.5 | $ | 108.1 | ||||||||||
Spire Missouri |
|
| — |
|
|
| — |
|
|
| 100.0 |
|
|
| 305.0 |
|
|
| — |
| 250.0 | — | 300.0 | — | — | |||||||||||||||
Spire Alabama |
|
| 40.0 |
|
|
| — |
|
|
| 50.0 |
|
|
| — |
|
|
| — |
| — | — | 35.0 | — | — |
Spire’s, Spire Missouri’s and Spire Alabama’sThe long-term debt agreements of Spire, Spire Missouri and Spire Alabama contain customary financial covenants and default provisions. As of September 30, 2019,2022, there were no events of default under these financial covenants.
After fiscal year end, on October 13, 2022, Spire Alabama issued $90.0 of notes due October 15, 2029, bearing interest at 5.32% and $85.0 of notes due October 15, 2032, bearing interest at 5.41%. Interest is payable semi-annually. The notes are senior unsecured obligations and rank equal in right to payment with all other senior unsecured indebtedness of Spire Alabama. Also on October 13, 2022, Spire Gulf issued $30.0 of first mortgage bonds due October 15, 2037, bearing interest at 5.61% payable semi-annually. The bonds rank equal in right to payment with the other first mortgage bonds issued by Spire Gulf. The bonds were issued under a supplemental indenture with collateral fall away provisions whereby, under certain conditions, Spire Gulf may elect to exchange the bonds, which are secured, for unsecured notes.
Spire
At September 30, 2019,2022, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $2,137.0,$3,258.9, of which $930.0$1,648.0 was issued by Spire Missouri, $415.0$575.0 was issued by Spire Alabama and $102.0$205.9 was issued by other subsidiaries. Except for a $100.0$300.0 of Spire Missouri floating-rate note,bonds, all long-term debt bears fixed rates and is subject to changes in fair value as market interest rates change. However, increases and decreases in fair value would impact earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemption of long-term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future period.
Interest expense shown on Spire’s consolidated statement of income is net of capitalized interest totaling $6.8, $2.6$4.5, $4.4 and $0.8$5.8 for the years ended September 30, 2019, 20182022, 2021 and 2017,2020, respectively.
As indicated in Note 5, Shareholders’ Equity, Spire has a shelf registration statement on Form S-3S-3 on file with the SEC for the issuance of equity and debt securities.
Spire Missouri
At September 30, 2019,2022, including the current portion but excluding unamortized discounts and debt issuance costs, Spire Missouri had long-term debt totaling $930.0.$1,648.0. Except for a $100.0$300.0 of floating-rate note,bonds, all long-term debt bears fixed rates and is subject to changes in fair value as market interest rates change.
Interest expense shown on Spire Missouri’s statement of comprehensive income is net of capitalized interest totaling $1.9, $0.9$0.6, $0.2 and $0.5$0.8 for the years ended September 30, 2019, 20182022, 2021 and 2017,2020, respectively.
As indicated in Note 5, Shareholders’ Equity, Spire Missouri has a shelf registration on Form S-3S-3 on file with the SEC for issuance of first mortgage bonds, unsecuredequity and debt and preferred stock,securities, which expires on May 14, 2022. 9, 2025. Effective March 5, 2022, Spire Missouri was authorized by the MoPSC to issue registered securities (firstconventional term loans, first mortgage bonds, unsecured debt, and preferred stock),stock and common stock and private placement debt in an aggregate amount of up to $500.0$800.0 for financings placed any time before December 31, 2024. As of September 30, 2021. As of September 30, 2019, $400.02022, the entire amount remained available under this authorization. On November 12, 2019, Spire Missouri issued $275.0 of 2.84% first mortgage bonds due November 15, 2029, a portion of which was immediately used to repay the $100.0 floating-rate note.
Substantially all of Spire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains several restrictions on Spire Missouri’s ability to pay cash dividends on its common stock, which are described in Note 5, Shareholders’ Equity.
Spire Alabama
At September 30, 2019,2022, including the current portion (none) but excluding unamortized debt issuance costs, Spire Alabama had fixed-rate long-term debt totaling $415.0.$575.0. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. Interest expense shown on Spire Alabama’s statement of income is net of capitalized interest totaling $3.2, $3.2 and $1.9 for the years ended September 30, 2022, 2021 and 2020, respectively.
Because
Spire Alabama has no standing authority to issue long-term debt itand must petition the APSC for each planned issuance. On July 9, 2019, the APSC approved $100.0 of additional long-term financing.
7. NOTES PAYABLE AND CREDIT AGREEMENTS
Spire, Spire Missouri and Spire Alabama have a syndicated revolving credit facility pursuant to a loan agreement with 1112 banks, expiring October 31, 2023. which was amended July 22, 2022, to increase the commitment and sublimits and extend the agreement through July 22, 2027. The amended loan agreement has an aggregate credit commitment of $975.0,$1,300.0, including sublimits of $300.0$450.0 for the Spire $475.0holding company, $575.0 for Spire Missouri and $200.0$275.0 for Spire Alabama. These sublimits may be reallocated from time to time among the three borrowers within the $975.0$1,300.0 aggregate commitment, with commitment fees and interest margins applied for each borrower relative to its credit rating.rating, as well as sustainability rate adjustments based on Spire's DART ("Days Away Restricted or Transferred") rate and methane emissions reductions. The Spire holding company may use its line to provide for the funding needs of various subsidiaries. The agreement also contains financial covenants limiting each borrower’s consolidated total debt, including short-term debt, to no more than 70% of its total capitalization. As defined in the line of credit, on September 30, 2019,2022, total debt was 53%less than or equal to 60% of total capitalization for the consolidated Company, 50% for Spire Missouri and 40% for Spire Alabama.each borrower. There were 0no borrowings against this credit facility as of September 30, 20192022 and 2018.2021.
Spire has a commercial paper program (“CP Program”) pursuant to which it may issue short-term, unsecured commercial paper notes. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the notes outstanding under the CP Program at any time not to exceed $975.0.$1,300.0. The notes may have maturities of up to 365 days from date of issue.
In March 2021, Spire Missouri entered into a loan agreement with several banks for a $250.0, 364-day unsecured term loan with an interest rate based on LIBOR plus 65 basis points. The loan was repaid in March 2022.
Information about Spire’s consolidated short-term borrowings, and aboutincluding Spire Missouri’s and Spire Alabama’s borrowings from Spire, is presented in the following table. As of September 30, 2019, $529.92022, $777.8 of Spire’s short-term borrowings were used to support lending to the Utilities.
|
| Spire Commercial Paper Borrowings |
|
| Spire Missouri Borrowings from Spire |
|
| Spire Alabama Borrowings from Spire |
| |||||||||||||||
Year Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Weighted average borrowings outstanding |
| $574.5 |
|
| $296.2 |
|
| $100.5 |
| |||||||||||||||
Weighted average interest rate |
| 2.7% |
|
| 2.7% |
|
| 2.7% |
| |||||||||||||||
Range of borrowings outstanding |
| $ | 363.0 |
| - | $ | 777.6 |
|
| $ | 178.4 |
| - | $ | 404.9 |
|
| $ | 43.8 |
| - | $ | 169.2 |
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Borrowings outstanding |
| $743.2 |
|
| $386.4 |
|
| $128.7 |
| |||||||||||||||
Weighted average interest rate |
| 2.3% |
|
| 2.3% |
|
| 2.3% |
| |||||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Borrowings outstanding |
| $553.6 |
|
| $345.3 |
|
| $142.5 |
| |||||||||||||||
Weighted average interest rate |
| 2.4% |
|
| 2.3% |
|
| 2.3% |
|
Spire | Spire | Spire | ||||||||||||||||||
(Parent Only) | Missouri | Alabama | Spire | |||||||||||||||||
CP | Term | Spire | Spire | Consol- | ||||||||||||||||
Program | Loan | Note | Note | idated | ||||||||||||||||
Year Ended September 30, 2022 | ||||||||||||||||||||
Highest borrowings outstanding | $ | 1,079.0 | $ | 250.0 | $ | 456.6 | $ | 265.2 | $ | 1,079.0 | ||||||||||
Lowest borrowings outstanding | 408.0 | — | 43.2 | 38.4 | 462.5 | |||||||||||||||
Weighted average borrowings | 636.2 | 113.0 | 244.9 | 152.6 | 749.2 | |||||||||||||||
Weighted average interest rate | 1.2 | % | 0.8 | % | 0.4 | % | 0.5 | % | 1.1 | % | ||||||||||
As of September 30, 2022 | ||||||||||||||||||||
Borrowings outstanding | $ | 1,037.5 | $ | — | $ | 445.3 | $ | 260.9 | $ | 1,037.5 | ||||||||||
Weighted average interest rate | 3.3 | % | 0.0 | % | 3.3 | % | 3.3 | % | 3.3 | % | ||||||||||
As of September 30, 2021 | ||||||||||||||||||||
Borrowings outstanding | $ | 422.0 | $ | 250.0 | $ | 240.9 | $ | 49.0 | $ | 672.0 | ||||||||||
Weighted average interest rate | 0.2 | % | 0.7 | % | 0.2 | % | 0.2 | % | 0.4 | % |
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis were as follows:
Classification of | ||||||||||||||||||||||||||||||||
Estimated Fair Value | ||||||||||||||||||||||||||||||||
Quoted | ||||||||||||||||||||||||||||||||
Prices in | Significant | |||||||||||||||||||||||||||||||
Active | Observable | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Classification of Estimated Fair Value |
| Carrying | Fair | Markets | Inputs | |||||||||||||||||
|
| Carrying Amount |
|
| Fair Value |
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
| Amount | Value | (Level 1) | (Level 2) | ||||||||||||||||
Spire |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 5.8 |
|
| $ | 5.8 |
|
| $ | 5.8 |
|
| $ | — |
| $ | 6.5 | $ | 6.5 | $ | 6.5 | $ | — | ||||||||
Notes payable |
|
| 743.2 |
|
|
| 743.2 |
|
|
| — |
|
|
| 743.2 |
| 1,037.5 | 1,037.5 | — | 1,037.5 | ||||||||||||
Long-term debt, including current portion |
|
| 2,122.6 |
|
|
| 2,373.4 |
|
|
| — |
|
|
| 2,373.4 |
| 3,239.7 | 2,851.8 | — | 2,851.8 | ||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 4.4 |
|
| $ | 4.4 |
|
| $ | 4.4 |
|
| $ | — |
| $ | 4.3 | $ | 4.3 | $ | 4.3 | $ | — | ||||||||
Notes payable |
|
| 553.6 |
|
|
| 553.6 |
|
|
| — |
|
|
| 553.6 |
| 672.0 | 672.0 | — | 672.0 | ||||||||||||
Long-term debt, including current portion |
|
| 2,075.6 |
|
|
| 2,074.0 |
|
|
| — |
|
|
| 2,074.0 |
| 2,994.9 | 3,375.9 | — | 3,375.9 | ||||||||||||
Spire Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
Notes payable - associated companies | $ | 445.3 | $ | 445.3 | $ | — | $ | 445.3 | ||||||||||||||||||||||||
Long-term debt, including current portion | 1,637.7 | 1,473.9 | — | 1,473.9 | ||||||||||||||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
Note Payable | $ | 250.0 | $ | 250.0 | $ | — | $ | 250.0 | ||||||||||||||||||||||||
Notes payable - associated companies | 240.9 | 240.9 | — | 240.9 | ||||||||||||||||||||||||||||
Long-term debt | 1,338.4 | 1,540.4 | — | 1,540.4 | ||||||||||||||||||||||||||||
Spire Alabama | ||||||||||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 2.6 |
|
| $ | 2.6 |
|
| $ | 2.6 |
|
| $ | — |
| $ | 2.4 | $ | 2.4 | $ | 2.4 | $ | — | ||||||||
Notes payable - associated companies |
|
| 386.4 |
|
|
| 386.4 |
|
|
| — |
|
|
| 386.4 |
| 260.9 | 260.9 | — | 260.9 | ||||||||||||
Long-term debt |
|
| 925.0 |
|
|
| 1,065.2 |
|
|
| — |
|
|
| 1,065.2 |
| 571.5 | 485.0 | — | 485.0 | ||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Cash and cash equivalents |
| $ | 2.0 |
|
| $ | 2.0 |
|
| $ | 2.0 |
|
| $ | — |
| ||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
Notes payable - associated companies |
|
| 345.3 |
|
|
| 345.3 |
|
|
| — |
|
|
| 345.3 |
| $ | 49.0 | $ | 49.0 | $ | — | $ | 49.0 | ||||||||
Long-term debt, including current portion |
|
| 874.4 |
|
|
| 906.6 |
|
|
| — |
|
|
| 906.6 |
| 621.2 | 707.5 | — | 707.5 | ||||||||||||
Spire Alabama |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Notes payable - associated companies |
| $ | 128.7 |
|
| $ | 128.7 |
|
| $ | — |
|
| $ | 128.7 |
| ||||||||||||||||
Long-term debt, including current portion |
|
| 412.2 |
|
|
| 474.8 |
|
|
| — |
|
|
| 474.8 |
| ||||||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Notes payable - associated companies |
| $ | 142.5 |
|
| $ | 142.5 |
|
| $ | — |
|
| $ | 142.5 |
| ||||||||||||||||
Long-term debt |
|
| 322.6 |
|
|
| 321.7 |
|
|
| — |
|
|
| 321.7 |
|
The information presented below categorizes the assets and liabilities in the balance sheets that are accounted for at fair value on a recurring basis in periods subsequent to initial recognition.
The mutual funds included in Level 1 are valued based on exchange-quoted market prices of individual securities. The mutual funds included in Level 2 are valued based on the closing net asset value per unit.
Derivative instruments included in Level 1 are valued using quoted market prices on the NYMEX or the Intercontinental Exchange (ICE). Derivative instruments classified in Level 2 include physical commodity derivatives that are valued using broker or dealer quotation services whose prices are derived principally from, or are corroborated by, observable market inputs. Also included in Level 2 are certain derivative instruments that have values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets. Derivative instruments included in Level 3 are valued using generally unobservable inputs that are based upon the best information available and reflect management’s assumptions about how market participants would price the asset or liability. There were no material Level 3 balances as of September 30, 20192022 or 2018.2021. The Company’s and the Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of the interim reporting period in which circumstances change or events occur to cause the transfer.
The mutual funds are included in “Other investments” on the Company’s balance sheets and in “Other Property and Investments” on Spire Missouri’s balance sheets. Changes in their recurring valuations are recorded as unrealized investment gains or losses in the corresponding periodic income statement. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net on the balance sheets when a legally enforceable netting agreement exist between the Company, Spire Missouri or Spire Alabama and the counterparty to the derivative contract. For additional information on derivative instruments, see Note 10, Derivative Instruments and Hedging Activities.
Spire
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Effects of Netting and Cash Margin Receivables /Payables |
|
| Total |
| |||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 20.5 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 20.5 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
NYMEX/ICE natural gas contracts |
|
| 0.9 |
|
|
| 6.5 |
|
|
| — |
|
|
| (6.9 | ) |
|
| 0.5 |
|
Natural gas commodity contracts |
|
| — |
|
|
| 16.8 |
|
|
| — |
|
|
| (2.5 | ) |
|
| 14.3 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
U.S. stock/bond mutual funds |
|
| 15.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15.5 |
|
Total |
| $ | 36.9 |
|
| $ | 23.3 |
|
| $ | — |
|
| $ | (9.4 | ) |
| $ | 50.8 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
| $ | 12.3 |
|
| $ | — |
|
| $ | — |
|
| $ | (12.3 | ) |
| $ | — |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
NYMEX/ICE natural gas contracts |
|
| 0.4 |
|
|
| 8.5 |
|
|
| — |
|
|
| (8.9 | ) |
|
| — |
|
Natural gas commodity contracts |
|
| — |
|
|
| 13.8 |
|
|
| 0.1 |
|
|
| (2.50 | ) |
|
| 11.4 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
| - |
|
|
| 43.4 |
|
|
| — |
|
|
| — |
|
|
| 43.4 |
|
Total |
| $ | 12.7 |
|
| $ | 65.7 |
|
| $ | 0.1 |
|
| $ | (23.7 | ) |
| $ | 54.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 20.3 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 20.3 |
|
NYMEX/ICE natural gas contracts |
|
| 2.7 |
|
|
| — |
|
|
| — |
|
|
| (2.7 | ) |
|
| — |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
|
| 0.2 |
|
|
| 4.0 |
|
|
| — |
|
|
| (4.2 | ) |
|
| — |
|
Natural gas commodity contracts |
|
| — |
|
|
| 17.5 |
|
|
| — |
|
|
| (1.5 | ) |
|
| 16.0 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
|
| 8.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8.9 |
|
Interest rate swaps |
|
| — |
|
|
| 3.0 |
|
|
| — |
|
|
| — |
|
|
| 3.0 |
|
Total |
| $ | 32.1 |
|
| $ | 24.5 |
|
| $ | — |
|
| $ | (8.4 | ) |
| $ | 48.2 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
| $ | 1.9 |
|
| $ | — |
|
| $ | — |
|
| $ | (1.9 | ) |
| $ | — |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
|
| 0.9 |
|
|
| 10.5 |
|
|
| — |
|
|
| (11.4 | ) |
|
| — |
|
Natural gas commodity contracts |
|
| — |
|
|
| 7.5 |
|
|
| 0.2 |
|
|
| (1.5 | ) |
|
| 6.2 |
|
Total |
| $ | 2.8 |
|
| $ | 18.0 |
|
| $ | 0.2 |
|
| $ | (14.8 | ) |
| $ | 6.2 |
|
Spire
Effects of | ||||||||||||||||||||
Quoted | Netting | |||||||||||||||||||
Prices | Significant | Significant | and Cash | |||||||||||||||||
in Active | Observable | Unobservable | Margin | |||||||||||||||||
Markets | Inputs | Inputs | Receivables | |||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | /Payables | Total | ||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Gas Utility: | ||||||||||||||||||||
U.S. stock/bond mutual funds | $ | 19.1 | $ | — | $ | — | $ | — | $ | 19.1 | ||||||||||
NYMEX/ICE natural gas contracts | 57.8 | — | — | (57.8 | ) | — | ||||||||||||||
Gas Marketing: | ||||||||||||||||||||
NYMEX/ICE natural gas contracts | 91.8 | — | — | (91.8 | ) | — | ||||||||||||||
Natural gas commodity contracts | 56.6 | — | — | (4.0 | ) | 52.6 | ||||||||||||||
Other: | ||||||||||||||||||||
U.S. stock/bond mutual funds | 29.3 | — | — | — | 29.3 | |||||||||||||||
Interest rate swaps | 63.6 | — | — | — | 63.6 | |||||||||||||||
Total | $ | 318.2 | $ | — | $ | — | $ | (153.6 | ) | $ | 164.6 | |||||||||
LIABILITIES | ||||||||||||||||||||
Gas Utility: | ||||||||||||||||||||
NYMEX/ICE natural gas contracts | $ | 30.7 | $ | — | $ | — | $ | (30.7 | ) | $ | — | |||||||||
Gas Marketing: | ||||||||||||||||||||
NYMEX/ICE natural gas contracts | 82.3 | — | — | (82.3 | ) | — | ||||||||||||||
Natural gas commodity contracts | 65.5 | — | — | (4.0 | ) | 61.5 | ||||||||||||||
Total | $ | 178.5 | $ | — | $ | — | $ | (117.0 | ) | $ | 61.5 | |||||||||
As of September 30, 2021 | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Gas Utility: | ||||||||||||||||||||
U.S. stock/bond mutual funds | $ | 23.8 | $ | — | $ | — | $ | — | $ | 23.8 | ||||||||||
NYMEX/ICE natural gas contracts | 104.0 | — | — | (104.0 | ) | — | ||||||||||||||
Gas Marketing: | ||||||||||||||||||||
NYMEX/ICE natural gas contracts | — | 114.7 | — | (93.7 | ) | 21.0 | ||||||||||||||
Natural gas commodity contracts | — | 35.2 | — | (5.5 | ) | 29.7 | ||||||||||||||
Other: | ||||||||||||||||||||
U.S. stock/bond mutual funds | 26.2 | — | — | — | 26.2 | |||||||||||||||
Interest rate swaps | 12.6 | — | — | (5.2 | ) | 7.4 | ||||||||||||||
Total | $ | 166.6 | $ | 149.9 | $ | — | $ | (208.4 | ) | $ | 108.1 | |||||||||
LIABILITIES | ||||||||||||||||||||
Gas Utility: | ||||||||||||||||||||
NYMEX/ICE natural gas contracts | $ | 0.3 | $ | — | $ | — | $ | (0.3 | ) | $ | — | |||||||||
Gas Marketing: | ||||||||||||||||||||
NYMEX/ICE natural gas contracts | — | 62.0 | — | (62.0 | ) | — | ||||||||||||||
Natural gas commodity contracts | — | 96.7 | — | (5.5 | ) | 91.2 | ||||||||||||||
Other: | ||||||||||||||||||||
Interest rate swaps | 5.7 | — | — | (5.2 | ) | 0.5 | ||||||||||||||
Total | $ | 6.0 | $ | 158.7 | $ | — | $ | (73.0 | ) | $ | 91.7 |
Spire Missouri
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Effects of Netting and Cash Margin Receivables /Payables |
|
| Total |
| Effects of | ||||||||||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
U.S. stock/bond mutual funds |
| $ | 20.5 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 20.5 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Quoted | Netting | ||||||||||||||||||
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
NYMEX/ICE natural gas contracts |
| $ | 12.3 |
|
| $ | — |
|
| $ | — |
|
| $ | (12.3 | ) |
| $ | — |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Prices | Significant | Significant | and Cash | ||||||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
in Active | Observable | Unobservable | Margin | |||||||||||||||||||||||||||||||||||||
Markets | Inputs | Inputs | Receivables | |||||||||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | /Payables | Total | ||||||||||||||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
U.S. stock/bond mutual funds |
| $ | 20.3 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 20.3 |
| $ | 19.1 | $ | — | $ | — | $ | — | $ | 19.1 | ||||||||||
NYMEX/ICE natural gas contracts |
|
| 2.7 |
|
|
| — |
|
|
| — |
|
|
| (2.7 | ) |
|
| — |
| 57.8 | — | — | (57.8 | ) | — | ||||||||||||||
Total |
| $ | 23.0 |
|
| $ | — |
|
| $ | — |
|
| $ | (2.7 | ) |
| $ | 20.3 |
| $ | 76.9 | $ | — | $ | — | $ | (57.8 | ) | $ | 19.1 | |||||||||
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
NYMEX/ICE natural gas contracts |
| $ | 1.9 |
|
| $ | — |
|
| $ | — |
|
| $ | (1.9 | ) |
| $ | — |
| $ | 30.7 | $ | — | $ | — | $ | (30.7 | ) | $ | — | |||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||
U.S. stock/bond mutual funds | $ | 23.8 | $ | — | $ | — | $ | — | $ | 23.8 | ||||||||||||||||||||||||||||||
NYMEX/ICE natural gas contracts | 104.0 | — | — | (104.0 | ) | — | ||||||||||||||||||||||||||||||||||
Total | $ | 127.8 | $ | — | $ | — | $ | (104.0 | ) | $ | 23.8 | |||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||
NYMEX/ICE natural gas contracts | $ | 0.3 | $ | — | $ | — | $ | (0.3 | ) | $ | — |
Spire Alabama
Spire Alabama occasionally utilizes a gasoline derivative program to stabilize the cost of fuel used in operations. As of September 30, 2019,2022 and September 30, 2018,2021, there were 0no gasoline derivatives outstanding.
10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Spire
Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options and swaps for the explicit purpose of managing price risk associated with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. Further discussion of this policy can be found in the Spire Missouri section.
From time to time Spire Missouri and Spire Alabama purchase NYMEX futures and options contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment. Further information on these derivatives can be found in the Spire Missouri and Spire Alabama sections, respectively.
In the course of its business, Spire’s gas marketing subsidiary, Spire Marketing (including a wholly owned subsidiary), enters into commitments associated with the purchase or sale of natural gas. Certain of Spire Marketing’s derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of ASC Topic 815 and are accounted for as executory contracts on an accrual basis. Any of Spire Marketing’s derivative natural gas contracts that are not designated as normal purchases or normal sales are accounted for at fair value. At September 30, 2019,2022, the fair values of 323.4492.2 million MMBtu of non-exchange-traded natural gas commodity contracts were reflected in the Consolidated Balance Sheet. Of these contracts, 245.2347.8 million MMBtu will settle during fiscal 2020,2023, and 68.588.8 million MMBtu, 8.747.5 million MMBtu, 0.97.0 million MMBtu, and 0.11.1 million MMBtu will settle during fiscal years 2021, 2022, 2023,2024,2025,2026 and 2024,2027, respectively. These contracts have not been designated as hedges; therefore, changes in the fair value of these contracts are reported in earnings each period.
Furthermore, Spire Marketing manages the price risk associated with its fixed-priced commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of NYMEX or ICE futures, swap, and option contracts to lock in margins.
At September 30, 2019,2022, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations. Spire Marketing’s NYMEX and ICE natural gas futures, swap and option contracts used to lock in margins may be designated as cash flow hedges of forecasted transactions for financial reporting purposes.
During
In the second quarter of fiscal 2017, Spire2020, the Company entered into anmultiple ten-year interest rate swapswaps with a fixed interest rate of 2.658% andrates ranging from 0.934% to 1.2975% for a total notional amount of $60.0 to protect itself against adverse movements in interest rates on future interest rate payments. In September 2019 this hedge was settled, resulting in a loss of $6.1 which will be amortized over the hedged periods. In August 2018, Spire entered into a three-year interest rate swap with a fixed interest rate of 2.7675% and a notional amount of $100.0$75.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $2.9$9.8 mark-to-market loss on this swap as part ofgain in accumulated other comprehensive income on these swaps for the yeartwelve months ended September 30, 2019. During2022. In the firstthird quarter of fiscal 2019,2021 the Company entered into amultiple three-yearten-year interest rate swapswaps with a fixed interest rate of 3.250% andrates ranging from 2.008% to 2.1075% for a total notional amount of $100.0$150.0 to protect itself against adverse movements in future interest rates on future interest rate payments. The Company recorded a $34.4$17.9 mark-to-market lossgain in accumulated other comprehensive income on these swaps for the twelve months ended September 30, 2022.
In the fourth quarter of 2021, the Company entered into two swap contracts. Both contracts are ten-year interest rate swaps; the first swap has a notional amount of $50.0 with a fixed interest rate of 1.597%, while the second swap has a notional amount of $50.0 with a fixed interest rate of 1.821%. The Company recorded a $5.7 mark-to-market gain in accumulated other comprehensive income on these swaps for the twelve months ended September 30, 2022.
In the first quarter of fiscal 2022, the Company entered into a ten-year interest rate swap contract with a notional amount of $50.0 with a fixed interest rate of 1.4918%. The Company recorded a $7.0 mark-to-market gain to accumulated other comprehensive income on this swap as partfor the twelve months ended September 30,2022.
In the second quarter of fiscal 2022, the Company entered into multiple ten-year interest rate swap contracts with a cumulative total notional amount of $150.0 with fixed interest rates ranging from 1.64750% to 1.7460%. The Company recorded a $16.2 mark-to-market gain to accumulated other comprehensive income on these swaps for the yeartwelve months ended September 30,2022.
As of September 30, 2019.
2022, the Company has recorded through other comprehensive income a cumulative mark-to-market net asset of $63.6 on open swaps. The Company’s and Spire Missouri’s exchange-traded/cleared derivative instruments consist primarily of NYMEX and ICE positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX and ICE natural gas futures and swap positions at September 30, 20192022 and 2021 were as follows:
|
| Gas Utility |
|
| Gas Marketing |
| ||||||||||
|
| MMBtu (millions) |
|
| Avg. Price Per MMBtu |
|
| MMBtu (millions) |
|
| Avg. Price Per MMBtu |
| ||||
NYMEX/ICE open short futures positions/swap positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
| $ | — |
|
|
| 10.04 |
|
| $ | 2.77 |
|
Fiscal 2021 |
|
| — |
|
|
| — |
|
|
| 1.76 |
|
|
| 2.71 |
|
NYMEX/ICE open long futures/swap positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| 66.36 |
|
|
| 2.66 |
|
|
| 11.00 |
|
|
| 2.63 |
|
Fiscal 2021 |
|
| 2.68 |
|
|
| 2.68 |
|
|
| 4.91 |
|
|
| 2.64 |
|
Fiscal 2022 |
|
| — |
|
|
| — |
|
|
| 1.13 |
|
|
| 2.73 |
|
Fiscal 2023 |
|
| — |
|
|
| — |
|
|
| 0.22 |
|
|
| 2.69 |
|
ICE open short daily swap positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
|
| — |
|
|
| 1.12 |
|
|
| 2.00 |
|
ICE open long daily swap positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
|
| — |
|
|
| 0.27 |
|
|
| 2.38 |
|
ICE open short basis swap positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
|
| — |
|
|
| 53.06 |
|
|
| 0.13 |
|
Fiscal 2021 |
|
| — |
|
|
| — |
|
|
| 5.35 |
|
|
| 0.25 |
|
Fiscal 2022 |
|
| — |
|
|
| — |
|
|
| 0.31 |
|
|
| 0.25 |
|
ICE open long basis swap positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
|
| — |
|
|
| 28.95 |
|
|
| 0.45 |
|
Fiscal 2021 |
|
| — |
|
|
| — |
|
|
| 1.32 |
|
|
| 0.49 |
|
Fiscal 2022 |
|
| — |
|
|
| — |
|
|
| 0.92 |
|
|
| 0.52 |
|
Fiscal 2023 |
|
| — |
|
|
| — |
|
|
| 0.16 |
|
|
| 0.52 |
|
ICE puts short positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
|
| — |
|
|
| 4.80 |
|
|
| 0.14 |
|
ICE calls long positions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| — |
|
|
| — |
|
|
| 2.10 |
|
|
| 0.10 |
|
September 30, 2022 | September 30, 2021 | |||||||||||||||
Gas Marketing | Notional (MMBtu millions) | Maximum Term (Months) | Notional (MMBtu millions) | Maximum Term (Months) | ||||||||||||
Natural gas futures purchased | 76.3 | 54 | 103.3 | 51 | ||||||||||||
Natural gas options purchased, net | 3.7 | 12 | 7.1 | 15 | ||||||||||||
Natural gas basis swaps purchased | 61.7 | 39 | 101.7 | 27 | ||||||||||||
Gas Utility | ||||||||||||||||
Natural gas futures purchased | 13.0 | 12 | 52.8 | 12 |
At September 30, 2019, neither2022, Spire Missouri nor Spire Marketingalso had any further23.4 MMBtu of other price mitigation in place.price mitigation in place through the use of NYMEX natural gas option-based strategies.
Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance sheets of the Company at fair value, and the change in fair value of the effective portion of these hedge instruments is recorded, net of income tax, in other comprehensive income or loss (OCI). Accumulated other comprehensive income or loss (AOCI) is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at September 30, 2019,2022, it is expected that an immaterial amount of unrealized gains will be reclassified into the Consolidated Statements of Income of the Company during the next twelve months. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the Consolidated Statements of Cash Flows.
Effect of Derivative Instruments on the Consolidated Statements of Income and Comprehensive Income | Effect of Derivative Instruments on the Consolidated Statements of Income and Comprehensive Income |
| Effect of Derivative Instruments on the Consolidated Statements of Income and Comprehensive Income | |||||||||||||||||||||||||
|
| Location of Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
| Location of Gain (Loss) | |||||||||||||
|
| Recorded in Income |
| 2019 |
|
| 2018 |
|
| 2017 |
| Recorded in Income | 2022 | 2021 | 2020 | |||||||||||||
Derivatives in Cash Flow Hedging Relationships | Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||||
Effective portion of gain (loss) recognized in OCI on derivatives: | Effective portion of gain (loss) recognized in OCI on derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| Effective portion of gain (loss) recognized in OCI on derivatives: | ||||||||||||||
Gas Utility gasoline and heating oil contracts |
| $ | — |
|
| $ | — |
|
| $ | 0.1 |
| ||||||||||||||||
Interest rate swaps |
|
|
|
| (46.4 | ) |
|
| 3.9 |
|
|
| 11.4 |
| Interest rate swaps | $ | 56.7 | $ | 61.2 | $ | (8.9 | ) | ||||||
Total |
|
|
| $ | (46.4 | ) |
| $ | 3.9 |
|
| $ | 11.5 |
| ||||||||||||||
Effective portion of gain (loss) reclassified from AOCI to income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Natural gas contracts |
| Gas Marketing Operating Revenues |
| $ | — |
|
| $ | — |
|
| $ | (0.4 | ) | ||||||||||||||
|
| Gas Marketing Operating Expenses |
|
| — |
|
|
| — |
|
|
| 0.1 |
| ||||||||||||||
Subtotal |
|
|
|
| — |
|
|
| — |
|
|
| (0.3 | ) | ||||||||||||||
Gasoline and heating oil contracts |
| Gas Utility Other Operating Expenses |
|
| — |
|
|
| 0.1 |
|
|
| 0.2 |
| ||||||||||||||
Effective portion of (loss) gain reclassified from AOCI to income: | Effective portion of (loss) gain reclassified from AOCI to income: | |||||||||||||||||||||||||||
Interest rate swaps |
| Interest Expense |
|
| 1.3 |
|
|
| 1.4 |
|
|
| 0.1 |
| Interest Expense | $ | (1.2 | ) | $ | (1.3 | ) | $ | (3.2 | ) | ||||
Total |
|
|
| $ | 1.3 |
|
| $ | 1.5 |
|
| $ | — |
| ||||||||||||||
Ineffective portion of gain (loss) on derivatives recognized in income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Interest rate swaps |
| Interest Expense |
|
| — |
|
|
| — |
|
|
| 0.5 |
| ||||||||||||||
Total |
|
|
| $ | — |
|
| $ | — |
|
| $ | 0.5 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Derivatives Not Designated as Hedging Instruments* | Derivatives Not Designated as Hedging Instruments* |
|
|
|
|
|
|
|
|
|
|
|
| Derivatives Not Designated as Hedging Instruments* | ||||||||||||||
Gain (loss) recognized in income on derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Gain (Loss) recognized in income on derivatives: | Gain (Loss) recognized in income on derivatives: | |||||||||||||||||||||||||||
Natural gas commodity contracts |
| Gas Marketing Operating Revenues |
| $ | 2.5 |
|
| $ | 10.2 |
|
| $ | 0.7 |
| Operating Expenses: Natural Gas | $ | 52.6 | $ | 54.1 | $ | 9.2 | |||||||
|
| Gas Marketing Operating Expenses |
|
| (8.4 | ) |
|
| (8.1 | ) |
|
| — |
| ||||||||||||||
NYMEX / ICE natural gas contracts |
| Gas Marketing Operating Revenues |
|
| — |
|
|
| — |
|
|
| (4.4 | ) | Operating Expenses: Natural Gas | 43.3 | (77.5 | ) | (11.8 | ) | ||||||||
Total |
|
|
| $ | (5.9 | ) |
| $ | 2.1 |
|
| $ | (3.7 | ) | Total | $ | 95.9 | $ | (23.4 | ) | $ | (2.6 | ) |
* | Gains and losses on Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments for financial reporting purposes, are deferred pursuant to the Missouri Utilities’ PGA clauses and initially recorded as regulatory assets or regulatory liabilities. These gains and losses are excluded from the table above because they have no direct impact on the statements of income. Such amounts are recognized in the statements of income as a component of |
Fair Value of Derivative Instruments in the Consolidated Balance Sheets |
| |||||||||||
|
| Derivative Assets* |
|
| Derivative Liabilities* |
| ||||||
September 30, 2019 |
| Balance Sheet Location |
| Fair Value |
|
| Balance Sheet Location |
| Fair Value |
| ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Other: Interest rate swaps |
| Derivative Instrument Liability |
| $ | — |
|
| Derivative Instrument Liability |
| $ | 43.4 |
|
Subtotal |
|
|
|
| — |
|
|
|
|
| 43.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
| Accounts Receivable – Other |
|
| — |
|
| Accounts Receivable – Other |
|
| 12.3 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX / ICE natural gas contracts |
| Derivative Instrument Assets |
|
| 7.0 |
|
| Derivative Instrument Assets |
|
| 7.3 |
|
|
| Deferred Charges – Other |
|
| 0.5 |
|
| Deferred Charges – Other |
|
| 1.6 |
|
Natural gas commodity |
| Derivative Instrument Assets |
|
| 10.4 |
|
| Derivative Instrument Assets |
|
| 0.9 |
|
|
| Deferred Charges – Other |
|
| 4.8 |
|
| Deferred Charges – Other |
|
| — |
|
|
| Current Liabilities – Other |
|
| 1.4 |
|
| Current Liabilities – Other |
|
| 11.5 |
|
|
| Deferred Credits – Other |
|
| 0.1 |
|
| Deferred Credits – Other |
|
| 1.5 |
|
Subtotal |
|
|
|
| 24.2 |
|
|
|
|
| 35.1 |
|
Total derivatives |
|
|
| $ | 24.2 |
|
|
|
| $ | 78.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Other: Interest rate swaps |
| Derivative Instrument Assets |
| $ | 3.0 |
|
| Derivative Instrument Assets |
| $ | — |
|
Subtotal |
|
|
|
| 3.0 |
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
| Accounts Receivable – Other |
|
| 2.7 |
|
| Accounts Receivable – Other |
|
| 1.9 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX / ICE natural gas contracts |
| Derivative Instrument Assets |
|
| 3.8 |
|
| Derivative Instrument Assets |
|
| 10.7 |
|
|
| Deferred Charges – Other |
|
| 0.4 |
|
| Deferred Charges – Other |
|
| 0.7 |
|
Natural gas commodity |
| Derivative Instrument Assets |
|
| 10.9 |
|
| Derivative Instrument Assets |
|
| 1.0 |
|
|
| Deferred Charges – Other |
|
| 6.3 |
|
| Deferred Charges – Other |
|
| 0.2 |
|
|
| Current Liabilities – Other |
|
| 0.3 |
|
| Current Liabilities – Other |
|
| 6.3 |
|
|
| Deferred Credits – Other |
|
| — |
|
| Deferred Credits – Other |
|
| 0.2 |
|
Subtotal |
|
|
|
| 24.4 |
|
|
|
|
| 21.0 |
|
Total derivatives |
|
|
| $ | 27.4 |
|
|
|
| $ | 21.0 |
|
Fair Value of Derivative Instruments in the Consolidated Balance Sheets | ||||||||||||
Derivative Assets* | Derivative Liabilities* | |||||||||||
September 30, 2022 | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Derivatives designated as hedging instruments | ||||||||||||
Other: Interest rate swaps | Current Assets: Other | $ | 63.6 | Current Liabilities: Other | $ | — | ||||||
Subtotal | 63.6 | — | ||||||||||
Derivatives not designated as hedging instruments | ||||||||||||
Gas Utility: | ||||||||||||
Natural gas contracts | Current Assets: Other | 57.8 | Current Liabilities: Other | 30.7 | ||||||||
Gas Marketing: | ||||||||||||
NYMEX / ICE natural gas contracts | Current Assets: Other | 79.2 | Current Liabilities – Other | 71.5 | ||||||||
Deferred Charges and Other Assets: Other | 12.7 | Deferred Credits and Other Liabilities: Other | 10.8 | |||||||||
Natural gas commodity | Current Assets: Other | 53.4 | Current Liabilities – Other | 55.1 | ||||||||
Deferred Charges and Other Assets: Other | 3.1 | Deferred Credits and Other Liabilities: Other | 10.4 | |||||||||
Subtotal | 206.2 | 178.5 | ||||||||||
Total derivatives | $ | 269.8 | $ | 178.5 | ||||||||
September 30, 2021 | ||||||||||||
Derivatives designated as hedging instruments | ||||||||||||
Other: Interest rate swaps | Current Assets: Other | $ | 12.6 | Current Liabilities: Other | $ | 5.7 | ||||||
Subtotal | 12.6 | 5.7 | ||||||||||
Derivatives not designated as hedging instruments | ||||||||||||
Gas Utility: | ||||||||||||
Natural gas contracts | Current Assets: Other | 104.0 | Current Liabilities: Other | 0.3 | ||||||||
Gas Marketing: | ||||||||||||
NYMEX / ICE natural gas contracts | Current Assets: Other | 93.9 | Current Liabilities – Other | 50.1 | ||||||||
Deferred Charges and Other Assets: Other | 20.8 | Deferred Credits and Other Liabilities: Other | 11.9 | |||||||||
Natural gas commodity | Current Assets: Other | 34.1 | Current Liabilities – Other | 82.5 | ||||||||
Deferred Charges and Other Assets: Other | 1.1 | Deferred Credits and Other Liabilities: Other | 14.2 | |||||||||
Subtotal | 253.9 | 159.0 | ||||||||||
Total derivatives | $ | 266.5 | $ | 164.7 |
* | The fair values of Derivative Assets and Derivative Liabilities exclude the fair value of cash margin receivables or payables with counterparties subject to netting arrangements. Fair value amounts of derivative contracts (including the fair value amounts of cash margin receivables and payables) for which there is a legal right to set off are presented net on the balance sheets. As such, the gross balances presented in the table above are not indicative of the Company’s net economic exposure. Refer to Note 9, Fair Value Measurements, for information on the valuation of derivative instruments. |
Following is a reconciliation of the amounts in the tables above to the amounts presented in the Consolidated Balance Sheets:
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | ||||||||
Fair value of derivative assets presented above |
| $ | 24.2 |
|
| $ | 27.4 |
| $ | 269.8 | $ | 266.5 | ||||
Fair value of cash margin receivable offset with derivatives |
|
| 14.3 |
|
|
| 6.4 |
| (36.6 | ) | (135.4 | ) | ||||
Netting of assets and liabilities with the same counterparty |
|
| (23.7 | ) |
|
| (14.8 | ) | (117.0 | ) | (73.0 | ) | ||||
Total |
| $ | 14.8 |
|
| $ | 19.0 |
| $ | 116.2 | $ | 58.1 | ||||
Derivative Instrument Assets, per Consolidated Balance Sheets: |
|
|
|
|
|
|
|
| ||||||||
Current Assets – Other |
| $ | 4.2 |
|
| $ | 13.3 |
| ||||||||
Deferred Charges and Other Assets – Other |
|
| 10.6 |
|
|
| 5.7 |
| ||||||||
Current Assets: Other | $ | 113.1 | $ | 57.0 | ||||||||||||
Deferred Charges and Other Assets: Other | 3.1 | 1.1 | ||||||||||||||
Total |
| $ | 14.8 |
|
| $ | 19.0 |
| $ | 116.2 | $ | 58.1 | ||||
|
|
|
|
|
|
|
|
| ||||||||
Fair value of derivative liabilities presented above |
| $ | 78.5 |
|
| $ | 21.0 |
| $ | 178.5 | $ | 164.7 | ||||
Netting of assets and liabilities with the same counterparty |
|
| (23.7 | ) |
|
| (14.8 | ) | (117.0 | ) | (73.0 | ) | ||||
Total |
| $ | 54.8 |
|
| $ | 6.2 |
| $ | 61.5 | $ | 91.7 | ||||
Derivative Instrument Liabilities, per Consolidated Balance Sheets: |
|
|
|
|
|
|
|
| ||||||||
Current Liabilities – Other |
| $ | 50.0 |
|
| $ | 6.0 |
| ||||||||
Deferred Credits and Other Liabilities – Other |
|
| 4.8 |
|
|
| 0.2 |
| ||||||||
Current Liabilities: Other | $ | 51.1 | $ | 77.5 | ||||||||||||
Deferred Credits and Other Liabilities: Other | 10.4 | 14.2 | ||||||||||||||
Total |
| $ | 54.8 |
|
| $ | 6.2 |
| $ | 61.5 | $ | 91.7 |
Additionally, at September 30, 20192022 and 2018,2021, the Company had $8.1$49.8 and $4.1,$40.8, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Spire Missouri
Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options, swaps and over-the-counter instruments for the explicit purpose of managing price risk associated with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. This policy strictly prohibits speculation and permits Spire Missouri to hedge current physical natural gas purchase commitments or forecasted or anticipated future peak (maximum) physical need for natural gas delivered. Costs and cost reductions, including carrying costs, associated with Spire Missouri’s use of natural gas derivative instruments are allowed to be passed on to Spire Missouri customers through the operation of its PGA clause, through which the MoPSC allows Spire Missouri to recover gas supply costs, subject to prudence review by the MoPSC. Accordingly, Spire Missouri does not expect any adverse earnings impact as a result of the use of these derivative instruments.
Spire Missouri does not designate these instruments as hedging instruments for financial reporting purposes because gains or losses associated with the use of these derivative instruments are deferred and recorded as regulatory assets or regulatory liabilities pursuant to ASC Topic 980,Regulated Operations, and, as a result, have no direct impact on the statements of income.
The timing of the operation of the PGA clause may cause interim variations in short-term cash flows, because Spire Missouri is subject to cash margin requirements associated with changes in the values of these instruments. Nevertheless, carrying costs associated with such requirements are recovered through the PGA clause.
From time to time, Spire Missouri purchases NYMEX futures and options contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. These contracts are designated as cash flow hedges of forecasted transactions pursuant to ASC Topic 815,Derivatives and Hedging. The gains or losses on these derivative instruments are not subject to Spire Missouri’s PGA clause. At September 30, 2019,2022, Spire Missouri had no gasoline futures contracts outstanding.
Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance sheets at fair value and the change in the fair value of the effective portion of these hedge instruments is recorded, net of income tax, in OCI. AOCI is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at September 30, 2019, it is expected that an immaterial amount of pre-tax gainsAs in both 2021 and 2020, there will be reclassifiedno reclassifications into the statements of income during fiscal 2020.2023. 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 cash flows.
Spire Missouri’s derivative instruments consist primarily of NYMEX positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX natural gas futures positions at September 30, 20192022 and 2021 were as follows:
|
| MMBtu (millions) |
|
| Avg. Price Per MMBtu |
| ||
NYMEX/ICE open long futures/swap positions |
|
|
|
|
|
|
|
|
Fiscal 2020 |
|
| 66.36 |
|
| $ | 2.66 |
|
Fiscal 2021 |
|
| 2.68 |
|
|
| 2.68 |
|
September 30, 2022 | September 30, 2021 | |||||||||||||||
Notional (MMBtu millions) | Maximum Term (Months) | Notional (MMBtu millions) | Maximum Term (Months) | |||||||||||||
Natural gas futures purchased | 13.0 | 12 | 52.8 | 12 |
At September 30, 2019,2022, Spire Missouri had noalso had 23.4 MMBtu of other price mitigation derivatives in place.place through the use of NYMEX natural gas option-based strategies.
Effect of Derivative Instruments on the Statements of Comprehensive Income |
| |||||||||||||
|
| Location of Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded in Income |
| 2019 |
|
| 2018 |
|
| 2017 |
| |||
Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
| ||
Effective portion of gain (loss) recognized in OCI on derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Gasoline and heating oil contracts |
|
|
| $ | — |
|
| $ | — |
|
| $ | 0.1 |
|
Effective portion of gain (loss) reclassified from AOCI to income: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Gasoline and heating oil contracts |
| Gas Utility Other Operating Expenses |
| $ | — |
|
| $ | 0.1 |
|
| $ | 0.2 |
|
Gains and losses on Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments for financial reporting purposes, are deferred pursuant to the Spire Missouri’s PGA clauses and initially recorded as regulatory assets or regulatory liabilities. Such amounts are recognized in the statements of income as a component of natural gas operating expenses when they are recovered through the PGA clause and reflected in customer billings.
Fair Value of Derivative Instruments in the Balance Sheets | ||||||||||||
Derivative Assets* | Derivative Liabilities* | |||||||||||
September 30, 2022 | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Derivatives not designated as hedging instruments | ||||||||||||
Natural gas contracts | Current Assets: Other | $ | 57.8 | Current Liabilities: Other | $ | 30.7 | ||||||
September 30, 2021 | ||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||
Natural gas contracts | Current Assets: Other | $ | 104.0 | Current Liabilities: Other | $ | 0.3 |
* |
|
Fair Value of Derivative Instruments in the Balance Sheets |
| |||||||||||
|
| Derivative Assets* |
|
| Derivative Liabilities* |
| ||||||
September 30, 2019 |
| Balance Sheet Location |
| Fair Value |
|
| Balance Sheet Location |
| Fair Value |
| ||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Natural gas contracts |
| Accounts Receivable – Other |
| $ | — |
|
| Accounts Receivable – Other |
| $ | 12.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Natural gas contracts |
| Accounts Receivable – Other |
| $ | 2.7 |
|
| Accounts Receivable – Other |
| $ | 1.9 |
|
| The fair values of Derivative Assets and Derivative Liabilities exclude the fair value of cash margin receivables or payables with counterparties subject to netting arrangements. Fair value amounts of derivative contracts (including the fair value amounts of cash margin receivables and payables) for which there is a legal right to set off are presented net on the Balance Sheets. As such, the gross balances presented in the table above are not indicative of Spire Missouri’s net economic exposure. Refer to Note 9, Fair Value Measurements, for information on the valuation of derivative instruments. |
Following is a reconciliation of the amounts in the tables above to the amounts presented in Spire Missouri’s Balance Sheets:
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | ||||||||
Fair value of derivative assets presented above |
| $ | — |
|
| $ | 2.7 |
| $ | 57.8 | $ | 104.0 | ||||
Fair value of cash margin (payable) receivable offset with derivatives |
|
| 12.3 |
|
|
| (0.8 | ) | (27.1 | ) | (103.7 | ) | ||||
Netting of assets and liabilities with the same counterparty |
|
| (12.3 | ) |
|
| (1.9 | ) | (30.7 | ) | (0.3 | ) | ||||
Total |
| $ | — |
|
| $ | — |
| $ | — | $ | — | ||||
|
|
|
|
|
|
|
|
| ||||||||
Fair value of derivative liabilities presented above |
| $ | 12.3 |
|
| $ | 1.9 |
| $ | 30.7 | $ | 0.3 | ||||
Netting of assets and liabilities with the same counterparty |
|
| (12.3 | ) |
|
| (1.9 | ) | (30.7 | ) | (0.3 | ) | ||||
Total |
| $ | — |
|
| $ | — |
| $ | — | $ | — |
Additionally, at September 30, 20192022 and 2018,2021, Spire Missouri had $7.8$24.0 and $3.8,$40.3, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Spire Alabama
During the fiscal second quarter of 2016,
Spire Alabama commencedperiodically employs a gasoline derivative program to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. Most of these contracts are designated as cash flow hedges of forecasted transactions pursuant to ASC Topic 815, Derivatives and Hedging. The gains or losses on these derivative instruments are not subject to Spire Alabama’s GSA rider. There were no such contracts outstanding as of September 30, 20192022 and 2018.2021.
11. CONCENTRATIONS OF CREDIT RISK
Spire’s Gas Utility segment serves 1.7 million customers in 3three states across multiple rate classes resulting in a significant amount of revenue diversity. Credit risk is mitigated by the high percentage of residential customers as well as the geographic diversity of the Utilities, though customers for each Utilityof the Utilities are concentrated in a single state.
A significant portion of
Spire Marketing’s transactions are with (or are associated with) energy producers,accounts receivable attributable to utility companies and pipelines.their marketing affiliates totaled $245.6 at September 30, 2022. The concentration of transactions with these counterparties has the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these 3 groups customers in this group may be affected similarly by changes in economic, industry, or other conditions. Spire Marketing also has concentrations of credit risk with certain individually significant counterparties. At September 30, 2022, the amounts included in accounts receivable from its five largest counterparties (in terms of net accounts receivable exposure) totaled $111.2. Four of these five counterparties are investment-grade rated integrated utilities, while the fifth is rated slightly below investment-grade, but with a stable outlook.
To manage this risk, as well as credit risk from significant counterparties in these and other industries,risks, Spire Marketing has established procedures to determine the creditworthiness of its counterparties. These procedures include obtaining credit ratings and credit reports, analyzing counterparty financial statements to assess financial condition, and considering the industry environment in which the counterparty operates. This information is monitored on an ongoing basis. In some instances, Spire Marketing may require credit assurances such as prepayments, letters of credit, or parental guaranties. In addition, Spire Marketing may enter into netting arrangements to mitigate credit risk with counterparties in the energy industry with whom it conducts both sales and purchases of natural gas. Where there is no netting arrangement, Spire Marketing records accounts receivable, accounts payable, and prepayments for physical sales and purchases of natural gas on a gross basis. Sales are typically made on an unsecured credit basis with payment due the month following delivery. Accounts receivable amounts are closely monitored and provisions for uncollectible amounts are accrued when losses are probable. Spire Marketing records accounts receivable, accounts payable, and prepayments for physical sales and purchases
The Company, Spire Missouri, and Spire Alabama are subject to federal income tax as well as income tax in various state and local jurisdictions. Spire files a consolidated federal income tax return and various state income tax returns and allocates income taxes to Spire Missouri, Spire Alabama and its other subsidiaries as if each entity were a separate taxpayer.
The provision (benefit) for income taxes during the fiscal years ended September 30, 2019, 2018,2022, 2021, and 20172020 was as follows:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Federal: |
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|
|
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|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Current |
| $ | 0.6 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| $ | 0.5 | $ | 0.2 | $ | 0.4 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Deferred |
|
| 27.4 |
|
|
| (22.7 | ) |
|
| 67.7 |
|
|
| 11.5 |
|
|
| (26.1 | ) |
|
| 42.0 |
|
|
| 16.3 |
|
|
| 81.5 |
|
|
| 31.6 |
| 47.0 | 49.5 | 5.8 | 18.2 | 22.0 | 14.9 | 18.1 | 19.8 | 17.4 | |||||||||||||||||||||||||||
Investment tax credits |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
| (0.2 | ) | (0.2 | ) | (0.2 | ) | (0.2 | ) | (0.2 | ) | (0.2 | ) | — | — | — | |||||||||||||||||||||
State and local: |
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| ||||||||||||||||||||||||||||||||||||
Current |
|
| 2.1 |
|
|
| 2.2 |
|
|
| 0.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| 0.5 | 1.3 | 3.0 | — | — | 0.1 | — | — | — | |||||||||||||||||||||||||||
Deferred |
|
| 4.6 |
|
|
| (5.8 | ) |
|
| 9.5 |
|
|
| 2.0 |
|
|
| (6.3 | ) |
|
| 5.7 |
|
|
| 4.2 |
|
|
| 0.1 |
|
|
| 4.2 |
| 11.1 | 17.7 | 3.4 | 3.3 | 3.5 | 2.5 | 5.1 | 5.2 | 4.6 | |||||||||||||||||||||||||||
Total income tax expense (benefit) |
| $ | 34.5 |
|
| $ | (26.5 | ) |
| $ | 77.6 |
|
| $ | 13.3 |
|
| $ | (32.6 | ) |
| $ | 47.5 |
|
| $ | 20.5 |
|
| $ | 81.6 |
|
| $ | 35.8 |
| ||||||||||||||||||||||||||||||||||||
Total income tax expense | $ | 58.9 | $ | 68.5 | $ | 12.4 | $ | 21.3 | $ | 25.3 | $ | 17.3 | $ | 23.2 | $ | 25.0 | $ | 22.0 |
The effective income tax rate varied from the federal statutory income tax rate for each year due to the following:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Federal income tax statutory rate |
|
| 21.0 | % |
|
| 24.5 | % |
|
| 35.0 | % |
|
| 21.0 | % |
|
| 24.5 | % |
|
| 35.0 | % |
|
| 21.0 | % |
|
| 24.5 | % |
|
| 35.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||||||||||||
State and local income taxes, net of federal income tax benefits |
|
| 3.6 |
|
|
| 3.4 |
|
|
| 2.8 |
|
|
| 2.6 |
|
|
| 3.4 |
|
|
| 2.8 |
|
|
| 4.1 |
|
|
| 3.8 |
|
|
| 2.8 |
| 3.6 | 3.6 | 9.0 | 2.6 | 2.6 | 2.6 | 4.1 | 4.1 | 4.1 | |||||||||||||||||||||||||||
Certain expenses capitalized on books and deducted on tax return |
|
| (3.8 | ) |
|
| (2.3 | ) |
|
| (2.3 | ) |
|
| (6.5 | ) |
|
| (4.6 | ) |
|
| (3.5 | ) |
|
| — |
|
|
| — |
|
|
| — |
| (1.6 | ) | (1.6 | ) | (6.6 | ) | (3.2 | ) | (3.3 | ) | (4.6 | ) | — | — | — | |||||||||||||||||||||
Taxes related to prior years |
|
| 0.2 |
|
|
| (0.4 | ) |
|
| (0.9 | ) |
|
| 0.1 |
|
|
| (0.7 | ) |
|
| (1.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
| (0.3 | ) | (0.5 | ) | (1.8 | ) | (0.6 | ) | (0.2 | ) | (1.4 | ) | — | — | 0.1 | |||||||||||||||||||||
Tax law changes |
|
| — |
|
|
| (35.9 | ) |
|
| — |
|
|
| — |
|
|
| (50.3 | ) |
|
| — |
|
|
| — |
|
|
| 70.0 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Amortization of excess deferred taxes |
|
| (3.8 | ) |
|
| (1.8 | ) |
|
| — |
|
|
| (6.6 | ) |
|
| (3.6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| (3.5 | ) | (2.5 | ) | (8.3 | ) | (7.3 | ) | (5.0 | ) | (5.7 | ) | — | — | — | |||||||||||||||||||||
Other items – net * |
|
| (1.4 | ) |
|
| (1.6 | ) |
|
| (2.2 | ) |
|
| (0.3 | ) |
|
| (2.5 | ) |
|
| (3.3 | ) |
|
| 0.2 |
|
|
| 0.1 |
|
|
| 0.3 |
| 1.9 | 0.1 | (1.0 | ) | 3.1 | (0.2 | ) | (0.2 | ) | 0.2 | 0.2 | (0.1 | ) | |||||||||||||||||||||||
Effective income tax rate |
|
| 15.8 | % |
|
| (14.1 | )% |
|
| 32.4 | % |
|
| 10.3 | % |
|
| (33.8 | )% |
|
| 29.6 | % |
|
| 25.3 | % |
|
| 98.4 | % |
|
| 38.1 | % | 21.1 | % | 20.1 | % | 12.3 | % | 15.6 | % | 14.9 | % | 11.7 | % | 25.3 | % | 25.3 | % | 25.1 | % |
* | Other consists primarily of property adjustments. |
|
The significant items comprising the net deferred tax liability or asset as of September 30 were as follows:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Reserves not currently deductible |
| $ | 31.4 |
|
| $ | 25.9 |
|
| $ | 21.2 |
|
| $ | 20.0 |
|
| $ | 6.2 |
|
| $ | 5.3 |
| $ | 33.5 | $ | 18.3 | $ | 4.0 | $ | 8.5 | $ | 7.4 | $ | 6.6 | ||||||||||||
Pension and other postretirement benefits |
|
| 102.7 |
|
|
| 75.6 |
|
|
| 78.7 |
|
|
| 71.9 |
|
|
| — |
|
|
| — |
| 72.6 | 77.4 | 52.6 | 53.4 | — | — | ||||||||||||||||||
Goodwill |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 116.8 |
|
|
| 129.6 |
| — | — | — | — | 73.0 | 87.2 | ||||||||||||||||||
Operating losses |
|
| 162.2 |
|
|
| 162.7 |
|
|
| 51.1 |
|
|
| 65.2 |
|
|
| 94.2 |
|
|
| 86.0 |
| 255.1 | 264.5 | 116.9 | 110.3 | 140.3 | 130.3 | ||||||||||||||||||
Regulatory amount due to customers, net |
|
| 46.5 |
|
|
| 41.8 |
|
|
| 42.7 |
|
|
| 38.0 |
|
|
| — |
|
|
| — |
| 34.5 | 33.2 | 30.7 | 29.4 | — | — | ||||||||||||||||||
Other |
|
| 20.0 |
|
|
| 8.2 |
|
|
| 1.2 |
|
|
| 0.5 |
|
|
| — |
|
|
| — |
| 24.9 | 32.4 | — | — | — | — | ||||||||||||||||||
Deferred tax assets |
|
| 362.8 |
|
|
| 314.2 |
|
|
| 194.9 |
|
|
| 195.6 |
|
|
| 217.2 |
|
|
| 220.9 |
| 420.6 | 425.8 | 204.2 | 201.6 | 220.7 | 224.1 | ||||||||||||||||||
Less: Valuation allowance |
|
| (1.8 | ) |
|
| (1.4 | ) |
|
| (1.8 | ) |
|
| (1.4 | ) |
|
| — |
|
|
| — |
| — | (0.5 | ) | — | (0.4 | ) | — | — | ||||||||||||||||
Total deferred tax assets |
|
| 361.0 |
|
|
| 312.8 |
|
|
| 193.1 |
|
|
| 194.2 |
|
|
| 217.2 |
|
|
| 220.9 |
| 420.6 | 425.3 | 204.2 | 201.2 | 220.7 | 224.1 | ||||||||||||||||||
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Relating to property |
|
| (562.9 | ) |
|
| (518.3 | ) |
|
| (395.1 | ) |
|
| (372.6 | ) |
|
| (129.3 | ) |
|
| (111.9 | ) | (740.0 | ) | (693.9 | ) | (489.3 | ) | (464.0 | ) | (201.6 | ) | (182.7 | ) | ||||||||||||
Regulatory pension and other postretirement benefits |
|
| (135.9 | ) |
|
| (117.1 | ) |
|
| (111.7 | ) |
|
| (113.4 | ) |
|
| (2.0 | ) |
|
| (1.8 | ) | (92.8 | ) | (95.6 | ) | (72.3 | ) | (71.2 | ) | (1.6 | ) | (1.6 | ) | ||||||||||||
Deferred gas costs | (75.8 | ) | (81.1 | ) | (74.0 | ) | (79.5 | ) | — | — | ||||||||||||||||||||||||||||||||||||||
Other** |
|
| (113.6 | ) |
|
| (113.2 | ) |
|
| (50.9 | ) |
|
| (69.2 | ) |
|
| (4.6 | ) |
|
| (5.4 | ) | (187.1 | ) | (167.0 | ) | (68.7 | ) | (66.5 | ) | (6.5 | ) | (5.6 | ) | ||||||||||||
Total deferred tax liabilities |
|
| (812.4 | ) |
|
| (748.6 | ) |
|
| (557.7 | ) |
|
| (555.2 | ) |
|
| (135.9 | ) |
|
| (119.1 | ) | (1,095.7 | ) | (1,037.6 | ) | (704.3 | ) | (681.2 | ) | (209.7 | ) | (189.9 | ) | ||||||||||||
Net deferred tax (liability) asset |
| $ | (451.4 | ) |
| $ | (435.8 | ) |
| $ | (364.6 | ) |
| $ | (361.0 | ) |
| $ | 81.3 |
|
| $ | 101.8 |
| $ | (675.1 | ) | $ | (612.3 | ) | $ | (500.1 | ) | $ | (480.0 | ) | $ | 11.0 | $ | 34.2 |
** | For Spire, Other consists primarily of goodwill-related liabilities. |
|
The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017, with an effective date of January 1, 2018, for substantially all of the provisions. This comprehensive act includes significant reform of the current income tax code including changes in the calculation for business entities and a reduction in the corporate federal income tax rate from 35% to 21%. The specific provisions related to regulated public utilities in the TCJA generally allow for the continued deductibility of interest expense, the elimination of full expensing for tax purposes of certain property acquired after September 27, 2017 and the continuation of certain rate normalization requirements for accelerated depreciation benefits. The Department of the Treasury (“Treasury”) has issued proposed regulations associated with the deductibility of interest expense, but further clarification of certain provisions is expected. Treasury has also issued proposed regulations on bonus depreciation which allow full expensing for certain property acquired in tax years beginning prior to January 1, 2018.
ASC Topic 740, Income Taxes, requires that the effects of changes in tax laws be recognized in the period in which the new law is enacted. It also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. For the Company’s regulated entities, the changes in deferred taxes related to the regulated operations are recorded as either an offset to or creation of a regulatory asset or liability and may be subject to refund to customers in future periods. The changes in deferred taxes that are not associated with rate making (including all changes for the Company’s non-regulated operations) are recorded as adjustments to deferred tax expense or benefit.
As indicated in Note 1, Summary of Significant Accounting Policies, the Company’s regulated operations accounting for income taxes is impacted by ASC Topic 980,Regulated Operations. ReductionsThe Tax Cuts and Jobs Act of 2017 (TCJA) reduced the corporate federal income tax rate, and the corresponding reductions in deferred income tax balances due to the reduction in the corporate income tax rate resulted in amounts previously collected from utility customers for these deferred taxes becoming refundable to such customers, generally through reductions in future rates. The TCJA includes provisions that stipulate how these excess deferred taxes are to be passed back to customers for certain accelerated tax depreciation benefits. In fiscal 2018, the MoPSC Amended Report and Order took effect and the estimated excess accumulated deferred income tax began to be returned to Spire Missouri customers in rates. During the current fiscal year, the amount of excess accumulated deferred income taxes was trued up as part of the rate proceeding. The amount being returned is estimated with a tracker established to defer the difference from the estimated amountsrelated to the actual amounts onceTCJA has been updated and in addition the actual amounts have been calculated.excess accumulated deferred income taxes related to the Missouri tax rate change has begun to be returned. Excess accumulated deferred taxes of $8.4$9.9 were returned in fiscal 2022 and $3.5$8.4 were returned by Spire Missouri during each of fiscal 2019years 2021, and 2018, respectively.2020. The treatment for accumulated deferred income tax balances for Spire Alabama, Spire Gulf and Spire Mississippi is yet to be determined by state regulators.regulators; however, discussions have begun with respect to these balances.
The Company recorded the TCJA impacts in fiscal 2018, including the impact of the federal income tax rate reduction and the revaluation of the deferred tax assets and liabilities. The total adjustments recorded, before reduction for amounts returned to customers, for the year ended September 30, 2018, were as follows:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Adjustment to deferred tax liabilities |
| $ | (318.3 | ) |
| $ | (285.3 | ) |
| $ | (61.0 | ) |
Adjustment to deferred income tax expense |
|
| (75.0 | ) |
|
| (57.0 | ) |
|
| 58.8 |
|
Adjustment to regulatory assets |
|
| (75.9 | ) |
|
| (78.1 | ) |
|
| 2.2 |
|
Adjustment to regulatory liabilities |
|
| 167.4 |
|
|
| 150.2 |
|
|
| — |
|
In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers all significant available positive and negative evidence, including the existence of losses in recent years, the timing of deferred tax liability reversals, projected future taxable income, taxable income in carryback years, and tax planning strategies to assess the need for a valuation allowance. Based upon this evidence, management believes it is more likely than not the Company, Spire Missouri and Spire Alabama will realize the benefits of these deferred tax assets, except for the contribution carryforward valuation allowances noted below.assets.
The Company
As of September 30, 2022, Spire, and on a separate company basis, Spire Missouri and Spire Alabama, had federal and state loss carryforwards, of approximately $661.6 at September 30, 2019. The loss carryforwards begin to expire in fiscal 2030 for certain state purposes and fiscal 2035 for federal and other states purposes. The Company also had contribution carryforwards, of approximately $14.0 at September 30, 2019, which begin to expire this year. The Company had a valuation allowance of $1.8, as a portion of the contribution carryforward will not be realized prior to its expiration. The Company also hadand various tax credit carryforwards of approximately $2.7 that begin to expire in 2020, as well as a capital loss carryforward of $0.1 that expires in 2022.shown below.
Spire Missouri had federal and state loss carryforwards of approximately $226.0 at September 30, 2019 on a separate company basis, which begin to expire in fiscal 2035.
Spire | Spire Missouri | Spire Alabama | ||||||||||
Federal and state loss carryforwards | $ | 1,047.7 | $ | 462.3 | $ | 556.7 | ||||||
Contribution carryforwards | 10.4 | 7.0 | 0.4 | |||||||||
Tax credit carryforwards | 4.6 | 3.4 | — |
For federal tax purposes, theseSpire Missouri’s and Spire Alabama’s loss carryforwards may be utilized against income from another member of the consolidated group. Spire Missouri also had contribution carryforwards of approximately $11.1 at September 30, 2019 that begin to expire this year. Spire Missouri had a valuation allowance of $1.8, as a portion of the contribution carryforward will not be realized prior to its expiration. Spire Missouri also had approximately $2.0 of various tax credit carryforwards that begin to expire in 2020.
On a separate company basis, Spire Alabama had federal and state loss carryforwards of approximately $375.2 at September 30, 2019. The loss carryforwards begin to expire in fiscal 2030 for certain state purposes and fiscal 2035 for federal and other state purposes. For federalContribution carryforwards and tax purposes, these losscredit carryforwards mayare expected to be utilized against income from another member of the consolidated group.prior to their expiration.
The Company, Spire Missouri and Spire Alabama 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. Unrecognized tax benefits are reported as a reduction of a deferred tax asset for an operating loss carryforward to the extent the recognition of the benefit would impact the operating loss carryforward, pursuant to ASU 2013-11. In addition, pursuant to the TCJA, the deferred tax asset for a net operating loss carryforward was revalued in fiscal 2018 based on the federal tax law change.2013-11. The following table presents a reconciliation of the beginning and ending balances of unrecognized tax benefits:
|
| Spire |
|
| Spire Missouri |
| ||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| ||||||
Unrecognized tax benefits, beginning of year |
| $ | 8.1 |
|
| $ | 11.0 |
|
| $ | 10.0 |
|
| $ | 7.8 |
|
| $ | 10.7 |
|
| $ | 9.7 |
|
Decrease related to tax law changes |
|
| — |
|
|
| (4.0 | ) |
|
| — |
|
|
| — |
|
|
| (4.0 | ) |
|
| — |
|
Increases related to tax positions taken in current year |
|
| 4.5 |
|
|
| 1.2 |
|
|
| 2.4 |
|
|
| 4.5 |
|
|
| 1.1 |
|
|
| 2.4 |
|
Reductions related to tax positions taken in prior year |
|
| (1.9 | ) |
|
| — |
|
|
| — |
|
|
| (1.9 | ) |
|
| — |
|
|
| — |
|
Reductions due to lapse of applicable statute of limitations |
|
| — |
|
|
| (0.1 | ) |
|
| (1.4 | ) |
|
| — |
|
|
| — |
|
|
| (1.4 | ) |
Unrecognized tax benefits, end of year |
| $ | 10.7 |
|
| $ | 8.1 |
|
| $ | 11.0 |
|
| $ | 10.4 |
|
| $ | 7.8 |
|
| $ | 10.7 |
|
Spire | Spire Missouri | |||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | 2020 | |||||||||||||||||||
Unrecognized tax benefits, beginning of year | $ | 16.4 | $ | 13.2 | $ | 10.7 | $ | 16.1 | $ | 13.0 | $ | 10.4 | ||||||||||||
Increases related to tax positions taken in current year | 3.3 | 3.2 | 2.6 | 3.2 | 3.1 | 2.6 | ||||||||||||||||||
Reductions due to lapse of applicable statute of limitations | (0.1 | ) | — | (0.1 | ) | — | — | — | ||||||||||||||||
Unrecognized tax benefits, end of year | $ | 19.6 | $ | 16.4 | $ | 13.2 | $ | 19.3 | $ | 16.1 | $ | 13.0 |
As of September 30, 20192022 and 2018,2021, the amounts of unrecognized tax benefits which, if recognized, would affect the effective tax rate were $2.5$4.0 and $3.9,$3.6, respectively, for the Company and $2.2$3.7 and $3.6,$3.3, respectively, for Spire Missouri. It is reasonably possible that events will occur in the next 12 months that could increase or decrease the amount of the unrecognized tax benefits. The Company and Spire Missouri do not expect that any such change will be significant to the balance sheets. Spire Alabama reported 0no unrecognized tax benefits for fiscal years 2019, 2018,2022, 2021, and 2017.2020.
The Company, Spire Missouri, and Spire Alabama record potential interest and penalties related to uncertain tax positions as interest expense and other income deductions, respectively. As of September 30, 20192022 and 2018,2021, interest accrued associated with uncertain tax positions was de minimis, and 0no penalties were accrued.
The
The Company, Spire Missouri, and Spire Alabama are no longer subject to examination for fiscal years prior to 2016,2019, except to the extent the net operating losses from prior years are reviewed.
13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
The pension plans of Spire consist of plans for employees at theSpire Missouri, Utilities, the employees of Spire Alabama and employees of the subsidiaries of Spire EnergySouth.
The
Spire Missouri Utilitiesand Spire Alabama have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Plan assets consist primarily of corporate and U.S. government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments.international credit markets.
Spire Alabama has non-contributory, defined benefit, trusteed forms
The net periodic pension costs includecost includes components shown in the following components:table. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except for Spire Alabama’s losses on lump-sum settlements. Such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Service cost – benefits earned during the period |
| $ | 19.3 |
|
| $ | 20.2 |
|
| $ | 20.5 |
|
| $ | 12.4 |
|
| $ | 12.7 |
|
| $ | 12.7 |
|
| $ | 6.2 |
|
| $ | 6.4 |
|
| $ | 6.2 |
| $ | 20.0 | $ | 21.7 | $ | 22.5 | $ | 14.4 | $ | 15.4 | $ | 15.7 | $ | 4.8 | $ | 5.5 | $ | 6.1 | ||||||||||||||||||
Interest cost on projected benefit obligation |
|
| 28.2 |
|
|
| 27.4 |
|
|
| 27.9 |
|
|
| 19.8 |
|
|
| 19.5 |
|
|
| 19.5 |
|
|
| 6.0 |
|
|
| 5.5 |
|
|
| 6.1 |
| 21.5 | 20.7 | 22.6 | 14.7 | 14.2 | 15.8 | 4.7 | 4.6 | 4.9 | |||||||||||||||||||||||||||
Expected return on plan assets |
|
| (36.3 | ) |
|
| (37.0 | ) |
|
| (38.5 | ) |
|
| (25.5 | ) |
|
| (27.2 | ) |
|
| (28.1 | ) |
|
| (7.3 | ) |
|
| (6.5 | ) |
|
| (7.2 | ) | (31.3 | ) | (31.6 | ) | (35.0 | ) | (22.7 | ) | (22.5 | ) | (24.6 | ) | (5.2 | ) | (5.8 | ) | (6.9 | ) | ||||||||||||||||||
Amortization of prior service (credit) cost |
|
| (1.1 | ) |
|
| (0.9 | ) |
|
| 1.0 |
|
|
| 0.9 |
|
|
| 0.9 |
|
|
| 1.0 |
|
|
| (1.8 | ) |
|
| (1.8 | ) |
|
| — |
| (4.5 | ) | (3.1 | ) | (2.5 | ) | (1.9 | ) | (0.6 | ) | 0.1 | (2.4 | ) | (2.3 | ) | (2.4 | ) | |||||||||||||||||||
Amortization of actuarial loss |
|
| 9.3 |
|
|
| 10.9 |
|
|
| 12.5 |
|
|
| 8.7 |
|
|
| 9.4 |
|
|
| 10.7 |
|
|
| 0.8 |
|
|
| 1.5 |
|
|
| 1.8 |
| 11.9 | 14.9 | 14.4 | 9.6 | 11.0 | 11.3 | 2.4 | 3.9 | 3.1 | |||||||||||||||||||||||||||
Loss on lump-sum settlements and curtailments |
|
| — |
|
|
| 18.6 |
|
|
| 17.9 |
|
|
| — |
|
|
| 16.1 |
|
|
| 13.5 |
|
|
| — |
|
|
| 2.4 |
|
|
| 4.6 |
| 33.6 | 18.2 | 31.6 | 27.3 | 11.6 | 26.6 | 6.3 | 6.6 | 5.0 | |||||||||||||||||||||||||||
Special termination benefits |
|
| — |
|
|
| — |
|
|
| 0.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Subtotal |
|
| 19.4 |
|
|
| 39.2 |
|
|
| 42.2 |
|
|
| 16.3 |
|
|
| 31.4 |
|
|
| 29.3 |
|
|
| 3.9 |
|
|
| 7.5 |
|
|
| 11.5 |
| 51.2 | 40.8 | 53.6 | 41.4 | 29.1 | 44.9 | 10.6 | 12.5 | 9.8 | |||||||||||||||||||||||||||
Regulatory adjustment |
|
| 39.6 |
|
|
| 37.4 |
|
|
| (2.4 | ) |
|
| 31.8 |
|
|
| 32.1 |
|
|
| (4.1 | ) |
|
| 6.9 |
|
|
| 4.5 |
|
|
| 1.8 |
| 12.5 | 20.6 | 6.6 | 9.9 | 19.0 | 3.9 | 1.7 | 0.7 | 1.8 | |||||||||||||||||||||||||||
Net pension cost |
| $ | 59.0 |
|
| $ | 76.6 |
|
| $ | 39.8 |
|
| $ | 48.1 |
|
| $ | 63.5 |
|
| $ | 25.2 |
|
| $ | 10.8 |
|
| $ | 12.0 |
|
| $ | 13.3 |
| $ | 63.7 | $ | 61.4 | $ | 60.2 | $ | 51.3 | $ | 48.1 | $ | 48.8 | $ | 12.3 | $ | 13.2 | $ | 11.6 |
Other changes in plan assets and pension benefit obligations recognized in other comprehensive income or loss include the following:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Current year actuarial loss (gain) |
| $ | 90.9 |
|
| $ | (1.4 | ) |
| $ | 14.1 |
|
| $ | 59.0 |
|
| $ | 2.2 |
|
| $ | 14.8 |
|
| $ | 26.3 |
|
| $ | (0.6 | ) |
| $ | 3.3 |
| ||||||||||||||||||||||||||||||||||||
Current year actuarial (gain) loss | $ | (16.9 | ) | $ | (8.1 | ) | $ | 68.0 | $ | 0.9 | $ | (0.9 | ) | $ | 37.8 | $ | (16.0 | ) | $ | (1.5 | ) | $ | 24.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of actuarial loss |
|
| (9.3 | ) |
|
| (10.9 | ) |
|
| (12.5 | ) |
|
| (8.7 | ) |
|
| (9.4 | ) |
|
| (10.7 | ) |
|
| (0.8 | ) |
|
| (1.5 | ) |
|
| (1.8 | ) | (11.9 | ) | (14.9 | ) | (14.4 | ) | (9.6 | ) | (11.0 | ) | (11.3 | ) | (2.4 | ) | (3.9 | ) | (3.1 | ) | ||||||||||||||||||
Acceleration of loss recognized due to settlement |
|
| — |
|
|
| (18.5 | ) |
|
| (18.2 | ) |
|
| — |
|
|
| (16.1 | ) |
|
| (13.5 | ) |
|
| — |
|
|
| (2.4 | ) |
|
| (4.5 | ) | (33.6 | ) | (18.2 | ) | (31.7 | ) | (27.3 | ) | (11.6 | ) | (26.6 | ) | (6.3 | ) | (6.6 | ) | (5.1 | ) | ||||||||||||||||||
Current year service credit |
|
| (10.2 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| (3.7 | ) |
|
| — |
|
|
| — |
|
|
| (6.5 | ) |
|
| — |
|
|
| — |
| — | (17.9 | ) | (4.4 | ) | — | (17.9 | ) | (4.4 | ) | — | — | — | |||||||||||||||||||||||
Current year prior year service cost |
|
| — |
|
|
| — |
|
|
| (20.7 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20.7 | ) | ||||||||||||||||||||||||||||||||||||
Transfer due to merger |
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Amortization of prior service credit (cost) |
|
| 1.1 |
|
|
| (2.9 | ) |
|
| (1.0 | ) |
|
| (0.9 | ) |
|
| (0.9 | ) |
|
| (1.0 | ) |
|
| 1.8 |
|
|
| — |
|
|
| — |
| 4.5 | 3.1 | 2.5 | 1.9 | 0.6 | (0.1 | ) | 2.4 | 2.3 | 2.4 | ||||||||||||||||||||||||||
Amortization of transition asset |
|
| — |
|
|
| 1.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.8 |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Subtotal |
|
| 72.5 |
|
|
| (31.9 | ) |
|
| (38.3 | ) |
|
| 45.7 |
|
|
| (24.1 | ) |
|
| (10.4 | ) |
|
| 20.8 |
|
|
| (2.7 | ) |
|
| (23.7 | ) | (57.9 | ) | (56.0 | ) | 20.0 | (34.1 | ) | (40.8 | ) | (4.6 | ) | (22.3 | ) | (9.7 | ) | 18.6 | ||||||||||||||||||||
Regulatory adjustment |
|
| (71.7 | ) |
|
| 31.6 |
|
|
| 38.0 |
|
|
| (44.9 | ) |
|
| 23.8 |
|
|
| 10.1 |
|
|
| (20.8 | ) |
|
| 2.7 |
|
|
| 23.7 |
| 56.3 | 57.3 | (19.5 | ) | 32.5 | 42.1 | 5.1 | 22.3 | 9.7 | (18.6 | ) | |||||||||||||||||||||||||
Total recognized in OCI |
| $ | 0.8 |
|
| $ | (0.3 | ) |
| $ | (0.3 | ) |
| $ | 0.8 |
|
| $ | (0.3 | ) |
| $ | (0.3 | ) |
| $ | — |
|
| $ | — |
|
| $ | — |
| $ | (1.6 | ) | $ | 1.3 | $ | 0.5 | $ | (1.6 | ) | $ | 1.3 | $ | 0.5 | $ | — | $ | — | $ | — |
Spire pension obligations are driven by separate plan and regulatory provisions governing Spire Missouri, Spire Alabama and Spire EnergySouth pension plans.
Pursuant to the provisions of the Missouri Utilities’Spire Missouri’s and Spire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds the sum of service and interest costs in a specific year. Special termination benefits, when offered, are also recognized as settlements which can result in gains or losses NaNlosses.
In the fiscal year ended September 30, 2022, two Spire Missouri plans and two Spire Alabama plans met the criteria for settlement recognition, requiring re-measurement of the obligation under those plans using updated census data and assumptions for discount rate and mortality. For the remeasurements, the discount rates for the Missouri plans were updated to 5.7% and 5.8%, respectfully, for each plan at September 30, 2022 (from 3.0%, respectfully, at September 30, 2021), and the discount rate for the Alabama plans were updated to 5.70% and 5.65%, respectfully, (from 3.1% and 3.0%, respectfully). Lump-sum payments recognized as settlements during fiscal year 2022 was $109.3 ($87.0 attributable to Spire Missouri and $22.3 to Spire Alabama). The Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan, and in fiscal 2022 the amortization periods range from 11.4 years to 12.3 years. Therefore, no lump sum settlement expenses were recorded in the fiscal year ended September 30, 2019. 2022.
In the fiscal year ended September 30, 2018 22021,two Spire Missouri plans and one Spire Alabama plans and 1 Spire Missouri plan met the criteria for settlement recognition, requiring re-measurement of the obligation under those plans using updated census data and assumptions for discount rate and mortality. For the remeasurements, the discount rates for the Missouri plans were updated to 4.20% and 4.15%3.00% at June 30, 2018 (from 3.70% and 3.75% at September 30, 2017)2021 (from 2.85% at September 30, 2020), and the discount rate for the Alabama plan was updated to 4.20%3.10% (from 3.65%2.95%). Lump-sum payments recognized as settlements during fiscal years 2018 and 2017 were $82.8year 2021 was $67.5 ($65.544.6 attributable to Spire Missouri and $17.3$22.9 to Spire Alabama) and $62.2 ($43.5 attributable to Spire Missouri and $18.7 to Spire Alabama), respectively.
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. The Alabama regulatory tariff requires that settlement 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 isbe amortized over the average remaining serviceactuarial life of active participants.the individuals in the plan, and in fiscal 2021 the amortization periods range from 11.4 years to 11.7 years. Therefore, no lump sum settlement expenses were recorded in the fiscal year ended September 30, 2021.
Up to April 18, 2018, the recovery in rates for Spire Missouri East’s qualified pension plan was based on an annual allowance of $15.5 effective January 1, 2011. The recovery in rates for Spire Missouri West’s qualified pension plan was based on an annual allowance of approximately $9.9 effective February 20, 2010.
Effective April 19, 2018, December 23, 2021, the pension cost for Spire Missouri WestMissouri’s western territory (Missouri West) included in customer rates was reduced from $9.9$5.5 to $5.5$4.4 per year, the pension cost included in the Spire Missouri EastMissouri’s eastern territory (Missouri East) customer rates was increased from $15.5$29.0 to $29.0$32.4 per year. Over an amortization period of eight years, Spire Missouri East rates also include the amortization of $173.0 of assets for pension and other postretirement benefits, and Spire Missouri West rates will be reduced by the amortization of a $26.2 net liability for pension and other postretirement benefits. These changes are discussed further in Note 15, Regulatory Matters.
The difference between these amounts and pension expense as calculated pursuant to the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
Also effective December 23, 2021, Missouri East prepaid pension assets and other postretirement benefits that were previously being included in rates at $21.6 per year for eight years were reduced to $11.0 per year, with the amortization period being reset for another eight years. Missouri West net liability for pension and other postretirement benefits that were previously reducing rates by $3.3 per year for eight years were reduced to a $1.1 reduction in rates per year, with the amortization period being reset for another eight years.
The following table shows the reconciliation of the beginning and ending balances of the pension benefit obligation at September 30:
Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Benefit obligation, beginning of year | $ | 689.6 | $ | 732.6 | $ | 479.0 | $ | 505.2 | $ | 149.4 | $ | 163.5 | ||||||||||||
Service cost | 20.0 | 21.7 | 14.4 | 15.4 | 4.8 | 5.5 | ||||||||||||||||||
Interest cost | 21.5 | 20.7 | 14.7 | 14.2 | 4.7 | 4.6 | ||||||||||||||||||
Actuarial (gain) loss | (173.9 | ) | 6.6 | (116.2 | ) | 11.0 | (42.4 | ) | (1.8 | ) | ||||||||||||||
Plan amendments | — | (17.9 | ) | — | (17.9 | ) | — | — | ||||||||||||||||
Settlement loss | 33.4 | 12.3 | 27.9 | 8.2 | 5.6 | 4.1 | ||||||||||||||||||
Settlement benefits paid | (109.3 | ) | (67.6 | ) | (87.0 | ) | (44.6 | ) | (22.3 | ) | (22.9 | ) | ||||||||||||
Regular benefits paid | (16.9 | ) | (18.8 | ) | (12.2 | ) | (12.5 | ) | (2.0 | ) | (3.6 | ) | ||||||||||||
Benefit obligation, end of year | $ | 464.4 | $ | 689.6 | $ | 320.6 | $ | 479.0 | $ | 97.8 | $ | 149.4 | ||||||||||||
Accumulated benefit obligation, end of year | $ | 457.1 | $ | 673.3 | $ | 315.0 | $ | 465.4 | $ | 96.2 | $ | 146.9 |
In 2022, all qualified plans experienced significant actuarial gains. These gains were driven by the discount rates increasing between 2.55% and 2.80% compared to the prior fiscal year, combined with lump sum rates that increased significantly since the prior fiscal year, which decreased the liability and contributed to liability gains. These gains were only partly offset by the losses on actual lump sum benefit payments compared to assumed amounts across all the plans. Actuarial losses 2021 were primarily due to the decrease in lump sum discount rates in one Spire Missouri plan and the losses on actual lump sum benefit payments compared to assumed amounts across all the plans. Except for Spire Alabama in 2021, these losses more than offset the gains that resulted from the increase in discount rates used to calculate the benefit obligations for each year.
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||
Benefit obligation, beginning of year |
| $ | 664.6 |
|
| $ | 748.8 |
|
| $ | 473.3 |
|
| $ | 539.6 |
|
| $ | 136.3 |
|
| $ | 148.2 |
|
Service cost |
|
| 19.3 |
|
|
| 20.2 |
|
|
| 12.4 |
|
|
| 12.7 |
|
|
| 6.2 |
|
|
| 6.4 |
|
Interest cost |
|
| 28.2 |
|
|
| 27.4 |
|
|
| 19.8 |
|
|
| 19.5 |
|
|
| 6.0 |
|
|
| 5.5 |
|
Actuarial loss (gain) |
|
| 104.8 |
|
|
| (34.9 | ) |
|
| 76.0 |
|
|
| (26.0 | ) |
|
| 23.7 |
|
|
| (3.8 | ) |
Plan amendments |
|
| (10.2 | ) |
|
| (2.0 | ) |
|
| (3.7 | ) |
|
| — |
|
|
| (6.5 | ) |
|
| — |
|
Plan mergers |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| — |
|
Settlement loss |
|
| — |
|
|
| 7.6 |
|
|
| — |
|
|
| 7.6 |
|
|
| — |
|
|
| — |
|
Settlement benefits paid |
|
| — |
|
|
| (82.8 | ) |
|
| — |
|
|
| (65.5 | ) |
|
| — |
|
|
| (17.3 | ) |
Regular benefits paid |
|
| (55.3 | ) |
|
| (19.7 | ) |
|
| (39.4 | ) |
|
| (14.3 | ) |
|
| (13.2 | ) |
|
| (2.7 | ) |
Benefit obligation, end of year |
| $ | 751.4 |
|
| $ | 664.6 |
|
| $ | 538.4 |
|
| $ | 473.3 |
|
| $ | 152.5 |
|
| $ | 136.3 |
|
Accumulated benefit obligation, end of year |
| $ | 712.9 |
|
| $ | 636.0 |
|
| $ | 500.2 |
|
| $ | 446.5 |
|
| $ | 152.3 |
|
| $ | 134.5 |
|
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Fair value of plan assets, beginning of year |
| $ | 499.2 |
|
| $ | 531.6 |
|
| $ | 349.1 |
|
| $ | 385.9 |
|
| $ | 101.3 |
|
| $ | 97.9 |
| $ | 498.9 | $ | 473.1 | $ | 364.0 | $ | 336.2 | $ | 82.8 | $ | 88.6 | ||||||||||||
Actual return on plan assets |
|
| 50.1 |
|
|
| 11.2 |
|
|
| 42.4 |
|
|
| 6.4 |
|
|
| 4.7 |
|
|
| 3.3 |
| (92.5 | ) | 58.8 | (66.7 | ) | 42.7 | (15.6 | ) | 9.6 | |||||||||||||||
Employer contributions |
|
| 27.8 |
|
|
| 58.9 |
|
|
| 27.1 |
|
|
| 36.9 |
|
|
| 0.5 |
|
|
| 20.1 |
| 52.4 | 53.4 | 37.8 | 42.2 | 14.4 | 11.1 | ||||||||||||||||||
Divestitures |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.3 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Settlement benefits paid |
|
| — |
|
|
| (82.8 | ) |
|
| — |
|
|
| (65.5 | ) |
|
| — |
|
|
| (17.3 | ) | (109.3 | ) | (67.6 | ) | (87.0 | ) | (44.6 | ) | (22.3 | ) | (22.9 | ) | ||||||||||||
Regular benefits paid |
|
| (55.3 | ) |
|
| (19.7 | ) |
|
| (39.4 | ) |
|
| (14.3 | ) |
|
| (13.2 | ) |
|
| (2.7 | ) | (16.8 | ) | (18.8 | ) | (12.2 | ) | (12.5 | ) | (2.0 | ) | (3.6 | ) | ||||||||||||
Fair value of plan assets, end of year |
| $ | 521.8 |
|
| $ | 499.2 |
|
| $ | 379.2 |
|
| $ | 349.1 |
|
| $ | 93.3 |
|
| $ | 101.3 |
| $ | 332.7 | $ | 498.9 | $ | 235.9 | $ | 364.0 | $ | 57.3 | $ | 82.8 | ||||||||||||
Funded status of plans, end of year |
| $ | (229.6 | ) |
| $ | (165.4 | ) |
| $ | (159.2 | ) |
| $ | (124.2 | ) |
| $ | (59.2 | ) |
| $ | (35.0 | ) | $ | (131.7 | ) | $ | (190.7 | ) | $ | (84.7 | ) | $ | (115.0 | ) | $ | (40.5 | ) | $ | (66.6 | ) |
The following table sets forth the amounts recognized in the balance sheets at September 30:
Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Current liabilities | $ | (1.1 | ) | $ | (0.8 | ) | $ | (1.1 | ) | $ | (0.8 | ) | $ | — | $ | — | ||||||||
Noncurrent liabilities | (130.6 | ) | (189.9 | ) | (83.6 | ) | (114.2 | ) | (40.5 | ) | (66.6 | ) | ||||||||||||
Total | $ | (131.7 | ) | $ | (190.7 | ) | $ | (84.7 | ) | $ | (115.0 | ) | $ | (40.5 | ) | $ | (66.6 | ) |
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||
Current liabilities |
| $ | (0.5 | ) |
| $ | (0.6 | ) |
| $ | (0.5 | ) |
| $ | (0.6 | ) |
| $ | — |
|
| $ | — |
|
Noncurrent liabilities |
|
| (229.1 | ) |
|
| (164.8 | ) |
|
| (158.7 | ) |
|
| (123.6 | ) |
|
| (59.2 | ) |
|
| (35.0 | ) |
Total |
| $ | (229.6 | ) |
| $ | (165.4 | ) |
| $ | (159.2 | ) |
| $ | (124.2 | ) |
| $ | (59.2 | ) |
| $ | (35.0 | ) |
Pre-tax amounts recognized in accumulated other comprehensive loss not yet recognized as components of net periodic pension cost consist of:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||
Net actuarial loss |
| $ | 213.7 |
|
| $ | 132.1 |
|
| $ | 153.1 |
|
| $ | 102.8 |
|
| $ | 61.9 |
|
| $ | 36.4 |
|
Prior service (credit) cost |
|
| (23.7 | ) |
|
| (14.4 | ) |
|
| 1.7 |
|
|
| 6.4 |
|
|
| (23.5 | ) |
|
| (18.8 | ) |
Subtotal |
|
| 190.0 |
|
|
| 117.7 |
|
|
| 154.8 |
|
|
| 109.2 |
|
|
| 38.4 |
|
|
| 17.6 |
|
Adjustments for amounts included in regulatory assets |
|
| (187.1 | ) |
|
| (115.5 | ) |
|
| (151.9 | ) |
|
| (107.0 | ) |
|
| (38.4 | ) |
|
| (17.6 | ) |
Total |
| $ | 2.9 |
|
| $ | 2.2 |
|
| $ | 2.9 |
|
| $ | 2.2 |
|
| $ | — |
|
| $ | — |
|
At September 30, 2019, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive loss into net periodic pension cost during fiscal 2020:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Amortization of net actuarial loss |
| $ | 14.7 |
|
| $ | 11.6 |
|
| $ | 3.1 |
|
Amortization of prior service (credit) cost |
|
| (2.5 | ) |
|
| 0.1 |
|
|
| (2.4 | ) |
Subtotal |
|
| 12.2 |
|
|
| 11.7 |
|
|
| 0.7 |
|
Regulatory adjustment |
|
| (12.0 | ) |
|
| (11.5 | ) |
|
| (0.7 | ) |
Total |
| $ | 0.2 |
|
| $ | 0.2 |
|
| $ | — |
|
Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Net actuarial loss | $ | 132.0 | $ | 194.6 | $ | 93.6 | $ | 129.6 | $ | 41.2 | $ | 66.1 | ||||||||||||
Prior service credit | (35.7 | ) | (40.3 | ) | (18.1 | ) | (20.1 | ) | (16.3 | ) | (18.7 | ) | ||||||||||||
Subtotal | 96.3 | 154.3 | 75.5 | 109.5 | 24.9 | 47.4 | ||||||||||||||||||
Adjustments for amounts included in regulatory assets | (93.1 | ) | (149.5 | ) | (72.3 | ) | (104.7 | ) | (24.9 | ) | (47.4 | ) | ||||||||||||
Total | $ | 3.2 | $ | 4.8 | $ | 3.2 | $ | 4.8 | $ | — | $ | — |
The assumptions used to calculate net periodic pension costs for Spire Missouri are as follows:
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | |||||||||
Weighted average discount rate - Spire Missouri East plan |
| 4.30% |
|
| 3.75% |
|
| 3.50% |
| 3.00% | 2.85% | 3.20% | |||||||||
Weighted average discount rate - Spire Missouri West plan |
| 4.35% |
|
| 3.70% |
|
| 3.50% |
| 3.00% | 2.75% | 3.15% | |||||||||
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 3.00% |
| 3.00% | 3.00% | 3.00% | |||||||||
Expected long-term rate of return on plan assets |
| 7.50% |
|
| 7.75% |
|
| 7.75% |
| 6.75% | 6.75% | 7.25% |
The assumptions used to calculate net periodic pension costs for Spire Alabama are as follows:
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | |||||||||
Weighted average discount rate |
| 4.35% |
|
| 3.65%/3.70% |
|
| 3.45%/3.50% |
| 3.10%/3.0% | 2.95%/2.80% | 3.25%/3.20% | |||||||||
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 3.00% |
| 3.00% | 3.00% | 3.00% | |||||||||
Expected long-term rate of return on plan assets |
| 7.25% |
|
| 7.25% |
|
| 7.25% |
| 6.75% | 6.75% | 7.25% |
The discount rate is based on long-term, high quality bond indices at the measurement date. The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each class.
The assumptions used to calculate the benefit obligations are as follows:
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | ||||||
Weighted average discount rate - Spire Missouri East plan |
| 3.20% |
|
| 4.30% |
| 5.70% | 3.00% | ||||||
Weighted average discount rate - Spire Missouri West plan |
| 3.15% |
|
| 4.35% |
| 5.80% | 3.00% | ||||||
Weighted average discount rate - Spire Alabama plans |
| 3.20%/3.25% |
|
| 4.35% |
| 5.70%/5.65% | 3.1%/3.0% | ||||||
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
| 3.00% | 3.00% | ||||||
Cash balance interest crediting rate - Spire Alabama / Spire Missouri | 4.25% | 4.25% |
Following areThe following table sets forth the year-end projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for plans that have a projected benefit obligation and an accumulated benefit obligation in excess of plan assets:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Projected benefit obligation |
| $ | 751.4 |
|
| $ | 664.6 |
|
| $ | 538.4 |
|
| $ | 473.3 |
|
| $ | 152.5 |
|
| $ | 136.3 |
| $ | 464.4 | $ | 689.6 | $ | 320.6 | $ | 479.0 | $ | 97.8 | $ | 149.4 | ||||||||||||
Accumulated benefit obligation |
|
| 712.9 |
|
|
| 636.0 |
|
|
| 500.2 |
|
|
| 446.5 |
|
|
| 152.3 |
|
|
| 134.5 |
| 457.1 | 673.3 | 315.0 | 465.4 | 96.2 | 146.9 | ||||||||||||||||||
Fair value of plan assets |
|
| 521.8 |
|
|
| 499.2 |
|
|
| 379.2 |
|
|
| 349.1 |
|
|
| 93.3 |
|
|
| 101.3 |
| 332.7 | 498.9 | 235.9 | 364.0 | 57.3 | 82.8 |
Following areThe following tables set forth the targeted and actual plan assets by category as of September 30 of each year for Spire Missouri and Spire Alabama:
Spire Missouri |
| 2019 Target |
|
| 2019 Actual |
|
| 2018 Target |
|
| 2018 Actual |
| ||||
Equity markets |
|
| 56.5 | % |
|
| 57.0 | % |
|
| 56.4 | % |
|
| 55.3 | % |
Debt securities |
|
| 43.5 | % |
|
| 39.8 | % |
|
| 43.6 | % |
|
| 42.4 | % |
Cash equivalents |
|
| — | % |
|
| 3.2 | % |
|
| — | % |
|
| 2.3 | % |
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Spire Missouri | 2022 Target | 2022 Actual | 2021 Target | 2021 Actual | ||||||||||||
Return seeking assets | 70.0 | % | 74.3 | % | 70.0 | % | 74.5 | % | ||||||||
Liability hedging assets | 30.0 | % | 22.8 | % | 30.0 | % | 23.1 | % | ||||||||
Cash and cash equivalents | — | % | 2.9 | % | — | % | 2.4 | % | ||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Spire Alabama |
| 2019 Target |
|
| 2019 Actual |
|
| 2018 Target |
|
| 2018 Actual |
| ||||
Equity markets |
|
| 60.0 | % |
|
| 58.5 | % |
|
| 60.0 | % |
|
| 59.4 | % |
Debt securities |
|
| 29.0 | % |
|
| 29.8 | % |
|
| 29.0 | % |
|
| 28.6 | % |
Other* |
|
| 11.0 | % |
|
| 11.7 | % |
|
| 11.0 | % |
|
| 12.0 | % |
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Spire Alabama | 2022 Target | 2022 Actual | 2021 Target | 2021 Actual | ||||||||||||
Return seeking assets | 70.0 | % | 68.7 | % | 70.0 | % | 72.8 | % | ||||||||
Liability hedging assets | 30.0 | % | 25.3 | % | 30.0 | % | 25.5 | % | ||||||||
Cash and cash equivalents | — | % | 6.0 | % | — | % | 1.7 | % | ||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
|
|
The Spire Missouri’s investment policies are designed to maximize, toInc. Retirement Plans Committee is responsible for the extent possible, the funded statusadministration of the various plans, over time, and minimize volatilityall payments under the plans require direction of funding and costs.that committee. The policy seeksSpire Inc. Defined Benefit Plan Investment Review Committee utilizes an Outsourced Chief Investment Officer (OCIO) model where investment decisions are outsourced to maximize investment returns consistent with these objectives and Spire Missouri’s tolerance for risk. The duration of plan liabilities and the impact of potential changesconsultants (Willis Towers Watson), who in asset values on the funded status are fundamental considerations in the selection of plan assets. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordanceturn become co-fiduciaries with the policy. The policy seeks to avoid significant concentrations of risk by investing in a diversified portfolio of assets, currently including a growth (equity) component and a liability-driven (debt) component. Investments in corporate, U.S. government and agencies, and, to a lesser extent, international debt securities seek to provide duration matching with plan liabilities, and typically have investment grade ratings and reflect allocations across various entities and industries. There are also exposures to additional asset types incommittee.
For all plans, the target portfolio: commodities, real estate and inflation-indexed securities. For the Missouri East plan, the investment policy permits the use of derivative instruments, which may be used to achieve the desired market exposure of an index, adjust portfolio duration, or rebalance the total portfolio to the target asset allocation. The growth strategy utilizes a combination of derivative instruments and debt securities to achieve diversified exposure to equity and other markets while generating returns from the fixed-income investments and providing further duration matching with the liabilities. Performance and compliance with the guidelines is regularly monitored. The policy calls for increased allocations to debt securities as the funded status improves.
Spire AlabamaCompany employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets with a prudent level of risk. Risk tolerance is established through consideration of plan liabilities, plan funded status, corporate financial condition and market conditions. Spire AlabamaThe Company has developed an investment strategy that focuses on asset allocation, diversification and quality guidelines. The investment goals are to obtain an adequate level of return to meet future obligations of the plansplan by providing above average risk-adjusted returns with a risk exposure in the mid-range of comparable funds. Investment managers are retained by Spire Alabama to manage separate pools of assets. Funds are allocated to such managers in order to achieve an appropriate, diversified, and balanced asset mix. Comparative market and peer group benchmarks are utilized to ensure that investment managers are performing satisfactorily. Spire AlabamaThe Company seeks to maintain an appropriate level of diversification to minimize the risk of large losses in a single asset class. Accordingly, plan assets for the pension plans do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund.
Following are
The following table sets forth expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five fiscal years thereafter, for Spire, Spire Missouri, and Spire Alabama:
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025- 2029 |
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028- 2032 | ||||||||||||||||||||||||
Spire |
| $ | 72.6 |
|
| $ | 64.3 |
|
| $ | 58.8 |
|
| $ | 58.7 |
|
| $ | 57.5 |
|
| $ | 268.3 |
| $ | 55.8 | $ | 52.3 | $ | 47.2 | $ | 44.0 | $ | 43.5 | $ | 202.9 | ||||||||||||
Spire Missouri |
|
| 56.1 |
|
|
| 47.8 |
|
|
| 42.6 |
|
|
| 42.7 |
|
|
| 41.3 |
|
|
| 190.1 |
| 41.4 | 38.9 | 33.9 | 30.8 | 29.6 | 137.5 | ||||||||||||||||||
Spire Alabama |
|
| 13.6 |
|
|
| 13.5 |
|
|
| 13.2 |
|
|
| 12.8 |
|
|
| 13.0 |
|
|
| 60.6 |
| 11.3 | 10.2 | 9.9 | 9.7 | 10.4 | 46.4 |
The funding policy of Spire Missouri and Spire Alabama is to contribute an amount not less than the minimum required by government funding standards nor more than the maximum deductible amount for federal income tax purposes. Spire Missouri’s contributions to the pension plans in fiscal 20202023 are anticipated to be $29.0$44.5 into the qualified trusts, and $0.6$1.1 into the non-qualified plans. Spire Alabama had $0.5 of required contributions to the qualified pension plans during 2019 and made discretionary contributions to the qualified pension plans totaling $20.1 during fiscal 2018. Spire Alabama’s contributions to the pension plans in fiscal 20202022 are anticipated to be $13.8 into the qualified trusts.
Other Postretirement Benefits
Spire and the Utilities provide certain life insurance benefits at retirement. Spire Missouri plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, the Spire Missouri West plans provided medical insurance after retirement until death. The Spire Alabama plans provide medical insurance upon retirement until death for certain retirees depending on the type of employee and the date the employee was originally hired.
Net periodic postretirement benefit costs consist of the following components:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Service cost – benefits earned during the period |
| $ | 7.4 |
|
| $ | 9.4 |
|
| $ | 11.0 |
|
| $ | 6.8 |
|
| $ | 9.0 |
|
| $ | 10.4 |
|
| $ | 0.4 |
|
| $ | 0.2 |
|
| $ | 0.3 |
| $ | 7.5 | $ | 7.3 | $ | 5.9 | $ | 6.3 | $ | 6.2 | $ | 5.3 | $ | 1.1 | $ | 0.9 | $ | 0.4 | ||||||||||||||||||
Interest cost on accumulated postretirement benefit obligation |
|
| 9.0 |
|
|
| 8.6 |
|
|
| 8.6 |
|
|
| 6.9 |
|
|
| 6.9 |
|
|
| 6.8 |
|
|
| 1.8 |
|
|
| 1.5 |
|
|
| 1.6 |
| 6.0 | 6.0 | 6.3 | 4.5 | 4.5 | 4.7 | 1.4 | 1.3 | 1.4 | |||||||||||||||||||||||||||
Expected return on plan assets |
|
| (16.2 | ) |
|
| (13.9 | ) |
|
| (13.6 | ) |
|
| (11.1 | ) |
|
| (9.6 | ) |
|
| (9.0 | ) |
|
| (4.8 | ) |
|
| (4.1 | ) |
|
| (4.4 | ) | (16.8 | ) | (16.1 | ) | (16.7 | ) | (11.3 | ) | (10.9 | ) | (11.4 | ) | (5.2 | ) | (4.9 | ) | (5.0 | ) | ||||||||||||||||||
Amortization of prior service (credit) cost |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| 0.3 |
|
|
| 0.3 |
|
|
| 0.2 |
|
|
| (0.4 | ) |
|
| (0.4 | ) |
|
| (0.2 | ) | ||||||||||||||||||||||||||||||||||||
Amortization of actuarial (gain) loss |
|
| (0.5 | ) |
|
| 0.8 |
|
|
| 2.5 |
|
|
| (0.5 | ) |
|
| 0.9 |
|
|
| 2.6 |
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) | ||||||||||||||||||||||||||||||||||||
Amortization of prior service cost (credit) | 1.0 | 1.0 | (0.5 | ) | 0.7 | 0.7 | (0.2 | ) | 0.3 | 0.3 | (0.3 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of actuarial gain | (2.2 | ) | (1.6 | ) | (2.0 | ) | (1.9 | ) | (1.5 | ) | (2.0 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal |
|
| (0.4 | ) |
|
| 4.8 |
|
|
| 8.5 |
|
|
| 2.4 |
|
|
| 7.5 |
|
|
| 11.0 |
|
|
| (3.0 | ) |
|
| (2.9 | ) |
|
| (2.8 | ) | (4.5 | ) | (3.4 | ) | (7.0 | ) | (1.7 | ) | (1.0 | ) | (3.6 | ) | (2.4 | ) | (2.4 | ) | (3.5 | ) | ||||||||||||||||||
Regulatory adjustment |
|
| 10.0 |
|
|
| 2.2 |
|
|
| (3.2 | ) |
|
| 11.7 |
|
|
| 3.9 |
|
|
| (1.5 | ) |
|
| (1.8 | ) |
|
| (1.8 | ) |
|
| (1.8 | ) | 3.3 | 13.2 | 16.0 | 5.0 | 15.0 | 17.7 | (1.8 | ) | (1.8 | ) | (1.8 | ) | ||||||||||||||||||||||||
Net postretirement benefit cost |
| $ | 9.6 |
|
| $ | 7.0 |
|
| $ | 5.3 |
|
| $ | 14.1 |
|
| $ | 11.4 |
|
| $ | 9.5 |
|
| $ | (4.8 | ) |
| $ | (4.7 | ) |
| $ | (4.6 | ) | ||||||||||||||||||||||||||||||||||||
Net postretirement benefit (income) cost | $ | (1.2 | ) | $ | 9.8 | $ | 9.0 | $ | 3.3 | $ | 14.0 | $ | 14.1 | $ | (4.2 | ) | $ | (4.2 | ) | $ | (5.3 | ) |
Other changes in plan assets and postretirement benefit obligations recognized in OCI include the following:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
Current year actuarial (gain) loss |
| $ | (12.2 | ) |
| $ | (45.1 | ) |
| $ | (34.1 | ) |
| $ | (17.3 | ) |
| $ | (47.1 | ) |
| $ | (28.5 | ) |
| $ | 5.5 |
|
| $ | 1.6 |
|
| $ | (4.5 | ) | ||||||||||||||||||||||||||||||||||||
Amortization of actuarial gain (loss) |
|
| 0.5 |
|
|
| (0.8 | ) |
|
| (2.5 | ) |
|
| 0.5 |
|
|
| (0.9 | ) |
|
| (2.6 | ) |
|
| — |
|
|
| 0.1 |
|
|
| 0.1 |
| ||||||||||||||||||||||||||||||||||||
Current year prior service credit (cost) |
|
| 5.5 |
|
|
| — |
|
|
| (1.4 | ) |
|
| 4.9 |
|
|
| — |
|
|
| — |
|
|
| 0.6 |
|
|
| — |
|
|
| (1.4 | ) | ||||||||||||||||||||||||||||||||||||
Amortization of current year service cost |
|
| 0.4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.4 |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Current year actuarial loss (gain) | $ | 15.8 | $ | (41.0 | ) | $ | (7.3 | ) | $ | 9.8 | $ | (29.0 | ) | $ | (7.6 | ) | $ | 5.9 | $ | (9.9 | ) | $ | 1.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of actuarial gain | 2.2 | 1.6 | 2.0 | 1.9 | 1.5 | 2.0 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current year prior service (cost) credit | (6.3 | ) | — | 15.8 | (1.1 | ) | — | 9.5 | (5.2 | ) | — | 6.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of prior service (cost) credit |
|
| (0.3 | ) |
|
| 0.1 |
|
|
| — |
|
|
| (0.3 | ) |
|
| (0.3 | ) |
|
| (0.2 | ) |
|
| — |
|
|
| 0.4 |
|
|
| 0.2 |
| (1.0 | ) | (1.0 | ) | 0.5 | (0.7 | ) | (0.7 | ) | 0.2 | (0.3 | ) | (0.3 | ) | 0.3 | |||||||||||||||||||||
Subtotal |
|
| (6.1 | ) |
|
| (45.8 | ) |
|
| (38.0 | ) |
|
| (12.2 | ) |
|
| (48.3 | ) |
|
| (31.3 | ) |
|
| 6.5 |
|
|
| 2.1 |
|
|
| (5.6 | ) | 10.7 | (40.4 | ) | 11.0 | 9.9 | (28.2 | ) | 4.1 | 0.4 | (10.2 | ) | 7.7 | ||||||||||||||||||||||||
Regulatory adjustment |
|
| 6.1 |
|
|
| 45.8 |
|
|
| 38.0 |
|
|
| 12.2 |
|
|
| 48.3 |
|
|
| 31.3 |
|
|
| (6.5 | ) |
|
| (2.1 | ) |
|
| 5.6 |
| (10.7 | ) | 40.4 | (11.0 | ) | (9.9 | ) | 28.2 | (4.1 | ) | (0.4 | ) | 10.2 | (7.7 | ) | |||||||||||||||||||||
Total recognized in OCI |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
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-yearfour-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. Up to Effective April 18, 2019, 2018, the recovery in rates for Spire Missouri’s postretirement benefit plans is based on an annual allowance of $9.5 effective January 1, 2011. Effective April 19, 2019, the allowance was reduced to $8.6. This change is discussed further in Note 15, Regulatory Matters. The difference between these amounts and postretirement benefit cost based on the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
The following table sets forth the reconciliation of the beginning and ending balances of the postretirement benefit obligation at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Benefit obligation, beginning of year |
| $ | 208.1 |
|
| $ | 238.5 |
|
| $ | 158.8 |
|
| $ | 192.5 |
|
| $ | 43.1 |
|
| $ | 40.6 |
| $ | 204.2 | $ | 212.3 | $ | 151.7 | $ | 158.4 | $ | 48.0 | $ | 48.3 | ||||||||||||
Service cost |
|
| 7.4 |
|
|
| 9.4 |
|
|
| 6.8 |
|
|
| 9.0 |
|
|
| 0.4 |
|
|
| 0.2 |
| 7.5 | 7.3 | 6.3 | 6.2 | 1.1 | 0.9 | ||||||||||||||||||
Interest cost |
|
| 9.0 |
|
|
| 8.6 |
|
|
| 6.9 |
|
|
| 6.9 |
|
|
| 1.8 |
|
|
| 1.5 |
| 6.0 | 6.0 | 4.5 | 4.5 | 1.4 | 1.3 | ||||||||||||||||||
Actuarial (gain) loss |
|
| (18.9 | ) |
|
| (37.5 | ) |
|
| (19.5 | ) |
|
| (41.1 | ) |
|
| 1.2 |
|
|
| 3.1 |
| (52.6 | ) | (7.5 | ) | (37.7 | ) | (6.7 | ) | (13.6 | ) | 0.7 | |||||||||||||
Plan amendments |
|
| 5.5 |
|
|
| — |
|
|
| 4.9 |
|
|
| — |
|
|
| 0.6 |
|
|
| — |
| (6.2 | ) | — | (1.0 | ) | — | (5.2 | ) | — | |||||||||||||||
Retiree drug subsidy program |
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.2 |
|
|
| 0.1 |
|
|
| — |
|
|
| 0.1 |
| 0.2 | — | 0.2 | — | — | — | ||||||||||||||||||
Benefits paid |
|
| (14.0 | ) |
|
| (11.1 | ) |
|
| (10.2 | ) |
|
| (8.6 | ) |
|
| (3.7 | ) |
|
| (2.4 | ) | (11.0 | ) | (13.9 | ) | (9.2 | ) | (10.7 | ) | (1.8 | ) | (3.2 | ) | ||||||||||||
Benefit obligation, end of year |
| $ | 197.3 |
|
| $ | 208.1 |
|
| $ | 147.9 |
|
| $ | 158.8 |
|
| $ | 43.4 |
|
| $ | 43.1 |
| $ | 148.1 | $ | 204.2 | $ | 114.8 | $ | 151.7 | $ | 29.9 | $ | 48.0 |
In fiscal 2022, the actuarial gains for all qualified Spire plans were driven by the increase in the discount rate used to calculate the benefit obligation. In fiscal 2021, the actuarial gains for Spire and Spire Missouri were driven by the increase in the discount rate used to calculate the benefit obligation. For Spire Alabama, this gain was more than offset by the loss associated with an update to the trend assumption.
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Fair value of plan assets at beginning of year |
| $ | 283.5 |
|
| $ | 265.5 |
|
| $ | 189.5 |
|
| $ | 174.9 |
|
| $ | 89.6 |
|
| $ | 86.4 |
| $ | 326.9 | $ | 291.0 | $ | 221.7 | $ | 199.2 | $ | 99.4 | $ | 87.0 | ||||||||||||
Actual return on plan assets |
|
| 9.7 |
|
|
| 21.5 |
|
|
| 9.0 |
|
|
| 15.6 |
|
|
| 0.5 |
|
|
| 5.6 |
| (51.6 | ) | 49.7 | (36.2 | ) | 33.1 | (14.3 | ) | 15.6 | |||||||||||||||
Employer contributions |
|
| 0.6 |
|
|
| 7.6 |
|
|
| 0.6 |
|
|
| 7.6 |
|
|
| — |
|
|
| — |
| 0.4 | 0.1 | 0.4 | 0.1 | — | — | ||||||||||||||||||
Benefits paid |
|
| (14.0 | ) |
|
| (11.1 | ) |
|
| (10.2 | ) |
|
| (8.6 | ) |
|
| (3.7 | ) |
|
| (2.4 | ) | (11.0 | ) | (13.9 | ) | (9.2 | ) | (10.7 | ) | (1.8 | ) | (3.2 | ) | ||||||||||||
Fair value of plan assets, end of year |
| $ | 279.8 |
|
| $ | 283.5 |
|
| $ | 188.9 |
|
| $ | 189.5 |
|
| $ | 86.4 |
|
| $ | 89.6 |
| $ | 264.7 | $ | 326.9 | $ | 176.7 | $ | 221.7 | $ | 83.3 | $ | 99.4 | ||||||||||||
Funded status of plans, end of year |
| $ | 82.5 |
|
| $ | 75.4 |
|
| $ | 41.0 |
|
| $ | 30.7 |
|
| $ | 43.0 |
|
| $ | 46.5 |
| $ | 116.6 | $ | 122.7 | $ | 61.9 | $ | 70.0 | $ | 53.4 | $ | 51.4 |
The following table sets forth the amounts recognized in the balance sheets at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Noncurrent assets |
| $ | 118.3 |
|
| $ | 92.0 |
|
| $ | 75.3 |
|
| $ | 45.5 |
|
| $ | 43.0 |
|
| $ | 46.5 |
| $ | 151.6 | $ | 170.2 | $ | 96.9 | $ | 117.5 | $ | 53.4 | $ | 51.4 | ||||||||||||
Current liabilities |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| — |
|
|
| — |
| (0.3 | ) | (0.5 | ) | (0.3 | ) | (0.5 | ) | — | — | ||||||||||||||
Noncurrent liabilities |
|
| (35.3 | ) |
|
| (16.1 | ) |
|
| (33.8 | ) |
|
| (14.3 | ) |
|
| — |
|
|
| — |
| (34.7 | ) | (47.0 | ) | (34.7 | ) | (47.0 | ) | — | — | ||||||||||||||
Total |
| $ | 82.5 |
|
| $ | 75.4 |
|
| $ | 41.0 |
|
| $ | 30.7 |
|
| $ | 43.0 |
|
| $ | 46.5 |
| $ | 116.6 | $ | 122.7 | $ | 61.9 | $ | 70.0 | $ | 53.4 | $ | 51.4 |
Pre-tax amounts recognized in accumulated other comprehensive loss not yet recognized as components of net periodic postretirement benefit cost consist of:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||
Net actuarial gain |
| $ | (56.3 | ) |
| $ | (44.4 | ) |
| $ | (52.6 | ) |
| $ | (35.7 | ) |
| $ | (2.6 | ) |
| $ | (8.0 | ) |
Prior service (credit) cost |
|
| (1.0 | ) |
|
| (6.6 | ) |
|
| 0.6 |
|
|
| (4.0 | ) |
|
| (1.6 | ) |
|
| (2.6 | ) |
Subtotal |
|
| (57.3 | ) |
|
| (51.0 | ) |
|
| (52.0 | ) |
|
| (39.7 | ) |
|
| (4.2 | ) |
|
| (10.6 | ) |
Adjustments for amounts included in regulatory assets |
|
| 57.3 |
|
|
| 51.0 |
|
|
| 52.0 |
|
|
| 39.7 |
|
|
| 4.2 |
|
|
| 10.6 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
At September 30, 2019, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive loss into net periodic postretirement benefit cost during fiscal 2020:
Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Net actuarial gain | $ | (83.3 | ) | $ | (101.2 | ) | $ | (74.2 | ) | $ | (85.8 | ) | $ | (5.6 | ) | $ | (11.5 | ) | ||||||
Prior service cost (credit) | 7.1 | 14.6 | 7.9 | 9.7 | (0.8 | ) | 4.9 | |||||||||||||||||
Subtotal | (76.2 | ) | (86.6 | ) | (66.3 | ) | (76.1 | ) | (6.4 | ) | (6.6 | ) | ||||||||||||
Adjustments for amounts included in regulatory assets | 76.2 | 86.6 | 66.3 | 76.1 | 6.4 | 6.6 | ||||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Amortization of net actuarial gain |
| $ | (2.0 | ) |
| $ | (2.0 | ) |
| $ | — |
|
Amortization of prior service credit |
|
| (0.5 | ) |
|
| (0.2 | ) |
|
| (0.3 | ) |
Subtotal |
|
| (2.5 | ) |
|
| (2.2 | ) |
|
| (0.3 | ) |
Regulatory adjustment |
|
| 2.5 |
|
|
| 2.2 |
|
|
| 0.3 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | — |
|
The assumptions used to calculate net periodic postretirement benefit costs for Spire Missouri are as follows:
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
Weighted average discount rate - Spire Missouri East plans |
| 4.30% |
|
| 3.60% |
|
| 3.15% |
|
Weighted average discount rate - Spire Missouri West plans |
| 4.30% |
|
| 3.60% |
|
| 3.45% |
|
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 3.00% |
|
Expected long-term rate of return on plan assets - Spire Missouri East plans |
| 6.25% |
|
| 5.75%/7.75% |
|
| 5.75%/7.75% |
|
Expected long-term rate of return on plan assets - Spire Missouri West plans |
| 6.25% |
|
| 5.75% |
|
| 5.50% |
|
2022 | 2021 | 2020 | ||||||||||
Weighted average discount rate - Spire Missouri plans | 2.95% | 2.75% | 3.15% | |||||||||
Weighted average rate of future compensation increase | 3.00% | 3.00% | 3.00% | |||||||||
Expected long-term rate of return on plan assets - Spire Missouri plans | 5.75% | 5.75% | 6.25% |
The assumptions used to calculate net periodic postretirement benefit costs for Spire Alabama are as follows:
|
| 2019 |
|
| 2018 |
|
| 2017 |
| 2022 | 2021 | 2020 | |||||||||
Weighted average discount rate |
| 4.30% |
|
| 3.80% |
|
| 3.60% |
| 2.95% | 2.75% | 3.15% | |||||||||
Expected long-term rate of return on plan assets |
| 5.00%/6.25% |
|
| 3.75%/6.00% |
|
| 4.00%/6.25% |
| 5.00%/6.25% | 5.00%/6.25% | 5.00%/6.25% |
The discount rate is based on long-term, high quality bond indices at the measurement date. The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were selected after analyzing historical experience and future expectations of the returns. The overall expected rate of return for the portfolio was developed based on the target allocation for each class.
The assumptions used to calculate the accumulated postretirement benefit obligations are as follows:
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | ||||||
Weighted average discount rate - Spire Alabama plans |
| 3.15% |
|
| 4.30% |
| 5.80% | 2.95% | ||||||
Weighted average discount rate - Spire Missouri East plans |
| 3.15% |
|
| 4.30% |
| ||||||||
Weighted average discount rate - Spire Missouri West plans |
| 3.15% |
|
| 4.30% |
| ||||||||
Weighted average discount rate - Spire Missouri plans | 5.80% | 2.95% | ||||||||||||
Weighted average rate of future compensation increase - Spire Missouri East plans |
| 3.00% |
|
| 3.00% |
| 3.00% | 3.00% |
The assumed medical cost trend rates at September 30 are as follows:
|
| 2019 |
|
| 2018 |
| 2022 | 2021 | ||||||
Medical cost trend assumed for next year - Spire Missouri |
| 6.75% |
|
| 7.00% |
| 6.75% | 7.00% | ||||||
Medical cost trend assumed for next year - Spire Alabama |
| 6.75% |
|
| 7.00% |
| 6.75% | 7.00% | ||||||
Rate to which the medical cost trend rate is assumed to decline (the ultimate medical cost trend rate) |
| 5.00% |
|
| 5.00% |
| 5.00% | 5.00% | ||||||
Year the rate reaches the ultimate trend |
| 2025 |
|
| 2025 |
| 2028 | 2028 |
The following table presents the effects of an assumed 1% change in the assumed medical cost trend rate:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 1% Increase |
|
| 1% Decrease |
|
| 1% Increase |
|
| 1% Decrease |
|
| 1% Increase |
|
| 1% Decrease |
| ||||||
Net periodic postretirement benefit cost |
| $ | 1.1 |
|
| $ | (1.0 | ) |
| $ | 0.9 |
|
| $ | (0.8 | ) |
| $ | 0.1 |
|
| $ | (0.1 | ) |
Accumulated postretirement benefit obligation |
|
| 7.2 |
|
|
| (6.5 | ) |
|
| 4.7 |
|
|
| (4.4 | ) |
|
| 1.8 |
|
|
| (1.6 | ) |
Following aretables set forth the targeted and actual plan assets by category as of September 30 of each year for Spire Missouri and Spire Alabama:
Spire Missouri |
| Target |
|
| 2019 Actual |
|
| 2018 Actual |
| Target | 2022 Actual | 2021 Actual | ||||||||||||
Equity securities |
|
| 60.0 | % |
|
| 58.4 | % |
|
| 58.8 | % | 60.0 | % | 58.7 | % | 59.2 | % | ||||||
Debt securities |
|
| 40.0 | % |
|
| 38.8 | % |
|
| 39.1 | % | 40.0 | % | 40.5 | % | 38.9 | % | ||||||
Other (cash and cash equivalents held to make benefit payments) |
|
| — | % |
|
| 2.8 | % |
|
| 2.1 | % | ||||||||||||
Cash and cash equivalents | — | % | 0.8 | % | 1.9 | % | ||||||||||||||||||
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Spire Alabama |
| Target |
|
| 2019 Actual |
|
| 2018 Actual |
| Target | 2022 Actual | 2021 Actual | ||||||||||||
Equity securities |
|
| 60.0 | % |
|
| 60.3 | % |
|
| 60.0 | % | 60.5 | % | 57.7 | % | 60.5 | % | ||||||
Debt securities |
|
| 40.0 | % |
|
| 39.7 | % |
|
| 40.0 | % | 39.5 | % | 42.3 | % | 39.5 | % | ||||||
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Missouri and Alabama state laws provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. The Utilities have established Voluntary Employees’ Beneficiary Association and Rabbi Trusts as external funding mechanisms. Their investment policies seek to maximize investment returns consistent with their tolerance for risk. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with policy. Performance and compliance with the guidelines is regularly monitored. Spire Missouri and Spire Alabama currently invest in mutual funds which are rebalanced periodically to the target allocation. The mutual funds are diversified across U.S. stock and bond markets, and for Spire Alabama, international stock markets.
Following are
The following table sets forth expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the five fiscal years thereafter for Spire, Spire Missouri, and Spire Alabama:
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025- 2029 |
| 2023 | 2024 | 2025 | 2026 | 2027 | 2028 - 2032 | ||||||||||||||||||||||||
Spire |
| $ | 13.6 |
|
| $ | 14.0 |
|
| $ | 14.5 |
|
| $ | 14.8 |
|
| $ | 15.0 |
|
| $ | 73.0 |
| $ | 13.7 | $ | 14.4 | $ | 14.6 | $ | 14.5 | $ | 14.7 | $ | 69.5 | ||||||||||||
Spire Missouri |
|
| 10.6 |
|
|
| 11.0 |
|
|
| 11.4 |
|
|
| 11.7 |
|
|
| 11.8 |
|
|
| 57.1 |
| 11.6 | 12.2 | 12.3 | 12.2 | 12.2 | 55.7 | ||||||||||||||||||
Spire Alabama |
|
| 2.7 |
|
|
| 2.7 |
|
|
| 2.8 |
|
|
| 2.8 |
|
|
| 2.8 |
|
|
| 13.5 |
| 1.9 | 2.0 | 2.1 | 2.1 | 2.2 | 11.9 |
The Utilities’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. For both Spire Missouri and Spire Alabama there are no anticipated contributions to the postretirement plans in fiscal 2020 are anticipated to be $2.0 to the qualified trusts and $0.5 paid directly to participants from Spire Missouri funds. It is not anticipated that contributions will be made to the Spire Alabama postretirement plans in fiscal 2020.2023.
Other Plans
Spire Services Inc. sponsors a 401(k)401(k) plan that cover substantially all employees of Spire Inc. and its subsidiaries. The plan allows employees to contribute a portion of their base pay in accordance with specific guidelines. The cost of the defined contribution plan for Spire Inc. totaled $13.8, $12.5,$15.5, $15.5, and $11.5$13.6 for fiscal years 2019, 2018,2022, 2021, and 2017,2020, respectively. Spire Missouri provides a match of such contributions within specific limits. The cost of the defined contribution plan for Spire Missouri amounted to $10.0, $9.0,$10.9, $10.9, and $8.4$9.5 for fiscal years 2019, 2018,2022, 2021, and 2017,2020, respectively. Spire Alabama also provides a match of employee contributions within specific limits. The cost of the defined contribution plan for Spire Alabama amounted to $3.1, $3.0,$3.6, $2.9, and $2.7$3.4 for fiscal years 2019, 2018,2022, 2021, and 2017,2020, respectively.
Fair Value Measurements of Pension and Other Postretirement Plan Assets
Spire
The table below categorizes the fair value measurements of the Spire pension plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 42.5 |
|
| $ | — |
|
| $ | — |
|
| $ | 42.5 |
|
Equity mutual funds - U.S. |
|
| 40.5 |
|
|
| 17.0 |
|
|
| — |
|
|
| 57.5 |
|
Equity mutual funds - international |
|
| 30.1 |
|
|
| 8.6 |
|
|
| — |
|
|
| 38.7 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 34.8 |
|
|
| 73.9 |
|
|
| — |
|
|
| 108.7 |
|
U.S. government |
|
| 52.9 |
|
|
| 9.5 |
|
|
| — |
|
|
| 62.4 |
|
U.S. corporate |
|
| 143.7 |
|
|
| — |
|
|
| — |
|
|
| 143.7 |
|
U.S. municipal |
|
| 4.0 |
|
|
| — |
|
|
| — |
|
|
| 4.0 |
|
International |
|
| 44.1 |
|
|
| 7.5 |
|
|
| — |
|
|
| 51.6 |
|
Derivatives and margin receivable |
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 0.2 |
|
103-12 Direct Filing Entities |
|
| — |
|
|
| 12.5 |
|
|
| — |
|
|
| 12.5 |
|
Total |
| $ | 392.8 |
|
| $ | 129.0 |
|
| $ | — |
|
| $ | 521.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 50.6 |
|
| $ | — |
|
| $ | — |
|
| $ | 50.6 |
|
Equity mutual funds - U.S. |
|
| 42.7 |
|
|
| 21.2 |
|
|
| — |
|
|
| 63.9 |
|
Equity mutual funds - international |
|
| 20.7 |
|
|
| 4.1 |
|
|
| — |
|
|
| 24.8 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 35.8 |
|
|
| 64.9 |
|
|
| — |
|
|
| 100.7 |
|
U.S. government |
|
| 31.7 |
|
|
| 5.6 |
|
|
| — |
|
|
| 37.3 |
|
U.S. corporate |
|
| 152.1 |
|
|
| — |
|
|
| — |
|
|
| 152.1 |
|
U.S. municipal |
|
| 3.6 |
|
|
| 3.0 |
|
|
| — |
|
|
| 6.6 |
|
International |
|
| 43.9 |
|
|
| 7.0 |
|
|
| — |
|
|
| 50.9 |
|
Derivatives and margin (payable) |
|
| (0.8 | ) |
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
103-12 Direct Filing Entities |
|
| — |
|
|
| 13.1 |
|
|
| — |
|
|
| 13.1 |
|
Total |
| $ | 380.3 |
|
| $ | 118.9 |
|
| $ | — |
|
| $ | 499.2 |
|
Quoted Prices | Significant | Significant | ||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
As of September 30, 2022 | ||||||||||||||||
Cash and cash equivalents | $ | 11.5 | $ | — | $ | — | $ | 11.5 | ||||||||
Equity funds - global (including U.S.) | — | 122.2 | — | 122.2 | ||||||||||||
Real asset funds | — | 61.0 | — | 61.0 | ||||||||||||
Debt securities: | ||||||||||||||||
U.S. bond funds | 42.3 | — | — | 42.3 | ||||||||||||
U.S. government index funds | 36.1 | — | — | 36.1 | ||||||||||||
Global funds (including U.S.) | — | 59.6 | — | 59.6 | ||||||||||||
Total | $ | 89.9 | $ | 242.8 | $ | — | $ | 332.7 | ||||||||
As of September 30, 2021 | ||||||||||||||||
Cash and cash equivalents | $ | 10.6 | $ | — | $ | — | $ | 10.6 | ||||||||
Equity funds - global (including U.S.) | — | 201.2 | — | 201.2 | ||||||||||||
Real asset funds | — | 87.7 | — | 87.7 | ||||||||||||
Debt securities: | ||||||||||||||||
U.S. bond funds | 58.4 | — | — | 58.4 | ||||||||||||
U.S. government index funds | 60.1 | — | — | 60.1 | ||||||||||||
Global funds (including U.S.) | — | 80.9 | — | 80.9 | ||||||||||||
Total | $ | 129.1 | $ | 369.8 | $ | — | $ | 498.9 |
The table below categorizes the fair value measurements of Spire’s postretirement plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| Quoted Prices | Significant | Significant | |||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||||||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 5.3 |
|
| $ | — |
|
| $ | — |
|
| $ | 5.3 |
| $ | 3.5 | $ | — | $ | — | $ | 3.5 | ||||||||
U.S. stock/bond mutual funds |
|
| 187.1 |
|
|
| 71.8 |
|
|
| — |
|
|
| 258.9 |
| 177.1 | 69.4 | — | 246.5 | ||||||||||||
International fund |
|
| 1.0 |
|
|
| 14.6 |
|
|
| — |
|
|
| 15.6 |
| 0.8 | 13.9 | — | 14.7 | ||||||||||||
Total |
| $ | 193.4 |
|
| $ | 86.4 |
|
| $ | — |
|
| $ | 279.8 |
| $ | 181.4 | $ | 83.3 | $ | — | $ | 264.7 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 3.7 |
|
| $ | — |
|
| $ | — |
|
| $ | 3.7 |
| $ | 3.1 | $ | — | $ | — | $ | 3.1 | ||||||||
U.S. stock/bond mutual funds |
|
| 190.2 |
|
|
| 74.5 |
|
|
| — |
|
|
| 264.7 |
| 223.2 | 82.5 | — | 305.7 | ||||||||||||
International fund |
|
| — |
|
|
| 15.1 |
|
|
| — |
|
|
| 15.1 |
| 1.2 | 16.9 | — | 18.1 | ||||||||||||
Total |
| $ | 193.9 |
|
| $ | 89.6 |
|
| $ | — |
|
| $ | 283.5 |
| $ | 227.5 | $ | 99.4 | $ | — | $ | 326.9 |
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
Spire Missouri
The table below categorizes the fair value measurements of Spire Missouri’s pension plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 41.2 |
|
| $ | — |
|
| $ | — |
|
| $ | 41.2 |
|
Equity mutual funds - U.S. |
|
| — |
|
|
| 9.1 |
|
|
| — |
|
|
| 9.1 |
|
Equity mutual funds - international |
|
| — |
|
|
| 3.3 |
|
|
| — |
|
|
| 3.3 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| — |
|
|
| 73.9 |
|
|
| — |
|
|
| 73.9 |
|
U.S. government |
|
| 52.9 |
|
|
| 6.8 |
|
|
| — |
|
|
| 59.7 |
|
U.S. corporate |
|
| 143.7 |
|
|
| — |
|
|
| — |
|
|
| 143.7 |
|
U.S. municipal |
|
| 4.0 |
|
|
| — |
|
|
| — |
|
|
| 4.0 |
|
International |
|
| 44.1 |
|
|
| — |
|
|
| — |
|
|
| 44.1 |
|
Derivatives and margin (payable) |
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 0.2 |
|
Total |
| $ | 286.1 |
|
| $ | 93.1 |
|
| $ | — |
|
| $ | 379.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 35.2 |
|
| $ | — |
|
| $ | — |
|
| $ | 35.2 |
|
Equity mutual funds - U.S. |
|
| — |
|
|
| 8.4 |
|
|
| — |
|
|
| 8.4 |
|
Equity mutual funds - international |
|
| — |
|
|
| 4.1 |
|
|
| — |
|
|
| 4.1 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| — |
|
|
| 64.9 |
|
|
| — |
|
|
| 64.9 |
|
U.S. government |
|
| 31.7 |
|
|
| 3.0 |
|
|
| — |
|
|
| 34.7 |
|
U.S. corporate |
|
| 152.1 |
|
|
| — |
|
|
| — |
|
|
| 152.1 |
|
U.S. municipal |
|
| 3.6 |
|
|
| 3.0 |
|
|
| — |
|
|
| 6.6 |
|
International |
|
| 43.9 |
|
|
| — |
|
|
| — |
|
|
| 43.9 |
|
Derivatives and margin (payable) |
|
| (0.8 | ) |
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
Total |
| $ | 265.7 |
|
| $ | 83.4 |
|
| $ | — |
|
| $ | 349.1 |
|
Quoted Prices | Significant | Significant | ||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
As of September 30, 2022 | ||||||||||||||||
Cash and cash equivalents | $ | 5.7 | $ | — | $ | — | $ | 5.7 | ||||||||
Equity funds - global (including U.S.) | — | 85.7 | — | 85.7 | ||||||||||||
Real asset funds | — | 47.2 | — | 47.2 | ||||||||||||
Debt securities: | ||||||||||||||||
U.S. bond funds | 29.4 | — | — | 29.4 | ||||||||||||
U.S. government index funds | 24.6 | — | — | 24.6 | ||||||||||||
Global funds (including U.S.) | — | 43.3 | — | 43.3 | ||||||||||||
Total | $ | 59.7 | $ | 176.2 | $ | — | $ | 235.9 | ||||||||
As of September 30, 2021 | ||||||||||||||||
Cash and cash equivalents | $ | 8.3 | $ | — | $ | — | $ | 8.3 | ||||||||
Equity funds - global (including U.S.) | — | 148.6 | — | 148.6 | ||||||||||||
Real asset funds | — | 59.2 | — | 59.2 | ||||||||||||
Debt securities: | ||||||||||||||||
U.S. bond funds | 38.4 | — | — | 38.4 | ||||||||||||
U.S. government index funds | 45.6 | — | — | 45.6 | ||||||||||||
Global funds (including U.S.) | — | 63.9 | — | 63.9 | ||||||||||||
Total | $ | 92.3 | $ | 271.7 | $ | — | $ | 364.0 |
The table below categorizes the fair value measurements of Spire Missouri’s postretirement plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| Quoted Prices | Significant | Significant | |||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||||||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 5.2 |
|
| $ | — |
|
| $ | — |
|
| $ | 5.2 |
| $ | 2.7 | $ | — | $ | — | $ | 2.7 | ||||||||
U.S. stock/bond mutual funds |
|
| 183.7 |
|
|
| — |
|
|
| — |
|
|
| 183.7 |
| 174.0 | — | — | 174.0 | ||||||||||||
Total |
| $ | 188.9 |
|
| $ | — |
|
| $ | — |
|
| $ | 188.9 |
| $ | 176.7 | $ | — | $ | — | $ | 176.7 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 3.5 |
|
| $ | — |
|
| $ | — |
|
| $ | 3.5 |
| $ | 2.4 | $ | — | $ | — | $ | 2.4 | ||||||||
U.S. stock/bond mutual funds |
|
| 186.0 |
|
|
| — |
|
|
| — |
|
|
| 186.0 |
| 219.3 | — | — | 219.3 | ||||||||||||
Total |
| $ | 189.5 |
|
| $ | — |
|
| $ | — |
|
| $ | 189.5 |
| $ | 221.7 | $ | — | $ | — | $ | 221.7 |
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
Spire Alabama
The table below categorizes the fair value measurements of Spire Alabama’s pension plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 0.8 |
|
| $ | — |
|
| $ | — |
|
| $ | 0.8 |
|
Equity mutual funds - U.S. |
|
| 26.5 |
|
|
| 5.2 |
|
|
| — |
|
|
| 31.7 |
|
Equity mutual funds - international |
|
| 19.7 |
|
|
| 3.5 |
|
|
| — |
|
|
| 23.2 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 22.8 |
|
|
| — |
|
|
| — |
|
|
| 22.8 |
|
U.S. government |
|
| — |
|
|
| 1.7 |
|
|
| — |
|
|
| 1.7 |
|
International |
|
| — |
|
|
| 4.9 |
|
|
| — |
|
|
| 4.9 |
|
103-12 Direct Filing Entities |
|
| — |
|
|
| 8.2 |
|
|
| — |
|
|
| 8.2 |
|
Total |
| $ | 69.8 |
|
| $ | 23.5 |
|
| $ | — |
|
| $ | 93.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 10.4 |
|
| $ | — |
|
| $ | — |
|
| $ | 10.4 |
|
Equity mutual funds - U.S. |
|
| 28.8 |
|
|
| 8.6 |
|
|
| — |
|
|
| 37.4 |
|
Equity mutual funds - international |
|
| 14.0 |
|
|
| — |
|
|
| — |
|
|
| 14.0 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 24.2 |
|
|
| — |
|
|
| — |
|
|
| 24.2 |
|
U.S. government |
|
| — |
|
|
| 1.8 |
|
|
| — |
|
|
| 1.8 |
|
International |
|
| — |
|
|
| 4.7 |
|
|
| — |
|
|
| 4.7 |
|
103-12 Direct Filing Entities |
|
| — |
|
|
| 8.8 |
|
|
| — |
|
|
| 8.8 |
|
Total |
| $ | 77.4 |
|
| $ | 23.9 |
|
| $ | — |
|
| $ | 101.3 |
|
Quoted Prices | Significant | Significant | ||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
As of September 30, 2022 | ||||||||||||||||
Cash and cash equivalents | $ | 3.5 | $ | — | $ | — | $ | 3.5 | ||||||||
Equity funds - global (including U.S.) | — | 21.6 | — | 21.6 | ||||||||||||
Real asset funds | — | 8.1 | — | 8.1 | ||||||||||||
Debt securities: | ||||||||||||||||
U.S. bond funds | 7.7 | — | — | 7.7 | ||||||||||||
U.S. government index funds | 6.8 | — | — | 6.8 | ||||||||||||
Global funds (including U.S.) | — | 9.6 | — | 9.6 | ||||||||||||
Total | $ | 18.0 | $ | 39.3 | $ | — | $ | 57.3 | ||||||||
As of September 30, 2021 | ||||||||||||||||
Cash and cash equivalents | $ | 1.4 | $ | — | $ | — | $ | 1.4 | ||||||||
Equity funds - global (including U.S.) | — | 32.3 | — | 32.3 | ||||||||||||
Real asset funds | — | 14.6 | — | 14.6 | ||||||||||||
Debt securities: | ||||||||||||||||
U.S. bond funds | 12.3 | — | — | 12.3 | ||||||||||||
U.S. government index funds | 8.9 | — | — | 8.9 | ||||||||||||
Global funds (including U.S.) | — | 13.3 | — | 13.3 | ||||||||||||
Total | $ | 22.6 | $ | 60.2 | $ | — | $ | 82.8 |
The table below categorizes the fair value measurements of Spire Alabama’s postretirement plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| Quoted Prices | Significant | Significant | |||||||||||||||||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||||||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
U.S. stock/bond mutual funds |
| $ | — |
|
| $ | 71.8 |
|
| $ | — |
|
| $ | 71.8 |
| $ | — | $ | 69.4 | $ | — | $ | 69.4 | ||||||||
International fund |
|
| — |
|
|
| 14.6 |
|
|
| — |
|
|
| 14.6 |
| — | 13.9 | — | 13.9 | ||||||||||||
Total |
| $ | — |
|
| $ | 86.4 |
|
| $ | — |
|
| $ | 86.4 |
| $ | — | $ | 83.3 | $ | — | $ | 83.3 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
U.S. stock/bond mutual funds |
| $ | — |
|
| $ | 74.5 |
|
| $ | — |
|
| $ | 74.5 |
| $ | — | $ | 82.5 | $ | — | $ | 82.5 | ||||||||
International fund |
|
| — |
|
|
| 15.1 |
|
|
| — |
|
|
| 15.1 |
| — | 16.9 | — | 16.9 | ||||||||||||
Total |
| $ | — |
|
| $ | 89.6 |
|
| $ | — |
|
| $ | 89.6 |
| $ | — | $ | 99.4 | $ | — | $ | 99.4 |
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values of derivative instruments are calculated by investment managers who use valuation models that incorporate observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
14. INFORMATION BY OPERATING SEGMENT
The Company has 2two reportable segments: Gas Utility and Gas Marketing. The Gas Utility segment is the aggregation of the operations of the Utilities. The Gas Marketing segment includes the results of Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities, including utilizing natural gas storage contracts for providing natural gas sales. Other components of the Company’s consolidated information include:
Accounting policies are described in Note 1, Summary of Significant Accounting Policies. Intersegment transactions include sales of natural gas from Spire Marketing to Spire Missouri and Spire Alabama, sales of natural gas from Spire Missouri to Spire Marketing, sales of natural gas from Spire Alabama to Spire Marketing, propane transportation services provided by Spire NGL Inc. to Spire Missouri, and propane storage services provided by Spire Missouri to Spire NGL Inc. 113 Management evaluates the performance of the operating segments based on the computation of net economic earnings. Net economic earnings exclude from reported net income the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions.
114
As discussed below for Spire Missouri and Spire Alabama, the Purchased Gas Adjustment (PGA) clauses and Gas Supply Adjustment (GSA) riders allow the Utilities to pass through to customers the cost of purchased gas supplies. Regulatory assets and regulatory liabilities related to the PGA clauses and the GSA rider are both labeled Unamortized Purchased Gas Adjustments herein. 115 The following regulatory assets and regulatory liabilities were reflected in the Balance Sheets as of September 30,
A portion of the Company’s regulatory assets are not earning a return and are shown in the schedule below:
Like all the Company’s regulatory assets, these regulatory assets are expected to be recovered from customers in future rates. The recovery period for the future income taxes due from customers and pension and other postretirement benefit costs could be 116 Spire Missouri As authorized by the MoPSC, the PGA clause allows Spire Missouri to flow through to customers, subject to prudence review by the MoPSC, the cost of purchased gas supplies. To better match customer billings with market natural gas prices, Spire Missouri is allowed to file to modify, on a periodic basis, the level of gas costs in its PGA. Certain provisions of the PGA clause are included below:
Pursuant to the provisions of the PGA clause, the difference between actual costs incurred and costs recovered through the application of the PGA clause, as well as the difference between the actual amount of off-system sales and capacity release revenues allocated to customers and the estimated amount assumed in PGA rates, are reflected as a
On March 7, 2018, the MoPSC issued its order in two general rate cases (docketed as
The Infrastructure System Replacement Surcharge (ISRS) In September 2020, Spire Missouri, the MoPSC staff and the Office of Public Counsel (OPC) reached a Unanimous Stipulation and Agreement regarding Spire Missouri’s request for an Accounting Authority Order (AAO) pertaining to certain costs and lost customer fee revenue related to the COVID-19 pandemic. In October 2020, the MoPSC issued an order approving that agreement and granting an AAO for the period of March 1, 2020 through March 31, 2021. As part of the 2021 rate order discussed below, the settled balance of deferred costs, including foregone late payment fees and reconnect/disconnect fees that Spire Missouri was authorized to defer, totaled $6.2 and will be recovered through a five-year amortization of a regulatory asset. 117 In mid- February 2021, the central U.S. experienced a period of unusually severe cold weather (“Winter Storm Uri”), and Spire Missouri implemented an Operational Flow Order (OFO) to preserve the integrity of its distribution system. During this time, Spire Missouri was required to purchase additional natural gas supply, both to ensure adequate supply for its firm utility customers, and to cover the shortfall created when third-party marketers failed to deliver natural gas supply to its city gates on behalf of their customers. In accordance with its tariffs, Spire Missouri invoiced the cost of gas and associated penalties totaling $195.8 to non-compliant marketers pursuant to the MoPSC-approved OFO tariff and recorded accounts receivable. Recoveries collected will be an offset to cost of natural gas for firm utility customers through the PGA and Actual Cost Adjustment (ACA), so are net income neutral to Spire Missouri. The three largest counterparties did not remit payment when due, so Spire Missouri filed suit against them in federal court to recover the invoiced amounts. Some marketers filed complaints with the MoPSC requesting review of the transactions between them and Spire Missouri. Through the first quarter of fiscal 2022, the Company had no reason to believe the MoPSC would not follow the tariff and had determined collection was probable, so the entire amount was recognized. In late February 2022, the parties to the OFO waiver suits agreed to a settlement in principle, pursuant to which marketers will reimburse Spire Missouri for the actual cost of its incremental gas purchases to serve marketers’ customers during Winter Storm Uri, so Spire Missouri reduced revenue, accounts receivable, cost of gas and regulatory liabilities by approximately $150 in the second quarter of fiscal 2022. The settlement, which reduced the total amount due from the three marketers to approximately $42, was approved by the MoPSC in late May 2022. Pursuant to the approved settlement, the marketers have begun making payments to Spire Missouri that will be credited to the PGA/ACA, the marketer complaints have been dismissed at the MoPSC, and Spire Missouri has dismissed its federal lawsuits against the marketers. Spire Missouri is not subject to any upstream OFO penalties on any interstate pipelines. As a result of the significant net deferred gas costs and average inventory cost in the second quarter of fiscal 2021, primarily due to Winter Storm Uri, Spire Missouri filed for and received MoPSC approval for an adjustment to the PGA tariff to increase a Spire Missouri is able to sell excess natural gas supply and capacity to third parties off-system, resulting in significant savings to its firm utility customers through the gas incentive mechanisms of The MoPSC approved compliance tariffs with an effective date of December 23, 2021, in Spire Missouri’s general rate case GR-2021-0108. These new tariffs were designed to increase Spire Missouri’s aggregate annual
118 On April 1, 2022, Spire Missouri filed tariff sheets to initiate a new general rate case proceeding which is intended to address the deferred amounts, along with other matters, and is expected to be resolved in the first half of fiscal 2023. The proposed tariff changes include revised rate schedules designed to produce an annual net increase in Spire Missouri’s gas revenues of approximately $151.9. Intervenor direct testimony was filed in late August and early September 2022. The MoPSC has set a test year ending September 30, 2021, adjusted for known and measurable rate base, revenue and expense items through May 31, 2022, with a true-up period through September 30, 2022. On October 7, 2022, Spire Missouri and various intervenors filed rebuttal testimony. MoPSC staff also filed updated accounting schedules reflecting a revised revenue requirement of $71.0. Local public hearings concluded in mid- October 2022. Following these hearings, the parties reached a Full Unanimous Stipulation and Agreement (the "Stipulation") to resolve all issues in the case which was filed with the MoPSC on November 4, 2022. A hearing regarding this Stipulation is currently set for November 18, 2022. The remainder of the procedural schedule has been suspended, pending MoPSC action on the Stipulation. If approved, the Stipulation would, among other things, authorize $78.0 in new base rate revenue (with rates effective no later than January 1, 2023), and authorize recovery of deferred overheads through amortization of the related regulatory assets discussed in the previous paragraph. On May 27, 2022, the MoPSC staff filed an ACA Review Recommendation and Report for the ACA period that first includes transportation charges incurred by Spire Missouri for service on the Spire STL Pipeline. That report concluded that the transaction complied with Missouri affiliate transaction rules and was prudent, and it recommended no disallowance of any Spire STL Pipeline related costs from the ACA mechanism. On July 11, 2022, Spire Missouri filed its response comments in support of the recommendation. The Missouri Office of the Public Counsel and Environmental Defense Fund filed comments on July 29 and August 1, 2022, respectively, raising concerns about
On February 23, 2022, the MoPSC issued an order approving Spire Missouri’s request for $800.0 in new financing authority over three years, subject to certain customary conditions. Spire Alabama In October 2018, the APSC approved the renewal of its Rate Stabilization and Equalization (RSE) rate-setting process for Spire Alabama through September 30, 2022, limiting equity as a percent of total capitalization to a range of 56.5% to 55.5%. Under RSE, the APSC conducts quarterly reviews to determine whether Spire Alabama’s return on average common equity (ROE) at the end of the rate year will be within the allowed range of return. Reductions in rates can be made quarterly to bring the projected ROE within the allowed range; increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year revenues. Spire Alabama’s allowed range of ROE is 10.15% to 10.65% with an adjusting point of 10.4%. In September 2022, the APSC approved the renewal of RSE through September 30, 2025, with certain modifications to the current terms. Effective October 1, 2022, Spire Alabama's allowed range of return on average common equity is 9.50% to 9.90% with an adjusting point of 9.70%. Average Common Equity growth is limited to 6.00% each year. Spire Alabama retains the ability to receive a performance-based adjustment of +/- 10 basis points to the return on equity adjusting point, based upon the terms of the previously approved Accelerated Infrastructure Modernization (AIM) Program tariff. However, in September of 2022, Spire applied for and received approval to suspend the operation of the AIM performance-based adjustment for 2023. The quarterly reviews have been modified to occur only in March, June, and September. Spire Alabama retained the current equity limitation as a percent of total capitalization at 55.5% and adjustments to the Cost Control Measure (CCM) as noted below. 119 The inflation-based CCM established by the APSC, allows for annual changes in operation and maintenance (“O&M”) expense per customer relative to an index range. The CCM will be calculated based upon O&M expense per customer and the O&M base year will be Spire Alabama’s actual 2018 O&M expense with an adjustment to that base in 2019 of 2/3 of the 2018 CCM differential (amount below the CCM range in 2018) and an adjustment in 2020 of 1/3 of the 2018 CCM differential, with no adjustment to the base in 2021 and 2022. Spire Alabama’s 2018 actual rate year O&M expense will be inflation-adjusted using a new index range based on the June CPI-U each rate year plus or minus 1.50%. If rate year O&M expense falls within the index range, no adjustment is required. If rate year O&M expense exceeds the index range, three-quarters of the difference is returned to customers through future rate adjustments. To the extent rate year O&M is less than the index range, Spire Alabama benefits by one-half of the difference through future rate adjustments. Effective October 1, 2022, the Base Year O&M expense will be computed by averaging the actual O&M expenses for 2020,2021, and 2022. The Base CPI-U will be computed by averaging the August CPI-U for 2020,2021,2022. The Index will be computed by measuring the change from the Base CPI-U to the August CPI-U of the preceding completed fiscal year, less a factor of 1.50%. The index range will be computed by adjusting the index plus or minus 1.50%. If rate year O&M expense falls within the index range, no adjustment is required. If rate year O&M expense exceeds the index range, three-quarters of the difference is returned to customers through future rate adjustments. To the extent rate year O&M is less than the index range, Spire Alabama benefits by one-half of the difference through future rate adjustments. If a benefit is achieved, the Base Year and the Base CPI-U for the following year will each be reset to an average of the three preceding completed years. If a benefit is not achieved, the Base Year and Base CPI-U will not be updated. Certain items that fluctuate based on situations demonstrated to be beyond Spire Alabama’s control may be excluded from the CCM calculation. The RSE reduction for September 30, 2021, following the year end point of test was $2.2 to bring the expected rate of return on average common equity to within the allowed rate of return. The CCM benefit for rate year 2021 was $8.8. To mitigate the impact on ratepayers, Spire Alabama requested and received approval from the APSC to recover the 2021 CCM benefit over five years (with recognition of revenue only up to 24 months in advance of recovery). As a part of the annual update for RSE, on December 29, 2021, Spire Alabama filed an increase for rate year 2022 of $5.3. The 2021 RSE reduction of $2.2, the five-year recovery of the 2021 CCM benefit of $8.8 and the annual RSE increase of $5.3 were all effective on January 1, 2022. There was no RSE reduction in 2022 for the January 31, April 30, July 31 or September 30 quarterly points of test. Spire Alabama recorded a CCM benefit for rate year 2022 of $17.2. Similar to the rate year 2021 CCM benefit, Spire has requested and received approval to recover the rate year 2022 CCM benefit over five years. On October 26, 2022, Spire Alabama made its annual RSE rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2023, including net income and a calculation of allowed ROE. Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider which permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA rider, which is designed to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily to residential, small commercial and small industrial customers. Other non-temperature weather-related conditions that may affect customer usage are not included in the temperature adjustment.
The APSC approved an 120 On July 12, 2022, the APSC approved Spire Spire In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is affected by the following regulatory matters. Spire Gulf has similar rate regulation to Spire Alabama. Its RSE rate-setting mechanism was renewed in September 2021 for a four-year term through September 2025. The RSE allowed ROE range
Spire Mississippi utilizes a formula rate-making process under the Rate Stabilization Adjustment Rider (RSA)
121 In August 2018, the Spire STL Pipeline On 16. COMMITMENTS AND CONTINGENCIES Commitments The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through
A consolidated subsidiary is a
122 Contingencies
The Company and the Utilities account for contingencies, including environmental liabilities, in accordance with accounting standards under the loss contingency guidance of ASC Topic 450,Contingencies, when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In addition to matters noted below, the Company and the Utilities are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the statements of income, balance sheets, and statements of cash flows of the Company, Spire Missouri, or Spire Alabama. However, there is uncertainty in the valuation of pending claims and prediction of litigation results. The Company and the Utilities own and operate 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 Utilities’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, the Company or the Utilities may incur additional environmental liabilities that may result in additional costs, which may be material. In the natural gas industry, many gas distribution companies have incurred environmental liabilities associated with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took place. The Utilities each have former manufactured gas plant (MGP) operations in their respective service To date, costs incurred for all Spire MGP sites for investigation, remediation and monitoring have not been material. However, the amount of costs relative to future remedial actions at these and other sites is unknown and may be material. The actual future costs that Spire Missouri and Spire Alabama may incur could be materially higher or lower depending upon several factors, including whether remediation will be required, final selection and regulatory approval of any remedial actions, changing technologies and government regulations, the ultimate ability of other PRPs to pay, and any insurance recoveries. In 2020, Spire retained an outside consultant to conduct probabilistic cost modeling of its former MGP sites in Missouri and Alabama. The purpose of this analysis was to develop an estimated range of probabilistic future liability for each of their MGP sites. That analysis, completed in March 2021, provided a range of demonstrated possible future expenditures to investigate, monitor and remediate the former MGP sites. Spire Missouri and Spire Alabama have recorded their best estimates of the probable expenditures that relate to these matters. The amount remains immaterial, and Spire Missouri, Spire Alabama and the Company do not expect potential liabilities that may arise from remediating these sites to have a material impact on their future financial condition or results of operations. Spire Missouri Spire Missouri has identified 123 In conjunction with redevelopment of
In a letter dated June 29,2011, the Attorney General for the State of Missouri informed Spire Missouri that the Additionally, in correspondence dated November 30, 2016, Region 7 of the EPA has asserted that Spire Missouri is liable under Section Spire Missouri has notified its insurers that it seeks reimbursement for costs incurred in the past and future potential liabilities associated with On March 10, 2015, Spire Missouri received a Section In its western service area, Spire Missouri has
Spire Alabama Spire Alabama is in the chain of title of 124 In 2011, a In 2012, Spire Alabama responded to an EPA Request for Information Pursuant to Section 104 of CERCLA relating to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama was identified as a PRP under CERCLA for the cleanup of the site or costs the EPA incurs in cleaning up the site. At this point, Spire Alabama has not been provided information that would allow it to determine the extent, if any, of its potential liability with respect to the 35th Avenue Superfund Site and vigorously denies its inclusion as a PRP. Assessments were performed by the EPA of the former MGP sites in Gadsden and Anniston, and NFA letters were received after each assessment. Spire In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is aware of the following contingent
Spire The lease agreement covering the Company’s primary office space in St. Louis extends through February 2035, with an option to renew for an additional five years. Spire Alabama’s lease agreement for office space in Birmingham extends through January 2037, with an option to renew for two additional five-year terms. The lease agreement covering Spire Marketing and Spire Storage office space in Houston extends through December 2028, with options to terminate three years earlier or to renew for an additional five years. The renewal options in the St. Louis and Houston leases are reasonably certain to be exercised and are included in the lease term used to determine the right-of-use assets and lease liabilities. The Company and its Operating lease cost, cash flow and noncash information are shown in the
125 The following table shows year-end balance sheet and
On the Following is a maturity analysis by fiscal year for operating lease liabilities as of
There are The Company elected, for all asset classes, not to recognize right-of-use assets and lease liabilities for short-term leases. Instead, the lease payments for short-term leases are recognized in profit or loss on a straight-line basis over the lease term and variable lease payments are recognized in the period in which the obligation for those payments is incurred. The Company elected, for all asset classes, not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that lease component as a single lease component. The discount rate used for all the leases is the applicable incremental borrowing rate, which is the rate of
126 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements on accounting and financial disclosure with Spire’s, Spire Missouri’s, or Spire Alabama’s outside auditors that are required to be disclosed. Item 9A. Controls and Procedures Spire Evaluation of Disclosure 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-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Change in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Spire Missouri Evaluation of Disclosure 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-15(e) and Rule 15d-15(e) 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. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Spire Alabama Evaluation of Disclosure 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 the disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) 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. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The Management Reports on Internal Control Over Financial Reporting and the Reports of Independent Registered Public Accounting Firm are included in Item 8, Financial Statements and Supplementary Data. None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. Item 10. Directors, Executive Officers and Corporate Governance Information about:
is incorporated by reference from the discussion in our 2022 proxy statement under the heading “Governance.” |
In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters for our Audit, Compensation and Corporate Governance Committees are available under “Governance documents” on our website, as indicated above, and a copy will be sent to any shareholder upon written request.
Item 11. Executive Compensation
Information about director and executive compensation is incorporated by reference from the discussion in our 20192022 proxy statement under the headings “Directors’ compensation” and “Executive compensation.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information about about:
• | security ownership of certain beneficial owners and management and | |
• | aggregate information regarding the Company’s equity compensation plan |
is incorporated by reference from the discussion in our 20192022 proxy statement under “Beneficial ownership of Spire stock.”
The following table sets forth aggregate information regarding the Company’s equity compensation plans as of September 30, 2019:
Plan category |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
| Weighted average exercise price of outstanding options, warrants and rights |
|
| Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| |||
|
| (a) |
|
| (b) |
|
| (c) |
| |||
Equity compensation plans approved by security holders (1) |
|
| 366,300 |
|
| $— |
|
|
| 424,603 |
| |
Equity compensation plans not approved by security holders |
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 366,300 |
|
| $— |
|
|
| 424,603 |
|
|
|
Information regarding the above referenced plan is set forth in Note 3, Stock-Based Compensation, of the Notes to Financial Statements in Item 8 of this report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information about:
• | our policy and procedures for related party transactions and |
• |
|
|
is included in our 20192022 proxy statement under “Governance” and is incorporated by reference. There were no related party transactions in fiscal 2019.2022.
Item 14. Principal Accounting Fees and Services
Information about fees paid to our independent registered public accountant and our policy for pre-approval of services provided by our independent registered public accountant is incorporated by reference from our 20192022 proxy statement under “Fees of independent registered public accountant” and “Governance,” respectively.
Item 15. Exhibits, Financial Statement Schedules
(a) | (1)Financial Statements |
See Item 8, Financial Statements and Supplementary Data, filed herewith, for a list of financial statements.
| (2) | Financial Statement Schedules |
Schedules have been omitted because they are not applicable, related significance tests were not met, or the required data has been included in the financial statements or notes to financial statements.
| (3)Exhibits |
|
Exhibit Number | Description | |
2.01* | ||
3.01* | ||
3.02* | ||
3.03* | ||
3.04* | ||
3.05* | ||
3.06* | ||
3.07* | ||
4.01* | ||
4.02* | ||
4.03* | Laclede Gas Board of Directors’ Resolution dated August 28, 1986 which generally provides that the Board may delegate its authority in the adoption of certain employee benefit plan amendments to certain designated Executive Officers; filed as Exhibit 4.12 to Laclede Gas’ Annual Report on Form 10-K for the fiscal year ended September 30, 1991. | |
4.04* | Indenture dated as of November 1, 1993, between Alagasco and NationsBank of Georgia, National Association, Trustee, (“Alagasco 1993 Indenture”); filed as Exhibit 4(k) to Alagasco’s Registration Statement on Form S-3 (Registration No. 33-70466). |
4.05*3 | ||
| ||
|
Exhibit Number | Description | |
| ||
| ||
| ||
4.10*2 | ||
4.11* | ||
| ||
| ||
| ||
| ||
| 4.14* | |
| 4.15* | |
| ||
| 4.17* |
| 4.18* | |
| 4.19* | |
| ||
| 4.21* | |
| 4.22* |
Exhibit Number | Description | |
| 4.23* | |
| 4.24* | |
| 4.25* | |
| 4.26* | |
| 4.27* | |
4.28* | ||
4.29* | ||
| ||
4.31* | ||
4.32* | ||
4.33* | ||
4.34* | ||
4.35* | ||
4.36* | ||
4.37* | ||
4.38* | ||
4.39* | ||
4.40* | ||
4.41* | ||
4.42* | ||
4.43* | Fifth Supplement to Master Note Purchase Agreement, dated as of October 13, 2022, between Spire Alabama Inc. and certain institutional investors, filed as Exhibit 4.1 to the Company’s and Spire Alabama's Current Report on Form 8-K on October 19, 2022. |
Exhibit Number | Description | |
10.01*†3 | Form of Indemnification Agreement between Laclede Gas and its Directors and Officers; filed as Exhibit 10.13 to Laclede | |
10.02* | Salient Features of Laclede | |
10.03* | Amendment to Laclede | |
10.04*3 | ||
10.05*3 | ||
10.06* |
10.07* | ||
10.08* | ||
10.09*3 | ||
10.10*3 | ||
10.11*3 | ||
10.12* | ||
10.13* | ||
| 3 | |
| ||
| ||
10.15* | ||
10.16*3 | ||
10.17* | ||
10.18* | ||
10.19*3 |
Exhibit Number | Description | |
10.20* | ||
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| 10.25* | |
| 10.26* | |
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| 10.32* | |
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| 10.33* |
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| 10.34* | |
| 10.35* | |
| 10.36* |
* |
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| Incorporated herein by reference and made a part hereof. Spire Inc. File No. 1-16681. Spire Missouri Inc. File No. 1-1822. Spire Alabama Inc. File No. 2-38960. |
† |
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| The Laclede Group, Inc. changed its name to Spire Inc. effective April 28, 2016. |
2 | Alabama Gas Corporation (“Alagasco”) changed its name to Spire Alabama Inc. effective September 1, |
3 | Laclede Gas Company changed its name to Spire Missouri Inc. effective August 30, |
Bold items reflect management contracts or compensatory plans or arrangements.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Spire Inc. | |||||||
Date | November | By | /s/ Steven P. Rasche | ||||
Steven P. Rasche | |||||||
Executive Vice President | |||||||
and Chief Financial Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date | Signature | Title | ||||
November | /s/ Suzanne Sitherwood | Director, President and Chief Executive Officer | ||||
Suzanne Sitherwood | (Principal Executive Officer) | |||||
November | /s/ Steven P. Rasche | Executive Vice President and Chief Financial Officer | ||||
Steven P. Rasche | (Principal Financial and Accounting Officer) | |||||
November | /s/ Edward L. Glotzbach | Chairman of the Board | ||||
Edward L. Glotzbach | ||||||
November | /s/ Mark A. Borer | Director | ||||
Mark A. Borer | ||||||
November | /s/ Maria V. Fogarty | Director | ||||
Maria V. Fogarty | ||||||
November 16, 2022 | /s/ Carrie J. Hightman | Director | ||||
Carrie J. Hightman | ||||||
November | /s/ Rob L. Jones | Director | ||||
Rob L. Jones | ||||||
November | /s/ Brenda D. Newberry | Director | ||||
Brenda D. Newberry | ||||||
November | /s/ Stephen S. Schwartz | Director | ||||
Stephen S. Schwartz | ||||||
November | /s/ John P. Stupp Jr. | Director | ||||
John P. Stupp Jr. | ||||||
November | /s/ Mary Ann Van Lokeren | Director | ||||
Mary Ann Van Lokeren |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Spire Missouri Inc. | |||||||
Date | November | By | /s/ | ||||
| |||||||
Controller and Chief Accounting Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date | Signature | Title | ||||
November | /s/ Suzanne Sitherwood | Chairman of the Board | ||||
Suzanne Sitherwood | ||||||
November |
|
| ||||
|
| |||||
| /s/ Steven L. Lindsey | Director and Chief Executive Officer | ||||
Steven L. Lindsey | (Principal Executive Officer) | |||||
November 16, 2022 | /s/ Adam W. Woodard | Chief Financial Officer and Treasurer | ||||
| (Principal Financial Officer) | |||||
November 16, 2022 | /s/ Timothy W. Krick | Controller and Chief Accounting Officer | ||||
Timothy W. Krick | (Principal Accounting Officer) | |||||
November 16, 2022 | /s/ Scott B. Carter | Director and President | ||||
Scott B. Carter | ||||||
November 16, 2022 | /s/ Mark C. Darrell | Director | ||||
Mark C. Darrell | ||||||
November | /s/ | Director | ||||
Steven P. Rasche |
| |||||
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Spire Alabama Inc. | |||||||
Date | November | By | /s/ | ||||
| |||||||
Chief |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date | Signature | Title | ||||
November | /s/ Suzanne Sitherwood | Chairman of the Board | ||||
Suzanne Sitherwood | ||||||
November |
|
| ||||
|
| |||||
| /s/ Steven L. Lindsey | Director and Chief Executive Officer | ||||
Steven L. Lindsey | (Principal Executive Officer) | |||||
November 16, 2022 | /s/ Adam W. Woodard | Chief Financial Officer and Treasurer | ||||
| (Principal Financial Officer) | |||||
November 16, 2022 | /s/ Timothy W. Krick | Chief Accounting Officer | ||||
Timothy W. Krick | (Principal Accounting Officer) | |||||
November 16, 2022 | /s/ Scott B. Carter | Director | ||||
Scott B. Carter | ||||||
November 16, 2022 | /s/ Mark C. Darrell | Director | ||||
Mark C. Darrell | ||||||
November | /s/ | Director and President | ||||
Joseph B. Hampton | ||||||
November 16, 2022 | /s/ Steven P. Rasche | Director | ||||
Steven P. Rasche |
| |||||
145