UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.
FORM 10-K
ANNUAL REPORT
For the Fiscal Year Ended September 30, 2015
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
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| [ X ] | ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 20152017 |
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| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Periodtransition 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 | | The Laclede Group,Spire Inc.
700 Market Street St. Louis, MO 63101 Telephone Number 314-342-0878314-342-0500
| | Missouri | | 74-2976504 |
| 1-1822 | | Laclede Gas CompanySpire Missouri Inc.
700 Market Street St. Louis, MO 63101 Telephone Number 314-342-0878314-342-0500
| | Missouri | | 43-0368139 |
| 2-38960 | | Spire Alabama Gas CorporationInc. 2101 6th Avenue North Birmingham, AlabamaAL 35203 Telephone Number 205-326-8100
| | Alabama | | 63-0022000 |
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):
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| | Title of Each Class each class | Name of Each Exchange On Which Registered
each exchange on which registered |
The Laclede Group,Spire Inc. | Common Stock $1.00 par value | New York Stock Exchange |
Laclede Gas CompanySpire Missouri Inc. | None | Not applicable |
Spire Alabama Gas CorporationInc. | None | Not Applicable |
Securities registered pursuant to Section 12(g) of the Exchange Act:
The Laclede Group, Inc.Yes [ ]No [ X ]Laclede Gas CompanyYes [ ]No [ X ]
Alabama Gas CorporationYes [ ]No [ X ] |
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| Spire Inc. | Yes [ ] | No [ X ] | |
| Spire Missouri Inc. | Yes [ ] | No [ X ] | |
| Spire Alabama Inc. | Yes [ ] | No [ X ] | |
Indicate by check mark whether each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Act of 1933, as amended.
The Laclede Group, Inc.Yes [ X ]No [ ]Laclede Gas CompanyYes [ ]No [ X ]
Alabama Gas CorporationYes [ ]No [ X ]
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| Spire Inc. | Yes [ X ] | No [ ] | |
| Spire Missouri Inc. | Yes [ ] | No [ X ] | |
| Spire Alabama Inc. | Yes [ ] | No [ X ] | |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the act.Exchange Act.
The Laclede Group, Inc.Yes [ ]No [ X ]Laclede Gas CompanyYes [ ]No [ X ]
Alabama Gas CorporationYes [ ]No [ X ] |
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| Spire Inc. | Yes [ ] | No [ X ] | |
| Spire Missouri Inc. | Yes [ ] | No [ X ] | |
| Spire Alabama Inc. | Yes [ ] | No [ X ] | |
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.
The Laclede Group, Inc.Yes [ X ] No [ ]Laclede Gas CompanyYes [ X ] No [ ]
Alabama Gas CorporationYes [ X ]No [ ] |
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| Spire Inc. | Yes [ X ] | No [ ] | |
| Spire Missouri Inc. | Yes [ X ] | No [ ] | |
| Spire Alabama Inc. | Yes [ X ] | No [ ] | |
Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
The Laclede Group, Inc. Yes [ X ] No [ ] Laclede Gas CompanyYes [ X ] No [ ]
Alabama Gas Corporation Yes [ X ] |
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| Spire Inc. | Yes [ X ] | No [ ] | |
| Spire Missouri Inc. | Yes [ X ] | No [ ] | |
| Spire Alabama Inc. | Yes [ X ] | No [ ] | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
The Laclede Group, Inc.[ X ]Laclede Gas Company[ X ]
Alabama Gas Corporation[ X ] |
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| Spire Inc. | [ X ] | | |
| Spire Missouri Inc. | [ X ] | | |
| Spire Alabama Inc. | [ X ] | | |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| | Large accelerated filer | | Accelerated filer | | Non- accelerated filer | | Smaller reporting company | | Emerging growth company |
The Laclede Group,Spire Inc. | X | | | | | | | | |
Laclede Gas CompanySpire Missouri Inc. | | | | | X | | | | |
Spire Alabama Gas CorporationInc. | | | | | X | | | | |
If an emerging growth company, indicate by check mark if the 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.
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| 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).
The Laclede Group, Inc.Yes [ ]No [ X ]Laclede Gas CompanyYes [ ]No [ X ]
Alabama Gas CorporationYes [ ]No [ X ]
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| Spire Inc. | Yes [ ] | No [ X ] | |
| Spire Missouri Inc. | Yes [ ] | No [ X ] | |
| Spire Alabama Inc. | Yes [ ] | No [ X ] | |
The aggregate market value of the voting stock held by non-affiliates of The Laclede Group,Spire Inc. amounted to $2,145,801,563$2,989,327,838 as of March 31, 2015.2017. All of Laclede Gas Company'sSpire Missouri Inc.’s and Spire Alabama Gas Corporation'sInc.’s equity securities are owned by The Laclede Group,Spire Inc., their parent company and a 1934 Act Reporting Company. Laclede Gas Companyreporting company under the Exchange Act.
The number of shares outstanding of each registrant’s common stock as of November 10, 2017 was as follows:
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| Spire Inc. | | Common Stock, par value $1.00 per share | | 48,266,858 |
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| Spire Missouri Inc. | | Common Stock, par value $1.00 per share (all owned by Spire Inc.) | | 24,577 |
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| Spire Alabama Inc. | | Common Stock, par value $0.01 per share (all owned by Spire Inc.) | | 1,972,052 |
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This combined Form 10-K represents separate filings by Spire Inc., Spire Missouri Inc., and Spire Alabama Gas CorporationInc. 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 registrant, 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
The number of shares outstanding of each registrant’s common stock as of November 20, 2015 was as follows:
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The Laclede Group, Inc. | | Common Stock, par value $1.00 per share | | 43,350,411 |
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Laclede Gas Company | | Common Stock, par value $1.00 per share (all owned by The Laclede Group, Inc.) | | 24,577 |
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Alabama Gas Corporation | | Common Stock, par value $0.01 per share (all owned by The Laclede Group, Inc.) | | 1,972,052 |
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Document Incorporated by Reference:
Portions of Proxy Statementproxy statement for Laclede Group,Spire Inc. to be filed on or about December 18, 201513, 2017 — Part III.Exhibit Index is found on page 145.
Certain exhibits as indicated in Part IV.
This combined Form 10-K represents separate filings by The Laclede Group, Inc. Laclede Gas Company, and Alabama Gas Corporation. 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 registrant, except that information relating to Laclede Gas Company and Alabama Gas Corporation is also attributed to The Laclede Group, Inc.
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| TABLE OF CONTENTS | Page No. |
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GLOSSARY OF KEY TERMS AND ABBREVIATIONS
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Alagasco | Alabama Gas Corporation or Alabama Utility | LNG | Liquefied natural gas |
Alabama UtilityUtilities | Spire Alabama Gas Corporation or Alagasco; the utility serving the Alabama regionand Spire Gulf | MGE | Missouri Gas EnergyMMBtu | Million British thermal units |
| AOCI | Accumulated other comprehensive income or loss | | MoPSC | Missouri Utilities | Laclede Gas Company (including MGE), the utilities serving the Missouri regionPublic Service Commission |
| APSC | Alabama Public Service Commission | MMBtu | Million British thermal unitsMSPSC | Mississippi Public Service Commission |
| ASC | Accounting Standards Codification | MoPSC | Missouri Public Service Commission |
APUC | Algonquin Power and Utilities Corp. | MRT | Enable Mississippi River Transmission LLC |
Bcf | Billion cubic feet | NEG | New England Gas Company |
CAM | Cost Allocation Manual | NYSE | New York Stock Exchange |
CCMASU | Cost Control MechanismAccounting Standards Update | | NYMEX | New York Mercantile Exchange, Inc. |
CNGBcf | Compressed Natural GasBillion cubic feet | | O&M | Operation and maintenance expense |
| BVCP | Brownfields/Voluntary Cleanup Program | | OCI | Other comprehensive income or loss |
DOECCM | DepartmentCost Control Measure | | OPC | Missouri Office of Energythe Public Counsel |
| Degree days | The average of a day’s high and low temperature below 65, subtracted from 65, multiplied by the number of days impacted | | OTCBB | Over-the-counter bulletin boardOver-the-Counter Bulletin Board |
| EPA | US Environmental Protection Agency | PEPL | Panhandle Eastern Pipe Line Company, LPPGA | Purchased Gas Adjustment |
| EPS | Earnings per share | | PRP | Potential Responsible Party |
| ESR | Enhanced Stability Reserve | PGA | Purchased Gas Adjustment |
ETERSE | Energy Transfers Equity, LP | PP&E | Property, plant,Rate Stabilization and equipmentEqualization |
| FASB | Financial Accounting Standards Board | REX | Rockies Express Pipeline, LLCSEC | US Securities and Exchange Commission |
| FERC | Federal Energy Regulatory Commission | RSE | Rate Stabilization and Equalization |
FIFOSpire Alabama | First-in, first-out | SEC | US Securities and Exchange CommissionSpire Alabama Inc. (formerly Alabama Gas Corporation) |
| GAAP | Accounting principles generally accepted in the United States of America | SPA | Stock Purchase Agreement with Energen to purchase 100% of the common shares of Alabama Gas Corporation (Alagasco) |
Gas Utility | Operating segment including the regulated operations of Laclede Gas Company and Alabama Gas Corporation | Spire EnergySouth | Laclede Group's compressed natural gas fueling solutions businessSpire EnergySouth Inc. (formerly EnergySouth, Inc.), parent of Spire Gulf and Spire Mississippi |
| Gas Marketing | Operating segmentSegment including LER,Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities | Southern Natural | Spire Gulf | Spire Gulf Inc. (formerly Mobile Gas Service Corporation) |
| Gas Utility | Southern Natural Gas Company, LLCSegment including the regulated operations of the Utilities | | Spire Marketing | Spire Marketing Inc. (formerly Laclede Energy Resources, Inc.) |
| GSA | Gas supply adjustmentSupply Adjustment | Southern Star | Southern Star CentralSpire Mississippi | Spire Mississippi Inc. (formerly Willmut Gas Pipeline, Inc.& Oil Company) |
| ICE | Intercontinental Exchange | SUG | Southern Union CompanySpire Missouri | Spire Missouri Inc. (formerly Laclede Gas Company) |
| ISRS | Infrastructure System Replacement Surcharge | TGIT | Tallgrass Interstate Gas Transmission, LLC |
LERSpire Missouri East | Laclede Energy Resources, Inc. | TSR | Total shareholder return |
LG | The Laclede Group, Inc. | Transco | Transcontinental Gas Pipe Line Company, LLC |
LGC | Laclede Gas Company | US | United StatesSpire Missouri’s eastern service territory |
| LIBOR | London Inter-Bank Offered Rate | | Spire Missouri West | Spire Missouri’s western service territory (formerly Missouri Gas Energy, or MGE) |
LIFOLNG | Last-in, first-outLiquefied natural gas | | TSR | Total shareholder return |
| MDNR | Missouri Department of Natural Resources | | US | United States |
| MGP | Manufactured gas plant | | Utilities | Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth |
| Missouri Utilities | Spire Missouri, including Spire Missouri East and Spire Missouri West, the utilities serving the Missouri region | | | |
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PART I
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results to differ materially from those contemplated in any forward-looking statement are:
Weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country;
Volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments;
The impact of changes and volatility in natural gas prices on our competitive position in relation to suppliers of alternative heating sources, such as electricity;
Changes in gas supply and pipeline availability, including decisions by natural gas producers to reduce production or shut in producing natural gas wells, expiration of existing supply and transportation arrangements that are not replaced with contracts with similar terms and pricing, as well as other changes that impact supply for and access to the markets in which our subsidiaries transact business;
The recent acquisitions may not achieve their intended results, including anticipated cost savings;
The Spire STL Pipeline project may be hindered or halted by regulatory, legal, or other obstacles;
Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affectingaffecting:
allowed rates of return,
incentive regulation,
industry structure,
purchased gas adjustment provisions,
rate design structure and implementation,
regulatory assets,
non-regulated and affiliate transactions,
franchise renewals,
environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change and pipeline safety,
taxes,
pension and other postretirement benefit liabilities and funding obligations, or
accounting standards;
The results of litigation;
The availability of and access to, in general, of 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 or credit 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 obligations under cross-default;obligation;
Capital and energy commodity market conditions, including the ability to obtain funds with reasonable terms for necessary capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;
Discovery of material weakness in internal controls; and
Employee workforce issues, including but not limited to labor disputes and future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets.
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.
ITEMItem 1. BUSINESSBusiness
OVERVIEW
Spire Inc. (Spire or the Company) was formerly The Laclede Group, Inc. (Laclede Group or the Company), an entity formed in 2000 and,that, effective October 1, 2001, became the public utility holding company for Laclede Gas Company (Laclede GasSpire Missouri Inc. (Spire Missouri or the Missouri Utilities). Laclede GasSpire Missouri was founded in 1857 as The Laclede Gas Light Company, and it was listed on the New York Stock Exchange (NYSE) in 1889, making the Company successor to the eighth longest listed stock on the NYSE. The Laclede Gas Light Company was renamed Laclede Gas Company in 1950.1950 and then Spire Missouri Inc. on August 30, 2017. Effective August 31, 2014, the Company purchased 100% of the common shares of Alabama Gas Corporation, which was renamed Spire Alabama Inc. (Spire Alabama) on September 1, 2017. On September 12, 2016, the Company purchased 100% of the common shares of EnergySouth, Inc., along with its wholly owned subsidiaries, Mobile Gas Service Corporation and Willmut Gas & Oil Company, and on or about August 30, 2017, those companies were renamed Spire EnergySouth Inc. (Spire EnergySouth), Spire Gulf Inc. (Spire Gulf), and Spire Mississippi Inc. (Spire Mississippi), respectively.
Laclede GroupSpire is committed to transforming its business and pursuing growth by:through 1) growing its Gas Utility business through prudent investmentorganically, 2) investing in infrastructure, upgrades and organic growth initiatives; 2)3) acquiring and integrating, gas utilities; 3) modernizing its gas assets; and 4) investing in innovation and emerging markets.technology.
The Company has two key business segments: Gas Utility and Gas Marketing.
The Gas Utility segment includes the regulated operations of Laclede GasSpire Missouri, Spire Alabama, Spire Gulf and Alabama Gas Corporation (Alagasco or the Alabama Utility)Spire Mississippi (collectively, the Utilities). Laclede Gas,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 more than 1.1 million residential, commercial and industrial customers, and is headquartered in St. Louis, Missouri. Laclede Gas servescustomers. For utility regulatory purposes Spire Missouri has two regions, one serving St. Louis and eastern Missouri (Spire Missouri East) and through Missouri Gas Energy (MGE),the other serving Kansas City and western Missouri. MGE was acquired by LacledeMissouri (Spire Missouri West, formerly Missouri Gas on September 1, 2013. AlagascoEnergy, or MGE). 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. The Company purchased 100%Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of the common shares of Alagasco from Energen Corporation (Energen) effective on August 31, 2014.natural gas to 0.1 million customers in southern Alabama and south central Mississippi.
The Gas Marketing segment includes Spire Marketing Inc. (Spire Marketing, formerly known as Laclede Energy Resources, Inc. (LER)), a wholly owned subsidiary engaged in the marketing of natural gas and related activities on a non-regulated basis.
As of September 30, 2015, Laclede Group2017, Spire had 3,0783,279 employees, Laclede Gas had 2,169 employees (including 22 employees dedicated to LERincluding 2,271 for Spire Missouri and other subsidiaries of the Company), and Alagasco had 909 employees.819 for Spire Alabama.
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. Consolidated operating revenues contributed by each segment for the last three fiscal years are presented below. For more detailed financial information regarding the segments, see Note 14, Information by Operating Segment, of the Notes to Financial Statements in Item 8. | | | (Dollars in millions) | 2015 | | 2014 | | 2013 | |
| (In millions) | | 2017 | | 2016* | | 2015 |
| Gas Utility | $ | 1,891.8 |
| | $ | 1,462.6 |
| | $ | 847.2 |
| $ | 1,660.0 |
| | $ | 1,457.2 |
| | $ | 1,891.8 |
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| Gas Marketing | 84.6 |
| | 164.6 |
| | 169.8 |
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| Gas Marketing and other | | 80.7 |
| | 80.1 |
| | 84.6 |
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| Total Operating Revenues | $ | 1,976.4 |
| | $ | 1,627.2 |
| | $ | 1,017.0 |
| $ | 1,740.7 |
| | $ | 1,537.3 |
| | $ | 1,976.4 |
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2015* 2016 Gas Utility operating results include twelve months each of MGE and Alagasco revenues. 2014 Gas Utility operating results include twelve months of MGESpire EnergySouth revenues and one month of Alagasco revenues. 2013 Gas Utility operating results include one month of MGE revenues.since the September 12, 2016 acquisition date.
Laclede Group’s
Spire’s common stock is listed on the New York Stock Exchange (NYSE)NYSE and trades under the ticker symbol “LG.“SR.” The following table reflects Laclede GroupSpire shares issued during the two most recent fiscal years:
| | | | 2015 | | 2014 | 2017 | | 2016 |
| Common Stock Issuance | — |
| | 10,350,000 |
| 2,504,684 |
| | 2,185,000 |
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| Dividend Reinvestment and Stock Purchase Plan (DRIP) | 31,166 |
| | 33,667 |
| 23,731 |
| | 22,878 |
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| Equity Incentive Plan | 125,441 |
| | 97,902 |
| 84,186 |
| | 107,752 |
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| Total Shares Issued | 156,607 |
| | 10,481,569 |
| 2,612,601 |
| | 2,315,630 |
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Shares were issued during 2017 in conjunction with the conversion of equity units that were issued in 2014 to help fund the Spire Alabama acquisition. Shares were issued during 2016 to partially fund the Spire EnergySouth acquisition. During fiscal 20152017 and 2014,2016, shares were issued at historically consistent levels for Laclede Group'sSpire’s DRIP and Equity Incentive Plan. Shares were issued during 2014 to effect the Alagasco acquisition.
During fiscal 2015,2017 and 2016, neither Laclede GasSpire Missouri nor AlagascoSpire Alabama issued shares to Laclede Group, but during fiscal 2014 Laclede Gas issued 28 shares.Spire. For more detailed common stock information of Laclede Group, Laclede GasSpire, Spire Missouri and Alagasco,Spire Alabama, see Item 5. Market for Registrant'sRegistrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. The information Laclede Group, Laclede GasSpire, Spire Missouri and AlagascoSpire Alabama file or furnish to the 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 "SEC Filings“Filings and Annual Reports"Reports” in the Investor RelationsInvestors section of
Laclede Group's Spire’s website, www.TheLacledeGroup.comSpireEnergy.com, as soon as reasonably practical after the information is filed with or furnished to the SEC. Information contained on Laclede Group'sSpire’s website is not incorporated by reference in this report.
GAS UTILITY
Natural Gas Supply
The Utilities'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'Utilities’ primary objectives.
Laclede Gas
Laclede GasSpire 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. In easternSpire Missouri Laclede GasEast utilizes both Mid-Continent and Gulf Coast 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. In westernSpire Missouri West utilizes both Mid-Continent and Rocky Mountain gas sources are utilized by MGE to provide a level of supply diversity that accesses low cost supplies while providing a natural gas price arbitrage. supplies.
In fiscal year 2015, Laclede Gas2017, Spire Missouri purchased natural gas from 4140 different suppliers to meet its total service area current gas sales and storage injection requirements. Laclede GasSpire 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 Laclede GasSpire Missouri for delivery to its service area through the Enable Mississippi River Transmission LLC (MRT) system totaled 60.545.9 billion cubic feet (Bcf). Laclede GasSpire Missouri also holds firm transportation on several other interstate pipeline systems that provide access to gas supplies upstream of MRT. In addition to natural gas deliveries from MRT, 57.249.7 Bcf was purchased on the Southern Star Central Gas Pipeline, Inc. (Southern Star), 10.0 Bcf was purchased on the MoGas Pipeline LLC (MoGas), 2.93.9 Bcf was purchased on the Tallgrass Interstate Gas Transmission, LLC (TGIT) system, 1.18.4 Bcf was purchased on the Panhandle Eastern Pipe Line Company, LP (PEPL) system, and 0.61.4 Bcf was purchased on the Rockies Express Pipeline, LLC (REX) system. Some of Laclede Gas’Spire Missouri’s commercial and industrial customers purchased their own gas with Laclede GasSpire Missouri transporting 42.944.8 Bcf to them through its distribution system.
The fiscal year 20152017 peak day send out of natural gas to Laclede GasSpire Missouri customers, in both eastern and western Missouri, including transportation customers, occurred on January 7, 2015.December 18, 2016. The average temperature was 7.08 degrees Fahrenheit in St. Louis and 8.0-3 degrees Fahrenheit in Kansas City. On that day, the Missouri Utilities'Utilities’ customers consumed 1.671.65 Bcf of natural gas. For eastern Missouri, about 76% of this peak day demand was met with natural gas transported to St. Louis through the MRT, MoGas Pipeline LLC, and Southern Star transportation systems, and the other 24% was met from Laclede Gas'Spire Missouri’s on-system storage and peak shaving resources. For western Missouri, this peak day demand was met with natural gas transported to Kansas City through the Southern Star, PEPL, TGIT, and REX transportation systems.
Alagasco
Alagasco’sSpire Alabama’s distribution system is connected to two major interstate natural gas pipeline systems, Southern Natural Gas Company, L.L.C. (Southern Natural Gas) and Transcontinental Gas Pipe Line Company, LLC (Transco). It is also connected to two intrastate natural gas pipeline systems.
AlagascoSpire 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 Alagasco’sSpire 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 year 2015, Alagasco2017, Spire Alabama purchased natural gas from 1514 different suppliers to meet current gas sales, storage injection, and LNGliquefied natural gas (LNG) liquefaction requirements, of which sixseven are under long-term supply agreements. Approximately 62.758.0 Bcf was transported by Southern Natural Gas, 7.14.4 Bcf by Transco, and 5.35.6 Bcf through intrastate pipelines to the AlagascoSpire Alabama delivery points for its residential, commercial, and industrial customers.
The fiscal year 20152017 peak day send out for AlagascoSpire Alabama was 0.6 Bcf on January 7, 2015,2017, when the average temperature was 22.031 degrees Fahrenheit in Birmingham, of which 84%100% was met with supplies transported through Southern Natural Gas, Transco, and intrastate facilities, and 16% was met with supplies from Alagasco'sone of the four liquefied natural gas (LNG)LNG peak shaving facilities.
Natural Gas Storage
Laclede Gas
For its eastern service area, Laclede GasSpire Missouri has a contractual right to store 21.6 Bcf of gas in MRT’s storage facility located in Unionville, Louisiana, and for its western service area 16.3 Bcf of gas storage in Southern StarStar’s system storage facilities located in Kansas and Oklahoma, as well asand 1.4 Bcf of firm storage on PEPL’s system storage. MRT’s tariffs allow injections into storage from May 16 through November 15 and require the withdrawal from storage of all but 2.1 Bcf from November 16 through May 15. Southern Star tariffs allow both injections and withdrawals into storage year round with ratchets that restrict the associated flows dependent upon the underlying inventory level per the contracts.
In addition, in easternSpire Missouri Laclede GasEast 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 maximum annual net withdrawals of approximately 4.0 Bcf of natural gas based on the inventory level that Laclede GasSpire Missouri plans to maintain.
Alagasco
AlagascoSpire Alabama has a contractual right to store 12.5 Bcf of gas with Southern Natural Gas, 0.2 Bcf of gas with Transco and 0.2 Bcf of gas with Tennessee Gas Pipeline. In addition, the AlagascoSpire Alabama has 1.8 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 South Pipeline Company, LP, and Sempra’s Bay Gas Storage.
Regulatory Matters
For details on regulatory matters, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. Other Pertinent Matters
Laclede GasSpire Missouri is the only distributor of natural gas within its franchised service areas, while AlagascoSpire Alabama is the main distributor of natural gas in its service areas. 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, forcustomers. For the Missouri Utilities, competition also comes from district steam systems in the downtown areas of both St. Louis and Kansas City, and for Alagasco,Spire Alabama, from municipally or publicly owned gas distributors located adjacent to its service territory. Coal is price competitive as a fuel source for very large boiler plant loads, but environmental requirements for coal 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. In certain cases, district steam has been competitive with gas for downtown St. Louis and Kansas City area heating users.
Laclede Gas' residential,Residential, commercial, and small industrial markets represented approximately 91% and 82% of itsfiscal 2017 operating revenuerevenues for fiscal 2015. Alagasco's residential, commercial,Spire Missouri and small industrial markets represented approximately 79% of its operating revenue for the twelve months ended September 30, 2015.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'Utilities’ competitive exposures are presently limited to space and water heating applications. Certain alternative heating systems can be cost competitive in traditional markets.
Laclede GasSpire 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 the Missouri Utilities would have received under their regular sales rates. Alagasco’sSpire Alabama’s transportation tariff allows the Alabama Utilityit to transport gas for large commercial and industrial customers rather than buying and reselling it to them and is based on the Alabama Utility’sSpire Alabama’s sales profit margin so that operating margins are unaffected. During 2015,fiscal 2017, substantially all of Alagasco’sSpire 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'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
As of September 30, 2015, the Company had approximately 1,897 employees represented by organized labor unions. 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 in production that could negatively impact the Company’s results of operations and cash flows.
The following table presents the Company'sCompany’s various labor agreements as of September 30, 2015:2017:
| | | Union | Local | Employees Covered | Contract Start Date | Contract End Date | Local | Employees Covered | Contract Start Date | Contract End Date |
| Laclede Gas Company (eastern Missouri) | | |
| Spire Missouri | | |
| United Steel, Paper and Forestry, Rubber Manufacturing, Allied-Industrial and Service Workers International Union (USW) | 884 | 60 | August 1, 2015 | July 31, 2018 | 884 | 64 | August 1, 2015 | July 31, 2018 |
| USW | 11-6 | 858 | August 1, 2015 | July 31, 2018 | 11-6 | 932 | August 1, 2015 | July 31, 2018 |
| USW | 11-194 | 142 | August 1, 2015 | July 31, 2018 | 11-194 | 85 | August 1, 2015 | July 31, 2018 |
| | | |
| Missouri Gas Energy (western Missouri) | | |
| USW | 12561 | 126 | June 1, 2014 | July 31, 2016 | 12561 | 130 | August 16, 2016 | July 31, 2019 |
| USW | 14228 | 38 | June 1, 2014 | July 31, 2016 | 14228 | 41 | August 16, 2016 | July 31, 2019 |
| USW | 11-267 | 32 | June 1, 2014 | July 31, 2016 | 11-267 | 27 | August 16, 2016 | July 31, 2019 |
| 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 | 193 | June 1, 2014 | July 31, 2016 | 781-Kansas City | 189 | August 16, 2016 | July 31, 2019 |
| 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 | 49 | June 1, 2014 | July 31, 2016 | 781-Monett | 56 | August 16, 2016 | July 31, 2019 |
| International Brotherhood of Electrical Workers (IBEW) | 53 | 4 | April 30, 2014 | July 31, 2016 | |
| Total Spire Missouri | | | 1,524 | |
| | | |
| Total Laclede Gas Company | | 1,502 | | |
| | | |
| Alabama Gas Corporation | | |
| Spire Alabama | | Spire Alabama | |
| USW | 12030 | 212 | December 19, 2014 | April 30, 2017 | 12030 | 200 | May 1, 2017 | April 30, 2020 |
| USW | 12030-A | 67 | May 1, 2014 | April 30, 2017 | 12030-A | 53 | May 1, 2017 | April 30, 2020 |
| United Association of Gas Fitters | 548 | 116 | July 1, 2013 | June 30, 2016 | 548 | 122 | July 1, 2016 | April 30, 2019 |
| Total Spire Alabama | | | 375 | |
| | | |
| Total Alabama Gas Corporation | | 395 | | |
| Spire Gulf | | |
| USW | | 3-541 | 65 | December 1, 2013 | November 30, 2017 |
| | | |
| Total Spire | | | 1,964 | |
Operating Revenues and Customer Information
RevenuesThe following information about revenues and therms sold and transported for the Gas Utility segment for the last three fiscal years are as follows (before intersegment eliminations):, and annual average numbers of customers, includes data of acquired utilities for only the period of ownership (beginning September 12, 2016 for the utilities of Spire EnergySouth).
|
| | | | | | | | | | | | |
| Gas Utility Operating Revenues | | | | | |
| (Dollars in millions) | 2015 | | 2014* | | 2013** |
| Residential | $ | 1,263.1 |
| | $ | 974.3 |
| | $ | 556.8 |
|
| Commercial & Industrial | 462.3 |
| | 357.1 |
| | 184.1 |
|
| Interruptible | 2.3 |
| | 2.1 |
| | 3.5 |
|
| Transportation | 92.2 |
| | 32.4 |
| | 15.3 |
|
| Off-System and Other Incentive | 76.2 |
| | 79.5 |
| | 90.2 |
|
| Provisions for Refunds and Other | (0.3 | ) | | 22.4 |
| | 7.9 |
|
| Total Utility Operating Revenues | $ | 1,895.8 |
| | $ | 1,467.8 |
| | $ | 857.8 |
|
| | | | | | |
| Gas Utility Therms Sold and Transported | | |
| | |
| (In millions) | 2015 | | 2014* | | 2013** |
| Residential | 1,065.1 |
| | 952.9 |
| | 496.6 |
|
| Commercial & Industrial | 491.6 |
| | 435.6 |
| | 229.6 |
|
| Interruptible | 3.6 |
| | 3.5 |
| | 3.1 |
|
| Transportation | 989.0 |
| | 484.6 |
| | 160.4 |
|
| System Therms Sold and Transported | 2,549.3 |
| | 1,876.6 |
| | 889.7 |
|
| Off-System | 193.5 |
| | 125.8 |
| | 229.4 |
|
| Total Utility Therms Sold and Transported | 2,742.8 |
| | 2,002.4 |
| | 1,119.1 |
|
| | | | | | | |
| * | Includes Alagasco for the one month ended September 30, 2014. |
| ** | Includes MGE for the one month ended September 30, 2013. |
The following table presents our Gas Utility customers for the last three fiscal years, based on an annual average number of customers:
| | | Gas Utility Operating Revenues | | Gas Utility Operating Revenues | | | | | |
| (In millions) | | (In millions) | 2017 | | 2016 | | 2015 |
| Residential | | Residential | $ | 1,084.5 |
| | $ | 979.0 |
| | $ | 1,263.1 |
|
| Commercial & Industrial | | Commercial & Industrial | 389.2 |
| | 331.3 |
| | 462.3 |
|
| Interruptible | | Interruptible | 5.1 |
| | 2.0 |
| | 2.3 |
|
| Transportation | | Transportation | 99.8 |
| | 93.1 |
| | 92.2 |
|
| Off-System and Other Incentive | | Off-System and Other Incentive | 67.9 |
| | 50.7 |
| | 76.2 |
|
| Provisions for Refunds and Other | | Provisions for Refunds and Other | 21.4 |
| | 3.3 |
| | (0.3 | ) |
| Total Gas Utility Operating Revenues | | Total Gas Utility Operating Revenues | $ | 1,667.9 |
| | $ | 1,459.4 |
| | $ | 1,895.8 |
|
| | | | | | | | |
| Gas Utility Therms Sold and Transported | | Gas Utility Therms Sold and Transported | | |
| | |
| (In millions) | | (In millions) | 2017 | | 2016 | | 2015 |
| Residential | | Residential | 866.2 |
| | 867.5 |
| | 1,065.1 |
|
| Commercial & Industrial | | Commercial & Industrial | 446.7 |
| | 420.4 |
| | 491.6 |
|
| Interruptible | | Interruptible | 12.6 |
| | 4.6 |
| | 3.6 |
|
| Transportation | | Transportation | 1,467.5 |
| | 1,089.8 |
| | 989.0 |
|
| System Therms Sold and Transported | | System Therms Sold and Transported | 2,793.0 |
| | 2,382.3 |
| | 2,549.3 |
|
| Off-System | | Off-System | 175.6 |
| | 183.3 |
| | 193.5 |
|
| Total Gas Utility Therms Sold and Transported | | Total Gas Utility Therms Sold and Transported | 2,968.6 |
| | 2,565.6 |
| | 2,742.8 |
|
| | | | | | | | | | | | | |
| Gas Utility Customers | Gas Utility Customers | 2015* | | 2014** | | 2013*** | Gas Utility Customers | 2017 | | 2016 | | 2015 |
| Residential | Residential | 1,434,584 |
| | 1,418,422 |
| | 1,022,026 |
| Residential | 1,550,777 |
| | 1,540,366 |
| | 1,434,584 |
|
| Commercial & Industrial | Commercial & Industrial | 132,388 |
| | 133,799 |
| | 99,671 |
| Commercial & Industrial | 133,864 |
| | 137,450 |
| | 132,388 |
|
| Interruptible | Interruptible | 18 |
| | 18 |
| | 17 |
| Interruptible | 64 |
| | 42 |
| | 18 |
|
| Transportation | Transportation | 796 |
| | 795 |
| | 513 |
| Transportation | 827 |
| | 824 |
| | 796 |
|
| Total Utility Customers | 1,567,786 |
| | 1,553,034 |
| | 1,122,227 |
| |
| | | | | | | | |
| * | Includes MGE and Alagasco for the twelve months ended September 30, 2015. | |
| ** | Includes Alagasco for the month of September 2014. The number of customers for 2014 is based on average customers over the twelve months ended September 30, 2014, while only including Alagasco customers for the month of ownership. Restated to align methodology. | |
| *** | Includes MGE for the one month ended September 30, 2013. Restated to align methodology. | |
| Total Gas Utility Customers | | Total Gas Utility Customers | 1,685,532 |
| | 1,678,682 |
| | 1,567,786 |
|
Total annual average number of customercustomers for Laclede GasSpire Missouri and AlagascoSpire Alabama for fiscal 20152017 was 1,148,3391,161,051 and 419,447,420,816, respectively.
Laclede GasSpire Missouri has franchises in nearly all the communities where it provides service with terms varying from five years to an indefinite duration. Generally, a franchise allows Laclede Gas, among other things,is essentially a municipal permit to install 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 Laclede Gas'Spire Missouri’s current public utility businesses in the state of Missouri. In recent years, although certain franchise agreements have expired, including Clayton, North Kansas City, Cameron, and Riverside, Laclede GasSpire Missouri has continued to provide service in those communities without formal franchises.
AlagascoSpire Alabama has franchises in nearly all the communities where it provides service with terms varying from five years to an indefinite duration. Generally, a franchise allows Alagasco, among other things,is essentially a municipal permit to install 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 Alagasco's currentSpire Alabama’s public utility business in the state of Alabama.
GAS MARKETING
LERSpire 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'Utilities’ traditional service areas. During fiscal year 2015, LER2017, Gas Marketing utilized 17over 20 interstate and intrastate pipelines and 107over 100 suppliers to market natural gas to itsmore than 200 retail customers and 100 wholesale customers, primarily in the Midwest. LER served more than 225 retail customers and 120 wholesale customers.central United States (US). Through its retail operations, LERSpire Marketing offers natural gas marketing services to large commercial and industrial customers, while its wholesale business consists of buying and selling natural gas to other marketers, producers, utilities,pipelines, power generators, pipelines,municipalities, storage operators, and municipalities.utility companies. Wholesale activities currently represent a majority of LER’sthe total Gas Marketing business.
In the course of its business, LERSpire 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, LERSpire Marketing contracts for transportation capacity on various pipelines from both pipeline companies and through the secondary capacity market from third parties. Throughout fiscal year 2015, LER2017, Spire Marketing held approximately 0.40.68 Bcf per day of firm transportation capacity. In addition, to ensure reliability of service and to provide operational flexibility, LERSpire 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 LERit sells the natural gas to third parties. As of September 30, 2015, LER2017, Gas Marketing has contracted for approximately 4.57.2 Bcf of such storage and park and loan capacity for the 2015-20162017-2018 winter period.season.
LER’sThe 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 growth in volumes in fiscal 2015 had significantly fewer opportunities for LER due2017 primarily to volatilityas a result of increased business with producers and extreme price spikes as compared to fiscal 2014. However, LER was able to expandpower generators and adding a sizable amount of day-to-day trading volumes by taking advantage of the flexibility that its producer services business and sales to power generation markets.overall portfolio of assets provided.
OTHER
The principal drivers of the Other results for fiscal 2015 and fiscal 2014in recent years has been interest expense related to the 2014on corporate debt issue to finance the Alagasco acquisition and other expenses attributable to the Alagasco transactionacquisition transactions and MGE integration. Additionally, Other includes Spire STL Pipeline LLC, Spire NGL LLC, and subsidiaries engaged in compression of natural gas and risk management, among other activities.
This category also includes LacledeSpire STL Pipeline Company,LLC is a 100%wholly owned subsidiary of Laclede Group, which operatesSpire that is planning construction and operation of a propane65-mile pipeline to connect to the Rockies Express Pipeline in Scott County, Illinois and end in St. Louis County, Missouri. The proposed pipeline will operate under Federal Energy Regulatory Commission (FERC) jurisdiction and will be capable of delivering up to 400,000 dekatherms per day of natural gas into eastern Missouri. Spire Missouri will be the foundational shipper with a contractual commitment of 350,000 dekatherms per day.
Spire NGL LLC (formerly Laclede Pipeline Company) is a wholly owned subsidiary of Spire that operates a propane pipeline under FERC jurisdiction. This pipeline allows Laclede GasSpire Missouri to receive propane that may be used to supplement its natural gas supply and meet peak demands on its distribution system. Laclede Pipeline CompanySpire NGL LLC also provides propane transportation services to third parties.
Additionally, this category includes Laclede Group’s subsidiaries that are engaged in compression of natural gas, oil production, real estate development, risk management, and financial investments in other enterprises, among other activities. These operations are conducted through seven subsidiaries.
ITEMItem 1A. RISK FACTORSRisk Factors
Laclede Group’sSpire’s and the Utilities'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 Laclede GroupSpire or the Utilities'Utilities’ securities, investors should carefully consider the following information, as well as information contained in the caption "Forward-Looking“Forward-Looking Statements,"” Item 7A, and other documents Laclede GroupSpire, Spire Missouri, and Laclede GasSpire Alabama file with the SEC. This list is not exhaustive, and Laclede Group'sSpire’s and the Utilities'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 LACLEDE GROUPSPIRE AND ITS SUBSIDIARIES
As a holding company, Laclede GroupSpire depends on its operating subsidiaries to meet its financial obligations.
Laclede GroupSpire is a holding company with no significant assets other than the stock of its operating subsidiaries and cash investments. Laclede Group,Spire, and Laclede GasSpire Missouri prior to Laclede Group’sthe holding company’s formation in 2000, have paid dividends continuously since 1946. Laclede Group’sSpire’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 below may also adversely affect Laclede Group’sSpire’s cash flows, liquidity, financial condition and results of operations.
A downgrade in Laclede Group’sSpire’s and/or its subsidiaries'subsidiaries’ credit ratings may negatively affect its ability to access capital.
Currently, Laclede GroupSpire and its utility subsidiaries have investment grade credit ratings, which are subject to review and change by the rating agencies. Laclede Group, Laclede GasStandard & Poor’s has rated Spire’s debt at BBB+, one notch lower than its issuer rating of A-, and AlagascoMoody’s (which does not use issuer ratings) rated Spire’s debt at Baa2. 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 haverating agency’s judgment, circumstances so warrant. Spire has a working capital line of credit to meet its short-term liquidity needs. Laclede Group’sSpire’s line of credit may also be used to meet the liquidity needs of any of its subsidiaries.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 such entity’s ability to secure new or additional credit facilities and would increase its costs of borrowing. Laclede Group’sSpire’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. In the fourth quarter of 2014, Laclede Group issued its first public debt and received its first senior unsecured debt ratings. Standard & Poor’s rated Laclede Group debt BBB+, one notch lower than its issuer rating of A-, while Fitch also rated the Laclede Group debt at BBB+, equal to its issuer rating, and Moody’s (which does not use issuer ratings) rated the Laclede Group debt at Baa2. These rating levels have no specific implications for Laclede Group's corporate funding ability or our ability to access the capital markets, nor do they trigger any collateralization requirements under Laclede Group's corporate guarantees. There is no assurance that such credit ratings for any of the Laclede Group 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.
Unexpected losses may adversely affect Laclede Group’sSpire’s or its subsidiariessubsidiaries’ financial condition and results of operations.
As with most businesses, there are operations and business risks inherent in the activities of Laclede Group’sSpire’s subsidiaries. If, in the normal course of business, Laclede GroupSpire 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, Laclede GroupSpire 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, Laclede GroupSpire 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. Laclede GroupSpire 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'subsidiaries’ financial condition and results of operations.
Increased inter-dependence on technology may hinder Laclede Group’sSpire’s and its subsidiaries'subsidiaries’ business operations and adversely affect their financial condition and results of operations if such technologies fail or are compromised.fail.
Over the last several years, Laclede GroupSpire 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. In fiscal year 2013, the Company completed its implementation of a Company-wide enterprise resource planning (ERP) system. These tools and systems support critical functions including Laclede GroupSpire and its subsidiaries'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'subsidiaries’ inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder their business operations and 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.
Laclede Gas completed the acquisitionA cyber-attack may disrupt Spire’s operations or lead to a loss or misuse of the assetsconfidential and liabilities of MGE near the end of fiscal 2013. Through fiscal 2015, Laclede Gas integrated MGE’s data into its systems, with the final migration to Laclede Gas' technology platforms occurring in September 2015.proprietary information or potential liability.
The Company completed the acquisition of the common stock of Alagasco near the end of fiscal 2014. Alagasco utilizes a different ERP system which will remain in place pending review of the Company's long-term ERP needs during the integration process.
Furthermore, the Company and its subsidiaries are subject to cyber-security risks primarily related to breaches of security pertaining to sensitive customer, employee, and vendor information maintained by the Company, and 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'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'subsidiaries’ financial condition and results of operations. 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'subsidiaries’ financial condition and results of operations.
Resources expended to pursue business acquisitions, investments or other business arrangements may adversely affect Laclede Group’sSpire’s financial position and results of operations and return on investments made may not meet expectations.
From time to time, Laclede GroupSpire may seek to grow through strategic acquisitions, investments or other business arrangements, including the recent MGE and Alagasco acquisitions, the opening of public compressed natural gas (CNG) stations or other future opportunities.arrangements. Attractive acquisition candidatesand investment opportunities may be difficult to acquirecomplete on economically acceptable terms. It is possible for Laclede GroupSpire to expend considerable resources pursuing an acquisition candidate,acquisitions and investments but, for a variety of reasons, such as changes in economic conditions, changes in the acquisition candidate’s business or concerns arising out of due diligence review, decide not to consummate a definitive transaction.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 acquisitionstransactions involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of management’s attention from daily operations, to the integration of the acquisition, 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. The failure to complete an acquisition successfully or to integrate future acquisitions or investments that it may choose to undertake could have an adverse effect on the Company'sCompany’s financial condition and results of operations and the market’s perception of the Company’s execution of its strategy.
In order to manage and diversify the risks of certain development projects, Laclede Group may use partnerships or other investments. Such business arrangements may limit Laclede Group’s ability to fully direct the management and policies of the business relationship. These arrangements may cause additional risks such as operating agreements limiting Laclede Group's control or Laclede Group's ability to appropriately value the business drivers or assets of the business arrangement. While Laclede Group would pursue strategies to mitigate these risks and enforce its interests, these risks may adversely impact the projects and Laclede Group’s financial condition, results of operations and cash flows.
In addition, to To the extent Laclede GroupSpire 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.
Failure to obtain required approvals and land rights or significant issues during the construction of the STL Pipeline could adversely impact Spire’s investment in the project.
The STL Pipeline is under jurisdiction of the FERC. Accordingly, the development, construction and operation of the project is subject to extensive regulatory oversight and requires various regulatory approvals, including federal and state environmental permits and licenses. Such projects are often subject to legal and political uncertainties which can be difficult to predict or control. These projects also require the acquisition of land rights, mostly from private landowners. Although FERC approval confers federal eminent domain authority, there is some risk and uncertainty associated with the cost of acquiring land rights, including potential condemnation costs. Spire may be unable to obtain required regulatory approvals or acquire necessary land rights, or may experience higher costs or delays in doing so.
Construction of such assets are subject to various risks and uncertainties, including supply chain and labor disruptions, weather conditions during construction, potential interconnection issues with other pipelines, equipment failures and construction quality issues. Any of these adverse events regarding regulatory approvals, land rights or construction risks could result in an impairment of Spire’s investment in the project, and such impairment could have a materially adverse effect on Spire’s financial condition and results of operations.
Workforce risks may affect the Company'sCompany’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 the knowledge and expertise of an aging workforce to new personnel 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.
Changes in accounting standards may adversely impact the Utilities’ financial condition and results of operations.
Laclede Group and its subsidiaries are subject to changes in US 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 US Financial Accounting Standards Board (FASB) continues to consider may be significant.
RISKS RELATED TO THE COMPANY'S AND ITS SUBSIDIARIES' ACQUISITION AND INTEGRATION ACTIVITIES
As a result of recent acquisitions, the Company and its subsidiaries are subject to risks related to its level of indebtedness.have substantial indebtedness which could adversely affect their financial condition.
In connection with the Alagasco and MGE acquisitions, Laclede Group and Laclede Gas incurred additional debt to pay a portion of the acquisition cost and transaction expenses. On August 19, 2014 Laclede Group issued unsecured debt in the aggregate principal amount of $625.0 to finance the acquisition of Alagasco. On August 13, 2013, Laclede Gas issued debt in the aggregate principal amount of $450.0 to finance the acquisition of MGE. Laclede Group'sSpire’s total consolidated indebtedness as of September 30, 20152017 was $2,189.5 ($338.0$2,572.3 (comprising $477.3 of short-term borrowings and $1,851.5$2,095.0 of long-term debt, including current portion) and Laclede Gas'. Spire Missouri’s total indebtedness as of September 30, 20152017 was $1,041.1 ($233.0$1,176.9 (comprising $203.0 of short-term borrowings, including borrowings from affiliates, and $808.1$973.9 of long-term debt, including current portion). Spire Alabama’s total indebtedness as of September 30, 2017 was $417.7 (comprising $169.9 of short-term borrowings, including borrowings from affiliates, and $247.8 of long-term debt).
Laclede Group’sThe indebtedness of the Company and Laclede Gas' debt service obligations with respect to this increased indebtednessits subsidiaries could have an adverse impact on their earnings and cash flows (which after the acquisitions include the earnings and cash flows of MGE and, in the case of Laclede Group, Alagasco) for as long as the indebtedness is outstanding. Among other risks, the increase in indebtedness may:important consequences. For example, it could:
make it more difficult for Laclede Group or Laclede Gas to pay or refinance their debts as they become due during adverse economic and industry conditions;
limit the Company’s or Laclede Gas' flexibility to pursue other strategic opportunities or react to changes in its business and the industry in which they operate and, consequently, place them at a competitive disadvantage to competitors with less debt;
require an increaseda significant portion of the Company’s or Laclede Gas' cash flows from operations of their respective subsidiaries to be used for debt service payments, thereby reducing the availability of their cash flows to fund working capital, capital expenditures, dividend payments and other general corporate activities;
result in a downgrade in the credit rating of Laclede Group’sSpire’s or the Utilities’ indebtedness, which could limit the Utilities’ ability to borrow additional funds or increase the applicable interest rates applicable to Utilities’ indebtedness;rates;
result in higher interest expense in the event of an increase in market interest rates for both long-term debt and short-term commercial paper or bank loans at variable rates;loans;
reduce the amount of credit available to support hedging activities; and
require that additional terms, conditions or covenants be placed on Spire or the Company or Laclede Gas.Utilities.
Based upon current levels of operations, Laclede Group or Laclede GasSpire and its subsidiaries expect to be able to generate sufficient cash through earnings on a consolidated basis or through refinancing to make all of the principal and interest payments when such payments are due under their existing credit agreements, indentures and other instruments governing outstanding indebtedness; but there can be no assurance that Laclede GroupSpire or Laclede Gasits subsidiaries will be able to repay or refinance such borrowings and obligations in future periods.
In addition, in order to maintain investment-grade credit ratings, Laclede GroupSpire and Laclede Gasits subsidiaries may consider it appropriate to reduce the amount of indebtedness outstanding following the acquisitions. This may be accomplished in several ways, including, in the case of Laclede Group,Spire, issuing additional shares of common stock or securities convertible into shares of common stock, or in the case of Laclede GroupSpire or Laclede Gas,its subsidiaries, reducing discretionary uses of cash or a combination of these and other measures. Issuances of additional shares of common stock or securities convertible into shares of common stock would have the effect of diluting the ownership percentage that shareholders hold in the Company, increasing the Company’s dividend payment obligations and perhaps reducing the reported earnings per share.
Recent acquisitions may not achieve their intended results, including anticipated efficiencies and cost savings.
Although the Company and its subsidiaries expect that the recent acquisitions will result in various benefits, including a significant cost savings and other financial and operational benefits, there can be no assurance regarding when or the extent to which the Company and its subsidiaries will be able to realize or retain these benefits. Achieving and retaining the anticipated benefits, including cost savings, is subject to a number of uncertainties, including whether the assets acquired can be operated in the manner the Company and its subsidiaries intended. Events outside of the control of the Company and its
subsidiaries, including but not limited to regulatory changes or developments, could also adversely affect their ability to realize the anticipated benefits from the acquisitions.
Thus, the integration of Alagascoacquired businesses may be unpredictable, subject to delays or changed circumstances, and the Company and its subsidiaries can give no assurance that the acquisitions will perform in accordance with their expectations or that their expectations with respect to integration or cost savings as a result of the Alagasco acquisitionacquisitions will materialize. In addition, the anticipated costs to the Company and its subsidiaries to achieve the integration of Alagascothe acquired businesses may differ significantly from their current estimates. The integration may place an additional burden on management and internal resources, and the diversion of management’s attention during the integration process could have an adverse effect on the Company'sCompany’s and its subsidiaries'subsidiaries’ business, financial condition and expected operating results.
In connection with the MGEacquisitions, Spire Missouri and the Alagasco acquisitions, Laclede Gas and Laclede Group, respectively,Spire recorded goodwill and long-lived assets that could become impaired and adversely affect its financial condition and results of operations.
Laclede GroupSpire and Laclede Gas willSpire 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 Laclede Gas willSpire 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 Laclede GasSpire Missouri may be required to incur impairment charges that could have a material impact on their results of operations. No impairment of long-lived assets was recorded during 2015 or 2014.
Since interest rates are a key component, among other assumptions, in the models used to estimate the fair values of the Company'sCompany’s reporting units, as interest rates rise, the calculated fair values decrease and future impairments may occur. Due to the subjectivity of the assumptions and estimates underlying the impairment analysis, Laclede GroupSpire and Laclede GasSpire 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. For additional information, see Item 7, Critical Accounting Policies.Estimates. Changes in accounting standards may adversely impact the Utilities’ financial condition and results of operations.
Spire and its subsidiaries are subject to changes in US 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 US 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 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 very gradually 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 and state 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 the adoption of related regulations by federal or state governments mandating a substantial reduction in greenhouse gas emissions 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’s financial condition and results of operations.
The Company has significantly reduced its federal and state income tax obligations over the past few years through tax planning strategies and the extension 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 before they expire due to lower than expected financial performance or if the Internal Revenue Service does not agree with the filing positions of the Company.
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. If enacted, 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.
Spire’s pension and other postretirement benefits 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 benefits 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 our 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.
RISKS THAT RELATE TO THE GAS UTILITY SEGMENT
Regulation of the Utilities’ businesses may impact rates they are able to charge, costs, and profitability.
The Utilities are subject to regulation by federal, state and local regulatory authorities. At the state level, the Utilities are regulated by regulatory authorities in Missouri by the Missouri Public Service Commission (MoPSC) and, in Alabama by the Alabama Public Service Commission (APSC), and in Mississippi by the Mississippi Public Service Commission (MSPSC). TheThese state regulatory authoritiespublic service commissions regulate many aspects of the Utilities’ distribution operations, including construction and maintenance of facilities, operations, safety, the rates that the Utilities may charge customers, the terms of service to their customers, transactions with their affiliates, and the rate of return that they are allowed to realize; as well asrealize, and the accounting treatment for certain aspects of their operations. For further discussion of these accounting matters, see Item 7, Critical Accounting PoliciesEstimates pertaining to the Utilities’ operations. 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. The first Missouri Utilities general rate case filed after October 1, 2015 must be for both the legacy Laclede GasSpire Alabama’s and the MGE operations. Alagasco’sSpire Gulf’s rate setting process, Rate Stabilization and Equalization (RSE), is subject to regulation by the APSC and is implemented pursuant to an APSC order that will continue beyond September 30, 2018 and September 30, 2021, respectively, unless the APSC enters an order to the contrary in a manner consistent with the law. Under the current RSE order, AlagascoSpire Mississippi is allowedsubject to earn a return on average common equity between 10.5% and 10.95%. Quarterly reviews are conductedregulation by the APSCMSPSC and if it is determined that Alagasco will exceedutilizes the allowed range of return, rates are reduced to bring the projected return within the allowed range. Rates can only be increased once a year effective December 1. Alagasco’s year-end equity under RSE is limited to 56.5% of total capitalization, subject to certain adjustments. The RSE order includes a Cost Control Mechanism (CCM) which requires Alagasco’s operationRate Stabilization Adjustment (RSA) Rider. For further details, see Regulatory and maintenance expenses to be within an allowed index range based on inflation-adjusted from 2007 actual operation and maintenance (O&M) expenses. If O&M expenses exceed the index range, 75% of the amount over the range is returned to customers through future rate adjustments.Other Matters in Item 7.
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. 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.
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 15 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’ liquidity may be adversely affected by delays in recovery of their costs, due to regulation.
In the normal course of business, there may beis 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 maycan require outlays of cash prior to the authorization of increases in rates charged to customers, as approved by the MoPSC, APSC, and APSC.MSPSC. Accordingly, the Utilities’ liquidity maycan be adversely impacted to the extent higher costs are not timely recovered from their customers. The first Missouri Utilities general rate case filed after October 1, 2015 is required to be for both the legacy Laclede Gas and the MGE 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, 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’ 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 Missouri Utilities' tariff rate schedules of the Missouri Utilities, Spire Gulf and Spire Mississippi contain Purchased Gas Adjustment (PGA) clauses and the Alabama Utility’sSpire 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, the Missouri Utilities are allowed to adjust the gas cost component of rates up to four times each year while Spire Alabama and Spire Gulf (collectively, the Alabama UtilityUtilities) and Spire Mississippi may adjust itsthe gas cost component of itstheir rates on a monthly basis. The 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 Missouri Utilities'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. Alagasco's GSA changesThe 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, Laclede GasSpire Missouri enters into contracts to hedge the forward commodity price of its natural gas supplies. As part of this strategy, Laclede GasSpire Missouri may use fixed-price, forward, physical purchase contracts, swaps, futures, and option contracts. However, Laclede GasSpire 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'Utilities’ 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'Utilities’ use of natural gas derivative instruments may cause short-term cash requirements to vary. These procedures remain subject to prudence review by the MoPSC.
TheSpire Alabama Utility currently does not utilize risk mitigation strategies that incorporate commodity hedge instruments, but 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'Utilities’ business activities are concentrated in twothree states.
The Utilities provide natural gas distribution services to customers in MissouriAlabama, Mississippi, and Alabama.Missouri. Changes in the regional economies, politics, regulations and weather patterns of these states could negatively impact the Utilities'Utilities’ growth opportunities and the usage patterns and financial condition of customers and could adversely affect the Utilities'Utilities’ earnings, cash flow, 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 expenses.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 are subject to pipeline safety and system integrity laws and regulations that may require significant expenditures or significant increases in operating costs.
Such laws and regulations affect various aspects of the Utilities’ present and future operations. These laws and regulations require the Utilities to maintain pipeline safety and system integrity by identifying and reducing 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.
Failure to comply may result in fines, penalties, or injunctive measures that would not be recoverable from customers in rates and could result in a material effect on the Utilities’ financial condition and results of operations.
Transporting, distributing, and storing natural gas and transporting and storing propane involves numerous risks that may result in accidents and other operating risks and costs.
There are inherent in gasGas distribution activities inherently involve a variety of hazards and operations risks, such as leaks, accidental explosions, includingdamage caused by third party damages,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 Utilities. 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 Laclede Gas'Spire Missouri’s propane storage, transmission and transmissionminor distribution operations. These activities may subject the Utilities to litigation or administrative proceedings from time to time.proceedings. Such litigation or proceedings could result in substantial monetary judgments, fines, or penalties against the Utilities or be resolved on unfavorable terms. The Utilities are subject to federal and state laws and regulations requiring the Utilities 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 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 Utilities’ financial condition and results of operations.
Because of the highly competitive nature of its business, the Utilities may not be able to retain existing customers or acquire new customers, which wouldcould have an adverse impact on its businesses,their business, operating results and financial conditions.condition.
The Utilities face the risk that customers may bypass gas distribution services by gaining distribution directly from interstate pipelines or, in the case of Alagasco,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 or other changes in legislation, regulation or policies will not have a material adverse effect on their business, financial condition or results of operation.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. If they are unable to compete effectively, the Utilities may lose existing customers and/or fail to acquire new customers, which could have a material adverse effect on their business, operating results 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 in wholesale natural gas prices compared with prices for electricity, fuel oil, coal, propane, or other energy sources 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 have weather mitigation rate designs and the Alabama Utility has aUtilities have Temperature Adjustment Rider (TAR)Riders (TARs), each of which is approved by the respective state regulatory body, which 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 and 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, and 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 the weather mitigation rate design at Laclede Gas,Spire Missouri East, the rate design wherewhereby distribution costs are recovered predominantly through fixed monthly charges at MGE,Spire Missouri West, or the Rate StabilizationRSE at Spire Alabama and Equalization (RSE) at AlagascoSpire Gulf, are subject to regulatory discretion.
In addition, the promulgation of regulations by the U. S. Environmental Protection Agency (EPA), particularly those regulating the emissions of greenhouse gases, and by the U. S. Department of Energy (DOE)supporting higher 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'Utilities’ 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'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. The Missouri Utilities are allowed to retain 15% to 25% of the first $6.0 in annual income earned (depending on the level of income earned) and 30% of income exceeding $6.0 annually. In accordance with an agreement approved by the MoPSC, Laclede GasSpire Missouri East deferred, until fiscal year 2017, its ability to retain 15% of the first $2.0. MGESpire Missouri West is allowed to retain 15% to 25% of the first $3.6 in annual income earned (depending on the level of income earned) and 30% of income exceeding $3.6 annually. The Missouri Utilities'Utilities’ ability to retain such income in the future is subject to regulatory discretion in a base rate proceeding.
Catastrophic events may adversely affect the Utilities’ facilities 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. 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 Utilities’ operations, financial condition, and results of operations. The availability of insurance covering catastrophic events may be limited or may result in higher deductibles, higher premiums, and more restrictive policy terms.
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 LER’sthe future profitability.profitability of Gas Marketing.
Competition in the marketplace and fluctuations in natural gas commodity prices have a direct impact on LER’sthe Gas Marketing business. Changing market conditions and prices, the narrowing of regional and seasonal price differentials and limited future price volatility may adversely impact LER’sits sales margins or affect LER’sits 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, LER’sGas 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 Federal Energy Regulatory Commission (FERC)FERC regulates the interstate transportation of natural gas and establishes the general terms and conditions under which LERSpire Marketing may use interstate gas pipeline capacity to purchase and transport natural gas, LERit 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 LER’sGas Marketing’s future profitability. Profitability may also be adversely impacted if pipeline capacity or future storage capacity secured by LER is not fully utilized and/or its costs are not fully recovered.
Reduced access to credit and/or capital markets may prevent LERthe Gas Marketing business from executing operating strategies.
LERThe Gas Marketing segment relies on its cash flows, netting capability,ability to effect net settlements with counterparties, parental guarantees, and access to Laclede Group’sSpire’s liquidity resources to satisfy its credit and working capital requirements. LER’sSpire Marketing’s ability to rely on parental guarantees is dependent upon Laclede Group’sSpire’s financial condition and credit ratings. If the rating agencies lowered Laclede Group’sSpire’s credit ratings were lowered, particularly below investment grade, counterparty acceptance of parental guarantees may diminish, resulting in decreased availability of credit. Additionally, under such circumstances, certain counterparties may require LERSpire 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 LER’sSpire Marketing’s ability to enter into certain transactions. In addition, LERSpire 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. LERSpire Marketing also has concentrations of credit risk in certain individually significant counterparties. LERSpire 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 LER’sGas Marketing’s sales and results of operations from volatility and may result in financial losses.
In the course of its business, LERSpire 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, LERSpire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments.
LERSpire 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 NYMEXNew York Mercantile Exchange, Inc. (NYMEX) and ICEthe Intercontinental Exchange (ICE) 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 LER’sSpire 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.
LER’s
Spire Marketing’s ability to meet its customers’ natural gas requirements may be impaired if contracted gas supplies and interstate pipeline services are not available or delivered in a timely manner.
LER’sSpire 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 LERSpire Marketing under firm contracts. If these counterparties fail to perform, they have a contractual obligation to reimburse LERSpire Marketing for adverse consequences. LERSpire Marketing will attempt to use such reimbursements to
obtain the necessary supplies so that LERit may fulfill its customer obligations. To the extent that it is unable to obtain the necessary supplies, LER’sSpire Marketing’s financial position and results of operations may be adversely impacted.
Regulatory and legislative developments pertaining to the energy industry may adversely impact LER’sSpire Marketing’s results of operations, financial condition and cash flows.
LER’sThe Spire Marketing business is non-regulated, in that the rates it charges its customers are not established by or subject to approval by any regulatory body.body with jurisdiction over utilities. However, LERit is subject to various laws and regulations affecting the energy industry. New regulatory and legislative actions may adversely impact LER’sSpire Marketing’s results of operations, financial condition, and cash flows by potentially reducing customer growth opportunities and/or increasing the costs of doing business.
LER could incurFor example, Spire Marketing incurs additional costs to comply with new laws and regulations, such as the Dodd-Frank Act amendments to the Commodity Exchange Act, which authorizes the Commodity Futures Trading Commission (the CFTC) to regulate futures contracts, options and swaps. These derivative transactions include instruments and bilateral contracts that Spire Marketing uses to hedge or mitigate ongoing commercial risks. The Dodd-Frank Act contemplates that most standardized swaps will be 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, include Spire Marketing, to maintain regulatory records of swap transactions, and to report swaps to centralized swap data repositories (SDRs), among other new compliance obligations. Although Spire Marketing may qualify for exceptions to certain of the new CFTC rules, its derivatives counterparties will be subject to new capital, margin, documentation and business conduct requirements imposed as a result of the Dodd-Frank Act. Such new rules will 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. The full impact of the new CFTC requirements will not be known definitively until all of the Dodd-Frank Act regulations have been finalized and fully implemented. 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.
In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent noncompliance could also increase. If LERthe business fails to comply with applicable laws and regulations, whether existing or new ones, it could be subject to fines, penalties or other enforcement action by the authorities that regulate its operations.
ITEMItem 1B. UNRESOLVED STAFF COMMENTSUnresolved Staff Comments
None.
ITEM
Item 2. PROPERTIESProperties
Laclede GasSpire
TheRefer to the information below about the principal properties of Laclede Gas consist of more than 30,000Spire Missouri and Spire Alabama. The Spire EnergySouth utilities own approximately 5,500 miles of gas mainpipelines. Other properties of Spire and related service pipes, meters,its subsidiaries, including Spire Marketing and regulators. In eastern Missouri, Laclede Gas has an underground storage facility, several operating centers, and other related properties, some of which are leased. Laclede Gas' western Missouri region, served by MGE, also has several operating centers and other related properties, some of which are leased. Substantially all of Laclede Gas' utility plant is subject to the liensSpire EnergySouth, do not constitute a significant portion of its mortgage.
All of the properties of Laclede Gas are held in fee, or by easement, or under lease agreements. The principal lease agreements include underground storage rights that are of indefinite duration and the downtown St. Louis office buildings.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.
Laclede Gas entered into an agreement to sell the Forest Park property, which closedFor further information on
May 14, 2014. As partleases see Note 16, Commitments and Contingencies, of the agreement Laclede Gas leased back the property for a term that expired April 1, 2015.Notes to Financial Statements in Item 8.AlagascoSpire Missouri
The principal properties of AlagascoSpire Missouri consist primarily of its gas distribution system, which includes approximately 23,000more than 30,000 miles of main and related service lines, odorization and regulation facilities, and customer meters. Alagasco also has four LNG facilities, several operation centers,The mains and other related property and equipment, some of which are leased by Alagasco.
For both Laclede Gas and Alagasco, the transmission pipelines and distribution mainsservice lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which we have obtained the necessary legal rights to place and operate our 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, or by easement, or under lease agreements. The principal lease agreements include underground storage rights that are of indefinite duration.
For further informationSpire Alabama
The properties of Spire Alabama consist primarily of its gas distribution system, which includes approximately 23,000 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 have obtained the
Utilities' leases see Note 16, Commitmentsnecessary legal rights to place and Contingencies,operate our facilities on such property. Spire Alabama also has four LNG facilities, several operating centers, and other related properties. All of the Notes to Financial Statements in Item 8. Other properties of Laclede Group, including LER, do not constitute a significant portion of its properties.Spire Alabama are held in fee, or by easement, or under lease agreements.
ITEMItem 3. LEGAL PROCEEDINGSLegal Proceedings
For a description of pending regulatory matters of Laclede Group,Spire, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. For a description of environmental matters, see Note 16, Commitments and Contingencies, of the Notes to Financial Statements in Item 8. Laclede GroupSpire 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.
EXECUTIVE OFFICERS OF THE REGISTRANT – Listed below are executive officers as defined by the SEC for Laclede Group, Laclede GasSpire, Spire Missouri and Alagasco.Spire Alabama. Their ages, at September 30, 2015,2017, and positions are listed below along with their business experience during the past five years. |
| | | | |
| Name | Age and | | Position with Company *(1) | Appointed (1)(2) |
| | | | |
S. Sitherwood Age 55 (2) | 57 | | Spire | |
| | | | |
| Laclede Group | | |
| | President and Chief Executive Officer | February 2012 |
| | President | | September 2011 |
| | | | |
| | Laclede Gas | | Spire Missouri | |
| | |
| | Chairman of the Board | January 2015 |
| | | Chairman of the Board and Chief Executive Officer | October 2012 |
| | | Chairman of the Board, Chief Executive Officer and President | February 2012 |
| | | | | |
| | Alagasco | | | Spire Alabama | |
| | | Chairman of the Board | September 2014 |
| | | | | |
S. L. Lindsey Age 49 (3) | 51 | | Spire | |
| | | | |
| Laclede Group | | |
| | Executive Vice President, Chief Operating Officer, Distribution Operations | October 2012 |
| | | | | |
| | Laclede Gas | | | Spire Missouri | |
| | | Chief Executive Officer and President | January 2015 |
| | | | President | October 2012 |
| | | | | |
| | Alagasco | | | Spire Alabama | |
| | | Chief Executive Officer | September 2014 |
| | | | | |
S. P. Rasche Age 55 | 57 | | Spire | |
| | | | |
| Laclede Group | | |
| Executive Vice President and Chief Financial Officer | November 2013 |
| | | Senior Vice President, Chief Financial Officer | October 2013 |
| | | Senior Vice President, Finance and Accounting | May 2012 |
| | | | | |
| | Laclede Gas | | | Spire Missouri | |
| | | Chief Financial Officer | May 2012 |
| | Vice President, Finance | November 2009 |
| | | | |
| | Alagasco | | Spire Alabama | |
| | |
| | Chief Financial Officer | September 2014 |
| | | | | |
M. C. Darrell Age 57 (4) | 59 | | Spire | |
| | | | |
| Laclede Group | | |
| | Senior Vice President, General Counsel and Chief Compliance Officer | May 2012 |
| | General Counsel | May 2004 |
| | | |
|
| | | |
L. C. Dowdy, Age 59 (5) | |
| | | |
| Laclede Group | | |
| Senior Vice President, External Affairs, Corporate Communications and Marketing | January 2014 |
| | | | |
M. C. Geiselhart Age 56 | 58 | | Spire | |
| | | | |
| Laclede Group | | |
| | Senior Vice President, Strategic Planning and Corporate Development | January 2015 |
| | | | Vice President, Strategic Planning and Corporate Development | February 2014 |
| | | Vice President, Strategic Development and Planning | August 2006 |
| | | | | |
K. A. Smith Age 57 | 59 | | Spire Alabama | |
| | | | |
| Alagasco | | |
| President | April 2015 |
| | | Vice President, System Integrity | August 2011 |
| Vice President, Operations | January 2008 |
|
| |
*(1) | 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. |
| |
(1)(2) | Officers of Laclede GroupSpire are normally reappointed by the Board of Directors in November of each year. Officers of Laclede GasSpire Missouri and AlagascoSpire Alabama are normally reappointed by the Boardtheir boards of Directorsdirectors in January of each year. |
| |
(2) | Ms. Sitherwood served as President of Atlanta Gas Light Company, Chattanooga Gas Company, and Florida City Gas, all of which are subsidiaries of AGL Resources, Inc., from November 2004 to September 2011. During that time, she also served as Senior Vice President of Southern Operations for AGL Resources, Inc. |
| |
(3) | Mr. Lindsey served as Senior Vice President, Southern Operations of AGL Resources, Inc. and President of its Atlanta Gas Light, Chattanooga Gas and Florida City Gas subsidiaries from December 2011 to October 2012. He also served as Vice President and General Manager of Atlanta Gas Light and Chattanooga Gas from 2005 to 2011. |
| |
(4) | Mr. Darrell served as Senior Vice President and General Counsel of Laclede Gas from October 2007 to July 2012. |
| |
(5) | Mr. Dowdy served as Partner at the law firm McKenna Long & Aldridge LLP until December 2013. He also served as Senior Vice President of Laclede Gas from January 2014 to January 2015. |
PART II
ITEMItem 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIESMarket for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Laclede GroupSpire
Laclede Group’sSpire’s common stock trades on The New York Stock Exchange (NYSE) under the symbol “LG.“SR.” The high and the low sales price for the common stock for each quarter in the two most recent fiscal years are:were:
| | | | 2015 | 2014 | 2017 | | 2016 |
| | High | Low | High | Low | High | | Low | | High | | Low |
| 1st Quarter | $ | 55.22 |
| $ | 46.00 |
| $ | 47.82 |
| $ | 43.96 |
| $ | 66.65 |
| | $ | 59.54 |
| | $ | 61.04 |
| | $ | 53.86 |
|
| 2nd Quarter | 55.75 |
| 49.07 |
| 47.48 |
| 43.95 |
| 68.30 |
| | 62.33 |
| | 68.79 |
| | 57.10 |
|
| 3rd Quarter | 54.32 |
| 50.04 |
| 48.75 |
| 44.75 |
| 72.83 |
| | 63.84 |
| | 70.87 |
| | 61.00 |
|
| 4th Quarter | 56.31 |
| 49.66 |
| 49.95 |
| 45.36 |
| 78.00 |
| | 68.30 |
| | 71.21 |
| | 61.96 |
|
The number of holders of record as of September 30, 2015November 10, 2017 was 3,611.3,224.
Dividends declared on common stock for the two most recent fiscal years were:
| | | | 2015 | 2014 | 2017 | | 2016 |
| 1st Quarter | $ | 0.46 |
| $ | 0.44 |
| $ | 0.525 |
| | $ | 0.49 |
|
| 2nd Quarter | 0.46 |
| 0.44 |
| 0.525 |
| | 0.49 |
|
| 3rd Quarter | 0.46 |
| 0.44 |
| 0.525 |
| | 0.49 |
|
| 4th Quarter | 0.46 |
| 0.44 |
| 0.525 |
| | 0.49 |
|
We have continuously paid a cash dividend to our common shareholders since 1946, with 2017 marking the 14th consecutive year of increasing the dividend on an annualized basis. Dividends are payable at the discretion of our Board of Directors. Future payment of dividends, and the amount of these dividends, will depend on our financial condition, results of operations, capital requirements, and other factors. We declared quarterly cash dividends on our common stock in 2017 and 2016, totaling $2.10 per share and $1.96 per share, respectively.
For disclosures related to securities authorized for issuance under equity compensation plans, see Item 12, page 139. The only repurchases of Laclede Group's common stock duringDuring the three months ended September 30, 2015 would be2017, the only repurchases of our common stock was 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. During the three months endedThe 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, 2017 - July 31, 2017 | 347 | $69.55 | — | — |
August 1, 2017 - August 31, 2017 | — | — | — | — |
September 1, 2017 - September 30, 2017 | — | — | — | — |
| Total | 347 | $69.55 | — | — |
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, | 2012 |
| | 2013 |
| | 2014 |
| | 2015 |
| | 2016 |
| | 2017 |
|
| Spire Inc. | $ | 100.00 |
| | $ | 108.90 |
| | $ | 116.61 |
| | $ | 142.06 |
| | $ | 171.23 |
| | $ | 206.75 |
|
| S&P 500 Index | 100.00 |
| | 119.34 |
| | 142.89 |
| | 142.02 |
| | 163.93 |
| | 194.44 |
|
| S&P Utilities Index | 100.00 |
| | 106.99 |
| | 125.32 |
| | 133.55 |
| | 156.74 |
| | 175.60 |
|
* Cumulative total return is based on a $100 investment on September 30, 2015, there were no such repurchases2012, assuming reinvestment of Laclede Group's common stock.dividends.
Laclede Gas
Laclede GasSpire Missouri
Spire Missouri common stock is owned by its parent, The Laclede Group,Spire Inc., and is not traded on any stock exchange. Dividends declared on common stock for the two most recent fiscal years were:
|
| | | | | | | |
| | 2017 | | 2016 |
| 1st Quarter | $ | 600.15 |
| | $ | 864.30 |
|
| 2nd Quarter | — |
| | 866.20 |
|
| 3rd Quarter | — |
| | 909.86 |
|
| 4th Quarter | — |
| | 569.64 |
|
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, 2017 and 2016, the amount under the mortgage’s formula that was available to pay dividends was $1,010.8 and $916.8, 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.
Dividends declared on common stock for the two most recent fiscal years were:
|
| | | | | | |
| | 2015 | 2014 |
| 1st Quarter | $ | 808.84 |
| $ | 586.08 |
|
| 2nd Quarter | 810.93 |
| 587.16 |
|
| 3rd Quarter | 810.71 |
| 587.14 |
|
| 4th Quarter | 811.21 |
| 773.05 |
|
Laclede Gas' mortgage contains restrictions on its ability to pay cash dividends on its common stock, as described in further detail in Note 5, Stockholder’s Equity, of the Notes to Financial Statements in Item 8. |
| | | | | | | |
| | 2017 | | 2016 |
| 1st Quarter | $ | 3.42 |
| | $ | 3.80 |
|
| 2nd Quarter | 1.90 |
| | 4.06 |
|
| 3rd Quarter | 3.42 |
| | 4.06 |
|
| 4th Quarter | 4.94 |
| | 4.06 |
|
Laclede Group periodically purchases common stock of Laclede Gas with the price set at the book value of Laclede Gas common stock as of the most recently completed fiscal quarter. The details on sales of common stock of Laclede Gas to Laclede Group during the past three fiscal years are set forth below:Item 6. Selected Financial Data
|
| | | | | | |
| Date of Sale | Aggregate Purchase Price (In millions) | | Number of Shares |
| | | | |
| 2013 | | | |
| December 13, 2012 | $ | 0.8 |
| | 21 |
|
| March 13, 2013 | 0.9 |
| | 22 |
|
| May 10, 2013 | 0.2 |
| | 5 |
|
| August 8, 2013 | 0.4 |
| | 9 |
|
| August 30, 2013 | 430.0 |
| | 10,581 |
|
| September 30, 2013 | 45.0 |
| | 1,107 |
|
| | | | |
| 2014 | | | |
| December 10, 2013 | $ | 0.3 |
| | 9 |
|
| February 6, 2014 | 0.4 |
| | 9 |
|
| May 12, 2014 | 0.4 |
| | 10 |
|
| | | | |
2015 (1) | | | |
| $ | — |
| | — |
|
(1) There were no purchases of Laclede Gas common stock during fiscal 2015.
Exemption from registration for the sale of stock was claimed under section 4(a)(2) of the Securities Act of 1933.
Alagasco
Alagasco common stock is owned by its parent, The Laclede Group, Inc., and is not traded on any stock exchange.
Dividends declared on common stock for the two most recent fiscal years were:
|
| | | | | | |
| | 2015 | 2014 |
| 1st Quarter | $ | — |
| $ | — |
|
| 2nd Quarter | — |
| 10.8 |
|
| 3rd Quarter | — |
| 10.8 |
|
| 4th Quarter | — |
| 15.8 |
|
In the fourth quarter of fiscal 2014, dividends declared after the August 31, 2014 effective date of Alagasco's acquisition by Laclede Group totaled $5.0.
ITEM 6. SELECTED FINANCIAL DATA
Laclede Group
|
| | | | | | | | | | | | | | | | | | | |
| | Fiscal Years Ended September 30 |
| (Dollars in Millions, Except Per Share Amounts) | 2015 | | 2014 (1) | | 2013 (2) | | 2012 | | 2011 |
| Statements of Income data | | | | | | | | | |
| Total Operating Revenues | $ | 1,976.4 |
| | $ | 1,627.2 |
| | $ | 1,017.0 |
| | $ | 1,125.5 |
| | $ | 1,603.3 |
|
| Net Income | 136.9 |
| | 84.6 |
| | 52.8 |
| | 62.6 |
| | 63.8 |
|
| Common Stock data | | | | | | | | | |
| Diluted Earnings Per Share of Common Stock | $ | 3.16 |
| | $ | 2.35 |
| | $ | 2.02 |
| | $ | 2.79 |
| | $ | 2.86 |
|
| Dividends Declared Per Share of Common Stock | 1.84 |
| | 1.76 |
| | 1.70 |
| | 1.66 |
| | 1.62 |
|
| Statements of Financial Position data | | | | | | | | | |
| Total Assets | $ | 5,290.2 |
| | $ | 5,074.0 |
| | $ | 3,125.4 |
| | $ | 1,880.3 |
| | $ | 1,783.1 |
|
| Long-Term Debt (less current portion) | 1,771.5 |
| | 1,851.0 |
| | 912.7 |
| | 339.4 |
| | 364.4 |
|
Consolidated Net Economic Earnings data (3) | | | | | | | | | |
| Net Income (GAAP) | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| | $ | 62.6 |
| | $ | 63.8 |
|
| Unrealized (gain) loss on energy-related derivatives | (1.8 | ) | | (0.9 | ) | | 0.5 |
| | (0.3 | ) | | (1.4 | ) |
| Lower of cost or market inventory adjustments | 0.3 |
| | (0.7 | ) | | 0.9 |
| | — |
| | — |
|
| Realized loss (gain) on economic hedges prior to the sale of the physical commodity | 1.5 |
| | (0.2 | ) | | — |
| | 0.2 |
| | — |
|
| Acquisition, divestiture and restructuring activities | 6.1 |
| | 17.3 |
| | 10.8 |
| | 0.1 |
| | — |
|
| Gain on sale of property | (4.7 | ) | | — |
| | — |
| | — |
| | — |
|
| Net Economic Earnings (Non-GAAP) | $ | 138.3 |
| | $ | 100.1 |
| | $ | 65.0 |
| | $ | 62.6 |
| | $ | 62.4 |
|
| Diluted Earnings per Share of Common Stock: | | | | | | | | | |
| Net Income (GAAP) | $ | 3.16 |
| | $ | 2.35 |
| | $ | 2.02 |
| | $ | 2.79 |
| | $ | 2.86 |
|
| Unrealized (gain) loss on energy-related derivatives | (0.04 | ) | | (0.02 | ) | | 0.02 |
| | (0.02 | ) | | (0.07 | ) |
| Lower of cost or market inventory adjustments | 0.01 |
| | (0.02 | ) | | 0.03 |
| | — |
| | — |
|
| Realized loss (gain) on economic hedges prior to the sale of the physical commodity | 0.03 |
| | (0.01 | ) | | — |
| | 0.01 |
| | — |
|
| Acquisition, divestiture and restructuring activities | 0.14 |
| | 0.48 |
| | 0.42 |
| | 0.01 |
| | — |
|
| Gain on sale of property | (0.11 | ) | | — |
| | — |
| | — |
| | — |
|
| Weighted average shares adjustment | — |
| | 0.27 |
| | 0.38 |
| | — |
| | — |
|
| Net Economic Earnings (Non-GAAP) | $ | 3.19 |
| | $ | 3.05 |
| | $ | 2.87 |
| | $ | 2.79 |
| | $ | 2.79 |
|
(1) Effective August 31, 2014, the Company completed the purchase from Energen of 100% of the outstanding common stock of Alagasco for $1,590.3 (including assumed debt of $264.8). Laclede Group funded the purchase price with a combination of the issuance of approximately 10.4 million shares of common stock and approximately 2.8 million equity units completed on June 11, 2014, the issuance by Laclede Group of $625.0 aggregate principal amount of senior notes on August 19, 2014, and cash from operations.
(2) Effective September 1, 2013, Laclede Gas completed the purchase from Southern Union Company, an affiliate of Energy Transfer Equity, L.P. and Energy Transfer Partners, L.P., of substantially all of the assets and liabilities of MGE, a utility engaged in the distribution of natural gas on a regulated basis in western Missouri for $940.2. The acquisition was supported by a combination of the issuance of approximately 10 million shares of common stock completed on May 29, 2013 and the issuance by Laclede Gas of $450.0 of first mortgage bonds on August 13, 2013.
(3) This section contains the non-GAAP financial measures of net economic earnings and net economic earnings per share. Net economic earnings per share are calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share calculation. Each item is shown net of tax. |
| | | | | | | | | | | | | | | | | | | |
| Spire | Fiscal Years Ended September 30 |
| (Dollars in millions, except per share amounts) | 2017 | | 2016(1) | | 2015 | | 2014(2) | | 2013(3) |
| Statements of Income data | | | | | | | | | |
| Total Operating Revenues | $ | 1,740.7 |
| | $ | 1,537.3 |
| | $ | 1,976.4 |
| | $ | 1,627.2 |
| | $ | 1,017.0 |
|
| Net Income | 161.6 |
| | 144.2 |
| | 136.9 |
| | 84.6 |
| | 52.8 |
|
| Common Stock data | | | | | | | | | |
| Diluted Earnings Per Share of Common Stock | $ | 3.43 |
| | $ | 3.24 |
| | $ | 3.16 |
| | $ | 2.35 |
| | $ | 2.02 |
|
| Dividends Declared Per Share of Common Stock | 2.10 |
| | 1.96 |
| | 1.84 |
| | 1.76 |
| | 1.70 |
|
Balance Sheet data (4) | | | | | | | | | |
| Total Assets | $ | 6,546.7 |
| | $ | 6,064.4 |
| | $ | 5,277.6 |
| | $ | 5,059.3 |
| | $ | 3,117.3 |
|
| Long-Term Debt (less current portion) | 1,995.0 |
| | 1,820.7 |
| | 1,758.9 |
| | 1,836.3 |
| | 904.6 |
|
Net Economic Earnings data (5) | | | | | | | | | |
| Net Income (GAAP) | $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
|
| Unrealized loss (gain) on energy-related derivatives | 6.0 |
| | (0.1 | ) | | (2.8 | ) | | (1.6 | ) | | 1.0 |
|
| Lower of cost or market inventory adjustments | — |
| | 0.2 |
| | 0.4 |
| | (1.1 | ) | | 1.4 |
|
| Realized (gain) loss on economic hedges prior to the sale of the physical commodity | (0.3 | ) | | (1.6 | ) | | 2.4 |
| | (0.4 | ) | | — |
|
| Acquisition, divestiture and restructuring activities | 4.0 |
| | 9.2 |
| | 9.8 |
| | 29.5 |
| | 17.3 |
|
| Gain on sale of property | — |
| | — |
| | (7.6 | ) | | — |
| | — |
|
| Income tax effect of adjustments | (3.7 | ) | | (2.8 | ) | | (0.8 | ) | | (10.9 | ) | | (7.6 | ) |
| Net Economic Earnings (Non-GAAP) | $ | 167.6 |
| | $ | 149.1 |
| | $ | 138.3 |
| | $ | 100.1 |
| | $ | 64.9 |
|
| Diluted Earnings per Share of Common Stock: | | | | | | | | | |
| Net Income (GAAP) | $ | 3.43 |
| | $ | 3.24 |
| | $ | 3.16 |
| | $ | 2.35 |
| | $ | 2.02 |
|
| Unrealized loss (gain) on energy-related derivatives | 0.13 |
| | — |
| | (0.07 | ) | | (0.04 | ) | | 0.04 |
|
| Lower of cost or market inventory adjustments | — |
| | 0.01 |
| | 0.01 |
| | (0.03 | ) | | 0.05 |
|
| Realized (gain) loss on economic hedges prior to the sale of the physical commodity | (0.01 | ) | | (0.04 | ) | | 0.06 |
| | (0.01 | ) | | — |
|
| Acquisition, divestiture and restructuring activities | 0.09 |
| | 0.21 |
| | 0.23 |
| | 0.82 |
| | 0.67 |
|
| Gain on sale of property | — |
| | — |
| | (0.18 | ) | | — |
| | — |
|
| Income tax effect of adjustments | (0.08 | ) | | (0.06 | ) | | (0.02 | ) | | (0.31 | ) | | (0.29 | ) |
| Weighted average shares adjustment | — |
| | 0.06 |
| | — |
| | 0.27 |
| | 0.38 |
|
| Net Economic Earnings (Non-GAAP) | $ | 3.56 |
| | $ | 3.42 |
| | $ | 3.19 |
| | $ | 3.05 |
| | $ | 2.87 |
|
| |
| (1) | Effective September 12, 2016, Spire completed the purchase of 100% of the outstanding common stock of Spire EnergySouth for $344 (including assumed debt of $67.0). Spire funded the purchase price with a combination of the issuance of approximately 2.2 million shares of common stock on May 17, 2016, the issuance of $165.0 aggregate principal amount of senior notes on September 9, 2016, and cash on hand. |
| |
| (2) | Effective August 31, 2014, Spire completed the purchase of 100% of the outstanding common stock of Spire Alabama for $1,590.3 (including assumed debt of $264.8), funded with a combination of the issuance of 10.35 million shares of common stock and 2.875 million equity units completed on June 11, 2014, the issuance of $625.0 aggregate principal amount of senior notes on August 19, 2014, and cash on hand. |
| |
| (3) | Effective September 1, 2013, Spire Missouri completed the purchase of substantially all of the assets and liabilities of Missouri Gas Energy (now Spire Missouri West) for $940.2, supported by a combination of the issuance of approximately 10.0 million shares of common stock completed on May 29, 2013 and the issuance by Spire Missouri of $450.0 of first mortgage bonds on August 13, 2013. |
| |
| (4) | Balance Sheet data for fiscal years 2013-2016 has been restated to retrospectively reflect the impact of implementing Accounting Standards Update (ASU) No. 2015-03, Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, during fiscal 2017. |
| |
| (5) | This section contains the non-GAAP financial measures of net economic earnings (NEE) and net economic earnings per share (NEEPS). NEEPS are calculated by replacing consolidated net income with consolidated NEE in the GAAP diluted earnings per share calculation. Each reconciling item between NEE and net income is shown pre-tax, with total related income taxes calculated by applying effective federal, state, and local income tax rates applicable to ordinary income to those amounts. 2016 NEEPS excludes the impact of the May 2016 equity offering to fund the acquisition of Spire EnergySouth. 2014 NEEPS excludes the impact of the June 2014 equity offerings to fund the acquisition of Alagasco, but includesSpire Alabama. 2013 NEEPS excludes the impact of the May 2013 equity offering to fund the MGESpire Missouri West acquisition. The weighted-average diluted shares used in the net economic earnings per shareNEEPS calculation for the fiscal year ended September 30,years 2016, 2014, wasand 2013 were 43.5, 32.7, and 22.5, respectively, compared to 44.3, 35.9, and 26.0, respectively, used in the GAAP EPS calculation.calculations for those years. For more information on net economic earnings data, refer to the Earnings section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
2013 net economic earnings per share excludes the impact of the May 2013 equity offering to fund the acquisition of MGE. The weighted-average diluted shares used in the net economic earnings per share calculation for the fiscal year ended September 30, 2013 was 22.5 compared to 26.0 in the GAAP EPS calculation.
For more information on economics earnings data, refer to the Earnings section of Management'sItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 24.
ITEM 7. MANAGEMENT’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 The Laclede Group,Spire Inc. (Laclede Group(Spire or the Company), Laclede Gas Company (Laclede GasSpire Missouri Inc. (Spire Missouri or the Missouri Utilities), and Spire Alabama Gas Corporation (Alagasco or theInc. (Spire Alabama). Spire Missouri, Spire Alabama, Utility). Laclede Gas and AlagascoSpire EnergySouth Inc. (Spire EnergySouth) are wholly owned subsidiaries of the Company. Collectively,Spire Missouri changed its name from Laclede Gas Company on August 30, 2017, and AlagascoSpire Alabama changed its name from Alabama Gas Corporation on September 1, 2017. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth Inc. (formerly known as EnergySouth, Inc.) are collectively referred to as the Utilities. The subsidiaries of Spire EnergySouth are Spire Gulf Inc. (Spire Gulf, formerly known as Mobile Gas Service Corporation) and Spire Mississippi Inc. (Spire Mississippi, formerly known as Willmut Gas & Oil Company). This section includes management’s view of factors that affect the respective businesses of the Company, Laclede Gas,Spire Missouri, and Alagasco,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, Laclede Gas'Company’s, Spire Missouri’s and Alagasco'sSpire Alabama’s overall financial condition and liquidity.
Reference is made to “Part I. Item“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 Laclede Group, Laclede Gas,Spire, Spire Missouri and AlagascoSpire Alabama included in “Item 8. Financial Statements and Supplementary Data.”
RESULTS OF OPERATIONS
Overview
The Company has two key business segments: Gas Utility and Gas Marketing. Laclede Group’sSpire’s earnings are primarily derived from its Gas Utility segment, which reflects the regulated activities of the Utilities. The Gas Utility segment consists of the regulated businesses of Laclede Gas and Alagasco. Due to the seasonal nature of the Utilities'Utilities’ business, earnings of Laclede Group, Laclede GasSpire, Spire Missouri and AlagascoSpire Alabama are typically concentrated during the heating season of November through April each fiscal year.
Gas Utility - Laclede GasSpire Missouri
Laclede GasSpire Missouri is Missouri’s largest natural gas distribution companyutility and is regulated by the Missouri Public Service Commission (MoPSC). Laclede GasSpire Missouri serves St. Louis and eastern Missouri through Spire Missouri East (formerly Laclede Gas Company) and serves Kansas City and western Missouri through MGE, which was acquired on September 1, 2013. LacledeSpire Missouri West (formerly Missouri Gas Energy, or MGE). Spire Missouri delivers natural gas to retail customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Laclede GasSpire Missouri are primarily generated by the sale of heating energy. The rate design for botheach service territories serveterritory serves to lessen the impact of weather volatility on its customers during cold winters and stabilize Laclede Gas'Spire Missouri’s earnings.
Gas Utility - AlagascoSpire Alabama
On August 31, 2014, the Company purchased from Energen 100% of the outstanding common stock of Alagasco. AlagascoSpire Alabama is the largest natural gas distribution utility in the state of Alabama. Alagasco’sSpire Alabama’s service territory is located in central and northern Alabama. Among the cities served by AlagascoSpire Alabama are Birmingham, the center of the largest metropolitan area in Alabama,the state, and Montgomery, the state capital. AlagascoSpire Alabama is regulated by the Alabama Public Service Commission (APSC). AlagascoSpire 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. AlagascoSpire Alabama also provides transportation services to large industrial and commercial customers located on its distribution system. These transportation customers, using AlagascoSpire Alabama as their agent or acting on their own, purchase gas directly from marketers or suppliers and arrange for delivery of the gas into the AlagascoSpire Alabama distribution system. AlagascoSpire Alabama charges a fee to transport such customer-owned gas through its distribution system to the customers’ facilities.
Gas Marketing
Laclede Energy Resources,Spire Marketing Inc. (Spire Marketing) is engaged in the marketing of natural gas and related activities on a non-regulated basis and is reported in the Gas Marketing segment. LERSpire Marketing markets natural gas across the country with the core of its footprint located in and around the central United States (US). It holds firm transportation and storage contracts in order to both on-system utility transportation customers and customers outside of Laclede Gas’ traditional service territory, including large retail and wholesale customers. LER’s operations andeffectively manage its customer base, are more subject to fluctuations in market conditions than the Utilities. LER entered into a 10-year contract for 1 Bcfwhich consists of natural gasproducers, pipelines, power generators, storage effective August 1, 2013operators, municipalities, utility companies, and has contracts for an additional 3.5 Bcf of storage that expire at various times through April 30, 2016.large commercial and industrial customers.
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 the following key variables in evaluating the financial condition and results of operations and managing the business.
Gas Utility Segment:segment:
the Utilities'Utilities’ ability to recover the costs of purchasing and distributing natural gas from their customers;
the impact of weather and other factors, such as customer conservation, on revenues and expenses;
changes in the regulatory environment at the federal, state, and local levels, as well as decisions by regulators, that impact the Utilities'Utilities’ ability to earn its authorized rate of return in all service territories they serve;
the Utilities'Utilities’ ability to access credit markets and maintain working capital sufficient to meet operating requirements;
the effect of natural gas price volatility on the business; and
the ability to integrate the operations of all acquisitions.
Gas Marketing Segment:segment:
the risks of competition;
fluctuations in natural gas prices;
new national infrastructure projects;
the ability to procure firm transportation and storage services at reasonable rates;
credit and/or capital market access;
counterparty risks; and
the effect of natural gas price volatility on the business.
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'Utilities’ distribution costs are the essential, primarily fixed, expenditures it must incur to operate and maintain more than 53,00058,000 miles of mains and services comprising the natural gas distribution systems and related storage facilities for Laclede GasSpire Missouri, Spire Alabama and Alagasco.the subsidiaries of Spire EnergySouth.
The Utilities'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'Utilities’ tariff rates. Laclede Gas'Spire Missouri’s tariff rates are approved by the MoPSC, whereas Alagasco'sSpire Alabama’s tariff rates are approved by the APSC. Laclede GasThe subsidiaries of Spire EnergySouth, Spire Gulf and Spire Mississippi, have tariff rates that are approved by the APSC and Mississippi Public Service Commission (MSPSC), respectively. Spire Missouri also has an off-system sales and capacity release income stream that is regulated by tariff.
Laclede Gas’
Spire Missouri’s income from off-system sales and capacity release remains subject to fluctuations in market conditions. Laclede GasSpire Missouri is allowed to retain the following portions of annual income (shown by service territory):
|
| | |
| Laclede Gas Company (eastern Missouri) | | |
| Pre-tax Income | Customer Share | Company Share |
| First $2.0* | 100% | —% |
| Next $2.0 | 80% | 20% |
| Next $2.0 | 75% | 25% |
| Amounts exceeding $6.0 | 70% | 30% |
| * Customer share reverts to 85% and company share reverts to 15% in 2017. | | |
| | | |
| MGE (western Missouri) | | |
| Pre-tax Income | Customer Share | Company Share |
| First $1.2 | 85% | 15% |
| Next $1.2 | 80% | 20% |
| Next $1.2 | 75% | 25% |
| Amounts exceeding $3.6 | 70% | 30% |
|
| | |
| | Customer Share | Company Share |
| Spire Missouri East | | |
| First $2.0 of pre-tax income* | 85% | 15% |
| Next $2.0 of pre-tax income | 80% | 20% |
| Next $2.0 of pre-tax income | 75% | 25% |
| Amounts of pre-tax income exceeding $6.0 | 70% | 30% |
| * Customer share was set to 85% and company share set to 15% in fiscal 2017. For fiscal 2016 and 2015, the customer share and company share were 100% and 0%, respectively. |
| Spire Missouri West | | |
| First $1.2 of pre-tax income | 85% | 15% |
| Next $1.2 of pre-tax income | 80% | 20% |
| Next $1.2 of pre-tax income | 75% | 25% |
| Amounts of pre-tax income exceeding $3.6 | 70% | 30% |
Some of the factors impacting the level of off-system sales include the availability and cost of Laclede Gas’Spire Missouri’s natural gas supply, the weather in its service area, and the weather in other markets. When Laclede Gas’Spire Missouri’s service area experiences warmer-than-
normalwarmer-than-normal weather while other markets experience colder weather or supply constraints, some of Laclede Gas'Spire Missouri’s natural gas supply is available for off-system sales.
Laclede Gas and AlagascoThe 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. The UtilitiesThey 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. Laclede Gas’The Purchased Gas Adjustment (PGA) clause of Spire Missouri, Spire Gulf, and Alagasco'sSpire Mississippi and Spire Alabama’s Gas Supply Adjustment (GSA) rider allowsallow the Utilities to flow through to customers, subject to prudence review by as applicable, the MoPSC or APSC,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 well as gas inventory carrying costs. As of September 30, 2015, Laclede Gas2017, Spire Missouri had active derivative positions, but AlagascoSpire Alabama has had no gas supply derivative instrument activity since 2010. 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.
Both Laclede Gas and AlagascoThe 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'Utilities’ ability to issue commercial paper, access their lines of credit, issue long-term bonds, or obtain new lines of credit is dependent on current conditions in the credit and capital markets. Management focuses on maintaining a strong balance sheet and believes it currently has adequate access to credit and capital markets and will have sufficient capital resources to meet their foreseeable obligations. See the Liquidity and Capital Resources section on page 41for additional information.Gas Marketing
LER providesSpire Marketing is engaged in the marketing of natural gas and providing energy services to both on-system Laclede Gasutility transportation customers and customers outside of Laclede Gas'the Utilities’ traditional service area with another choice in non-regulated natural gas suppliers. LERareas. 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. LERSpire Marketing is committed to managing commodity price risk while it seeks to expand the services that it now provides. Nevertheless, income from LER’sthe Gas Marketing operations is subject to more fluctuations in market conditions than Laclede Gas’the Utilities’ operations.
LER’sThe Gas Marketing business is directly impacted by the effects of competition in the marketplace, the impacts of new infrastructure, and surplus natural gas supplies, on natural gas commodity prices. Managementand the addition of new demand from exports, power generation and industrial load. Spire Marketing’s management expects that LER's net economic earnings (a non-GAAP measure,a growing need for marketing services across the country as discussed below) will be challenged by significant commodity pricing declines that occurred through fiscal 2015customers manage seasonal variability and that are expected to remain constrained for the foreseeable future.marketplace volatility.
In addition to its operating cash flows, LERSpire Marketing relies on Laclede Group’sSpire’s parental guarantees to secure its purchase and sales obligations of natural gas. LERgas, and it also has access to Laclede Group’sSpire’s liquidity resources. A large portion of LER’sSpire Marketing’s receivables are from customers in the energy industry. LERIt also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure. Although LER’sSpire Marketing’s uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from customers are possible and could adversely affect LER’sGas Marketing’s liquidity and results of operations.
LERSpire Marketing carefully monitors the creditworthiness of counterparties to its transactions. LERIt performs in-house credit reviews of potential customers and may require credit assurances such as prepayments, letters of credit, or parental guarantees when appropriate. Credit limits for customers are established and monitored.
As a result of infrastructure optimization activities and an abundance of natural gas supply, LERSpire Marketing cannot be certain that all of its wholesale purchase and sale transactions will settle physically. As such, certain transactions entered into in fiscal years 2015, 2014, and 2013 are designated as trading activities for financial reporting purposes, due to their settlement characteristics, rather than elected for normal purchases or normal sales designations under generally accepted accounting principles (GAAP).characteristics. Results of operations from trading activities are reported on a net basis in Gas Marketing Operating Revenues,operating revenues (or expenses, if negative), which may cause volatility in the Company’s operating revenues, but hashave no effect on operating income or net income.
In the course of its business, LERSpire Marketing enters into commitments associated with the purchase or sale of natural gas. In accordance with GAAP,US generally accepted accounting principles (GAAP), some of LER’sits 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.
Other
In addition to the Gas Utility and Gas Marketing segments, the Company's business includes certain other non-utility activities reported as Other. Other includes:of the Company include:
unallocated corporate costs,items, including certain debt and associated interest costs,costs;
LacledeSpire STL Pipeline, Company, a subsidiary of Laclede Group which operatesSpire planning construction and operation of a propane pipeline underproposed 65-mile Federal Energy Regulatory Commission (FERC) jurisdiction,regulated pipeline to deliver natural gas into eastern Missouri; and
Laclede Group'sSpire’s subsidiaries that are engaged in the operation of a propane pipeline, compression of natural gas oil production, real estate development,and risk management, and financial investments in other enterprises, among other activities. All subsidiaries are wholly owned.
EARNINGS
Net income reported by the Laclede Group, Laclede GasSpire, Spire Missouri and Alagasco areSpire Alabama is determined in accordance with accounting principles generally accepted in the United States of America (GAAP).GAAP. Management also uses the non-GAAP financial measures of net economic earnings, net economic earnings per share and operatingcontribution margin when internally evaluating and reporting results of operations. These non-GAAP operating metrics should not be considered as an alternativealternatives to, or more meaningful than, GAAP measures such as net income, earnings per share and operating income. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are provided on the following pages.
Non-GAAP Measures - 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 after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions as well as acquisition, divestiture, and restructuring activities. These 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 result primarily from two sources:
| |
| 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 underlying hedge instruments; |
Lower of cost or market adjustments to the carrying value of commodity inventories resulting when the market price of the commodity falls below its original cost, to the extent that those commodities are economically hedged; and
Realized gains and losses resulting from the settlement of economic hedges prior to the sale of the physical commodity.
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 transaction(s)transactions occur. While management uses these non-GAAP measures to evaluate both the Utilities and LER,non-utility businesses, the net effect of adjustments on the Utilities'Utilities’ earnings are minimal. This is due tominimal because gains or losses on Laclede Gas'their natural gas derivative instruments beingare deferred pursuant to its PGA clause, as authorized by the MoPSC.state regulation.
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. In addition, management excludes the impact related to uniquecertain acquisition, divestiture, and restructuring activities when evaluating on-going performance, and therefore excludes these impacts from net economic earnings. NetSimilarly, in fiscal years 2016, 2014 and 2013, net economic earnings per share also excludeexcludes the impactsimpact of the May 2013 and June 2014 equity offeringsshares issued in those years to fund thefinance acquisitions of MGE and Alagasco, respectively.that closed late in each fiscal year. Management believes that this presentation provides a useful representation of operating performance by facilitating comparisons of year-over-year results. The definition and measurement of net economic earnings provided above is consistent with that used by management and the Board of Directors in assessing the Company's, Laclede Gas'Company’s, Spire Missouri’s and Alagasco'sSpire Alabama’s performance as well as determining performance under the Company's, Laclede Gas'Company’s, Spire Missouri’s and Alagasco'sSpire Alabama’s incentive compensation plans. Further, the Company believes this better enables an investor to view the Company's, Laclede Gas'Company’s, Spire Missouri’s and Alagasco'sSpire Alabama’s performance in that period on a basis that would be comparable to prior periods.
Reconciliations of net economic earnings and net economic earnings per share to the Company'sCompany’s most directly comparable GAAP measures are provided on the following pages.
Non-GAAP Measure - OperatingContribution Margin
In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of operatingcontribution margin when evaluating resultresults of operations, as shown in the table below.operations. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC, APSC, or APSC)MSPSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses (Missouri Utilities) andor GSA rider (Alabama Utility).rider. 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(which are calculated as a percentage of revenues,revenues), with the same amount excluding(excluding immaterial timing differences,differences) included in revenues, has no direct effect on operating income. Contribution margin is defined as operating revenues less natural and propane gas costs and gross receipts tax expense. As these costsitems are includedreflected in both operating revenue and operating expenses and management does not have anyhas little control over these amounts for the Utilities, management believes that beginning with operating marginscontribution margin is a more useful supplemental measure. In addition, it is management'smanagement’s belief that operating marginscontribution margin and the remaining operating expenses that calculate operating income is a moreare useful measure in assessing the Company'sCompany’s and the Utilities'Utilities’ performance as management has more ability to influence control over these revenues and expenses.
LACLEDE GROUPSpire
Overview – Net Income (Loss)
|
| | | | | | | | | | | | | | | | | | | | |
| | | Gas Utility | | Gas Marketing | | Other | | Consolidated | | Per Diluted Share |
| Year Ended September 30, 2015 | | | | | | | | | |
| | Net Income (Loss) (GAAP) | $ | 153.3 |
| | $ | 4.1 |
| | $ | (20.5 | ) | | $ | 136.9 |
| | $ | 3.16 |
|
| | Unrealized (gain) on energy-related derivatives* | (0.1 | ) | | (1.7 | ) | | — |
| | (1.8 | ) | | (0.04 | ) |
| | Lower of cost or market inventory adjustments* | — |
| | 0.3 |
| | — |
| | 0.3 |
| | 0.01 |
|
| | Realized loss on economic hedges prior to the sale of the physical commodity* | — |
| | 1.5 |
| | — |
| | 1.5 |
| | 0.03 |
|
| | Acquisition, divestiture and restructuring activities* | 1.9 |
| | — |
| | 4.2 |
| | 6.1 |
| | 0.14 |
|
| | Gain on sale of property* | (4.7 | ) | | — |
| | — |
| | (4.7 | ) | | (0.11 | ) |
| | Net Economic Earnings (Loss) (Non-GAAP) | $ | 150.4 |
| | $ | 4.2 |
| | $ | (16.3 | ) | | $ | 138.3 |
| | $ | 3.19 |
|
| | | | | | | | | | | |
| Year Ended September 30, 2014 | | | | | | | | | |
| | Net Income (Loss) (GAAP) | $ | 87.1 |
| | $ | 12.2 |
| | $ | (14.7 | ) | | $ | 84.6 |
| | $ | 2.35 |
|
| | Unrealized loss (gain) on energy-related derivatives* | 0.2 |
| | (1.1 | ) | | — |
| | (0.9 | ) | | (0.02 | ) |
| | Lower of cost or market inventory adjustments* | — |
| | (0.7 | ) | | — |
| | (0.7 | ) | | (0.02 | ) |
| | Realized (gain) on economic hedges prior to the sale of the physical commodity* | — |
| | (0.2 | ) | | — |
| | (0.2 | ) | | (0.01 | ) |
| | Acquisition, divestiture and restructuring activities* | 5.5 |
| | — |
| | 11.8 |
| | 17.3 |
| | 0.48 |
|
| | Weighted average shares adjustment ** | | | | | | | | | 0.27 |
|
| | Net Economic Earnings (Loss) (Non-GAAP) | $ | 92.8 |
| | $ | 10.2 |
| | $ | (2.9 | ) | | $ | 100.1 |
| | $ | 3.05 |
|
| | | | | | | | | | | |
| Year Ended September 30, 2013 | | | | | | | | | |
| | Net Income (Loss) (GAAP) | $ | 56.3 |
| | $ | 7.6 |
| | $ | (11.1 | ) | | $ | 52.8 |
| | $ | 2.02 |
|
| | Unrealized loss on energy-related derivatives* | 0.1 |
| | 0.4 |
| | — |
| | 0.5 |
| | 0.02 |
|
| | Lower of cost or market inventory adjustments* | — |
| | 0.9 |
| | — |
| | 0.9 |
| | 0.03 |
|
| | Less: Acquisition, divestiture and restructuring activities* | 0.3 |
| | — |
| | 10.5 |
| | 10.8 |
| | 0.42 |
|
| | Weighted average shares adjustment *** | | | | | | | | | $ | 0.38 |
|
| | Net Economic Earnings (Loss) (Non-GAAP) | $ | 56.7 |
| | $ | 8.9 |
| | $ | (0.6 | ) | | $ | 65.0 |
| | $ | 2.87 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | | Gas Utility | | Gas Marketing | | Other | | Consol-idated | | Per Diluted Share** |
| Year Ended September 30, 2017 | | | | | | | | | |
| | Net Income (Loss) (GAAP) | $ | 180.5 |
| | $ | 3.4 |
| | $ | (22.3 | ) | | $ | 161.6 |
| | $ | 3.43 |
|
| | Adjustments, pre-tax: | | | | | | | | | |
| | 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 |
|
| | | | | | | | | | | |
| Year Ended September 30, 2016 | | | | | | | | | |
| | Net Income (Loss) (GAAP) | $ | 159.0 |
| | $ | 7.1 |
| | $ | (21.9 | ) | | $ | 144.2 |
| | $ | 3.24 |
|
| | Adjustments, pre-tax: | | | | | | | | | |
| | Unrealized (gain) loss on energy-related derivatives | (0.3 | ) | | 0.2 |
| | — |
| | (0.1 | ) | | — |
|
| | Lower of cost or market inventory adjustments | — |
| | 0.2 |
| | — |
| | 0.2 |
| | 0.01 |
|
| | Realized gain on economic hedges prior to the sale of the physical commodity | — |
| | (1.6 | ) | | — |
| | (1.6 | ) | | (0.04 | ) |
| | Acquisition, divestiture and restructuring activities | 2.3 |
| | — |
| | 6.9 |
| | 9.2 |
| | 0.21 |
|
| | Income tax effect of adjustments* | (0.7 | ) | | 0.5 |
| | (2.6 | ) | | (2.8 | ) | | (0.06 | ) |
| | Weighted average shares adjustment ** | — |
| | — |
| | — |
| | — |
| | 0.06 |
|
| | Net Economic Earnings (Loss) (Non-GAAP) | $ | 160.3 |
| | $ | 6.4 |
| | $ | (17.6 | ) | | $ | 149.1 |
| | $ | 3.42 |
|
| | | | | | | | | | | |
| Year Ended September 30, 2015 | | | | | | | | | |
| | Net Income (Loss) (GAAP) | $ | 153.3 |
| | $ | 4.1 |
| | $ | (20.5 | ) | | $ | 136.9 |
| | $ | 3.16 |
|
| | Adjustments, pre-tax: | | | | | | | | | |
| | Unrealized gain on energy-related derivatives | (0.1 | ) | | (2.7 | ) | | — |
| | (2.8 | ) | | (0.07 | ) |
| | Lower of cost or market inventory adjustments | — |
| | 0.4 |
| | — |
| | 0.4 |
| | 0.01 |
|
| | Realized loss on economic hedges prior to the sale of the physical commodity | — |
| | 2.4 |
| | — |
| | 2.4 |
| | 0.06 |
|
| | Acquisition, divestiture and restructuring activities | 3.1 |
| | — |
| | 6.7 |
| | 9.8 |
| | 0.23 |
|
| | Gain on sale of property | (7.6 | ) | | — |
| | — |
| | (7.6 | ) | | (0.18 | ) |
| | Income tax effect of adjustments* | 1.7 |
| | — |
| | (2.5 | ) | | (0.8 | ) | | (0.02 | ) |
| | Net Economic Earnings (Loss) (Non-GAAP) | $ | 150.4 |
| | $ | 4.2 |
| | $ | (16.3 | ) | | $ | 138.3 |
| | $ | 3.19 |
|
| |
| * | Amounts presented net of income taxes. Income taxes aretax 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. |
| |
| ** | 2014Fiscal 2016 net economic earnings per share excludes the impact of the June 2014May 2016 equity offeringsissuance to fund a portion of the acquisition of Alagasco, but includes the May 2013 equity offering to fund the MGE acquisition.Spire EnergySouth. The weighted-averageweighted average diluted shares used in the net economic earnings per share calculation for the fiscal year ended September 30, 20142016 was 32.743.5 compared to 35.944.3 in the GAAP EPSdiluted earnings per share (EPS) calculation. |
| |
*** | 2013 For fiscal years 2017 and 2015, net economic earnings per share excludes the impact of the May 2013 equity offering to fund the acquisition of MGE. The weighted-average diluted shares used in theis calculated by replacing consolidated net income with consolidated net economic earnings per share calculation for the fiscal year ended September 30, 2014 was 22.5 compared to 26.0 in the GAAP diluted EPS calculation. |
2015
2017 vs. 20142016
Consolidated
Laclede Group’sSpire’s net income was $136.9$161.6 in fiscal year 2015,2017, compared with $84.6$144.2 in fiscal year 2014.2016. Basic and diluted earnings per share were $3.16$3.44 and $3.43, respectively, for fiscal year 20152017 compared with basic and diluted earnings per share of $2.36$3.26 and $2.35,$3.24, respectively, for fiscal year 2014.2016. Net economic earnings were $138.3$167.6 (or $3.19$3.56 per share) in fiscal year 2015,2017, compared with $100.1$149.1 (or $3.05$3.42 per share) in fiscal year 2014.2016, an increase of $18.5. Net income increased in fiscal year 20152017 compared to fiscal year 20142016 primarily due to $66.2$21.5 income growth in the Gas Utility segment, which reflects $50.9 improvement relating to the inclusion of a full year of Alagasco earnings versus the $2.9 Alagasco loss included in 2014 for the month of September. Gas Utility also
benefited from $15.3 income growth from the Missouri Utilities. The increased net income from Gas Utility was partiallypartly offset by an $8.1 decreasea $3.7 income decline in the Gas Marketing net incomesegment and a $5.8 higher$0.4 larger loss from other non-utility activities, principally due to interest expense relating to the 2014 financing of the Alagasco acquisition.activities.
Gas Utility
Gas Utility net income and net economic earnings increased by $66.2$21.5 and $57.6,$21.2, respectively, in 2015,fiscal 2017, compared to 2014.fiscal 2016. The increases to net income and net economic earnings were primarily due todriven by the $9.6 income growth generated by the Spire EnergySouth acquisition, margin growth and combined lower O&M expenses at Spire Missouri and Spire Alabama. The margin growth was driven by higher operating margin (a non-GAAP measure, as discussed below) of $271.3, which reflectsInfrastructure System Replacement Surcharge (ISRS) charges at the inclusion of Alagasco operating margin of $285.1 for twelve months in 2015 versus $14.8 for one month in 2014,Missouri Utilities and a $1.0 increase in Laclede Gas operating margin. The increase in operating margin was partiallynet favorable regulatory adjustments at Spire Alabama, partly offset by an increase in other operating expenses of $112.1 and an increaseweather impacts resulting from warmer winter temperatures. These impacts were partly offset by increases in depreciation and amortization expenses totaling $47.5, asexpenses. Additionally, interest expense was higher due to the Spire EnergySouth acquisition and higher interest charges experienced by Spire Missouri. Income taxes were also higher due to the Spire EnergySouth acquisition and higher pre-tax income for both Spire Missouri and Spire Alabama. Further details are discussed in the Gas Utility, sectionSpire Missouri, and Spire Alabama sections below. Additionally, interest expense for 2015 was $11.6 higher than 2014 due to the inclusion of full year Alagasco results offsetting the $1.0 decline experienced by Laclede Gas. Income taxes were also higher by $38.8, due to higher Missouri Utilities operating results and from the inclusion of twelve months of Alagasco operating results in 2015 versus only the month of September in 2014.
Gas Marketing
Gas Marketing reported GAAP earningsnet income totaling $4.1,$3.4, a decrease of $8.1$3.7 compared with the same period last year. Net economic earnings for fiscal year 2015 decreased $6.02017 increased $0.4 from fiscal year 2014.2016. The decreasesdecrease in net income and net economic earnings werewas primarily attributable to decreasesunfavorable mark-to-market (MTM) activity in operating margin, with the impact to netcurrent year. Net economic earnings being partly mitigated by mark-to-market activity asbenefited from increased value from spreads and asset optimization in the current year versus the prior year. Further details are discussed in the Gas Marketing section below.
Other
The combined increase in net loss and net economic loss for the Company'sCompany’s other non-utility activities were $5.8$0.4 and $13.4 larger,$3.1, respectively, for the 2015 fiscal year2017 compared to the same period last year. The increase in netincreased loss was primarily the result of $16.6 increasedhigher current year interest expense related tocharges associated with the 2014 debt issued to finance the AlagascoSeptember 2016 acquisition partially offset by lower transaction and integration expenses in fiscal year 2015 as compared to 2014.
Operating Revenues and Operating Expenses
Reconciliations of operating margin to the most directly comparable GAAP measure are shown below. |
| | | | | | | | | | | | | | | | |
| | Gas Utility | Gas Marketing | Other | Eliminations | Consolidated |
| Year Ended September 30, 2015 | | | | | |
| | Operating Revenues | $ | 1,895.8 |
| $ | 153.4 |
| $ | 3.7 |
| $ | (76.5 | ) | $ | 1,976.4 |
|
| | Natural and propane gas expense | 957.6 |
| 140.5 |
| 0.3 |
| (75.5 | ) | 1,022.9 |
|
| | Gross receipts tax expense | 96.1 |
| 0.2 |
| — |
| — |
| 96.3 |
|
| | Operating margin (non-GAAP) | 842.1 |
| 12.7 |
| 3.4 |
| (1.0 | ) | 857.2 |
|
| | Depreciation and amortization | 129.9 |
| 0.3 |
| 0.6 |
| — |
| 130.8 |
|
| | Other operating expenses | 437.6 |
| 5.6 |
| 11.7 |
| (1.0 | ) | 453.9 |
|
| | Operating income (Loss) (GAAP) | $ | 274.6 |
| $ | 6.8 |
| $ | (8.9 | ) | $ | — |
| $ | 272.5 |
|
| | | | | | | |
| Year Ended September 30, 2014 | |
| |
| |
| | |
|
| | Operating revenues | $ | 1,467.8 |
| $ | 246.6 |
| $ | 3.8 |
| $ | (91.0 | ) | $ | 1,627.2 |
|
| | Natural and propane gas expense | 821.8 |
| 220.4 |
| — |
| (90.2 | ) | 952.0 |
|
| | Gross receipts tax expense | 75.2 |
| 0.2 |
| — |
| — |
| 75.4 |
|
| | Operating margin (non-GAAP) | 570.8 |
| 26.0 |
| 3.8 |
| (0.8 | ) | 599.8 |
|
| | Depreciation and amortization | 82.4 |
| 0.4 |
| 0.5 |
| — |
| 83.3 |
|
| | Other operating expenses | 325.5 |
| 5.4 |
| 20.0 |
| (0.8 | ) | 350.1 |
|
| | Operating income (Loss) (GAAP) | $ | 162.9 |
| $ | 20.2 |
| $ | (16.7 | ) | $ | — |
| $ | 166.4 |
|
| | | | | | | |
| Year Ended September 30, 2013 | |
| |
| |
| | |
|
| | Operating revenues | $ | 857.8 |
| $ | 189.4 |
| $ | 6.2 |
| $ | (36.4 | ) | $ | 1,017.0 |
|
| | Natural and propane gas expense | 469.1 |
| 171.6 |
| 1.3 |
| (35.7 | ) | 606.3 |
|
| | Gross receipts tax expense | 40.2 |
| 0.1 |
| — |
| — |
| 40.3 |
|
| | Operating margin (non-GAAP) | 348.5 |
| 17.7 |
| 4.9 |
| (0.7 | ) | 370.4 |
|
| | Depreciation and amortization | 48.3 |
| 0.3 |
| 0.7 |
| — |
| 49.3 |
|
| | Other operating expenses | 200.6 |
| 4.6 |
| 20.1 |
| (0.7 | ) | 224.6 |
|
| | Operating income (Loss) (GAAP) | $ | 99.6 |
| $ | 12.8 |
| $ | (15.9 | ) | $ | — |
| $ | 96.5 |
|
Consolidated
Laclede Group reported operating revenues of $1,976.4 for the fiscal year ended September 30, 2015 compared with $1,627.2 for the same period last year. Laclede Group's operating margin increased $257.4 for the twelve months ended September 30, 2015, compared to the same period last year primarily due to higher Gas Utility operating margin, slightly offset by the lower operating margin reported by Gas Marketing as discussed below. Other operating expenses and depreciation and amortization increased $103.8 and $47.5, respectively, for the twelve months ended September 30, 2015 as compared to the same period last year. These increases were primarily due to the impact of eleven additional months of Alagasco other operating expenses and depreciation and amortization expenses in fiscal 2015 totaling $134.4 and $43.4, respectively. The increase in other operating expenses was partially offset by $22.3 lower expenses in the Missouri Utilities and a $8.3 decrease in expenses in Other, as discussed below. The remaining increase in depreciation and amortization was related to higher capital spending within the Missouri Utilities in 2015.
Gas Utility
Operating Revenues – Gas Utility Operating Revenues for fiscal year 2015 increased $428.0, compared to fiscal year 2014, was primarily attributable to the following factors:
|
| | | |
| New customer revenue from Alagasco acquisition | $ | 459.5 |
|
| Variance due to Missouri Utilities: | |
| Lower system volumes and off-system pricing | (42.2 | ) |
| Base rate increases and Infrastructure System Replacement Surcharge (ISRS) charges | 10.9 |
|
| Higher wholesale gas prices passed to customers | 7.1 |
|
| Higher optimization of assets in the prior year | (6.2 | ) |
| Lower gross receipts tax | (1.8 | ) |
| All other variance | 0.7 |
|
| Total Variation | $ | 428.0 |
|
Operating Margin – Gas Utility operating margin was $842.1 for fiscal year 2015, a $271.3 increase over the same period last year. The increase was attributable to the following factors:
|
| | | |
| Operating margin from Alagasco | $ | 270.3 |
|
| Variance due to Missouri Utilities: | |
| Base rate increases and ISRS charges | 10.9 |
|
| Lower system volumes and off-system pricing | (8.3 | ) |
| Higher optimization of assets in the prior year | (3.1 | ) |
| All other variance | 1.5 |
|
| Total Variation | $ | 271.3 |
|
The increase was primarily attributable to the acquisition of Alagasco totaling $270.3. Temperatures in the Laclede Gas service area in 2015 were 11.2% warmer than in the same period in the prior year, negatively impacting current year revenues by $8.3. The prior year also benefited $3.1 due to a higher level of asset optimization. These negative impacts to revenue were mostly offset by base rate increases and ISRS charges of $10.9.
Operating Expenses – Gas Utility other operating expenses in fiscal year 2015 increased $112.1 from fiscal year 2014, with $134.4 attributable to the Alagasco acquisition offset by a decrease in other operating expenses within the Missouri Utilities. Of the $22.3 decrease in Missouri, $7.6 was due to a gain on the sale of property, $7.5 was the result of lower payroll and benefits expenses, and $9.8 resulted from cost efficiencies. Depreciation and amortization expense increased $4.1 at the Missouri Utilities primarily due to higher levels of capital expenditures, with the remaining $43.4 increase reflecting the inclusion of Alagasco for the full fiscal year.
Gas Marketing
Operating Revenues – Gas Marketing operating revenue for the twelve months ended September 30, 2015 decreased $93.2 from the same period last year due to higher per unit gas sales prices in the prior year as the colder weather in the Midwest created higher market volatility and basis differentials (pricing differences between supply regions). Gas commodity pricing has also declined $1.35/MMBtu versus the prior year. Overall gas commodity pricing in the current year is below the prior year, negatively impacting revenues in the current year. The prior year also included a $3.3 higher benefit from mark-to-market impact on derivatives and inventory.
Operating Margin – Gas Marketing operating margin was $12.7 for fiscal year 2015, a $13.3 decrease compared to the same period last year. Of this decrease, $10.0 was primarily attributable to higher sales margins (operating margin less fair value adjustments) last year reflecting higher market volatility and basis differentials of natural gas prices and the expiration of a favorable gas supply contract in the first quarter of fiscal 2014. The remaining variance was due to $3.3 higher pre-tax income in the prior year associated with unrealized gains on derivatives and lower-of-cost-or-market adjustments to inventory.
Other
Operating Revenue and Operating Expenses - Other operating revenue was essentially flat with the prior year, as volume increases at the Company's Spire LNG fueling operations were offset by lower prices. Other operating expenses decreased $8.3 primarily due to the Alagasco acquisition-related transaction expenses in the prior year being higher than the MGE and Alagasco integration related expenses incurred in fiscal 2015.
Interest Charges
Interest charges during the twelve months ended September 30, 2015 increased $28.4 from the same period last year. The increase was primarily due to the Company's August 2014 issuance of long-term debt totaling $625.0, and the June 2014 issuance of equity units totaling $143.8. These increases were partially offset by Laclede Gas' early redemption of $80.0 of 6.35% first mortgage bonds on January 6, 2014. The assumption of Alagasco debt contributed $12.6 to the increase in interest expense. For the twelve months ended September 30, 2015 and 2014, average short-term borrowings were $300.6 and $82.3, respectively, and the average interest rates on those borrowings were 0.7% and 0.5%, respectively.
Income Taxes
Consolidated Income tax expense increased $29.9 in fiscal year 2015 from fiscal year 2014 primarily due to higher pre-tax income and a higher effective tax rate. The current year effective tax rate of 31.2% is approximately 3.6 percentage points higher than the prior year primarily due to the full-year inclusion of Alagasco, which has a higher effective tax rate than Laclede Gas.
In connection with the acquisition of 100% of the common stock of Alagasco (Alagasco Transaction), the Company and Energen made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the Alagasco Transaction as a deemed purchase and sale of assets for tax purposes. As a result of the election, goodwill was generated for tax purposes at Alagasco. For book purposes, goodwill was recorded on the Laclede Group parent entity balance sheet and not pushed down to Alagasco. Consequently, a deferred tax asset (DTA) was recorded at Alagasco related to the excess of tax deductible goodwill over book goodwill for the stand-alone entity. That initial goodwill DTA is eliminated (along with the investment in subsidiary and Alagasco’s equity) in the Laclede Group consolidated balance sheet because, at that consolidated level, there is no excess of tax deductible goodwill over book goodwill. As the tax goodwill is amortized and deducted for tax purposes, the DTA at Alagasco is reduced, and for Laclede Group, a deferred tax liability (DTL) is created. For both Alagasco and consolidated Laclede Group, the change to the goodwill DTA/DTL is reported as a component of deferred tax expense in the statements of income. Because the deferred tax expense impact is offset by an opposite current tax expense impact, there is no significant impact on the effective tax rate of the Company.
LACLEDE GAS
Summary Operating Results
|
| | | | | | | |
| Year ended September 30, | 2015 | | 2014 |
| Operating revenues | $ | 1,416.6 |
| | $ | 1,448.2 |
|
| Natural and propane gas expense | 786.1 |
| | 816.9 |
|
| Gross receipts tax expense | 73.5 |
| | 75.2 |
|
| Operating margin (non-GAAP) | 557.0 |
| | 556.1 |
|
| Depreciation and amortization | 82.6 |
| | 78.5 |
|
| Other operating expenses | 289.0 |
| | 311.2 |
|
| Operating income (GAAP) | $ | 185.4 |
| | $ | 166.4 |
|
| Net Income | $ | 105.3 |
| | $ | 90.1 |
|
Operating revenues during the twelve months ended September 30, 2015 decreased $31.6 from the same period last year. Base rate increases and ISRS charges of $10.9 and $7.1 in higher wholesale gas costs passed onto customers were more than offset by $42.2 in lower system volumes and off-system pricing and $6.2 higher optimization of assets in the prior year.
Operating margin for the twelve months ended September 30, 2015 increased $0.9 from the same period last year. Higher base rates and ISRS charges of $10.9 and other positive variations of $1.5 were mostly offset by lower system volumes and off-system pricing of $8.3 in the current year and $3.1 in higher optimization of assets in the prior year.
Other operating expenses for the twelve months ended September 30, 2015 decreased $22.2 versus the same period last year. Primary drivers of the expense decrease were a $7.6 gain on the sale of property, $9.8 of cost efficiencies and a $7.5 decrease in payroll and benefits expenses. Resulting net income for the twelve months ended September 30, 2015 increased $15.2 from the same period last year.
Temperatures experienced in the Missouri Utilities' service area during 2015 were 11.2% warmer than the same period last year and 1.5% warmer than normal. Total system therms sold and transported were 1,684.3 million for fiscal year 2015 compared with 1,828.1 million for fiscal year 2014. Total off-system therms sold and transported outside of Laclede Gas' service area were 193.5 million for fiscal year 2015 compared with 125.8 million for fiscal year 2014. This increase was due to warmer temperatures and decreased heating demand in Laclede Gas' services areas, increasing the gas supply resources
available for off-system sales or capacity release. However, the increase in off-system volume revenue was more than offset by lower gas commodity pricing realized during 2015.
ALAGASCO
Change in Fiscal Year
Effective September 2, 2014, Alagasco changed its fiscal year end from December 31 to September 30. The various periods that are covered in the discussion below are defined as follows:
"current year" means October 1, 2014 through September 30, 2015; and
"transition period" means January 1, 2014 through September 30, 2014.
Summary Operating Results
|
| | | | | | | |
| | Year Ended September 30, | | Nine Months Ended September 30, |
| | 2015 | | 2014 |
| Operating revenues | $ | 479.2 |
| | $ | 417.2 |
|
| Natural gas expense | 171.5 |
| | 184.5 |
|
| Gross receipts tax expense | 22.6 |
| | 20.6 |
|
| Operating margin (non-GAAP) | 285.1 |
| | 212.1 |
|
| Depreciation and amortization | 47.3 |
| | 34.4 |
|
| Other operating expenses | 148.6 |
| | 115.5 |
|
| Operating income (GAAP) | $ | 89.2 |
| | $ | 62.2 |
|
| Net Income | $ | 48.0 |
| | $ | 33.0 |
|
Operating revenues for the twelve months ended September 30, 2015 increased $62.0 versus the transition period ended September 30, 2014. Of the increase, $142.7 was attributable to the current year including one more quarter of operating activity, offset by lower system volumes and lower pricing in the current year totaling $80.7.
Operating margin increased $73.0, due primarily to the inclusion of $84.3 relating to the extra quarter of activity included in the current year results, offset slightly by the previously mentioned lower system volumes and pricing.
Other operating expenses for the twelve months ended September 30, 2015 increased $33.1 versus the transition period ended September 30, 2014. $38.4 of the increase was due to the current year including one more quarter of activity than the prior year. This increase was offset slightly by $2.6 lower labor-related costs and $2.7 in net other cost reductions during the current year. Net income increased $15.0 in the current year, $19.8 due to the inclusion of an extra quarter of activity in 2015 partly offset due to the factors described above.
Temperatures in Alagasco's service area during the twelve months ended September 30, 2015 were 9.7% colder than normal. However, temperatures were 7.8% warmer than the same period a year earlier. The colder than normal temperatures still resulted in comparatively higher gas usage for cycle customers versus the prior year. Alagasco's total therms sold and transported were 865.0 million for the twelve months ended September 30, 2015, compared with 840.1 million for the same period last year.
For further information on the GSA and Rate Stabilization and Equalization (RSE) mechanisms, please see Note 1, Summary of Significant Accounting Policies, and Note 15, Regulatory Matters, in the Notes to Financial Statements.
2014 vs. 2013
LACLEDE GROUP
Consolidated
Laclede Group’s net income was $84.6 in fiscal year 2014, including net loss of $2.9 relating to Alagasco's operations for the month ended September 30, 2014, compared with $52.8 in fiscal year 2013. Basic and diluted earnings per share were $2.36 and $2.35 respectively for fiscal year 2014 compared with basic and diluted earnings per share of $2.03 and $2.02 respectively for fiscal year 2013. Net economic earnings were $100.1 (or $3.05 per share) in fiscal year 2014, compared with $65.0 (or $2.87 per share) in fiscal year 2013. GAAP earnings increased in fiscal year 2014 compared to fiscal year 2013 primarily due to improved results in Laclede Group's Gas Utility segment, which reflects the inclusion of a full year of MGE operations,
improved earnings from Gas Marketing and the impact of colder weather in fiscal 2014, partially offset by Alagasco acquisition costs and MGE integration costs incurred during the year.
Gas Utility
Gas Utility net income and net economic earnings increased by $30.8 and $36.1, respectively, in 2014, compared with 2013. The increase to net income and net economic earnings were primarily due to higher operating margin (a non-GAAP measure discussed below) of $222.3, which reflects the inclusion of MGE operating margin of $186.5 and Alagasco operating margin of $14.8. These increases were partially offset by an increase in other operating expenses of $124.9, including MGE other operating expenses of $103.5; Alagasco other operating expenses of $14.2; an increase in depreciation and amortization expenses totaling $34.1, including MGE depreciation and amortization expenses totaling $26.0 and Alagasco depreciation and amortization of $3.9; higher interest expense totaling $12.6; and increased income tax expenses of $14.5.
Gas Marketing
Gas Marketing reported GAAP earnings totaling $12.2, an increase of $4.6 compared with the same period in 2013. Net economic earnings for fiscal year 2014 increased $1.3 from fiscal year 2013. The increases in net income and net economic earnings were primarily attributable to increases in operating margin, as discussed in the Gas Marketing section below.
Other
Other net income and other net economic earnings for fiscal 2014 decreased $3.6 and $2.3, respectively, compared with the fiscal 2013. The decrease in net income is primarily due to expenses attributable to the Alagasco acquisition in fiscal 2014 being higher than the expenses attributable to the MGE and NEG transaction in 2013.
Operating Revenues and Operating Expenses
Reconciliations of the Company's operatingcontribution margin to the most directly comparable GAAP measure are shown below. |
| | | | | | | | | | | | | | | | | | | | |
| | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| Year Ended September 30, 2017 | | | | | | | | | |
| | Operating Income (Loss) | $ | 321.6 |
| | $ | 5.2 |
| | $ | (5.1 | ) | | $ | — |
| | $ | 321.7 |
|
| | Operation and maintenance expenses | 409.1 |
| | 5.9 |
| | 11.8 |
| | (5.5 | ) | | 421.3 |
|
| | 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 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | Gas
Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| Year Ended September 30, 2016 | | | | | | | | | |
| | Operating Income (Loss) | $ | 278.3 |
| | $ | 11.8 |
| | $ | (7.8 | ) | | $ | — |
| | $ | 282.3 |
|
| | Operation and maintenance expenses | 379.3 |
| | 5.6 |
| | 12.1 |
| | (2.4 | ) | | 394.6 |
|
| | Depreciation and amortization | 136.9 |
| | 0.1 |
| | 0.5 |
| | | | 137.5 |
|
| | Taxes, other than income taxes | 125.2 |
| | 0.3 |
| | (0.2 | ) | | | | 125.3 |
|
| | Less: Gross receipts tax expense | (75.3 | ) | | (0.1 | ) | | — |
| | — |
| | (75.4 | ) |
| | Contribution Margin (Non-GAAP) | 844.4 |
| | 17.7 |
| | 4.6 |
| | (2.4 | ) | | 864.3 |
|
| | Natural and propane gas costs | 539.7 |
| | 60.7 |
| | 0.2 |
| | (3.0 | ) | | 597.6 |
|
| | Gross receipts tax expense | 75.3 |
| | 0.1 |
| | — |
| | — |
| | 75.4 |
|
| | Operating Revenues | $ | 1,459.4 |
| | $ | 78.5 |
| | $ | 4.8 |
| | $ | (5.4 | ) | | $ | 1,537.3 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | Gas
Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| Year Ended September 30, 2015 | | | | | | | | | |
| | Operating Income (Loss) | $ | 274.6 |
| | $ | 6.8 |
| | $ | (8.9 | ) | | $ | — |
| | $ | 272.5 |
|
| | Operation and maintenance expenses | 391.5 |
| | 5.4 |
| | 11.7 |
| | (1.0 | ) | | 407.6 |
|
| | Depreciation and amortization | 129.9 |
| | 0.3 |
| | 0.6 |
| | — |
| | 130.8 |
|
| | Taxes, other than income taxes | 142.2 |
| | 0.4 |
| | — |
| | — |
| | 142.6 |
|
| | Less: Gross receipts tax expense | (96.1 | ) | | (0.2 | ) | | — |
| | — |
| | (96.3 | ) |
| | Contribution Margin (Non-GAAP) | 842.1 |
| | 12.7 |
| | 3.4 |
| | (1.0 | ) | | 857.2 |
|
| | Natural and propane gas costs | 957.6 |
| | 140.5 |
| | 0.3 |
| | (75.5 | ) | | 1,022.9 |
|
| | Gross receipts tax expense | 96.1 |
| | 0.2 |
| | — |
| | — |
| | 96.3 |
|
| | Operating Revenues | $ | 1,895.8 |
| | $ | 153.4 |
| | $ | 3.7 |
| | $ | (76.5 | ) | | $ | 1,976.4 |
|
Consolidated
Laclede GroupSpire reported operating revenues of $1,627.2$1,740.7 for the year ended September 30, 2017 compared with for $1,537.3 the same period last year. The increase was driven primarily by the Utilities, the result of the Spire EnergySouth acquisition, higher ISRS charges at Spire Missouri, favorable regulatory adjustments at Spire Alabama, and higher gas costs passed on to customers in both Missouri and Alabama. These positive drivers were partly offset by lower demand as a result of warmer weather. Spire’s contribution margin increased $88.2 for the twelve months ended September 30, 2017, compared to the same period last year. The increase was primarily due to higher contribution margin of $94.6 for the Gas Utility segment, slightly offset by the lower contribution margin reported in Gas Marketing. Operation and maintenance (O&M) expenses increased $26.7 for the twelve months ended September 30, 2017 as compared to the same period last year, as discussed below. Depreciation and amortization expenses increased $16.6, driven principally by the Spire EnergySouth acquisition and continued infrastructure investment at Spire Missouri and Spire Alabama in fiscal 2017.
Gas Utility
Operating Revenues – Gas Utility operating revenues for fiscal 2017 increased $208.5 compared to fiscal 2016, and was attributable to the following factors:
|
| | | |
| New customer revenue from Spire EnergySouth acquisition | $ | 92.1 |
|
| Higher wholesale gas costs passed on to customers | 87.2 |
|
| Spire Alabama – Lower Rate Stabilization and Equalization (RSE) revenue reduction and higher Cost Control Measure (CCM) benefit | 19.2 |
|
| Spire Missouri - Higher off-system sales and capacity release | 17.9 |
|
| Spire Missouri - Higher ISRS charges | 14.2 |
|
| Higher gross receipts tax | 4.9 |
|
| Weather / temperature adjustment impact | (27.3 | ) |
| All other | 0.3 |
|
| Total Variation | $ | 208.5 |
|
Contribution Margin – Gas Utility contribution margin was $939.0 for fiscal 2017, a $94.6 increase over the same period last year. The increase was attributable to the following factors:
|
| | | |
| Contribution margin from Spire EnergySouth acquisition | $ | 66.6 |
|
| Spire Alabama – Lower RSE revenue reduction and higher CCM benefit | 19.2 |
|
| Spire Missouri - Higher ISRS charges | 14.2 |
|
| Spire Missouri - Higher off-system sales and capacity release | 1.4 |
|
| Weather / temperature adjustment impact | (8.6 | ) |
| All other | 1.8 |
|
| Total Variation | $ | 94.6 |
|
The increase was primarily attributable to the $66.6 of operating margin resulting from the Spire EnergySouth acquisition, lower RSE revenue adjustments, beneficial CCM and return on capital impacts totaling $19.2 for Spire Alabama, and benefits of higher ISRS charges for the Missouri Utilities in 2017 of $14.2. These positive impacts offset the negative impact of weather and temperature adjustments. Temperatures in the Spire Missouri territory experienced degree days that were 1% warmer than last year and 20% warmer than normal. Degree days in the Spire Alabama service areas in fiscal 2017 were 15% warmer than the prior year, and 35% warmer than normal. Temperatures are a significant part of the Utilities’ rate cases, contributing to the constrained margins experienced in the current year.
Operating Expenses – Depreciation and amortization expenses for the twelve months ended September 30, 2017 increased $16.6 from the same period last year, $10.0 the result of the Spire EnergySouth acquisition, $4.5 due to Spire Missouri and $2.1 relating to Spire Alabama, principally the result of continued infrastructure capital spending in fiscal 2017. O&M expenses increased $29.8 for the twelve months ended September 30, 2017 compared to the same period in the prior year. Excluding the impact of the $33.5 increase relating to the Spire EnergySouth acquisition, O&M expenses were $3.7 below prior year levels due primarily to lower employee-related costs that were only partly offset by higher professional services. The employee labor-costs were favorably impacted by the warmer weather experienced in both the Spire Missouri and Spire Alabama service territories. Taxes other than income taxes were $12.6 higher in the current year, with $7.6 of the increase attributable to the Spire EnergySouth acquisition. $4.2 of the increase was related to the higher gross receipt taxes due to the higher revenues, with the remainder of the variance related to property tax expense at Spire Missouri.
Gas Marketing
Operating Revenues –Gas Marketing operating revenue for the twelve months ended September 30, 2017 increased $0.8 from the same period last year. The variance in revenues reflects the impact of higher total volumes and higher commodity pricing levels offset by the effect of increased trading activities, and unfavorable mark-to-market adjustments on derivatives. Under GAAP, revenues associated with trading activities are presented net of related costs. Average pricing for the twelve months ended September 30, 2017 was approximately $2.897/MMBtu versus approximately $2.286/MMBtu for fiscal 2016, an increase of $0.611/MMBtu.
Contribution Margin – Gas Marketing contribution margin was $11.6 for fiscal 2017, a $6.1 decrease compared to the same period last year, with that variance significantly impacted by unfavorable fair value adjustments on derivative holdings in the current year, and favorable adjustments in the prior year. Removing these fair value adjustments from both periods, contribution margin is $0.7 higher than last year, reflecting favorable wholesale trading volumes and storage optimization.
Other
Other operating revenue increased $2.9 for the twelve months ended September 30, 2017 compared to the same period in 2016, driven by higher reinsurance premiums. Other operating expenses were essentially flat with the prior year, as an increase in costs related to the reinsurance premiums was offset by a decrease in corporate-level integration expenses.
Interest Charges
Consolidated interest charges during the twelve months ended September 30, 2017 increased $11.9 versus the same period last year. The increase was primarily driven by the debt incurred and assumed as a result of the Spire EnergySouth acquisition generating interest expense of $8.5, combined with marginally higher interest rates on floating rate debt in the first six months of the year and higher interest rates on the senior notes issued in March of this year that were used to retire the $250.0 of floating rate debt. Also, for the twelve months ended September 30, 2017 and 2016, average short-term borrowings were $485.8 and $273.9, respectively, and the average interest rates on these borrowings were 1.2% and 0.9%, respectively.
Income Taxes
Consolidated income tax expense increased $8.1 in fiscal 2017 from fiscal 2016 primarily due to higher pre-tax income. The current year effective tax rate of 32.4% was essentially flat versus fiscal 2016’s effective rate of 32.5%.
Spire Missouri
Summary Operating Results
|
| | | | | | | |
| Year ended September 30, | 2017 | | 2016 |
| Operating Income | $ | 196.9 |
| | $ | 186.9 |
|
| Operation and maintenance expenses | 243.8 |
| | 244.4 |
|
| Depreciation and amortization | 93.1 |
| | 88.6 |
|
| Taxes, other than income taxes | 99.8 |
| | 96.3 |
|
| Less: Gross receipts tax expense | (60.0 | ) | | (57.4 | ) |
| Contribution Margin (non-GAAP) | 573.6 |
| | 558.8 |
|
| Natural and propane gas costs | 538.3 |
| | 471.3 |
|
| Gross receipts tax expense | 60.0 |
| | 57.4 |
|
| Operating Revenues | $ | 1,171.9 |
| | $ | 1,087.5 |
|
Operating revenues during the twelve months ended September 30, 2017 increased $84.4 from the same period last year. Revenues were impacted primarily by higher gas costs of $50.9 passed on to customers, $17.9 higher off- system and capacity release sales, higher ISRS charges of $14.2, and higher gross receipts taxes of $3.3. These impacts were slightly offset by negative weather impacts.
Contribution margin for the twelve months ended September 30, 2017 increased $14.8 from the same period last year. Higher ISRS charges of $14.2 were only partly offset by a negative $2.6 weather impact attributable to the 1% warmer weather experienced in the current year.
O&M for the twelve months ended September 30, 2017 were $0.6 lower than the prior year. Lower employment-related costs were almost completely offset by higher professional services. Depreciation and amortization increased $4.5, reflecting continued infrastructure investments throughout Missouri. Interest expense in the current year was $1.7 greater than prior year, the result of a combination of higher short-term borrowings and higher average effective interest rates. Income taxes were $2.1 higher for the twelve months ended September 30, 2017 versus the comparable prior year period due to higher pre-tax book income, mitigated by a slightly lower effective tax rate.
Temperatures experienced in the Missouri Utilities’ service area during fiscal 2017 were 1% warmer than the same period last year and 20% warmer than normal. Normal temperatures are part of Spire Missouri’s rate case design, meaning the warmer than normal temperatures continued to constrain margins. Total system therms sold and transported were 1,482.1 million for fiscal 2017 compared with 1,479.3 million for fiscal 2016. Total off-system therms sold and transported outside of Spire Missouri’s service area were 175.6 million for fiscal 2017 compared with 183.3 million for fiscal 2016.
Spire Alabama
Summary Operating Results
|
| | | | | | | |
| Year ended September 30, | 2017 | | 2016 |
| Operating Income | $ | 105.8 |
| | $ | 91.5 |
|
| Operation and maintenance expenses | 130.4 |
| | 133.5 |
|
| Depreciation and amortization | 49.9 |
| | 47.8 |
|
| Taxes, other than income taxes | 29.9 |
| | 28.4 |
|
| Less: Gross receipts tax expense | (19.5 | ) | | (17.9 | ) |
| Contribution Margin (Non-GAAP) | 296.5 |
| | 283.3 |
|
| Natural and propane gas costs | 84.5 |
| | 67.3 |
|
| Gross receipts tax expense | 19.5 |
| | 17.9 |
|
| Operating Revenues | $ | 400.5 |
| | $ | 368.5 |
|
Operating revenues for the twelve months ended September 30, 2017 increased $32.0 versus the comparable period ended September 30, 2016. Of the increase, $19.2 of the increase related to lower RSE return on equity revenue adjustments and higher CCM benefits in the current year, $11.2 resulted from weather/temperature adjustments, along with slightly higher gross receipts taxes of $1.6.
Contribution margin increased $13.2 versus prior year, as $19.2 in favorable RSE, CCM adjustments and return on capital more than offset negative weather and usage impacts of $6.0. Contributing to the favorable current year RSE return on equity adjustment impact was a fiscal 2016 reduction in revenues relating to a legal settlement of $6.0. There was no impact to net income, as this revenue adjustment offset a corresponding $6.0 gain recorded in other income.
O&M expenses for the twelve months ended September 30, 2017 decreased $3.1 versus the year ended September 30, 2016. The decrease in other operating expenses was driven primarily by lower employee-related costs, which were favorably impacted by the warmer weather in the current year. Depreciation and amortization was $2.1 higher versus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory. Income tax expense increased $3.4, primarily due to the higher pre-tax book income earned in the current year.
Temperatures in Spire Alabama’s service area during the twelve months ended September 30, 2017 were 35% warmer than normal and 15% warmer than the same period a year earlier. Spire Alabama’s total therms sold and transported were 900.6 million for the twelve months ended September 30, 2017, compared with 878.1 million for the same period last year.
For further information on the GSA, RSE and CCM mechanisms, please see Note 1, Summary of Significant Accounting Policies, and Note 15, Regulatory Matters, in the Notes to Financial Statements.
2016 vs. 2015
Spire
Consolidated
Spire’s net income was $144.2 in fiscal 2016, compared with $136.9 in fiscal 2015. Basic and diluted earnings per share were $3.26 and $3.24, respectively, for fiscal 2016 compared with basic and diluted earnings per share of $3.16 for fiscal 2015. Net economic earnings were $149.1 (or $3.42 per share) in fiscal 2016, compared with $138.3 (or $3.19 per share) in fiscal 2015. Net income increased in fiscal 2016 compared to fiscal 2015 primarily due to $5.7 income growth in the Gas Utility segment and $3.0 income growth in the Gas Marketing segment, partly offset by a $1.4 larger loss from other activities.
Gas Utility
Gas Utility net income and net economic earnings increased by $5.7 and $9.9, respectively, in fiscal 2016, compared to 2015. The increases to net income and net economic earnings were driven by higher ISRS charges at Spire Missouri and net favorable regulatory adjustments at Spire Alabama, partly offset by lower volumes resulting from warmer winter temperatures. The segment also benefited from a decrease in O&M, which includes effects of the warmer weather. These impacts were partly offset by an increase in depreciation and amortization expenses. Additionally, interest expense was higher due to the increase experienced by Spire Missouri. Income taxes were also higher due to higher pre-tax income for both the Spire Missouri and Spire Alabama.
Gas Marketing
Gas Marketing reported net income totaling $7.1 in fiscal 2016, an increase of $3.0 compared to fiscal 2015. Net economic earnings for fiscal 2016 increased $2.2 from fiscal 2015. The increases in net income and net economic earnings were primarily attributable to increases in contribution margin, with the impact to net economic earnings being partly offset by mark-to-market activity as discussed in the Gas Marketing section below.
Other
The combined increase in net loss and net economic loss for the Company’s other non-utility activities were $1.4 and $1.3, respectively, for fiscal 2016 compared to the prior year. The increase was primarily the result of higher interest charges.
Operating Revenues and Operating Expenses
Reconciliations of the Company’s contribution margin to the most directly comparable GAAP measure are shown above.
Consolidated
Spire reported operating revenues of $1,537.3 for the fiscal year ended September 30, 20142016 compared with $1,017.0$1,976.4 for the 2013 fiscal year. Laclede Group's operatingsame prior year period. The decrease was driven primarily by the Utilities, the result of lower volumes and lower gas costs passed on to customers. Spire’s contribution margin increased $229.4$7.1 for the twelve months ended September 30, 2014,2016, compared to the same period in 2013prior year period. The increase was primarily due to higher contribution margin of $5.0 and $2.3 for the Gas Marketing and Gas Utility operating margin, and growth insegments, respectively, slightly offset by the operatinglower contribution margin reported by Gas Marketing as discussed below. Other operatingin Other. O&M expenses and depreciation and amortization increased $125.5 and $34.0, respectively,decreased $9.4 for the twelve months ended September 30, 20142016 as compared to the twelve months ended September 30, 2013.fiscal 2015, as discussed below. The increases were primarily due to the incremental impact of eleven additional months of MGE other operatingdecrease in O&M expenses andwas partially offset by $6.7 higher depreciation and amortization expensesexpense, driven principally by continued infrastructure investment at the Utilities in fiscal 2014 totaling $103.5 and $26.0, respectively, as well as the inclusion of one month of Alagasco operating expenses and depreciation and amortization of $14.2 and $3.9, respectively. The remaining increase in other operating expenses was due to the impact of colder weather reflected in the higher provision for uncollectible accounts, and higher maintenance and employee-related expenses. The remaining increase in depreciation and amortization was associated with capital spending in fiscal 2014.2016.
Gas Utility
Operating Revenues – Gas Utility Operating Revenues for fiscal year 2014 increased $610.0,2016 decreased $436.4 compared to fiscal year 2013, which2015, and was primarily attributable to the following factors:
|
| | | |
| Higher system sales volumes and other variations | $ | 66.3 |
|
| Lower wholesale gas costs passed on to Utility customers | (9.4 | ) |
| Lower off-system sales volumes | (11.7 | ) |
| Propane utility sales | 9.2 |
|
| Higher gross receipts tax | 3.7 |
|
| New customer revenue from MGE acquisition | 532.2 |
|
| New customer revenue from Alagasco acquisition | 19.7 |
|
| Total Variation | $ | 610.0 |
|
|
| | | |
| Lower wholesale gas costs passed on to customers | $ | (262.8 | ) |
| Lower system sales volumes | (147.4 | ) |
| Spire Missouri - Lower off-system sales and capacity release | (25.3 | ) |
| Lower gross receipts tax | (21.8 | ) |
| Spire Missouri - Higher ISRS charges | 13.8 |
|
| Spire Alabama - Lower RSE revenue adjustments | 4.5 |
|
| New customer revenue from Spire EnergySouth acquisition | 3.3 |
|
| All other | (0.7 | ) |
| Total Variation | $ | (436.4 | ) |
Temperatures experienced in Laclede Gas' service area during 2014 were 13.3% colder than 2013 and 11.4% colder than normal. Total system therms sold and transported were 1,876.6 million for fiscal year 2014 compared with 889.7 million for fiscal year 2013. Total off-system therms sold and transported outside of Laclede Gas' service area were 125.8 million for fiscal
year 2014 compared with 229.4 million for fiscal year 2013. This decrease was due to colder temperatures and increased heating demand in our services areas, reducing the gas supply resources available for off-system sales or capacity release.
OperatingContribution Margin – Gas Utility operatingcontribution margin was $570.8$844.4 for fiscal year 2014,2016, a $222.3$2.3 increase over the same period for 2013.of fiscal 2015. The increase was attributable to the following factors:
|
| | | |
| Operating margin from MGE | $ | 186.5 |
|
| Operating margin from Alagasco | 14.8 |
|
| Cold weather impact - higher therms sold and transported | 11.9 |
|
| Propane utility sales | 6.1 |
|
| Other | 3.0 |
|
| Total Variation | $ | 222.3 |
|
|
| | | |
| Lower system sales volume | $ | (18.0 | ) |
| Spire Missouri - Higher ISRS charges | 13.8 |
|
| Spire Alabama - Lower RSE revenue adjustments | 4.5 |
|
| Contribution margin from Spire EnergySouth acquisition | 2.2 |
|
| All other | (0.2 | ) |
| Total Variation | $ | 2.3 |
|
The increase iswas primarily attributable to benefits of higher ISRS charges for Spire Missouri in 2016 of $13.8, lower RSE revenue adjustments, beneficial CCM and return on capital impacts totaling $4.5 for Spire Alabama, and $2.2 of contribution margin resulting from the acquisitions of MGE and Alagasco totaling $186.5 and $14.8, respectively. The higher system sales volume drivenSpire EnergySouth acquisition, which were mostly offset by the 13.3% colder weathernegative impact of lower sales volume. A $6.0 gain related to a legal settlement was recorded in other income, but contribution margin was reduced by a revenue adjustment corresponding to the $6.0 gain, resulting in no impact on net income. Temperatures in the Laclede GasSpire Missouri and Spire Alabama service area contributedareas in fiscal 2016 were 19.7% and 30% warmer than in the same period in the prior year, respectively, significantly contributing to $11.9 of the increase. $6.1 of the increase was the result of propane utility sales, with the remaining $3.0 the result of all other minor variations.$18.0 negative volume impact on contribution margin in fiscal 2016.
Operating Expenses – Gas Utility other operating expenses in fiscal year 2014 increased $124.9 from fiscal year 2013. Of the $124.9 increase, $103.5 is attributable to the MGE acquisition and $14.2 is the result of the Alagasco acquisition. The remaining increase in other expenses was due to the impact of colder weather reflected in the higher provision for uncollectible accounts, higher maintenance costs and employee-related expenses. Excluding the acquisition impact of $29.9, depreciationDepreciation and amortization expense increased $4.2 primarily due to additional depreciable property.
Gas Marketing
Operating Revenues – Gas Marketing operating revenuesexpenses for the twelve months ended September 30, 20142016 increased $57.2$7.0 from the twelve months ended September 30, 20132015, due principally to continued infrastructure capital spending in fiscal 2016. O&M expenses decreased $8.4 for the twelve months ended September 30, 2016 compared to the same period in the prior year. Excluding the impact of a $7.6 gain on the sale of property in 2015, O&M expenses were $16.0 below 2015 levels due primarily to lower bad debt expense (reflecting the impact of warmer weather experienced during the heating season) and employee-related costs.
Gas Marketing
Operating Revenues – Gas Marketing operating revenue for the twelve months ended September 30, 2016 decreased $74.9 from the same prior year period. The decrease in revenues reflects the impact of higher total volumes soldbeing more than offset by lower commodity pricing levels, the effect of increased trading activities, and higher per unit gas sales prices. Higher gas sales prices were driven byfavorable mark-to-market adjustments on derivatives. Average pricing for the colder weather that resulted intwelve months ended September 30, 2016 was approximately $2.286/MMBtu versus approximately $3.066/MMBtu for 2015, a constrained infrastructure creating higher volatility between differing regions.$0.781 decline.
OperatingContribution Margin – Gas Marketing operatingcontribution margin was $26.0$17.7 for fiscal year 2014, an $8.32016, a $5.0 increase compared to fiscal 2013. The2015. Favorable wholesale trading volumes and storage optimization resulted in an $11.7 increase more than offsetting $7.9 of negative pricing impacts. Fair value adjustments accounted for an additional $1.2 favorable impact in operating margin was primarily attributable to higher price volatility and basis differentials that stemmed from unusually cold winter. The higher weather-related margins offset lower run-rate margins versus the prior year, reflecting the expiration of two favorable gas supply contracts during 2013 and early 2014.fiscal 2016.
Other
Operating Revenue and Operating Expenses–Other operating revenue decreased $2.4 primarily due to fiscal 2013 having a one-time sale of propane inventory by Laclede Pipeline totaling $1.7. Other operating expenses decreased $0.1 primarily dueincreased $1.1 for the twelve months ended September 30, 2016 compared to the 2014 Alagasco acquisition-relatedsame period in fiscal 2015, reflecting higher insurance revenues. Other O&M expenses discussed above being lower thanwere essentially flat with the MGE acquisition expenses incurred in 2013.prior year.
Interest Charges
Interest charges during fiscal year 2014the twelve months ended September 30, 2016 increased $17.6$2.6 from fiscal year 2013. The increase was primarily due2015. Interest expense reductions from the refinancing of $115.0 in Spire Alabama long-term debt in September and December of 2015, along with lower average short-term borrowings, have been offset by higher rates on short-term borrowings, interest on debt issued to finance the Spire EnergySouth acquisition, interest on acquired debt, and charges related to a temporary bridge facility commitment obtained and terminated during the third quarter of fiscal 2016 related to the December 2012, March 2013, August 2013Spire EnergySouth acquisition. For the twelve months ended September 30, 2016 and August 2014 issuance of additional long-term debt of $25.0, $100.0, $450.0 and $625.0, respectively, the June 2014 issuance of equity units totaling $143.8, offset by the early bond redemption of $80.0, 6.35% first mortgage bonds on January 6, 2014 and the October 2012 maturity of $25.0, 6.5% first mortgage bonds. The assumption of Alagasco debt contributed $1.3 to the increase in interest expense.
Average short-term interest rates were 0.5% and 0.3% for fiscal years 2014 and 2013. Average2015, average short-term borrowings were $82.3$273.9 and $34.2 for fiscal years 2014$300.6, respectively, and 2013,the average interest rates on those borrowings were 0.9% and 0.7%, respectively.
Income Taxes
IncomeConsolidated income tax expense increased $14.7$7.3 in fiscal year 20142016 from fiscal year 20132015 primarily due to higher pre-tax income slightlyand a higher effective tax rates, and other minor variations.
As explained for Laclede Group above, changes to the goodwill DTA are not expected to have a significant impact on Alagasco'srate. The fiscal 2016 effective tax rate.rate of 32.5% is approximately 1.3 percentage points higher than the rate for fiscal 2015. The higher fiscal 2016 rate includes tax expense associated with a valuation allowance on deferred tax assets.
CRITICAL ACCOUNTING POLICIESESTIMATES
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 ASCFinancial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 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. ManagementFor Spire Missouri and Spire Alabama, management believes the following represent the more significant items recorded through the application of this accounting guidance:
PGA Clause – Laclede Gas'Spire Missouri’s PGA clauses allows Laclede Gas and MGEthe Missouri Utilities 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'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. Laclede Gas'Spire Missouri’s PGA clauseclauses also authorizes it to recover costs it incurs to finance its investment in gas supplies that are purchased during the storage injection season for sale during the heating season.
GSA Rider – Alagasco’sSpire 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. Alagasco’sSpire 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 Alagasco’sSpire 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, AlagascoSpire Alabama entered into cash flow derivative commodity instruments to hedge its exposure to price fluctuations on its gas supply. AlagascoSpire 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 Alagasco’sSpire 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 Alagasco. AlagascoSpire Alabama. Spire Alabama currently has no active gas supply derivative positions.
Revenue Recognition – The Utilities read meters and bill customers on monthly cycles. The Utilities 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.
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, and adjustments are recorded during the measurement period to finalize the allocation of purchase price. Laclede GasSpire Missouri has recorded goodwill related to the 2013 acquisition of MGESpire Missouri West, and Laclede GroupSpire also has recorded goodwill related to the 2016 and 2014 acquisitionacquisitions of Alagasco. Alagasco has noSpire EnergySouth and Spire Alabama, respectively. Neither Spire EnergySouth nor Spire Alabama have goodwill on itstheir balance sheetsheets as push down accounting was not applied. Laclede GroupSpire and Laclede GasSpire Missouri evaluate goodwill for impairment as of July 1st1 of each year, or more frequently if events and circumstances indicate that goodwill might be impaired. The goodwill impairment test compares the fair value of the determinedeach reporting unit to its carrying amount, including goodwill. Laclede Group has one reporting unit, which is the Gas Utility segment, and Laclede Gas has one reporting
unit, which is the entire Laclede Gas Company. At July 1, 2017, 2016 and 2015, Spire and 2014, Laclede Group and Laclede GasSpire Missouri each applied a quantitative goodwill evaluation model to itstheir reporting unitunits and concluded goodwill was not impaired because the fair value exceeded the carrying amount.amounts.
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 costcosts recognized in the financial statements related to the Utilities'Utilities’ qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC (for Laclede Gas)Spire Missouri) and as approved by the APSC (for Alagasco)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 cost,costs, be reflected in other comprehensive income. For the Utilities'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.
The tables below reflect the sensitivity of Laclede Group'sSpire’s plans to potential changes in key assumptions:
| | | Pension Plan Benefits: | | | | | | | |
| Actuarial Assumptions | | Increase/ (Decrease) | | Estimated Increase/(Decrease) to Projected Benefit Obligation | | Estimated Increase/ (Decrease) to Annual Net Pension Cost* | |
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 | % | | $ | (15.9 | ) | | $ | 0.3 |
| | 0.25 | % | | $ | (17.9 | ) | | $ | 0.6 |
| |
| | | | (0.25 | )% | | 18.7 |
| | (0.6 | ) | |
| Expected Return on Plan Assets | | | 0.25 | % | | — |
| | (1.1 | ) | |
| | | (0.25 | )% | | 16.5 |
| | (0.4 | ) | | (0.25 | )% | | — |
| | 1.3 |
| |
| Rate of Future Compensation Increase | | 0.25 | % | | 6.3 |
| | 0.7 |
| | 0.25 | % | | 4.9 |
| | 0.6 |
| |
| | | (0.25 | )% | | (6.3 | ) | | (0.8 | ) | | (0.25 | )% | | (4.7 | ) | | (0.5 | ) | |
| Expected Return on Plan Assets | | 0.25 | % | | — |
| | (1.2 | ) | |
| | | (0.25 | )% | | — |
| | 1.2 |
| |
| | | Postretirement Benefits: | | | | | | | |
| Actuarial Assumptions | | Increase/ (Decrease) | | Estimated Increase/(Decrease) to Projected Postretirement Benefit Obligation | | Estimated Increase/(Decrease) to Annual Net Postretirement Benefit Cost* | |
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 | % | | $ | (5.1 | ) | | $ | — |
| | | 0.25 | % | | | $ | (5.0 | ) | | $ | 0.1 |
| |
| | | (0.25 | )% | | 5.3 |
| | — |
| | (0.25 | )% | | 5.2 |
| | (0.1 | ) | |
| Expected Return on Plan Assets | | 0.25 | % | | — |
| | (0.5 | ) | | 0.25 | % | | — |
| | (0.6 | ) | |
| | | (0.25 | )% | | — |
| | 0.5 |
| | (0.25 | )% | | — |
| | 0.6 |
| |
| Annual Medical Cost Trend | | 1.00 | % | | 9.2 |
| | 1.6 |
| | 1.00 | % | | 10.0 |
| | 1.7 |
| |
| | | (1.00 | )% | | (8.5 | ) | | (1.5 | ) | | (1.00 | )% | | (9.2 | ) | | (1.4 | ) | |
| |
| * | * Excludes the impact of regulatory deferral mechanism. See Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements for information regarding the regulatory treatment of these costs.Asset Retirement Obligations –Asset retirement obligations are recorded in accordance with GAAP using various assumptions related to the timing, method of settlement, inflation, and profit margins that third parties would demand to settle the future obligations. These assumptions require the use of judgment and estimates and may change in future periods as circumstances dictate. As authorized by the MoPSC, Laclede Gas accrues future removal costs associated with its property, plant and equipment through its depreciation rates, even if a legal obligation does not exist as defined by GAAP. Similarly, Alagasco accrues removal costs on certain gas distribution assets over the useful lives of its property, plant and equipment through depreciation expense in accordance with rates approved by the APSC.
As part of the MGE and Alagasco acquisitions, Laclede Gas and Laclede Group had estimated the asset retirement obligation of their long-lived assets as of their respective acquisition dates. Subsequent valuations were finalized for the MGE acquisition as of September 30, 2014 and for the Alagasco acquisition as of September 30, 2015.
|
For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements.
REGULATORY AND OTHER MATTERS
Laclede GasSpire Missouri
On December 19, 2014, the MoPSC Staff proposed a contingent disallowance of approximately $1.0 related to Laclede Gas' recovery of its purchased gas costs in fiscal 2013. Laclede Gas opposed the disallowance and reached an agreement with the MoPSC Staff under which the proposed disallowance was withdrawn. The MoPSC approved this agreement effective August 29, 2015.
On April 17, 2015, Laclede GasSeptember 30, 2016, Spire Missouri filed to increase its Infrastructure System Replacement Surcharge (ISRS) revenues by $5.5 in its Laclede Gas' eastern Missouri service territory and by $2.9 in its MGE service territory, to recover the cost of gas safety replacement investments and public improvement projects over six months from September 2014 through February 2015. Effective May 22, 2015, the MoPSC approved an increase to the ISRS tariffs in the amounts of $5.4 for Laclede Gas' eastern Missouri service territory and $2.8 for MGE's service territory.
On August 3, 2015, Laclede Gas filed applications to increase its ISRS revenues by $4.3 in its Laclede Gas eastern$5.0 for Spire Missouri service territoryEast and by $1.8 in its MGE service territory, to recover the cost of replacement investments$3.4 for Spire Missouri West, related to gas safety and public improvement projects over six monthsISRS investments from March 2016 through August 2015.October 2016. On November 12, 2015,29, 2016, MoPSC staff recommended $4.5 and $3.4 for Spire Missouri East and Spire Missouri West, respectively, based on updated filings. On January 3, 2017, the MoPSC approvedheld a hearing to decide two issues raised by the Missouri Office of the Public Counsel (OPC) pertaining to the ISRS eligibility of hydrostatic testing done by Spire Missouri West and of the replacement of cast iron main interspersed with portions of plastic pipe. On January 18, 2017, the MoPSC found in favor of the Missouri Utilities on the interspersed plastics issue, but against Spire Missouri West on hydrostatic testing, and issued an incrementalorder setting the ISRS amount of $4.4increases at $4.5 and $3.2 for Laclede Gas' easternSpire Missouri service territoryEast and $1.9 for MGE, effective December 1, 2015,Spire Missouri West, respectively, bringing total annualized ISRS revenue to $19.6$29.5 and $13.4, respectively. Rates were effective January 28, 2017. On March 3, 2017, the OPC filed an appeal to Missouri’s Western District Court of Appeals of the MoPSC’s decision permitting Spire Missouri to include in the ISRS the replacement of cast iron main interspersed with plastic pipe. The appeal will be heard in November 2017.
On February 3, 2017, Spire Missouri filed to increase its ISRS revenues, by $3.3 for Laclede Gas' easternSpire Missouri East and $2.9 for Spire Missouri West, related to ISRS investments from November 2016 through February 2017. Following the submission of updated information, on April 4, 2017, MoPSC staff submitted its recommendation for an increase in rates of approximately $3.0 each, for a cumulative total of $32.6 and $16.4 for Spire Missouri East and Spire Missouri West, respectively. On that same date, the OPC again raised an objection to the ISRS eligibility of replacing cast iron main interspersed with portions of plastic. On April 18, 2017, the parties filed with the MoPSC a unanimous stipulation and agreement proposing to apply the judicial outcome of the OPC’s March 3, 2017 appeal on the plastics issue to both the ISRS cases on appeal and the current ISRS cases. The agreement was approved by the MoPSC on April 26, 2017. ISRS rates for each of the two service territory and $6.7 for MGE's service territory.
Alagascoterritories were increased by the MoPSC staff-recommended amounts, effective June 1, 2017.
On April 14, 2014, Laclede Group, along15, 2015, Spire Missouri applied to the MoPSC for a new authorization of long-term financing in the amount of $550.0. On February 10, 2016, the MoPSC issued an order, by a 3-2 vote, authorizing Spire Missouri financing authority of $300.0 for long-term financings placed any time before September 30, 2018. Spire Missouri filed an application for rehearing, which was denied on March 9, 2016. On March 31, 2016, Spire Missouri filed an appeal with EnergenMissouri’s Western District Court of Appeals concerning this matter. The parties filed briefs and Alagasco,oral arguments were heard on November 17, 2016. On May 30, 2017, Missouri’s Western District Court of Appeals issued a decision upholding the MoPSC’s February 10, 2016 Order granting Spire Missouri $300.0 in long-term financing authority. On July 5, 2017, the Court denied Spire Missouri’s request to transfer the case to the Missouri Supreme Court, and on October 5, 2017, the Missouri Supreme Court declined to hear Spire Missouri’s direct appeal. On March 20, 2017, Spire Missouri entered into a bond purchase agreement for $170.0 that was funded on September 15, 2017, and applied against the $300.0 authorization.
On April 11, 2017, both Spire Missouri East and Spire Missouri West filed for a joint application with the APSC for approvalgeneral rate case, and did so concurrently as agreed to acquire from Energen 100%in GM-2013-0254, as part of the common stockacquisition of Alagasco. On July 22, 2014Spire Missouri West by Spire Missouri in fiscal 2013. The request for Spire Missouri East represents a net rate increase of $25.5. With the APSC unanimously voted$32.6 already being billed in ISRS, the total base rate increase request was $58.1. Spire Missouri West’s request represents a net rate increase of $34.0. With the $16.4 already being billed in ISRS, the total base rate increase request was $50.4. The rates were premised upon a 10.35% return on equity and the details of the filing can be found in GR-2017-0215 and GR-2017-0216 for Spire Missouri East and Spire Missouri West, respectively. An evidentiary hearing has been set for December 4 through 15, 2017, with a MoPSC decision expected by February 2018. Missouri statutes require new rates to approvebe effective within 11 months of the Alagasco Transaction and subsequently issued a written order reflecting their decision effective July 24, 2014. This sale closed August 31, 2014.filing, or by March 8, 2018.
AlagascoSpire Alabama
Spire Alabama is subject to regulation by the APSC which established the Rate Stabilization and Equalization (RSE)RSE rate-setting process in 1983. Alagasco’sSpire Alabama’s current RSE order has a term extending beyond September 30, 2018, unless the APSC enters an order to the contrary in a manner consistent with law. In the event of unforeseen circumstances, whether physical or economic, of the nature of force majeure and including a change in control, the APSC and AlagascoSpire Alabama will consult in good faith with respect to modifications, if any. Effective January 1, 2014, Alagasco’sSpire Alabama’s allowed range of return on average common equity is 10.5% to 10.95% with an adjusting point of 10.8%. The previous allowed range of return on average common equity was 13.15% to 13.65% through December 31, 2013. AlagascoSpire Alabama is eligible to receive a performance-based adjustment of 5 basis points to the return on equity adjusting point, based on meeting certain customer satisfaction criteria. Under RSE, the APSC conducts quarterly reviews to determine whether Alagasco’sSpire Alabama’s return on average common equity 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 return within the allowed range;
increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year revenues. The RSE reduction for the July 31, 2016 quarterly point of test was $4.8 and went into effect October 1, 2016, and for the quarterly point of test at September 30, 2016, Spire Alabama recorded a $2.7 RSE reduction effective December 1, 2016. As part of the annual update for RSE, on November 30, 2016, Spire Alabama filed a reduction for rate year 2017 of $2.5 that also became effective December 1, 2016. There was no RSE reduction for the January 31, 2017, April 30, 2017 and July 31, 2017 points of test. As of September 30, 2017, Spire Alabama recorded a $2.7 RSE reduction to operating revenues to bring the expected rate of return on average common equity at the end of the year to within the allowed range of return.
The inflation-based Cost Control Mechanism (CCM),CCM, established by the APSC, allows for annual increases to operations and maintenance (O&M)O&M expense. The CCM range is Alagasco’sSpire Alabama’s 2007 actual rate year O&M expense (Base Year) inflation-adjusted using the June Consumer Price Index For All Urban Consumers (CPI-U) each rate year plus or minus 1.75% (Index Range). 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 that rate year O&M is less than the Index Range, AlagascoSpire Alabama benefits by one-half of the difference through future rate adjustments. Certain items that fluctuate based on situations demonstrated to be beyond Alagasco’sSpire Alabama’s control may be excluded from the CCM calculation. As of September 30, 2017, Spire Alabama recorded a CCM benefit of $10.7 for rate year 2017, which will be reflected in rates effective December 1, 2017. The CCM benefit was $7.8 for fiscal 2015 was $4.9,rate year 2016 and $2.4$4.7 for 2014.rate year 2015.
On June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, and a regulatory liability set uprecorded for Alagasco, with the revised prospective composite depreciation rate approximating 3.1%.Spire Alabama. Refunds from such negative salvage liability will be passed back to eligible customers on a declining basis through lower tariff rates through rate year 2019 pursuant to the terms of thisthe Negative Salvage Rebalancing (NSR) rider. The total amount refundable to customers is subject to adjustments over the remaining period for charges made to the Enhanced Stability Reserve (ESR) and other APSC-approved charges. The refunds are due to a re-estimation of future removal costs provided for through the prior depreciation rates. The re-estimation was primarily the result of Alagasco’s actual removal cost experience, combined with technology improvements and Alagasco’s system efficiency improvements. For fiscal 2015, Alagasco refunded $13.1 to customers. For fiscal 2016, $10.82017, approximately $6.3 of the remaining customer refund of $27.0 will bewas returned to customers. This order also required a comprehensive depreciation studyAs of September 30, 2017, $12.3 is remaining to occur every 5 years. This was completedbe refunded to customers. The NSR pass back for fiscal 2018 is $8.2 and provided to the APSCwill be reflected in a timely manner in fiscal 2015.rates effective December 1, 2017 through March 31, 2018.
The APSC approved an Enhanced Stability Reserve (ESR)ESR in 1998, which was subsequently modified and expanded in 2010. As currently approved, the ESR provides deferred treatment and recovery for the following: (1) extraordinary O&M expenses related to environmental response costs; (2) extraordinary O&M expenses related to self-insurance costs that exceed $1 million$1.0 per occurrence; (3) extraordinary O&M expenses, other than environmental response costs and self-insurance costs, resulting from a single force majeure event or multiple force majeure events greater than $0.3 and $0.4, respectively, during a rate year; and (4) negative individual large commercial and industrial customer budget revenue variances that exceed $0.4 during a rate year. Charges to the ESR are subject to certain limitations which may disallow deferred treatment and which prescribe the timing of recovery. Funding to the ESR is provided as a reduction to the refundable negative salvage balance over its nine yearnine-year term beginning December 1, 2010. Subsequent to the nine-year period and subject to APSC authorization, AlagascoSpire Alabama expects to be able to recover underfunded ESR balances over a five-year amortization period with an annual limitation of $0.7. Amounts in excess of this limitation are deferred for recovery in future years.
Spire Alabama has APSC approval for an intercompany revolving credit agreement allowing Spire Alabama to borrow from Spire in a principal amount not to exceed $200.0 at any time outstanding in combination with its bank line of credit, and to loan to Spire in a principal amount not to exceed $25.0 at any time outstanding. Borrowings may be used for the following purposes: (a) meeting increased working capital requirements; (b) financing construction requirements related to additions, extensions, and replacements of the distribution systems; and (c) financing other expenditures that may arise from time to time in the normal course of business.
On September 18, 2017, Spire Alabama filed an application with the APSC for authorization to issue and sell $75.0 principal amount of debt and to purchase interest rate derivative instruments for the purpose of locking in favorable interest rates and to include the associated interest charges, issuance costs, fees and any gain or loss resulting from the settlement of such interest rate derivative instruments through rates. The application was approved by the APSC October 3, 2017.
Spire
In addition to the matters described above, the following regulatory matters affect Spire.
Spire Gulf has similar rate regulation to Spire Alabama. The RSE allowed range of return on average common equity is 10.45% to 10.95% with an adjusting point of 10.7%. The CCM has the same return and similar recovery provisions when expenses exceed or are under a band of +/- 1.50% around the CPI-U inflated O&M per customer expense level from September 30, 2017, excluding expenses for pensions and gas bad debt. Additionally, it has a Cast Iron Main Replacement (CIMR) factor that provides an enhanced return on the pro-rata costs associated with cast iron main replacement for miles over 10 miles per year based on a 75% weighting for the equity content. Spire Gulf also has an ESR for negative revenue variances over $o.1 or a force majeure event expense of $0.1 (or two events that exceed $0.15), a Self Insurance Reserve (SIR) for general liability coverage, and an Environmental Cost Recovery Factor (ECRF) as part of its PGA that recovers 90% of prudently incurred costs for compliance with environmental laws, rules and regulations. It also has an APSC-approved intercompany revolving credit agreement with Spire to borrow in a principal amount not to exceed $50.0, and to loan up to $25.0.
On September 21, 2017, Spire Gulf filed an application to defer certain pension and post-retirement health plan costs. The application was approved by the APSC October 3, 2017.
Spire Mississippi utilizes a formula rate-making process under the Rate Stabilization Adjustment (RSA) Rider. It is based on a formulaically derived return on equity, and is updated on an annual basis if the equity return on an end of period rate base is beyond the allowed return on equity by 1.0%, with 75% of any shortfall back to the midpoint being put into a rate increase and 50% of any excess back to the midpoint resulting in a rate decrease. Updates are made based on known and measurable adjustments to historic costs from 12-months ended June 30, submitted September 15 for an effective date of November 1, unless disputed by the Mississippi Public Utilities Staff, with any disputes to be resolved by the MSPSC by January 15 of the following year. Spire Mississippi had approved December 3, 2015 a Supplemental Growth Rider (SGR) for a 3-year period to provide enhanced returns of a 12.0% return on equity for a period of 10 years on certain system expansion projects.
In July 2016, the proposed project of Spire STL Pipeline LLC, a wholly owned subsidiary of Spire, was accepted into the pre-filing process at the FERC. The proposal outlined the plan to build, own, operate, and maintain a pipeline interconnecting with the Rockies Express pipeline to deliver natural gas to the St. Louis, Missouri area. As an interstate project, the Spire STL Pipeline is being reviewed for siting and permitting by the FERC, which is the lead agency for other federal, state, and local permitting authorities. In January 2017, Spire submitted an application with the FERC requesting issuance of a certificate of convenience and necessity authorizing it to construct, own, and operate an interstate pipeline. Several parties have filed interventions and comments regarding the Spire STL Pipeline project. The company is monitoring these closely and has responded where appropriate. In April 2017, Spire STL Pipeline filed an amended certificate application to adjust the preferred route to include a new six-mile segment rather than an existing line, offering a number of benefits including eliminating potential supply disruption risk for Spire Missouri during construction, eliminating uncertainty regarding upgrade costs, and reducing long-term integrity management costs. In its Environmental Assessment issued on September 29, 2017, the FERC concluded that approval of the Spire STL Pipeline, with appropriate mitigating measures, would not constitute a major federal action significantly affecting the quality of the human environment. Spire anticipates the FERC will deliver a Final Order by the end of calendar year 2017.
ACCOUNTING PRONOUNCEMENTS
The Company, Laclede GasSpire Missouri and AlagascoSpire Alabama have evaluated or are in the process of evaluating the impact that recently issued accounting standards will have on their financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting StandardsPronouncements section of Note 1 of the Notes to Financial Statements.Statements. 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, Laclede GasSpire Missouri and Alagasco,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 Company, Laclede GasSpire Missouri and AlagascoSpire Alabama believe that any higher costs experienced upon replacement of existing facilities will be recovered through the normal regulatory process.
FINANCIAL CONDITION
CASH FLOWS
Laclede Group
The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when it purchases itsthey purchase natural gas and when itstheir customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with Laclede Gas'Spire Missouri’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under Laclede Gas'the Utilities’ PGA clauseclauses and Alagasco's GSA rider,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.
| | | Cash Flow Summary | 2015 |
| | 2014 |
| | 2013 |
| 2017 | | 2016 | | 2015 |
| Net cash provided by operating activities | 322.4 |
| | 122.6 |
| | 163.9 |
| $ | 288.3 |
| | $ | 328.3 |
| | $ | 322.4 |
|
| Net cash used in investing activities | (298.7 | ) | | (1,437.6 | ) | | (1,108.3 | ) | (433.5 | ) | | (612.7 | ) | | (298.7 | ) |
| Net cash (used in) provided by financing activities | (26.0 | ) | | 1,278.1 |
| | 969.9 |
| |
| Net cash provided by (used in) financing activities | | 147.4 |
| | 275.8 |
| | (26.0 | ) |
Net cash provided by operating activities fordecreased $39.9 from fiscal years 2015, 2014 and 2013 was $322.4, $122.6 and $163.9, respectively.2016 to fiscal 2017. The increase from 2014 to 2015 waschange is primarily due to the incremental change for Alagasco reflecting the inclusion of a full yearfluctuations in 2015, which provided $96.3 of cash from operating activities. The remaining increase wasworking capital, as mentioned above, largely driven by the timing of collections ofrelative weather conditions and gas costs underprices during the PGAperiods. Cash was provided by increases in accounts payable, net income, depreciation, and changesdeferred income taxes. These benefits were more than offset by a net decrease in advance customer billings and net increases in accounts receivable and natural gas inventory values.
The decrease in netCompany used $179.2 less cash provided by operating activities in 2014 as compared to 2013 is primarily attributable to delayed customer billings increases reflecting the inclusion of MGE's operations and the timing of collections of gas cost under Laclede Gas' PGA clauses, accelerated build of natural gas stored underground, the cash paid on interest rate swaps and other working capital changes. These uses of cash were only partly offset by higher net income and higher depreciation, amortization and accretion reflecting the inclusion of MGE and colder weather.
Net cash used in investing activities forin fiscal years 2015, 2014 and 2013 was $298.7, $1,437.6 and $1,108.3, respectively. The increased use of cash, excluding $1,305.2 for the 2014 acquisition of Alagasco, was driven by higher capital expenditures of approximately $118.8, which includes the incremental increase of $80.2 for Alagasco and an increase of $35.6 at Laclede Gas. Additionally, the current year2017 versus fiscal 2016 but $134.8 more than in fiscal 2015. Fiscal 2016 included a payment for the final reconciliation associated with the Alagasco acquisition, whereas the prior year included the cash receipts associated with the MGE acquisition and the sale of New England Gas Company (NEG) to Algonquin Power & Utility Corp. (APUC). The increase in$317.7 net cash used in 2014 as compared to 2013 is attributable to $1,305.2 for the acquisition of Alagasco, offset partially by cash receiptsSpire EnergySouth, while fiscal 2017 and fiscal 2015 included only smaller acquisition settlements. Capital expenditures increased $144.8 from fiscal 2016 to fiscal 2017, primarily as a result of the higher level of infrastructure upgrades across both Missouri and Alabama, as well as $16.0 from the addition of EnergySouth and $25.5 for the final reconciliation amount for the MGE acquisition and for the sale of NEG to APUC. Net cash used in 2013 includes $975.0 for the acquisition of MGE. The remaining net cash used in investing activities in 2014 primarily reflected the increase in capital expenditures related to distribution plant and information technology investments. Laclede GroupSpire STL Pipeline project. Spire estimates its capital expenditures for fiscal 20162018 will be approximately $315, comprised$485.0, including approximately $415.0 for the Utilities. The increase in investment reflects the continued commitment to infrastructure upgrades at the Utilities and the beginning of $220 for Laclede Gas, $90 for Alagasco, and $5 for non-regulated businesses.the construction phase of the Spire STL Pipeline.
Net cash used in financing activities for fiscal year 2015 was $26.0, while the net cashCash provided by financing activities for 2014 and 2013 was $1,278.1 and $969.9, respectively. Excluding the proceeds from the prior year common stock issuance of 10.350 million shares of $457.1 and the prior year issuance of long-term debt of $768.8 for the acquisition of Alagasco, the difference between net cash used$128.5 lower in 2015 and net cash providedfiscal 2017 than in 2014 was $78.2.fiscal 2016. This change primarily reflects the decreaseeffect of a $26.2 net issuance of long-term debt in fiscal 2017 compared with a $165.0 net issuance the previous year, while short-term borrowing andborrowings continued to increase, reflecting the increaseCompany’s growing operations. Stock issuances in dividends paid,fiscal 2017, which included the conversion of equity units issued in 2014, provided $9.7 more cash than last year, which included the offering to help fund the Spire EnergySouth acquisition. These net cash inflows were partially offset by the lower repayment of long term-debt. The increasecontinued increases in net cash provided bydividend payments and other financing activities inthis year. In fiscal year 2014 from fiscal year 2013 primarily reflects2015, the issuancenet issuances of long-term debt and common stock equity units, andwere not significant. In the first half of fiscal 2018, Spire Alabama plans to issue long-term debt relatednotes totaling $75.0. Spire Missouri expects to the Alagasco acquisitionrefinance $100.0 of bonds due in 2014, exceeding the common stock and long-term debt issuance associated with the MGE acquisition in 2013.August 2018.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
Laclede Group had no temporary cash investments as of September 30, 2015.
Laclede Gas had no temporary cash investments as of September 30, 2015, but the balance of its short-term investments ranged between $0 and $10.0 during fiscal 2015 and ranged between $0.0 and $983.5 during fiscal year 2014.
Alagasco had no short-term investments as of September 30, 2015. Its bankBank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of September 30, 2017 or 2016. Due to lower yields available to Spire on short-term investments, the Company elected to provide a portion of Spire Missouri’s and Spire Alabama’s short-term funding through intercompany lending during the past fiscal year.
Short-term Debt
The Utilities'Utilities’ short-term borrowingsborrowing requirements typically peak during the colder months, while the Company'sCompany’s needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper supported by lines of credit with banks or through directthe use of the lines of credit. At September 30, 2015, Laclede Gas had a revolving credit facility.
On December 14, 2016, Spire, Spire Missouri, and Spire Alabama entered into a new syndicated line ofrevolving credit in place of $450.0 from nine banks.facility pursuant to a loan agreement with 11 banks, expiring December 14, 2021. The largest portion provided by a single bank under the line is 15.6%12.3%. The Laclede Gasloan agreement replaced Spire’s and Spire Missouri’s existing loan agreements dated as of September 3, 2013 and amended September 3, 2014, which were set to expire on September 3, 2019, and Spire Alabama’s existing loan agreement dated September 2, 2014, which was set to expire September 2, 2019. All three previous agreements were terminated on December 14, 2016.
The loan agreement has an aggregate credit commitment of $975.0, including sublimits of $300.0 for Spire, $475.0 for Spire Missouri, and $200.0 for Spire Alabama. These sublimits may be reallocated from time to time among the three borrowers within the $975.0 aggregate commitment. Spire may use its line to provide for the funding needs of credit includes a covenantvarious subsidiaries. Spire, Spire Missouri, and Spire Alabama expect to use the loan agreement for general corporate purposes, including short-term borrowings and letters of credit. 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, 2017, total debt was 50%56% of total capitalization on September 30, 2015.
At September 30, 2015, Alagasco had a $150.0 syndicated line of credit with twelve banks. The largest portion provided by a single bank is 10%. The line of credit, which matures on September 2, 2019, has a covenant limiting total debt to 70% of Alagasco’s total capitalization. As defined in the line of credit, this ratio stood at 24% on September 30, 2015. Borrowing under Alagasco's line during fiscal year 2015 ranged from $0.0 to $69.5, with a balance at September 30, 2015 of $31.0. Borrowings under Alagasco's line for the month of September of fiscal 2014 ranged from $9.0 to $16.0, with a balance at September 30, 2014 of $16.0.
At September 30, 2015, the Laclede Group parent company had a $150.0 syndicated line ofconsolidated Company, 50% for Spire Missouri, and 33% for Spire Alabama. There were no borrowings against this credit from nine banks, with the largest portion provided by a single bank being 15.6%. The line of credit has a covenant limiting the total debt of the consolidated Laclede Group to no more than 70% of the Company’s total capitalization. As defined in the line of credit, this ratio stood at 58% on September 30, 2015. Laclede Group’s line may be used to provide for the funding needs of various
subsidiaries. Borrowings under Laclede Group’s line during fiscal year 2015 ranged from $32.5 to $80.0, with the balance at September 30, 2015 at $74.0. Borrowings under this line of credit during fiscal year 2014 ranged from $0.0 to $40.0, with the balance at September 30, 2014 of $32.5.
On September 3, 2014, Laclede Group and Laclede Gas entered into extension agreements to extend the maturity dates on their loan agreements for a period of one year from September 3, 2018 to September 3, 2019.
Information about Laclede Group’s consolidated short-term borrowings during the twelve months ended September 30, 2015 and 2014 andfacility as of September 30, 20152017.
On December 21, 2016, Spire established a commercial paper program (Program) pursuant to which Spire may issue short-term, unsecured commercial paper notes (Notes). Amounts available under the Program may be borrowed, repaid, and 2014re-borrowed from time to time, with the aggregate face or principal amount of the Notes outstanding under the Program at any time not to exceed $975.0. The Notes may have maturities of up to 365 days from date of issue. The net proceeds of the issuances of the Notes are expected to be used for general corporate purposes, including to provide working capital for both utility and non-utility subsidiaries. As of September 30, 2017, Notes outstanding under the Program totaled $477.3.
Information about Spire’s consolidated short-term borrowings is presented below:
|
| | | | |
| | Laclede Gas Commercial Paper Borrowings | Laclede Group*** Bank Line Borrowings | Alagasco Bank Line Borrowings * | Total Short-Term Borrowings ** |
| Year Ended September 30, 2015 | | | | |
| Weighted average borrowings outstanding | $212.7 | $65.6 | $22.3 | $300.6 |
| Weighted average interest rate | 0.4% | 1.4% | 1.1% | 0.7% |
| Range of borrowings outstanding | $ 102.1 - $341.0 | $32.5 - $80.0 | $0 - $69.5 | $180.1 - $488.5 |
| As of September 30, 2015 | | | | |
| Borrowings outstanding at end of period | $233.0 | $74.0 | $31.0 | $338.0 |
| Weighted average interest rate | 0.5% | 1.5% | 1.2% | 0.8% |
| Year Ended September 30, 2014 | | | | |
| Weighted average borrowings outstanding | $77.6 | $3.6 | $13.2 | $82.3 |
| Weighted average interest rate | 0.3% | 1.4% | 1.2% | 0.5% |
| Range of borrowings outstanding | $0 – $244.5 | $0 – $40.0 | $9.0 – $16.0 | $0 – $300.5 |
| As of September 30, 2014 | | | | |
| Borrowings outstanding at end of period | $238.6 | $32.5 | $16.0 | $287.1 |
| Weighted average interest rate | 0.3% | 1.4% | 1.2% | 0.5% |
* Weighted average borrowings for Alagasco forin the year ended September 30, 2014 represents Laclede Group's ownership period of one month. The one-month average approximates the Alagasco daily outstanding balance for the fiscal year ended September 30, 2014.
** Represents twelve-month weighted average for Laclede Group***, Laclede Gas, and Alagasco.
*** The Laclede Group, Inc., excluding its wholly owned subsidiaries.
following table. Based on average short-term borrowings for the year ended September 30, 2015,2017, an increase in the average interest rate of 100 basis points would decrease Laclede Group’sSpire’s pre-tax earnings and cash flows by approximately $3.0$4.9 on an annual basis, portions of which may be offset through the application of PGA or GSA carrying costs.
|
| | | | |
| | Spire Short‑term Borrowings1 | Spire Missouri Commercial Paper Borrowings2 | Spire Alabama
Bank Line Borrowings | Total Short‑term Borrowings |
| Year Ended September 30, 2017 | | | | |
| Weighted average borrowings outstanding | $369.0 | $88.5 | $28.3 | $485.8 |
| Weighted average interest rate | 1.3% | 0.9% | 1.6% | 1.2% |
| Range of borrowings outstanding | $73.0 - $675.6 | $0.0 - $329.7 | $0.0 - $102.5 | $395.5 - $675.6 |
| As of September 30, 2017 | | | | |
| Borrowings outstanding | $477.3 | $— | $— | $477.3 |
| Weighted average interest rate | 1.5% | —% | —% | 1.5% |
| Year Ended September 30, 2016 | | | | |
| Weighted average borrowings outstanding | $42.7 | $201.0 | $30.2 | $273.9 |
| Weighted average interest rate | 1.6% | 0.7% | 1.4% | 0.9% |
| Range of borrowings outstanding | $0.0 - $82.0 | $43.0 - $307.2 | $0.0 - $82.0 | $73.1 - $427.2 |
| As of September 30, 2016 | | | | |
| Borrowings outstanding | $73.0 | $243.7 | $82.0 | $398.7 |
| Weighted average interest rate | 1.8% | 0.8% | 1.5% | 1.1% |
| |
1 | Spire Short-term Borrowings includes bank line borrowings of Spire Inc. (excluding its subsidiaries) and, since January 1, 2017, commercial paper. Of Spire’s $477.3 borrowings outstanding as of September 30, 2017, $440.0 was used to provide funding to its subsidiaries, including Spire Missouri ($203.0), Spire Alabama ($169.9), Spire EnergySouth and subsidiaries ($12.9), Spire STL Pipeline LLC ($26.6), and others ($27.6). |
2 The commercial paper program for Spire Missouri terminated February 2, 2017.
Long-term Debt and Equity
Laclede Group
At September 30, 2015,2017, including the current portion but excluding unamortized discounts and net hedging gains, Laclede Groupdebt issuance costs, Spire had fixed-rate long-term debt totaling $1,603.8 and floating rate debt totaling $250.0,$2,112.0, of which $810.0$980.0 was issued by Laclede Gas andSpire Missouri, $250.0 was issued by Alagasco. With the exception of the $250.0 floating rate senior notesSpire Alabama, and $67.0 was issued by Laclede Group in August 2014, theother subsidiaries. All long-term debt issues are fixed-ratebears fixed rates and areis subject to changes in their fair value as market interest rates change. However, increases orand 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'Utilities’ regulated operations, losses or gains on early redemptionsredemption of long-term debt typically would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future period.
Of the Company's $1,710.0 seniorCompany’s $2,112.0 long-term debt (including the current portion), $25.0 has no call options, $710.0$1,037.0 has make-whole call options, $725.0 are$5.0 is callable currently, and $1,045.0 is callable at par one to six months prior to maturity and $250.0 are callable at par one year prior to maturity. The remainder of the Company's long-term debt is $143.8 of junior subordinated notes associated with the equity units. None of the debt has any put options
Laclede Group has a shelf registration statement on Form S-3 on file with the SEC for the issuance and sale of up to 168,698 shares of its common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 129,413 and 123,889 shares at September 30, 2015 and November 24, 2015, respectively, remaining available for issuance under its Form S-3. Laclede Group also has a shelf registration statement on Form S-3 on file with the SEC for the issuance of equity and debt securities.
Consolidated capitalization at September 30, 2015 consisted of 47.0% of Laclede Group common stock equity and 53.0%Maturities of long-term debt comparedfor Spire on a consolidated basis, Spire Missouri and Spire Alabama for the five fiscal years subsequent to 44.9% of Laclede Group common stock equitySeptember 30, 2017 are as follows:
|
| | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| 2018 | $ | 100.0 |
| | $ | 100.0 |
| | $ | — |
|
| 2019 | 180.0 |
| | 50.0 |
| | — |
|
| 2020 | 40.0 |
| | — |
| | 40.0 |
|
| 2021 | 55.0 |
| | — |
| | — |
|
| 2022 | 50.0 |
| | — |
| | 50.0 |
|
Spire’s, Spire Missouri’s and 55.1% ofSpire Alabama’s short-term credit facilities and long-term debt at September 30, 2014.
Laclede Gas
Of Laclede Gas' $810.0 in long-term debt, $25.0 has no call option, $435.0 has make-whole call options,agreements contain customary covenants and $350.0 are callable at par one to six months prior to maturity. None of the debt has any put options.
Laclede Gas had authority from the MoPSC to issue debt securities and preferred stock, including on a private placement basis, as well as to issue common stock, receive paid-in capital, and enter into capital lease agreements, all for a total of up to $518.0. This authorization was effective through June 30, 2015. On April 15, 2015, Laclede Gas filed with the MoPSC for a new financing authorization. On June 24, 2015 the MoPSC granted an extension of the current authorization until the pending application is resolved. During the year ended September 30, 2015, Laclede Gas issued no securities under this authorization. As of November 24, 2015, $369.7 remains available under this authorization. Laclede Gas has a shelf registration on Form S-3 on file with the SEC for issuance of first mortgage bonds, unsecured debt, and preferred stock, which expires August 6, 2016. The amount, timing, and type of additional financing to be issued under this shelf registration will depend on cash requirements and market conditions, as well as future MoPSC authorizations.
Laclede Gas capitalization at September 30, 2015 consisted of 56.2% of common stock equity and 43.8% of long-term debt compared to 55.5% of common stock equity and 44.5% of long-term debt at September 30, 2014.
Alagasco
All of Alagasco's $250.0 long-term debt, including the current portion of long-term debt, has a make-whole call option. None of the debt has any put options.
Alagasco has no standing authority to issue long-term debt and must petition the APSC for planned issuances. On November 3, 2014, Alagasco received authorization and approval from the APSC to borrow $35.0 for the purposes of redeeming, without penalty, $34.8 in existing long-term, callable debt financed at 5.7%. Pursuant to a call notice issued on December 14, 2014, Alagasco redeemed $34.8 of debt effective January 15, 2015. On February 3, 2015, Alagasco received authorization and approval from the APSC to borrow $80.0 for the purpose of refinancing $80.0 of existing debt scheduled to mature on December 1, 2015. Pursuant to these authorizations, Alagasco entered into a master note purchase agreement on June 5, 2015 with certain institutional purchasers pursuant to which Alagasco committed to issue $115.0 unsecured notes in the private placement market: $35.0 at a rate of 3.21% for 10 years issued on September 15, 2015, and $80.0 at a rate of 4.31% for 30 years settling December 1, 2015.default provisions. As of September 30, 2015, the current portion2017, there were no events of long-term debt for Alagasco consisted of this $80.0 fixed-rate note maturing on December 1, 2015.
Alagasco's capitalization at September 30, 2015 consisted of 83.7% of common stock equity and 16.3% of long-term debt compared to 77.3% of common stock equity and 22.7% of long-term debt at September 30, 2014.default under these covenants.
The Company’s, Laclede Gas'Spire Missouri’s and Alagasco'sSpire 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. The credit ratings of the Company, Laclede GasSpire Missouri and AlagascoSpire Alabama remain at investment grade, but are subject to review and change by the rating agencies.
It is management’s view that the Company, Laclede Gas,Spire Missouri and AlagascoSpire 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 ofon long-term debt, scheduled maturities of long-term debt, short-term seasonal needs, and dividends.
On March 10, 2017, Spire redeemed in full at par its $250.0 floating rate notes due August 15, 2017, plus accrued and unpaid interest.
43
TableOn March 15, 2017, Spire completed the issuance and sale of Contents$100.0 in aggregate principal amount of Senior Notes due March 15, 2027. The notes bear interest at the rate of 3.93% per annum, payable semi-annually. The notes are senior unsecured obligations of the Company. The Company used the proceeds from the sale of the notes for the repayment of other debt.In 2014, Spire issued 2.875 million equity units as a portion of the Spire Alabama acquisition financing. The equity units were originally issued at $50 per unit pursuant to the Purchase Contract and Pledge Agreement (Purchase Contract) dated as of June 11, 2014 between Spire and U.S. Bank National Association, as purchase contract agent, collateral agent, custodial agent and securities intermediary. These units consisted of $143.8 aggregate principal amount of 2014 Series A 2.00% remarketable junior subordinated notes due 2022 (the Junior Notes) and the Purchase Contract obligating the holder to purchase common shares at a future settlement date (anticipated to be three years in the future and prior to the Junior Notes maturity).
The equity unit investments were effectively replaced as planned in a series of transactions outlined below:
On February 22, 2017, the selling securityholders (as defined below) agreed to purchase the Junior Notes in connection with the remarketing of the junior subordinated notes that comprised a component of the equity units.
On the same day, Spire entered two related agreements: (1) a Securities Purchase and Registration Rights Agreement (the SPRRA), among Spire and the several purchasers named therein (the selling securityholders), obligating the selling securityholders to sell the Junior Notes to Spire in exchange for $143.8 aggregate principal amount of Spire’s 3.543% Senior Notes due 2024 (the Senior Notes) and a cash payment, and (2) an underwriting agreement with the selling securityholders and the several underwriters named therein in connection with the public offering of $150.0 aggregate principal amount of Senior Notes consisting of $6.2 principal amount of the Senior Notes issued and sold by Spire and $143.8 principal amount of the Senior Notes sold by the selling securityholders. The SPRRA granted the selling securityholders the right to offer the Senior Notes to the public in secondary public offerings.
The public offering was completed on February 27, 2017. Spire used its net proceeds from its sale of the Senior Notes to repay short-term debt. Spire did not receive any proceeds from the sale of the Senior Notes by the selling securityholders.
On April 3, 2017, Spire settled the Purchase Contracts underlying its 2.875 million equity units by issuing 2,504,684 shares of its common stock at a purchase price of $57.3921 per share. Fractional shares were settled in cash at $67.50 per share. The purchase price was funded with the proceeds of the Junior Notes. Under the contract term, the equity units were converted to common stock at the rate of 0.8712, with a corresponding adjustment to purchase price. Spire received net cash proceeds of approximately $142.0, which it used to repay short-term debt incurred the previous month to redeem the floating rate notes.
On September 15, 2017, Spire Missouri issued and sold in a private placement $50.0 in aggregate principal amount of its first mortgage bonds due September 15, 2032, $70.0 in aggregate principal amount of its first mortgage bonds due September 15, 2047 and $50.0 in aggregate principal amount of its first mortgage bonds due September 15, 2057. Spire Missouri used the proceeds to refinance existing indebtedness and for other general corporate purposes. The 2032 bonds, 2047 bonds and 2057 bonds bear interest at a rate per annum of 3.68%, 4.23% and 4.38%, respectively, payable semi-annually on the 15th day of March and September of each year.
Spire Missouri has authority from the MoPSC to issue debt securities and preferred stock, including on a private placement basis, as well as to issue common stock, receive paid-in-capital, and enter into capital lease agreements, all for a total of up to $300.0 for financings placed any time before September 30, 2018. During the year ended September 30, 2017, Spire Missouri issued $170.0 in securities under this authorization, so as of that date, $130.0 remains available to be issued.
Spire has a shelf registration statement on Form S-3 on file with the US 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 244,130 and 239,945 at September 30, 2017 and November 10, 2017, respectively, remaining available for issuance under this Form S-3. Spire also has a shelf registration statement on Form S-3 on file with the SEC for the issuance of equity and debt securities. Spire Missouri has a shelf registration on Form S-3 on file with the SEC for issuance of first mortgage bonds, unsecured debt, and preferred stock, which expires on September 22, 2019.
Including the current portion of long-term debt, the Company’s capitalization at September 30, 2017 consisted of 48.7% of common stock equity and 51.3% long-term debt, compared to 46.1% of common stock equity and 53.9% of long-term debt at September 30, 2016.
CONTRACTUAL OBLIGATIONS
As of September 30, 2015, Laclede Group2017, Spire had contractual obligations with payments due as summarized below:
| | | | | | Payments due by period | | | Payments due by period |
| Contractual Obligations | Total | | Less than 1 Year | | 1-3 Years | | 3-5 Years | | More than 5 Years | Total | | Less than 1 Year | | 1-3 Years | | 3-5 Years | | More than 5 Years |
| Principal Payments on Long-Term Debt | $ | 1,853.8 |
| | $ | 80.0 |
| | $ | 350.0 |
| | $ | 215.0 |
| | $ | 1,208.8 |
| |
| Interest Payments on Long-Term Debt (a) | 977.1 |
| | 72.5 |
| | 127.9 |
| | 111.0 |
| | 665.7 |
| |
| Principal Payments on Long-term Debt | | $ | 2,112.0 |
| | $ | 100.0 |
| | $ | 220.0 |
| | $ | 105.0 |
| | $ | 1,687.0 |
|
| Interest Payments on Long-term Debt (a) | | 1,242.5 |
| | 85.8 |
| | 160.4 |
| | 144.6 |
| | 851.7 |
|
| Operating Leases (b) | 101.5 |
| | 11.0 |
| | 18.3 |
| | 12.7 |
| | 59.5 |
| 83.7 |
| | 10.1 |
| | 17.1 |
| | 12.1 |
| | 44.4 |
|
| Purchase Obligations – Natural Gas (c) | 1,369.3 |
| | 587.7 |
| | 565.7 |
| | 152.6 |
| | 63.3 |
| 1,281.8 |
| | 703.3 |
| | 373.9 |
| | 66.8 |
| | 137.8 |
|
| Purchase Obligations – Other (d) | 102.7 |
| | 47.2 |
| | 35.1 |
| | 19.9 |
| | 0.5 |
| 74.9 |
| | 63.6 |
| | 9.2 |
| | 1.8 |
| | 0.3 |
|
| Other Long-Term Liabilities | 122.7 |
| | 13.3 |
| | 26.8 |
| | 27.8 |
| | 54.8 |
| |
| Asset Retirement Obligations | | 296.6 |
| | 10.1 |
| | 23.3 |
| | 16.8 |
| | 246.4 |
|
| Total (e) | $ | 4,527.1 |
| | $ | 811.7 |
| | $ | 1,123.8 |
| | $ | 539.0 |
| | $ | 2,052.6 |
| $ | 5,091.5 |
| | $ | 972.9 |
| | $ | 803.9 |
| | $ | 347.1 |
| | $ | 2,967.6 |
|
| |
| (a) | Includes interest payments over the terms of the debt and payments on related stock purchase contracts.debt. Interest is calculated using the applicable interest rate or forward interest rate curve at September 30, 2015 and outstanding principal for each instrument with the terms ending at each instrument’s stated maturity. See Note 6, Long-Term Debt, of the Notes to Financial Statements. Does not reflect Laclede Group's ability to defer quarterly interest and contract adjustment payments related to its equity units, as discussed in Note 5, Stockholders' Equity. |
The principal and interest payments on long-term debt included in the table above do not include obligations associated with Alagasco's commitment to issue $80 million of 4.31% 30-year unsecured notes in private placements scheduled for settlement in December 2015.
| |
| (b) | Lease obligations are primarily for office space, vehicles, and power operated equipment. Additional payments will be incurred if renewal options are exercised under the provisions of certain agreements. |
| |
| (c) | These purchase obligations represent the minimum payments required under existing natural gas transportation and storage contracts and natural gas supply agreements in the Gas Utility and Gas Marketing segments. These amounts reflect fixed obligations as well as obligations to purchase natural gas at future market prices, calculated using September 30, 20152017 forward market prices. Laclede GasEach of the Utilities generally recovers the 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 MoPSC. Alagasco recovers the costs related to its purchases, transportation, and storage of natural gas through the operation of its GSA gas rider clause, subject to prudence review by the APSC.appropriate regional public service commission. Variations in the timing of collections of gas costs from customers may affect short-term cash requirements. Additional contractual commitments are generally entered into prior to or during the heating season. |
| |
| (d) | These purchase obligations primarily reflect miscellaneous agreements for the purchase of materials and the procurement of services necessary for normal operations. |
| |
| (e) | Long-term liabilities associated with unrecognized tax benefits, totaling $7.2,$11.0, have been excluded from the table above because the timing of future cash outflows, if any, cannot be reasonably estimated. Also, commitments related to pension and postretirement benefit plans have been excluded from the table above. The Company expects to contribute $26.0$35.5 to its qualified, trusteed pension plans and $0.5$0.5 to its non-qualified pension plans during fiscal year 2016.2018. With regard to the postretirement benefits, the Company anticipates it will contribute $14.3$7.2 to the qualified trusts and $0.4$0.2 directly to participants from Laclede GasSpire Missouri funds during fiscal year 2016.2018. For further discussion of the Company’s pension and postretirement benefit plans, refer to Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial Statements. |
MARKET RISK
Commodity Price Risk
Gas Utility
The Utilities'Utilities’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of Laclede Gas' and MGE'sthe Missouri Utilities’ PGA clauses and Alagasco'sSpire 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, as well as gas inventory carrying costs. Laclede GasSpire 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. Laclede GasSpire Missouri is able to mitigate, to some extent, changes in commodity prices through the use of physical storage supplies and regional supply diversity. 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, 2017, 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. As of September 30, 2015, Laclede Gas had active derivative positions, but Alagasco did not have any open derivative positions. 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'Utilities’ natural gas derivative instruments, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements. Gas Marketing
In the course of its business, Laclede Group’sSpire’s non-regulated gas marketing subsidiary, LER,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, LERSpire 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, LERSpire Marketing manages the price risk associated with its fixed-pricefixed 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 NYMEXNew York Mercantile Exchange (NYMEX) and ICEIntercontinental Exchange (ICE) to lock in margins. At September 30, 20152017 and 2014, LER’s2016, Spire Marketing’s unmatched fixed-price positions were not material to Laclede Group’sSpire’s financial position or results of operations.
As mentioned above, LERSpire 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. Information about the fair values of LER’sSpire Marketing’s exchange-traded/cleared natural gas derivative instruments is presented below:
| | | | Derivative Fair Values | | Cash Margin | | Derivatives and Cash Margin | Derivative Fair Values | | Cash Margin | | Derivatives and Cash Margin |
| Net balance of derivative assets at September 30, 2014 | $ | 0.4 |
| | $ | 2.1 |
| | $ | 2.5 |
| |
| Net balance of derivative assets at September 30, 2016 | | $ | (1.3 | ) | | $ | 4.1 |
| | $ | 2.8 |
|
| Changes in fair value | 4.9 |
| | — |
| | 4.9 |
| 4.4 |
| | — |
| | 4.4 |
|
| Settlements/purchases - net | 0.2 |
| | — |
| | 0.2 |
| (2.7 | ) | | — |
| | (2.7 | ) |
| Changes in cash margin | — |
| | (3.7 | ) | | (3.7 | ) | — |
| | (2.2 | ) | | (2.2 | ) |
| Net balance of derivative assets at September 30, 2015 | $ | 5.5 |
| | $ | (1.6 | ) | | $ | 3.9 |
| |
| Net balance of derivative assets at September 30, 2017 | | $ | 0.4 |
| | $ | 1.9 |
| | $ | 2.3 |
|
| | | | As of September 30, 2015 | As of September 30, 2017 |
| Maturity by Fiscal Year | Total | | 2016 | | 2017 | | 2018 | Total | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
| Fair values of exchange-traded/cleared natural gas derivatives - net | $ | 3.0 |
| | $ | 3.4 |
| | $ | (0.4 | ) | | $ | — |
| $ | 0.6 |
| | $ | 0.6 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Fair values of basis swaps - net | 2.5 |
| | 1.5 |
| | 0.9 |
| | 0.1 |
| (0.1 | ) | | (0.3 | ) | | 0.2 |
| | — |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | |
| Position volumes: | | | | | | | | | | | | | | | | | | |
| MMBtu – net (short) long futures/swap/option positions | (18.5 | ) | | (21.1 | ) | | 2.2 |
| | 0.4 |
| |
| MMBtu - net (short) long futures/swap/option positions | | (16.1 | ) | | (18.6 | ) | | (0.9 | ) | | 1.9 |
| | 0.8 |
| | 0.7 |
|
| MMBtu - net (short) long basis swap positions | (8.9 | ) | | (4.6 | ) | | (3.8 | ) | | (0.5 | ) | (4.2 | ) | | (2.9 | ) | | (1.1 | ) | | (0.2 | ) | | — |
| | — |
|
Certain of LER’sSpire 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 year 2016:2020:
| | | Net balance of derivative assets at September 30, 2014 | $ | 2.1 |
| |
| Net balance of derivative assets at September 30, 2016 | | $ | 6.3 |
|
| Changes in fair value | 1.4 |
| (0.7 | ) |
| Settlements | (4.0 | ) | (7.1 | ) |
| Net balance of derivative assets at September 30, 2015 | $ | (0.5 | ) | |
| Net balance of derivative liabilities at September 30, 2017 | | $ | (1.5 | ) |
For further details related to LER’sSpire Marketing’s derivatives and hedging activities, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements. Counterparty Credit Risk
LERSpire 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. LERSpire Marketing also has concentrations of credit risk with certain individually significant counterparties. To the extent possible, LERSpire Marketing enters into netting arrangements with its counterparties to mitigate exposure to credit risk. LERIt is also exposed to credit risk associated with its derivative contracts designated as normal purchases and normal sales. LERSpire 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 concentrations of credit risk, including how LERSpire Marketing manages these risks, see Note 11, Concentrations of Credit Risk, of the Notes to Financial Statements.Interest Rate Risk
The Company is subject to interest rate risk associated with its long-term and short-term debt issuances. Based on average short-term borrowings during fiscal year 2015,2017, an increase of 100 basis points in the underlying average interest rate for short-term debt would have caused an increase in interest expense of approximately $3.0$4.9 on an annual basis. Portions of such increases may be offset through the application of PGA carrying costs. At September 30, 2015, Laclede Group2017, Spire had $250.0 ofno variable rate long-term debt. An increase of 100 basis points in the underlying average interest rate for the variable long-term note would have caused an increase in interest expense of approximately $2.5 on an annual basis. At September 30, 2015, Laclede Group had fixed-rate long-term debt (including current portion) totaling $1,603.8. Laclede Gasoutstanding but had fixed-rate long-term debt totaling $810.0$2,112.0, which includes $67.0 of fixed-rate long-term debt assumed through the acquisition of Spire EnergySouth. Spire Missouri had fixed-rate long-term debt totaling $980.0 and Alagasco hasSpire Alabama had fixed rate long-term debt (including current portion) of $250.0, which are both included with Laclede Groupin Spire’s total long-term debt (including current).debt. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to maturity. Under GAAP applicable to the Utilities'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.
The CompanyDuring the second quarter of fiscal 2016, Spire entered into and settled certainfive-year interest rate swap transactions with a fixed interest rate of 1.776% and a notional amount of $105.0 to protect itself against adverse movement in 2014interest rates in anticipation of the issuance of long-term debt in fiscal 2017. During the third quarter of fiscal 2016, the Company entered into seven-year swap transactions with an average fixed interest rate of 1.501% and a notional amount of $120.0 to hedge additional debt expected to be issued in fiscal 2017. All of these hedge positions were settled during the second quarter of fiscal 2017, resulting in a gain of $14.1 which will be amortized over the hedged periods. Also during the second quarter of fiscal 2017, Spire entered into a ten-year 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 associated withon future interest rate payments. The Company recorded a $0.9 mark-to-market loss on this swap for the issuance of long-term debt to fund the acquisition of Alagasco. In 2015, Alagasco entered into and settled interest swaps to protect itself against adverse movements in interest rates in anticipation of the issuance of $115.0 in debt.year ended September 30, 2017. Refer to Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements for additional details on these interest rate swap transactions.ENVIRONMENTAL MATTERS
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, Spire Missouri’s, or the Utilities'Spire Alabama’s financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, the Utilities may be required to incur additional costs. For information relative to environmental matters, see Note 16, Commitments and Contingencies, of the Notes to Financial Statements. OFF-BALANCE SHEET ARRANGEMENTS
At September 30, 2015, none of Laclede Group or its subsidiary companies2017, the Company had no off-balance sheet financing arrangements, other than operating leases and letters of credit entered into in the ordinary course of business. None of Laclede Group or its subsidiaries expectsThe Company does not expect to engage in any significant off-balance sheet financing arrangements in the near future.
ITEMItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk
For this discussion, see Item 7.7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk, on page 44of this report.
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ITEMItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFinancial Statements and Supplementary Data | |
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| | | Financial Statements:Statements (for years ended September 30, 2017, 2016, and 2015): | |
| | | The Laclede Group,Spire Inc. (for years ended September 30, 2015, 2014, and 2013) | |
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| | | Laclede Gas Company (for years ended September 30, 2015, 2014, and 2013)Spire Missouri Inc. | |
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| | | Spire Alabama Gas Corporation (for the year ended September 30, 2015, the nine months ended September 30, 2014, and the year ended December 31, 2013)Inc. | |
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| | | Notes to Financial Statements | |
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The Laclede Group, Inc.
Management ReportReports on Internal Control Overover Financial Reporting
Spire Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. The Laclede Group,Spire Inc.'s’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.
The Laclede GroupSpire Inc.’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of the Laclede GroupSpire Inc.’s internal control over financial reporting as of September 30, 2015.2017. In making this assessment, management used the criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that assessment, management concluded that the Laclede GroupSpire Inc.’s internal control over financial reporting was effective as of September 30, 2015.2017. Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on the Laclede GroupSpire Inc.’s internal control over financial reporting, which is included herein.
Laclede Gas Company
Management Report on Internal Control Over Financial ReportingSpire Missouri Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Laclede Gas Company’sSpire 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.
Laclede Gas Company’sSpire Missouri Inc.’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Laclede Gas Company’sSpire Missouri Inc.’s internal control over financial reporting as of September 30, 2015.2017. In making this assessment, management used the criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that assessment, management concluded that Laclede Gas Company’sSpire Missouri Inc.’s internal control over financial reporting was effective as of September 30, 2015.2017.
Spire Alabama Gas Corporation
Management Report on Internal Control Over Financial ReportingInc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Alabama Gas Corporation'sInc.’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 Gas Corporation'sInc.’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Alabama Gas Corporation'sInc.’s internal control over financial reporting as of September 30, 2015.2017. In making this assessment, management used the criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that assessment, management concluded that Spire Alabama Gas Corporation’sInc.’s internal control over financial reporting was effective as of September 30, 2015.2017.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
The Laclede Group,Spire Inc.
St. Louis, Missouri
We have audited the internal control over financial reporting of The Laclede Group,Spire Inc. and subsidiaries (the "Company"“Company”) as of September 30, 2015,2017, based on criteria established in Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Spire section of Management ReportReports 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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain 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.
A company'scompany’s internal control over financial reporting is a process designed by, or under the supervision of, the company'scompany’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company'scompany’s board of directors, management, and other personnel 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'scompany’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'scompany’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2015,2017, based on the criteria established in Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended September 30, 2015 2017of the Company and our report dated November 24, 201515, 2017 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTEDeloitte & TOUCHETouche LLP
St. Louis, Missouri
November 24, 201515, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
The Laclede Group,Spire Inc.
St. Louis, Missouri
We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of The Laclede Group,Spire Inc. and subsidiaries (the “Company”) as of September 30, 20152017 and 2014,2016, and the related consolidated statements of income, comprehensive income, common shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2015.2017. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Laclede Group,Spire Inc. and subsidiaries as of September 30, 20152017 and 2014,2016, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2015,2017, 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), the Company’s internal control over financial reporting as of September 30, 2015,2017, based on the criteria established in Internal Control-IntegratedControl - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 24, 201515, 2017, expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTEDeloitte & TOUCHETouche LLP
St. Louis, Missouri
November 24, 201515, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Laclede Gas CompanySpire Missouri Inc.
St. Louis, Missouri
We have audited the accompanying balance sheets and statements of capitalization of Spire Missouri Inc. (formerly Laclede Gas CompanyCompany) (a wholly owned subsidiary of The Laclede Group,Spire Inc.) (the “Company”) as of September 30, 20152017 and 2014,2016, and the related statements of income, comprehensive income, common shareholder’s equity, and cash flows for each of the three years in the period ended September 30, 2015.2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Laclede Gas Company as of September 30, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2015, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
St. Louis, Missouri
November 24, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Alabama Gas Corporation
Birmingham, Alabama
We have audited the accompanying balance sheets and statements of capitalization of Alabama Gas Corporation (a wholly owned subsidiary of The Laclede Group, Inc.) (the "Company") as of September 30, 2015 and 2014, and the related statements of income, common shareholder’s equity, and cash flows for the year ended September 30, 2015 and the nine months ended September 30, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Alabama Gas CorporationSpire Missouri Inc. as of September 30, 20152017 and 2014,2016, and the results of its operations and its cash flows for each of the yearthree years in the period ended September 30, 2015 and the nine months ended September 30, 2014,2017, in conformity with accounting principles generally accepted in the United States of America.
/s/ DELOITTEDeloitte & TOUCHETouche LLP
Birmingham, Alabama
St. Louis, Missouri
November 24, 201515, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Spire Alabama Inc.
Birmingham, Alabama
We have audited the accompanying balance sheets and statements of capitalization of Spire Alabama Inc. (formerly Alabama Gas Corporation
In our opinion,Corporation) (a wholly owned subsidiary of Spire Inc.) (the “Company”) as of September 30, 2017 and 2016, and the accompanyingrelated statements of income, common shareholder’s equity, and cash flows present fairly, in all material respects,for each of the results of operations and cash flows of Alabama Gas Corporation for the year ended December 31, 2013 in conformity with accounting principles generally acceptedthree years in the United States of America.period ended September 30, 2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesethe financial statements based on our audit. audits.
We conducted our audit of these statementsaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, andas well as evaluating the overall financial statement presentation. We believe that our audit providesaudits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Spire Alabama Inc. as of September 30, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2017, in conformity with accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopersDeloitte & Touche LLP
Birmingham, Alabama
March 3, 2014November 15, 2017
| | | THE LACLEDE GROUP, INC. | |
| SPIRE INC. | | SPIRE INC. |
CONSOLIDATED STATEMENTS OF INCOME | | (In Millions, Except Per Share Amounts) | | | | | | |
| (In millions, except per share amounts) | | | | | | |
| Years Ended September 30 | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Operating Revenues: | | | | | | | | | | |
| Gas Utility | $ | 1,891.8 |
| | $ | 1,462.6 |
| | $ | 847.2 |
| $ | 1,660.0 |
| | $ | 1,457.2 |
| | $ | 1,891.8 |
|
| Gas Marketing and other | 84.6 |
| | 164.6 |
| | 169.8 |
| 80.7 |
| | 80.1 |
| | 84.6 |
|
| Total Operating Revenues | 1,976.4 |
| | 1,627.2 |
| | 1,017.0 |
| 1,740.7 |
| | 1,537.3 |
| | 1,976.4 |
|
| Operating Expenses: | | | | | | | | | | |
| Gas Utility | | | | | | | | | | |
| Natural and propane gas | 882.4 |
| | 731.7 |
| | 433.4 |
| 570.5 |
| | 492.2 |
| | 882.4 |
|
| Other operation and maintenance expenses | 390.6 |
| | 287.8 |
| | 180.3 |
| 405.0 |
| | 377.5 |
| | 390.6 |
|
| Depreciation and amortization | 129.9 |
| | 82.4 |
| | 48.3 |
| 153.5 |
| | 136.9 |
| | 129.9 |
|
| Taxes, other than income taxes | 142.1 |
| | 112.0 |
| | 60.1 |
| 137.8 |
| | 125.2 |
| | 142.1 |
|
| Total Gas Utility Operating Expenses | 1,545.0 |
| | 1,213.9 |
| | 722.1 |
| 1,266.8 |
| | 1,131.8 |
| | 1,545.0 |
|
| Gas Marketing and other | 158.9 |
| | 246.9 |
| | 198.4 |
| 152.2 |
| | 123.2 |
| | 158.9 |
|
| Total Operating Expenses | 1,703.9 |
| | 1,460.8 |
| | 920.5 |
| 1,419.0 |
| | 1,255.0 |
| | 1,703.9 |
|
| Operating Income | 272.5 |
| | 166.4 |
| | 96.5 |
| 321.7 |
| | 282.3 |
| | 272.5 |
|
| Other Income and (Income Deductions) – Net | 1.2 |
| | (3.3 | ) | | 2.5 |
| |
| Other Income – Net | | 6.6 |
| | 8.6 |
| | 1.2 |
|
| Interest Charges: | | | | | | | | | | |
| Interest on long-term debt | 66.6 |
| | 39.3 |
| | 25.5 |
| 76.8 |
| | 67.6 |
| | 66.6 |
|
| Other interest charges | 8.0 |
| | 6.9 |
| | 3.1 |
| 12.3 |
| | 9.6 |
| | 8.0 |
|
| Total Interest Charges | 74.6 |
| | 46.2 |
| | 28.6 |
| 89.1 |
| | 77.2 |
| | 74.6 |
|
| Income Before Income Taxes | 199.1 |
| | 116.9 |
| | 70.4 |
| 239.2 |
| | 213.7 |
| | 199.1 |
|
| Income Tax Expense | 62.2 |
| | 32.3 |
| | 17.6 |
| 77.6 |
| | 69.5 |
| | 62.2 |
|
| Net Income | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
|
| Weighted Average Number of Common Shares Outstanding: | | | | | | | | | | |
| Basic | 43.2 |
| | 35.8 |
| | 25.9 |
| 46.9 |
| | 44.1 |
| | 43.2 |
|
| Diluted | 43.3 |
| | 35.9 |
| | 26.0 |
| 47.0 |
| | 44.3 |
| | 43.3 |
|
| Basic Earnings Per Share of Common Stock | $ | 3.16 |
| | $ | 2.36 |
| | $ | 2.03 |
| $ | 3.44 |
| | $ | 3.26 |
| | $ | 3.16 |
|
| Diluted Earnings Per Share of Common Stock | $ | 3.16 |
| | $ | 2.35 |
| | $ | 2.02 |
| $ | 3.43 |
| | $ | 3.24 |
| | $ | 3.16 |
|
| | | THE LACLEDE GROUP, INC. | |
| SPIRE INC. | | SPIRE INC. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | (In Millions) | | | | | | |
| (In millions) | | | | | | |
| Years Ended September 30 | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Net Income | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
|
| Other Comprehensive Income (Loss), Before Tax: | | | | | | | | | | |
| Cash flow hedging derivative instruments: | | | | | | | | | | |
| Net hedging gain (losses) arising during the period | (5.5 | ) | | (4.5 | ) | | 5.0 |
| |
| Reclassification adjustment for losses included in net income | 4.4 |
| | 2.5 |
| | 0.3 |
| |
| Net unrealized gains (losses) on cash flow hedging derivative instruments | (1.1 | ) | | (2.0 | ) | | 5.3 |
| |
| Net hedging gain (loss) arising during the period | | 11.5 |
| | (4.0 | ) | | (5.5 | ) |
| Reclassification adjustment for loss included in net income | | — |
| | 1.1 |
| | 4.4 |
|
| Net unrealized gain (loss) on cash flow hedging derivative instruments | | 11.5 |
| | (2.9 | ) | | (1.1 | ) |
| Defined benefit pension and other postretirement benefit plans: | | | | | | | | | | |
| Net actuarial gain (losses) arising during the period | 0.1 |
| | — |
| | (0.1 | ) | |
| Amortization of actuarial loss included in net periodic pension and postretirement benefit cost | 0.4 |
| | 0.5 |
| | 0.2 |
| |
| Net actuarial gain arising during the period | | — |
| | — |
| | 0.1 |
|
| Amortization of actuarial loss (gain) included in net periodic pension and postretirement benefit cost | | 0.4 |
| | (0.3 | ) | | 0.4 |
|
| Net defined benefit pension and other postretirement benefit plans | 0.5 |
| | 0.5 |
| | 0.1 |
| 0.4 |
| | (0.3 | ) | | 0.5 |
|
| Loss on available for sale securities | | (0.1 | ) | | — |
| | — |
|
| Other Comprehensive Income (Loss), Before Tax | (0.6 | ) | | (1.5 | ) | | 5.4 |
| 11.8 |
| | (3.2 | ) | | (0.6 | ) |
| Income Tax Expense (Benefit) Related to Items of Other Comprehensive Income (Loss) | (0.3 | ) | | (0.6 | ) | | 2.1 |
| 4.4 |
| | (1.0 | ) | | (0.3 | ) |
| Other Comprehensive Income (Loss), Net of Tax | (0.3 | ) | | (0.9 | ) | | 3.3 |
| 7.4 |
| | (2.2 | ) | | (0.3 | ) |
| Comprehensive Income | $ | 136.6 |
| | $ | 83.7 |
| | $ | 56.1 |
| $ | 169.0 |
| | $ | 142.0 |
| | $ | 136.6 |
|
| | | THE LACLEDE GROUP, INC. | |
| SPIRE INC. | | SPIRE INC. |
CONSOLIDATED BALANCE SHEETS | | (In Millions) | | | | |
| (In millions) | | | | |
| September 30 | 2015 | | 2014 | 2017 | | 2016 |
| ASSETS | | | | | | |
| Utility Plant | $ | 4,234.5 |
| | $ | 3,928.3 |
| $ | 5,278.4 |
| | $ | 4,793.6 |
|
| Less: Accumulated depreciation and amortization | 1,307.0 |
| | 1,168.6 |
| 1,613.2 |
| | 1,506.4 |
|
| Net Utility Plant | 2,927.5 |
| | 2,759.7 |
| 3,665.2 |
| | 3,287.2 |
|
| Non-utility property (net of accumulated depreciation and amortization, $7.5 and $6.7 at September 30, 2015 and 2014, respectively) | 13.7 |
| | 9.2 |
| |
| Non-utility property (net of accumulated depreciation and amortization, $8.6 and $8.1 at September 30, 2017 and 2016, respectively) | | 52.0 |
| | 13.7 |
|
| Goodwill | 946.0 |
| | 937.8 |
| 1,171.6 |
| | 1,164.9 |
|
| Other investments | 59.9 |
| | 60.0 |
| 64.2 |
| | 62.1 |
|
| Other Property and Investments | 1,019.6 |
| | 1,007.0 |
| 1,287.8 |
| | 1,240.7 |
|
| Current Assets: | | | | | | |
| Cash and cash equivalents | 13.8 |
| | 16.1 |
| 7.4 |
| | 5.2 |
|
| Accounts receivable: | | | | | | |
| Utility | 138.1 |
| | 148.2 |
| 140.5 |
| | 127.8 |
|
| Other | 86.7 |
| | 86.5 |
| 149.2 |
| | 113.4 |
|
| Allowance for doubtful accounts | (14.2 | ) | | (15.9 | ) | (18.3 | ) | | (20.5 | ) |
| Delayed customer billings | 2.6 |
| | 10.8 |
| 3.4 |
| | 1.6 |
|
| Inventories: | | | | | | |
| Natural gas | 188.6 |
| | 245.5 |
| 194.9 |
| | 174.0 |
|
| Propane gas | 12.0 |
| | 11.7 |
| 12.0 |
| | 12.0 |
|
| Materials and supplies | 14.8 |
| | 13.0 |
| 18.9 |
| | 16.3 |
|
| Natural gas receivable | 17.3 |
| | 7.3 |
| 1.9 |
| | 9.7 |
|
| Derivative instrument assets | 4.6 |
| | 2.4 |
| 5.9 |
| | 11.4 |
|
| Unamortized purchased gas adjustments | 12.9 |
| | 54.0 |
| 102.6 |
| | 49.7 |
|
| Regulatory assets | 27.6 |
| | 26.8 |
| |
| Other regulatory assets | | 72.9 |
| | 44.2 |
|
| Prepayments and other | 25.3 |
| | 21.6 |
| 34.2 |
| | 24.8 |
|
| Total Current Assets | 530.1 |
| | 628.0 |
| 725.5 |
| | 569.6 |
|
| Deferred Charges: | | | | | | |
| Regulatory assets | 737.6 |
| | 614.3 |
| 791.1 |
| | 838.0 |
|
| Other | 75.4 |
| | 65.0 |
| 77.1 |
| | 128.9 |
|
| Total Deferred Charges | 813.0 |
| | 679.3 |
| 868.2 |
| | 966.9 |
|
| Total Assets | $ | 5,290.2 |
| | $ | 5,074.0 |
| $ | 6,546.7 |
| | $ | 6,064.4 |
|
|
| | | | | | | |
| SPIRE INC. |
| CONSOLIDATED BALANCE SHEETS (Continued) |
| | | | |
| September 30 | 2017 | | 2016 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization: | | | |
| Common stock equity | $ | 1,991.3 |
| | $ | 1,768.2 |
|
| Long-term debt | 1,995.0 |
| | 1,820.7 |
|
| Total Capitalization | 3,986.3 |
| | 3,588.9 |
|
| Current Liabilities: | | | |
| Current portion of long-term debt | 100.0 |
| | 250.0 |
|
| Notes payable | 477.3 |
| | 398.7 |
|
| Accounts payable | 257.1 |
| | 210.9 |
|
| Advance customer billings | 32.0 |
| | 70.2 |
|
| Wages and compensation accrued | 38.7 |
| | 39.8 |
|
| Dividends payable | 26.6 |
| | 23.5 |
|
| Customer deposits | 34.9 |
| | 34.9 |
|
| Interest accrued | 14.6 |
| | 14.8 |
|
| Unamortized purchased gas adjustments | 1.0 |
| | 1.7 |
|
| Taxes accrued | 61.0 |
| | 55.2 |
|
| Other regulatory liabilities | 21.6 |
| | 28.9 |
|
| Other | 33.1 |
| | 32.7 |
|
| Total Current Liabilities | 1,097.9 |
| | 1,161.3 |
|
| Deferred Credits and Other Liabilities: | | | |
| Deferred income taxes | 707.5 |
| | 607.3 |
|
| Pension and postretirement benefit costs | 237.4 |
| | 303.7 |
|
| Asset retirement obligations | 296.6 |
| | 206.4 |
|
| Regulatory liabilities | 157.2 |
| | 130.7 |
|
| Other | 63.8 |
| | 66.1 |
|
| Total Deferred Credits and Other Liabilities | 1,462.5 |
| | 1,314.2 |
|
|
| |
|
| Total Capitalization and Liabilities | $ | 6,546.7 |
| | $ | 6,064.4 |
|
|
| | | | | | | |
| SPIRE INC. |
| CONSOLIDATED STATEMENTS OF CAPITALIZATION |
| (Dollars in millions, except per share amounts) | | | |
| September 30 | 2017 | | 2016 |
| Common Stock Equity: | | | |
| Common stock, par value $1 per share: | | | |
| Authorized – 70,000,000 shares | | | |
| Outstanding – 48,263,243 shares and 45,650,642 shares, respectively | $ | 48.3 |
| | $ | 45.6 |
|
| Paid-in capital | 1,325.6 |
| | 1,175.9 |
|
| Retained earnings | 614.2 |
| | 550.9 |
|
| Accumulated other comprehensive income (loss) | 3.2 |
| | (4.2 | ) |
| Total Common Stock Equity | 1,991.3 |
| | 1,768.2 |
|
| Long-Term Debt - Spire: | | | |
| 2.55% Senior Notes, due August 15, 2019 | 125.0 |
| | 125.0 |
|
| 2.52% Senior Notes, due September 1, 2021 | 35.0 |
| | 35.0 |
|
| 2.0% Series A Remarketable Subordinated Notes, due April 1, 2022 | — |
| | 143.8 |
|
| 3.31% Notes Payable, due December 15, 2022 | 25.0 |
| | 25.0 |
|
| 3.54% Senior Notes, due February 27, 2024 | 150.0 |
| | — |
|
| 3.13% Senior Notes, due September 1, 2026 | 130.0 |
| | 130.0 |
|
| 3.93% Senior Notes, due March 15, 2027 | 100.0 |
| | — |
|
| 4.70% Senior Notes, due August 15, 2044 | 250.0 |
| | 250.0 |
|
| Long-Term Debt - Spire Missouri: | | | |
| First Mortgage Bonds: | | | |
| 2.0% Series, due August 15, 2018 | — |
| | 100.0 |
|
| 5.5% Series, due May 1, 2019 | 50.0 |
| | 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 |
| | — |
|
| 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 |
| | — |
|
| 4.38% Series, due September 15, 2057 | 50.0 |
| | — |
|
| Long-Term Debt - Spire Alabama: | | | |
| 5.2% Notes, due January 15, 2020 | 40.0 |
| | 40.0 |
|
| 3.86% Notes, due December 23, 2021 | 50.0 |
| | 50.0 |
|
| 3.21% Notes, due September 15, 2025 | 35.0 |
| | 35.0 |
|
| 5.9% Notes, due January 15, 2037 | 45.0 |
| | 45.0 |
|
| 4.31% Notes, due December 1, 2045 | 80.0 |
| | 80.0 |
|
| Long-Term Debt - Other: | | | |
| 3.10% Note, due December 30, 2018 | 5.0 |
| | 5.0 |
|
| 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 |
|
| Total Principal of Long-Term Debt | 2,012.0 |
| | 1,835.8 |
|
| Unamortized debt issuance costs | (15.2 | ) | | (13.0 | ) |
| Unamortized discounts on long-term debt | (1.8 | ) | | (2.1 | ) |
| Total Long-Term Debt | 1,995.0 |
| | 1,820.7 |
|
| Total Capitalization | $ | 3,986.3 |
| | $ | 3,588.9 |
|
Long-term debt dollar amounts are exclusive of current portion.
|
| | | | | | | | | | | | | | | | | | | | | | |
| SPIRE INC. |
| CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS’ EQUITY |
| | | | | | | | | | |
| | Common Stock Outstanding | | Paid-in Capital | | Retained Earnings | | AOCI* | | |
| (Dollars in millions, except per share amounts) | Shares | | Amount | | | | | Total |
| Balance at September 30, 2014 | 43,178,405 |
| | $ | 43.2 |
| | $ | 1,029.4 |
| | $ | 437.5 |
| | $ | (1.7 | ) | | $ | 1,508.4 |
|
| Net income | — |
| | — |
| | — |
| | 136.9 |
| | — |
| | 136.9 |
|
| Dividend reinvestment plan | 31,166 |
| | — |
| | 1.6 |
| | — |
| | — |
| | 1.6 |
|
| Stock-based compensation costs | — |
| | — |
| | 6.7 |
| | — |
| | — |
| | 6.7 |
|
| Stock issued under stock-based compensation plans | 156,925 |
| | 0.1 |
| | 1.3 |
| | — |
| | — |
| | 1.4 |
|
| Employees’ tax withholding for stock-based compensation | (31,484 | ) | | — |
| | (1.6 | ) | | — |
| | — |
| | (1.6 | ) |
| Tax benefit – stock compensation | — |
| | — |
| | 0.7 |
| | — |
| | — |
| | 0.7 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock ($1.84 per share) | — |
| | — |
| | — |
| | (80.2 | ) | | — |
| | (80.2 | ) |
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | (0.3 | ) | | (0.3 | ) |
| Balance at September 30, 2015 | 43,335,012 |
| | $ | 43.3 |
| | $ | 1,038.1 |
| | $ | 494.2 |
| | $ | (2.0 | ) | | $ | 1,573.6 |
|
| Net income | — |
| | — |
| | — |
| | 144.2 |
| | — |
| | 144.2 |
|
| Common stock offering | 2,185,000 |
| | 2.2 |
| | 131.0 |
| | — |
| | — |
| | 133.2 |
|
| Dividend reinvestment plan | 22,878 |
| | — |
| | 1.4 |
| | — |
| | — |
| | 1.4 |
|
| Stock-based compensation costs | — |
| | — |
| | 6.7 |
| | — |
| | — |
| | 6.7 |
|
| Stock issued under stock-based compensation plans | 136,979 |
| | 0.1 |
| | 0.4 |
| | — |
| | — |
| | 0.5 |
|
| Employees’ tax withholding for stock-based compensation | (29,227 | ) | | — |
| | (1.7 | ) | | — |
| | — |
| | (1.7 | ) |
| Dividends declared: | | | | | | | | | |
| | |
| Common stock ($1.96 per share) | — |
| | — |
| | — |
| | (87.5 | ) | | — |
| | (87.5 | ) |
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | (2.2 | ) | | (2.2 | ) |
| 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 offering | 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 |
|
*Accumulated other comprehensive income (loss)
|
| | | | | | | | | | | |
| SPIRE INC. |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In millions) | | | | | |
| Years Ended September 30 | 2017 | | 2016 | | 2015 |
| Operating Activities: | | | | | |
| Net Income | $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 154.1 |
| | 137.5 |
| | 130.8 |
|
| Deferred income taxes and investment tax credits | 77.0 |
| | 68.8 |
| | 65.5 |
|
| Changes in assets and liabilities: | | | | | |
| Accounts receivable – net | (63.0 | ) | | (12.3 | ) | | (4.8 | ) |
| Unamortized purchased gas adjustments | (50.9 | ) | | (52.8 | ) | | 27.1 |
|
| Accounts payable | 51.1 |
| | 30.0 |
| | (30.0 | ) |
| Delayed/advance customer billings – net | (40.0 | ) | | 26.9 |
| | 20.3 |
|
| Taxes accrued | 5.8 |
| | (0.4 | ) | | (17.0 | ) |
| Inventories | (23.5 | ) | | 16.5 |
| | 54.8 |
|
| Other assets and liabilities | 11.9 |
| | (35.0 | ) | | (67.6 | ) |
| Other | 4.2 |
| | 4.9 |
| | 6.4 |
|
| Net cash provided by operating activities | 288.3 |
| | 328.3 |
| | 322.4 |
|
| Investing Activities: | | | | | |
| Capital expenditures | (438.1 | ) | | (293.3 | ) | | (289.8 | ) |
| Acquisition of Spire EnergySouth (net of $2.0 cash acquired) and final settlement | 3.8 |
| | (317.7 | ) | | — |
|
| Final settlement related to acquisition of Spire Alabama | — |
| | — |
| | (8.2 | ) |
| Other | 0.8 |
| | (1.7 | ) | | (0.7 | ) |
| Net cash used in investing activities | (433.5 | ) | | (612.7 | ) | | (298.7 | ) |
| Financing Activities: | | | | | |
| Issuance of long-term debt | 420.0 |
| | 245.0 |
| | 35.0 |
|
| Repayment of long-term debt | (393.8 | ) | | (80.0 | ) | | (34.8 | ) |
| Issuance of short-term debt - net | 78.6 |
| | 60.7 |
| | 50.8 |
|
| Issuance of common stock | 146.9 |
| | 137.1 |
| | 3.1 |
|
| Dividends paid | (96.2 | ) | | (85.2 | ) | | (79.0 | ) |
| Other | (8.1 | ) | | (1.8 | ) | | (1.1 | ) |
| Net cash provided by (used in) financing activities | 147.4 |
| | 275.8 |
| | (26.0 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | 2.2 |
| | (8.6 | ) | | (2.3 | ) |
| Cash and Cash Equivalents at Beginning of Year | 5.2 |
| | 13.8 |
| | 16.1 |
|
| Cash and Cash Equivalents at End of Year | $ | 7.4 |
| | $ | 5.2 |
| | $ | 13.8 |
|
| | | | | | |
| Supplemental disclosure of cash (paid) refunded for: | | | | | |
| Interest | $ | (85.5 | ) | | $ | (72.5 | ) | | $ | (65.3 | ) |
| Income taxes | (1.3 | ) | | 2.9 |
| | 1.3 |
|
|
| | | | | | | |
| THE LACLEDE GROUP, INC. |
| CONSOLIDATED BALANCE SHEETS (Continued) |
| (In Millions) | | | |
| September 30 | 2015 | | 2014 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization: | | | |
| Common stock equity | $ | 1,573.6 |
| | $ | 1,508.4 |
|
| Long-term debt | 1,771.5 |
| | 1,851.0 |
|
| Total Capitalization | 3,345.1 |
| | 3,359.4 |
|
| Current Liabilities: | | | |
| Current portion of long-term debt | 80.0 |
| | — |
|
| Notes payable | 338.0 |
| | 287.1 |
|
| Accounts payable | 146.5 |
| | 176.7 |
|
| Advance customer billings | 44.3 |
| | 32.2 |
|
| Wages and compensation accrued | 32.7 |
| | 36.0 |
|
| Dividends payable | 21.1 |
| | 19.9 |
|
| Customer deposits | 32.1 |
| | 34.0 |
|
| Interest accrued | 14.3 |
| | 15.1 |
|
| Unamortized purchased gas adjustments | 28.2 |
| | 22.4 |
|
| Taxes accrued | 51.7 |
| | 63.4 |
|
| Deferred income taxes | — |
| | 9.9 |
|
| Regulatory liabilities | 32.4 |
| | 41.3 |
|
| Other | 32.5 |
| | 47.8 |
|
| Total Current Liabilities | 853.8 |
| | 785.8 |
|
| Deferred Credits and Other Liabilities: | | | |
| Deferred income taxes | 482.1 |
| | 383.8 |
|
| Pension and postretirement benefit costs | 253.4 |
| | 244.9 |
|
| Asset retirement obligations | 159.2 |
| | 99.2 |
|
| Regulatory liabilities | 119.3 |
| | 125.8 |
|
| Other | 77.3 |
| | 75.1 |
|
| Total Deferred Credits and Other Liabilities | 1,091.3 |
| | 928.8 |
|
|
| |
|
| Total Capitalization and Liabilities | $ | 5,290.2 |
| | $ | 5,074.0 |
|
|
| | | | | | | | | | | |
| SPIRE MISSOURI INC. |
| STATEMENTS OF INCOME |
| (In millions) | | | | | |
| Years Ended September 30 | 2017 | | 2016 | | 2015 |
| Operating Revenues: | | | | | |
| Utility | $ | 1,171.9 |
| | $ | 1,087.5 |
| | $ | 1,416.6 |
|
| Total Operating Revenues | 1,171.9 |
| | 1,087.5 |
| | 1,416.6 |
|
| Operating Expenses: | | | | | |
| Utility | | | | | |
| Natural and propane gas | 538.3 |
| | 471.3 |
| | 786.1 |
|
| Other operation and maintenance expenses | 243.8 |
| | 244.4 |
| | 253.6 |
|
| Depreciation and amortization | 93.1 |
| | 88.6 |
| | 82.6 |
|
| Taxes, other than income taxes | 99.8 |
| | 96.3 |
| | 108.9 |
|
| Total Operating Expenses | 975.0 |
| | 900.6 |
| | 1,231.2 |
|
| Operating Income | 196.9 |
| | 186.9 |
| | 185.4 |
|
| Other Income and (Income Deductions) - Net | 2.7 |
| | 1.8 |
| | (0.5 | ) |
| Interest Charges: | | | | | |
| Interest on long-term debt | 32.9 |
| | 32.9 |
| | 33.1 |
|
| Other interest charges | 6.2 |
| | 4.5 |
| | 3.3 |
|
| Total Interest Charges | 39.1 |
| | 37.4 |
| | 36.4 |
|
| Income Before Income Taxes | 160.5 |
| | 151.3 |
| | 148.5 |
|
| Income Tax Expense | 47.5 |
| | 45.4 |
| | 43.2 |
|
| Net Income | $ | 113.0 |
| | $ | 105.9 |
| | $ | 105.3 |
|
|
| | | | | | | |
| THE LACLEDE GROUP, INC. |
| CONSOLIDATED STATEMENTS OF CAPITALIZATION |
| (Dollars in Millions, Except Per Share Amounts) | | | |
| September 30 | 2015 | | 2014 |
| Common Stock Equity: | | | |
| Common stock, par value $1 per share: | | | |
| Authorized – 70,000,000 shares | | | |
| Outstanding – 43,335,012 shares and 43,183,818 shares, respectively | $ | 43.3 |
| | $ | 43.2 |
|
| Paid-in capital | 1,038.1 |
| | 1,029.4 |
|
| Retained earnings | 494.2 |
| | 437.5 |
|
| Accumulated other comprehensive loss | (2.0 | ) | | (1.7 | ) |
| Total Common Stock Equity | 1,573.6 |
| | 1,508.4 |
|
| Long-Term Debt - Laclede Group: | | | |
| Floating Rate Senior Notes, due August 15, 2017 | 250.0 |
| | 250.0 |
|
| 2.55% Senior Notes, due August 15, 2019 | 125.0 |
| | 125.0 |
|
| 3.31% Notes Payable, due December 15, 2022 | 25.0 |
| | 25.0 |
|
| 2.0% Series A Remarketable Subordinated Notes, due April 1, 2022 | 143.8 |
| | 143.8 |
|
| 4.70% Senior Notes, due August 15, 2044 | 250.0 |
| | 250.0 |
|
| Long-Term Debt - Laclede Gas: | | | |
| First Mortgage Bonds: | | | |
| 2.0% Series, due August 15, 2018 | 100.0 |
| | 100.0 |
|
| 5.5% Series, due May 1, 2019 | 50.0 |
| | 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 |
|
| 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 |
|
| Long-Term Debt - Alagasco: | | | |
| 5.368% Notes, due December 1, 2015 | — |
| | 80.0 |
|
| 5.2% Notes, due January 15, 2020 | 40.0 |
| | 40.0 |
|
| 3.86% Notes, due December 23, 2021 | 50.0 |
| | 50.0 |
|
| 3.21% Notes, due September 15, 2025 | 35.0 |
| | — |
|
| 5.7% Notes, due January 15, 2035 | — |
| | 34.8 |
|
| 5.9% Notes, due January 15, 2037 | 45.0 |
| | 45.0 |
|
| Total | 1,773.8 |
| | 1,853.6 |
|
| Unamortized discount, net of premium, on long-term debt | (2.3 | ) | | (2.6 | ) |
| Total Long-Term Debt | 1,771.5 |
| | 1,851.0 |
|
| Total Capitalization | $ | 3,345.1 |
| | $ | 3,359.4 |
|
|
| | | | | | | | | | | |
| SPIRE MISSOURI INC. |
| STATEMENTS OF COMPREHENSIVE INCOME |
| (In millions) | | | | | |
| Years Ended September 30 | 2017 | | 2016 | | 2015 |
| Net Income | $ | 113.0 |
| | $ | 105.9 |
| | $ | 105.3 |
|
| Other Comprehensive Income, Before Tax: | | | | | |
| Cash flow hedging derivative instruments: | | | | | |
| Net hedging gain (loss) arising during the period | 0.1 |
| | — |
| | (1.2 | ) |
| Reclassification adjustment for (gain) loss included in net income | (0.2 | ) | | 0.5 |
| | 0.9 |
|
| Net unrealized (loss) gain on cash flow hedging derivative instruments | (0.1 | ) | | 0.5 |
| | (0.3 | ) |
| Defined benefit pension and other postretirement benefit plans: | | | | | |
| Net actuarial gain arising during the period | — |
| | — |
| | 0.1 |
|
| Amortization of actuarial loss (gain) included in net periodic pension and postretirement benefit cost | 0.3 |
| | (0.3 | ) | | 0.4 |
|
| Net defined benefit pension and other postretirement benefit plans | 0.3 |
| | (0.3 | ) | | 0.5 |
|
| Loss on available for sale securities | (0.1 | ) | | (0.1 | ) | | — |
|
| Other Comprehensive Income, Before Tax | 0.1 |
| | 0.1 |
| | 0.2 |
|
| Income Tax Expense Related to Items of Other Comprehensive Income | — |
| | 0.2 |
| | — |
|
| Other Comprehensive Income (Loss), Net of Tax | 0.1 |
| | (0.1 | ) | | 0.2 |
|
| Comprehensive Income | $ | 113.1 |
| | $ | 105.8 |
| | $ | 105.5 |
|
|
| | | | | | | |
| SPIRE MISSOURI INC. |
| BALANCE SHEETS |
| (In Millions) | | | |
| September 30 | 2017 | | 2016 |
| ASSETS | | | |
| Utility Plant | $ | 3,091.8 |
| | $ | 2,718.5 |
|
| Less: Accumulated depreciation and amortization | 681.6 |
| | 604.5 |
|
| Net Utility Plant | 2,410.2 |
| | 2,114.0 |
|
| Goodwill | 210.2 |
| | 210.2 |
|
| Other Property and Investments | 59.4 |
| | 57.3 |
|
| Other Property and Investments | 269.6 |
| | 267.5 |
|
| Current Assets: | | | |
| Cash and cash equivalents | 2.5 |
| | 2.1 |
|
| Accounts receivable: | | | |
| Utility | 101.7 |
| | 87.9 |
|
| Associated companies | 3.3 |
| | 2.2 |
|
| Other | 15.0 |
| | 11.4 |
|
| Allowance for doubtful accounts | (14.1 | ) | | (16.1 | ) |
| Delayed customer billings | 3.4 |
| | 1.6 |
|
| Inventories: | | | |
| Natural gas | 138.2 |
| | 127.3 |
|
| Propane gas | 12.0 |
| | 12.0 |
|
| Materials and supplies | 11.3 |
| | 9.2 |
|
| Derivative instrument assets | 0.1 |
| | 4.9 |
|
| Unamortized purchased gas adjustments | 57.4 |
| | 43.1 |
|
| Other regulatory assets | 38.2 |
| | 23.9 |
|
| Prepayments and other | 19.6 |
| | 14.5 |
|
| Total Current Assets | 388.6 |
| | 324.0 |
|
| Deferred Charges: | | | |
| Regulatory assets | 557.8 |
| | 589.8 |
|
| Other | 5.3 |
| | 1.1 |
|
| Total Deferred Charges | 563.1 |
| | 590.9 |
|
| Total Assets | $ | 3,631.5 |
| | $ | 3,296.4 |
|
|
| | | | | | | |
| SPIRE MISSOURI INC. |
| BALANCE SHEETS (continued) |
| | | | |
| September 30 | 2017 | | 2016 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization: | | | |
| Common stock equity | $ | 1,171.0 |
| | $ | 1,068.5 |
|
| Long-term debt | 873.9 |
| | 804.1 |
|
| Total Capitalization | 2,044.9 |
| | 1,872.6 |
|
| Current Liabilities: | | | |
| Current portion of long-term debt | 100.0 |
| | — |
|
| Notes payable | — |
| | 243.7 |
|
| Notes payable – associated companies | 203.0 |
| | — |
|
| Accounts payable | 89.9 |
| | 67.6 |
|
| Accounts payable to associated companies | 5.4 |
| | 5.4 |
|
| Advance customer billings | 13.3 |
| | 49.1 |
|
| Wages and compensation accrued | 29.6 |
| | 29.9 |
|
| Dividends payable | — |
| | 14.0 |
|
| Customer deposits | 13.3 |
| | 13.5 |
|
| Interest accrued | 8.0 |
| | 7.7 |
|
| Taxes accrued | 34.1 |
| | 29.1 |
|
| Regulatory liabilities | 2.7 |
| | 1.3 |
|
| Other | 8.5 |
| | 9.9 |
|
| Total Current Liabilities | 507.8 |
| | 471.2 |
|
| Deferred Credits and Other Liabilities: | | | |
| Deferred income taxes | 623.8 |
| | 556.9 |
|
| Pension and postretirement benefit costs | 173.0 |
| | 211.8 |
|
| Asset retirement obligations | 158.6 |
| | 75.2 |
|
| Regulatory liabilities | 81.2 |
| | 67.3 |
|
| Other | 42.2 |
| | 41.4 |
|
| Total Deferred Credits and Other Liabilities | 1,078.8 |
| | 952.6 |
|
|
| |
|
| Total Capitalization and Liabilities | $ | 3,631.5 |
| | $ | 3,296.4 |
|
|
| | | | | | | |
| SPIRE MISSOURI INC. |
| STATEMENTS OF CAPITALIZATION |
| (Dollars in millions, except per share amounts) | | | |
| September 30 | 2017 | | 2016 |
| Common Stock Equity: | | | |
| Common stock, par value $1 per share: | | | |
| Authorized – 50,000,000 shares |
|
| | |
| Outstanding – 24,577 shares | $ | 0.1 |
| | $ | 0.1 |
|
| Paid-in capital | 756.1 |
| | 751.9 |
|
| Retained earnings | 416.5 |
| | 318.3 |
|
| Accumulated other comprehensive loss | (1.7 | ) | | (1.8 | ) |
| Total Common Stock Equity | 1,171.0 |
| | 1,068.5 |
|
| Long-Term Debt: | | | |
| First Mortgage Bonds: | | | |
| 2.0% Series, due August 15, 2018 | — |
| | 100.0 |
|
| 5.5% Series, due May 1, 2019 | 50.0 |
| | 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 |
| | — |
|
| 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 |
| | — |
|
| 4.38% Series, due September 15, 2057 | 50.0 |
| | — |
|
| Total Principal of Long-Term Debt | 880.0 |
| | 810.0 |
|
| Unamortized debt issuance costs | (4.6 | ) | | (4.2 | ) |
| Unamortized discounts on long-term debt | (1.5 | ) | | (1.7 | ) |
| Total Long-Term Debt | 873.9 |
| | 804.1 |
|
| Total Capitalization | $ | 2,044.9 |
| | $ | 1,872.6 |
|
Long-term debt dollar amounts are exclusive of current portion.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| THE LACLEDE GROUP, INC. |
| CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS’ EQUITY |
| | | | | | | | | | |
| | Common Stock Outstanding | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income/(Loss) | | |
| (Dollars in Millions, Except Per Share Amounts) | Shares | | Amount | | | | | Total |
| BALANCE SEPTEMBER 30, 2012 | 22,539,431 |
| | $ | 22.6 |
| | $ | 168.6 |
| | $ | 414.5 |
| | $ | (4.1 | ) | | $ | 601.6 |
|
| Net income | — |
| | — |
| | — |
| | 52.8 |
| | — |
| | 52.8 |
|
| Common stock offering | 10,005,000 |
| | 10.0 |
| | 417.2 |
| | — |
| | — |
| | 427.2 |
|
| Dividend reinvestment plan | 44,074 |
| | — |
| | 1.8 |
| | — |
| | — |
| | 1.8 |
|
| Stock-based compensation costs | — |
| | — |
| | 4.4 |
| | — |
| | — |
| | 4.4 |
|
| Equity Incentive Plan | 108,331 |
| | 0.1 |
| | 2.6 |
| | — |
| | — |
| | 2.7 |
|
Employees’ taxes paid associated with restricted shares withheld upon vesting | — |
| | — |
| | (0.9 | ) | | — |
| | — |
| | (0.9 | ) |
| Tax benefit – stock compensation | — |
| | — |
| | 0.6 |
| | — |
| | — |
| | 0.6 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock ($1.70 per share) | — |
| | — |
| | — |
| | (47.2 | ) | | — |
| | (47.2 | ) |
| Other comprehensive income, net of tax | — |
| | — |
| | — |
| | — |
| | 3.3 |
| | 3.3 |
|
| BALANCE SEPTEMBER 30, 2013 | 32,696,836 |
| | $ | 32.7 |
| | $ | 594.3 |
| | $ | 420.1 |
| | $ | (0.8 | ) | | $ | 1,046.3 |
|
| Net income | — |
| | — |
| | — |
| | 84.6 |
| | — |
| | 84.6 |
|
| Common stock offering | 10,350,000 |
| | 10.4 |
| | 446.4 |
| | — |
| | — |
| | 456.8 |
|
| Equity units offering | — |
| | — |
| | (19.7 | ) | | — |
| | — |
| | (19.7 | ) |
| Dividend reinvestment plan | 33,667 |
| | — |
| | 1.5 |
| | — |
| | — |
| | 1.5 |
|
| Stock-based compensation costs | — |
| | — |
| | 5.8 |
| | — |
| | — |
| | 5.8 |
|
| Equity Incentive Plan | 97,902 |
| | 0.1 |
| | 1.6 |
| | — |
| | — |
| | 1.7 |
|
Employees’ taxes paid associated with restricted shares withheld upon vesting | — |
| | — |
| | (1.1 | ) | | — |
| | — |
| | (1.1 | ) |
| Tax benefit – stock compensation | — |
| | — |
| | 0.6 |
| | — |
| | — |
| | 0.6 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock ($1.76 per share) | — |
| | — |
| | — |
| | (67.2 | ) | | — |
| | (67.2 | ) |
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| — |
| — |
| | (0.9 | ) | | (0.9 | ) |
| BALANCE SEPTEMBER 30, 2014 | 43,178,405 |
| | $ | 43.2 |
| | $ | 1,029.4 |
| | $ | 437.5 |
| | $ | (1.7 | ) | | $ | 1,508.4 |
|
| Net income | — |
| | — |
| | — |
| | 136.9 |
| | — |
| | 136.9 |
|
| Dividend reinvestment plan | 31,166 |
| | — |
| | 1.6 |
| | — |
| | — |
| | 1.6 |
|
| Stock-based compensation costs | — |
| | — |
| | 3.0 |
| | — |
| | — |
| | 3.0 |
|
| Equity Incentive Plan | 125,441 |
| | 0.1 |
| | 5.0 |
| | — |
| | — |
| | 5.1 |
|
Employees’ taxes paid associated with restricted shares withheld upon vesting | — |
| | — |
| | (1.6 | ) | | — |
| | — |
| | (1.6 | ) |
| Tax benefit – stock compensation | — |
| | — |
| | 0.7 |
| | — |
| | — |
| | 0.7 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock ($1.84 per share) | — |
| | — |
| | — |
| | (80.2 | ) | | — |
| | (80.2 | ) |
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | (0.3 | ) | | (0.3 | ) |
| BALANCE SEPTEMBER 30, 2015 | 43,335,012 |
| | $ | 43.3 |
| | $ | 1,038.1 |
| | $ | 494.2 |
| | $ | (2.0 | ) | | $ | 1,573.6 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| SPIRE MISSOURI INC. |
| STATEMENTS OF COMMON SHAREHOLDER’S EQUITY |
| | | | | | | | | | |
| | Common Stock Outstanding | | Paid-in Capital | | Retained Earnings | | AOCI* | | |
| (Dollars in millions) | Shares | | Amount | | | | | Total |
| Balance at September 30, 2014 | 24,577 |
| | $ | 0.1 |
| | $ | 744.0 |
| | $ | 265.6 |
| | $ | (1.9 | ) | | $ | 1,007.8 |
|
| Net income | — |
| | — |
| | — |
| | 105.3 |
| | — |
| | 105.3 |
|
| Stock-based compensation costs | — |
| | — |
| | 3.7 |
| | — |
| | — |
| | 3.7 |
|
| Tax benefit – stock compensation | — |
| | — |
| | 0.5 |
| | — |
| | — |
| | 0.5 |
|
| Dividends declared | — |
| | — |
| | — |
| | (79.7 | ) | | — |
| | (79.7 | ) |
| Other comprehensive income, net of tax | — |
| | — |
| | — |
| | — |
| | 0.2 |
| | 0.2 |
|
| Balance at September 30, 2015 | 24,577 |
| | $ | 0.1 |
| | $ | 748.2 |
| | $ | 291.2 |
| | $ | (1.7 | ) | | $ | 1,037.8 |
|
| Net income | — |
| | — |
| | — |
| | 105.9 |
| | — |
| | 105.9 |
|
| Stock-based compensation costs | — |
| | — |
| | 3.7 |
| | — |
| | — |
| | 3.7 |
|
| Dividends declared | — |
| | — |
| | — |
| | (78.8 | ) | | — |
| | (78.8 | ) |
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | (0.1 | ) | | (0.1 | ) |
| 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 |
|
*Accumulated other comprehensive income (loss)
| | | THE LACLEDE GROUP, INC. | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| (In Millions) | | | | | | |
| SPIRE MISSOURI INC. | | SPIRE MISSOURI INC. |
| STATEMENTS OF CASH FLOWS | | STATEMENTS OF CASH FLOWS |
| (In millions) | | | | | | |
| Years Ended September 30 | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Operating Activities: | | | | | | | | | | |
| Net Income | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| $ | 113.0 |
| | $ | 105.9 |
| | $ | 105.3 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | |
| Depreciation, amortization and accretion | 130.8 |
| | 83.3 |
| | 49.3 |
| |
| Depreciation and amortization | | 93.1 |
| | 88.6 |
| | 82.6 |
|
| Deferred income taxes and investment tax credits | 65.5 |
| | 31.4 |
| | 22.0 |
| 47.5 |
| | 45.3 |
| | 45.4 |
|
| Changes in assets and liabilities: | | | | | | | | | | |
| Accounts receivable – net | (4.8 | ) | | (5.3 | ) | | (0.7 | ) | (20.5 | ) | | 35.7 |
| | 9.9 |
|
| Unamortized purchased gas adjustments | 46.9 |
| | (36.4 | ) | | 23.1 |
| (11.6 | ) | | (18.7 | ) | | 21.3 |
|
| Deferred purchased gas costs | (19.8 | ) | | 13.9 |
| | 13.3 |
| |
| Accounts payable | (30.0 | ) | | 8.6 |
| | 35.4 |
| 16.8 |
| | 0.9 |
| | (11.4 | ) |
| Delayed / advance customer billings – net | 20.3 |
| | (19.1 | ) | | (8.2 | ) | |
| Delayed/advance customer billings – net | | (37.6 | ) | | 24.9 |
| | 17.9 |
|
| Taxes accrued | (17.0 | ) | | (0.8 | ) | | 3.7 |
| 5.0 |
| | 4.9 |
| | (14.6 | ) |
| Inventories | 54.8 |
| | (15.5 | ) | | (30.6 | ) | (13.0 | ) | | 11.0 |
| | 51.2 |
|
| Other assets and liabilities | (67.6 | ) | | (27.5 | ) | | 2.8 |
| (11.6 | ) | | (29.6 | ) | | (32.8 | ) |
| Other | 6.4 |
| | 5.4 |
| | 1.0 |
| 1.6 |
| | 2.3 |
| | 2.8 |
|
| Net cash provided by operating activities | 322.4 |
| | 122.6 |
| | 163.9 |
| 182.7 |
| | 271.2 |
| | 277.6 |
|
| Investing Activities: | | | | | | | | | | |
| Capital expenditures | (289.8 | ) | | (171.0 | ) | | (130.8 | ) | (282.2 | ) | | (197.8 | ) | | (198.6 | ) |
| Acquisition of Alagasco (net of $12.1 cash acquired in 2014) | (8.2 | ) | | (1,305.2 | ) | | — |
| |
| Acquisition of MGE | — |
| | 23.9 |
| | (975.0 | ) | |
| Proceeds from sale of right to acquire New England Gas Company | — |
| | 11.0 |
| | — |
| |
| Other | (0.7 | ) | | 3.7 |
| | (2.5 | ) | 1.1 |
| | 1.1 |
| | 2.9 |
|
| Net cash used in investing activities | (298.7 | ) | | (1,437.6 | ) | | (1,108.3 | ) | (281.1 | ) | | (196.7 | ) | | (195.7 | ) |
| Financing Activities: | | | | | | | | | | |
| Issuance of long-term debt | 35.0 |
| | 768.8 |
| | 575.0 |
| |
| Repayment of long-term debt | (34.8 | ) | | (80.0 | ) | | (25.0 | ) | |
| Issuance of short-term debt - net | 50.8 |
| | 198.1 |
| | 33.9 |
| |
| Issuance of common stock | 3.1 |
| | 460.0 |
| | 431.7 |
| |
| Issuance of first mortgage bonds | | 170.0 |
| | — |
| | — |
|
| (Repayment) issuance of short-term debt - net | | (243.7 | ) | | 10.7 |
| | (5.7 | ) |
| Borrowings from Spire | | 203.0 |
| | — |
| | 18.4 |
|
| Repayment of borrowings from Spire | | — |
| | — |
| | (18.4 | ) |
| Dividends paid | (79.0 | ) | | (61.9 | ) | | (42.5 | ) | (28.7 | ) | | (84.8 | ) | | (78.7 | ) |
| Other | (1.1 | ) | | (6.9 | ) | | (3.2 | ) | (1.8 | ) | | — |
| | 0.5 |
|
| Net cash (used in) provided by financing activities | (26.0 | ) | | 1,278.1 |
| | 969.9 |
| |
| Net (Decrease) Increase in Cash and Cash Equivalents | (2.3 | ) | | (36.9 | ) | | 25.5 |
| |
| Net cash provided by (used in) financing activities | | 98.8 |
| | (74.1 | ) | | (83.9 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | | 0.4 |
| | 0.4 |
| | (2.0 | ) |
| Cash and Cash Equivalents at Beginning of Year | 16.1 |
| | 53.0 |
| | 27.5 |
| 2.1 |
| | 1.7 |
| | 3.7 |
|
| Cash and Cash Equivalents at End of Year | $ | 13.8 |
| | $ | 16.1 |
| | $ | 53.0 |
| $ | 2.5 |
| | $ | 2.1 |
| | $ | 1.7 |
|
| | | | | | | | | | | |
| Supplemental disclosure of cash (paid) refunded for: | | | | | | | | | | |
| Interest | $ | (65.3 | ) | | $ | (40.6 | ) | | $ | (26.3 | ) | $ | (38.6 | ) | | $ | (35.7 | ) | | $ | (31.0 | ) |
| Income taxes | 1.3 |
| | (3.4 | ) | | 9.4 |
| — |
| | 2.1 |
| | 0.7 |
|
|
| | | | | | | | | | | |
| SPIRE ALABAMA INC. |
| STATEMENTS OF INCOME |
| (In millions) | | | | | |
| Years Ended September 30 | 2017 | | 2016 | | 2015 |
| Operating Revenues: | | | | | |
| Utility | $ | 400.5 |
| | $ | 368.5 |
| | $ | 479.2 |
|
| Total Operating Revenues | 400.5 |
| | 368.5 |
| | 479.2 |
|
| Operating Expenses: | | | | | |
| Utility | | | | | |
| Natural and propane gas | 84.5 |
| | 67.3 |
| | 171.5 |
|
| Other operation and maintenance expenses | 130.4 |
| | 133.5 |
| | 138.0 |
|
| Depreciation and amortization | 49.9 |
| | 47.8 |
| | 47.3 |
|
| Taxes, other than income taxes | 29.9 |
| | 28.4 |
| | 33.2 |
|
| Total Operating Expenses | 294.7 |
| | 277.0 |
| | 390.0 |
|
| Operating Income | 105.8 |
| | 91.5 |
| | 89.2 |
|
| Other Income - Net | 2.5 |
| | 7.9 |
| | 2.0 |
|
| Interest Charges: | | | | | |
| Interest on long-term debt | 11.2 |
| | 11.4 |
| | 11.6 |
|
| Other interest charges | 3.2 |
| | 2.4 |
| | 2.3 |
|
| Total Interest Charges | 14.4 |
| | 13.8 |
| | 13.9 |
|
| Income Before Income Taxes | 93.9 |
| | 85.6 |
| | 77.3 |
|
| Income Tax Expense | 35.8 |
| | 32.4 |
| | 29.3 |
|
| Net Income | $ | 58.1 |
| | $ | 53.2 |
| | $ | 48.0 |
|
|
| | | | | | | | | | | |
| LACLEDE GAS COMPANY |
| STATEMENTS OF INCOME |
| (In Millions) | | | | | |
| Years Ended September 30 | 2015 | | 2014 | | 2013 |
| Operating Revenues: | | | | | |
| Utility | $ | 1,416.6 |
| | $ | 1,448.1 |
| | $ | 857.8 |
|
| Other | — |
| | 0.1 |
| | 1.6 |
|
| Total Operating Revenues | 1,416.6 |
| | 1,448.2 |
| | 859.4 |
|
| Operating Expenses: | | | | | |
| Utility | | | | | |
| Natural and propane gas | 786.1 |
| | 816.9 |
| | 469.1 |
|
| Other operation and maintenance expenses | 253.6 |
| | 276.4 |
| | 180.7 |
|
| Depreciation and amortization | 82.6 |
| | 78.5 |
| | 48.3 |
|
| Taxes, other than income taxes | 108.9 |
| | 110.1 |
| | 60.1 |
|
| Total Utility Operating Expenses | 1,231.2 |
| | 1,281.9 |
| | 758.2 |
|
| Other | — |
| | (0.1 | ) | | 13.7 |
|
| Total Operating Expenses | 1,231.2 |
| | 1,281.8 |
| | 771.9 |
|
| Operating Income | 185.4 |
| | 166.4 |
| | 87.5 |
|
| Other (Income Deductions) and Income - Net | (0.5 | ) | | (3.4 | ) | | 2.0 |
|
| Interest Charges: | | | | | |
| Interest on long-term debt | 33.1 |
| | 34.4 |
| | 24.9 |
|
| Other interest charges | 3.3 |
| | 3.0 |
| | 1.2 |
|
| Total Interest Charges | 36.4 |
| | 37.4 |
| | 26.1 |
|
| Income Before Income Taxes | 148.5 |
| | 125.6 |
| | 63.4 |
|
| Income Tax Expense | 43.2 |
| | 35.5 |
| | 14.6 |
|
| Net Income | $ | 105.3 |
| | $ | 90.1 |
| | $ | 48.8 |
|
|
| | | | | | | |
| SPIRE ALABAMA INC. |
| BALANCE SHEETS |
| (In millions) | | | |
| September 30 | 2017 | | 2016 |
| ASSETS | | | |
| Utility Plant | $ | 1,838.0 |
| | $ | 1,729.6 |
|
| Less: Accumulated depreciation and amortization | 782.0 |
| | 756.6 |
|
| Net Utility Plant | 1,056.0 |
| | 973.0 |
|
| Current Assets: | | | |
| Cash and cash equivalents | 0.1 |
| | — |
|
| Accounts receivable: | | | |
| Utility | 32.0 |
| | 34.0 |
|
| Other | 6.2 |
| | 7.2 |
|
| Allowance for doubtful accounts | (2.6 | ) | | (3.3 | ) |
| Inventories: | | | |
| Natural gas | 33.9 |
| | 34.6 |
|
| Materials and supplies | 6.5 |
| | 5.9 |
|
| Unamortized purchased gas adjustments | 45.2 |
| | 5.6 |
|
| Other regulatory assets | 19.4 |
| | 14.9 |
|
| Prepayments and other | 6.7 |
| | 5.1 |
|
| Total Current Assets | 147.4 |
| | 104.0 |
|
| Deferred Charges: | | | |
| Regulatory assets | 197.0 |
| | 230.7 |
|
| Deferred income tax | 185.6 |
| | 221.4 |
|
| Other | 57.0 |
| | 60.8 |
|
| Total Deferred Charges | 439.6 |
| | 512.9 |
|
| Total Assets | $ | 1,643.0 |
| | $ | 1,589.9 |
|
|
| | | | | | | |
| SPIRE ALABAMA INC. |
| BALANCE SHEETS (continued) |
| | | | |
| September 30 | 2017 | | 2016 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization: | | | |
| Common stock equity | $ | 867.4 |
| | $ | 867.3 |
|
| Long-term debt | 247.8 |
| | 247.6 |
|
| Total Capitalization | 1,115.2 |
| | 1,114.9 |
|
| Current Liabilities: | | | |
| Notes payable | — |
| | 82.0 |
|
| Notes payable – associated companies | 169.9 |
| | — |
|
| Accounts payable | 44.4 |
| | 34.3 |
|
| Accounts payable to associated companies | 1.6 |
| | 0.4 |
|
| Advance customer billings | 18.6 |
| | 21.1 |
|
| Wages and compensation accrued | 7.4 |
| | 7.8 |
|
| Customer deposits | 17.9 |
| | 18.2 |
|
| Interest accrued | 3.3 |
| | 3.3 |
|
| Taxes accrued | 23.4 |
| | 21.6 |
|
| Other regulatory liabilities | 12.0 |
| | 22.7 |
|
| Other | 2.9 |
| | 6.3 |
|
| Total Current Liabilities | 301.4 |
| | 217.7 |
|
| Deferred Credits and Other Liabilities: | | | |
| Pension and postretirement benefit costs | 50.2 |
| | 74.3 |
|
| Asset retirement obligations | 128.4 |
| | 120.1 |
|
| Regulatory liabilities | 39.6 |
| | 41.7 |
|
| Other | 8.2 |
| | 21.2 |
|
| Total Deferred Credits and Other Liabilities | 226.4 |
| | 257.3 |
|
|
| |
|
| Total Capitalization and Liabilities | $ | 1,643.0 |
| | $ | 1,589.9 |
|
|
| | | | | | | |
| SPIRE ALABAMA INC. |
| STATEMENTS OF CAPITALIZATION |
| (Dollars in millions, except per share amounts) | | | |
| September 30 | 2017 | | 2016 |
| Common Stock Equity: | | | |
| Common stock, par value $0.01 per share, and paid-in capital: | | | |
| Authorized – 3,000,000 shares | | | |
| Outstanding – 1,972,052 shares | $ | 420.9 |
| | $ | 451.9 |
|
| Retained earnings | 446.5 |
| | 415.4 |
|
| Total Common Stock Equity | 867.4 |
| | 867.3 |
|
| Long-Term Debt: | | | |
| 5.2% Notes, due January 15, 2020 | 40.0 |
| | 40.0 |
|
| 3.86% Notes, due December 23, 2021 | 50.0 |
| | 50.0 |
|
| 3.21% Notes, due September 15, 2025 | 35.0 |
| | 35.0 |
|
| 5.9% Notes, due January 15, 2037 | 45.0 |
| | 45.0 |
|
| 4.31% Notes, due December 1, 2045 | 80.0 |
| | 80.0 |
|
| Total Principal of Long-Term Debt | 250.0 |
| | 250.0 |
|
| Unamortized debt issuance costs | (2.2 | ) | | (2.4 | ) |
| Total Long-Term Debt | 247.8 |
| | 247.6 |
|
| Total Capitalization | $ | 1,115.2 |
| | $ | 1,114.9 |
|
Long-term debt dollar amounts are exclusive of current portion.
|
| | | | | | | | | | | |
| LACLEDE GAS COMPANY |
| STATEMENTS OF COMPREHENSIVE INCOME |
| (In Millions) | | | | | |
| Years Ended September 30 | 2015 | | 2014 | | 2013 |
| Net Income | $ | 105.3 |
| | $ | 90.1 |
| | $ | 48.8 |
|
| Other Comprehensive Income, Before Tax: | | | | | |
| Cash flow hedging derivative instruments: | | | | | |
| Net hedging gain (loss) arising during the period | (1.2 | ) | | 0.1 |
| | 0.1 |
|
| Reclassification adjustment for losses (gains) included in net income | 0.9 |
| | (0.2 | ) | | (0.2 | ) |
| Net unrealized (loss) on cash flow hedging derivative instruments | (0.3 | ) | | (0.1 | ) | | (0.1 | ) |
| Defined benefit pension and other postretirement benefit plans: | | | | | |
| Net actuarial gain (loss) arising during the period | 0.1 |
| | — |
| | (0.1 | ) |
| Amortization of actuarial loss included in net periodic pension and postretirement benefit cost | 0.4 |
| | 0.4 |
| | 0.2 |
|
| Net defined benefit pension and other postretirement benefit plans | 0.5 |
| | 0.4 |
| | 0.1 |
|
| Other Comprehensive Income, Before Tax | 0.2 |
| | 0.3 |
| | — |
|
| Income Tax Expense Related to Items of Other Comprehensive Income | — |
| | 0.1 |
| | — |
|
| Other Comprehensive Income, Net of Tax | 0.2 |
| | 0.2 |
| | — |
|
| Comprehensive Income | $ | 105.5 |
| | $ | 90.3 |
| | $ | 48.8 |
|
|
| | | | | | | | | | | | | | | | | | |
| SPIRE ALABAMA INC. |
| STATEMENTS OF COMMON SHAREHOLDER’S EQUITY |
| | | | | | | | |
| | Common Stock Outstanding | | Paid-in Capital | | Retained Earnings | | |
| (Dollars in millions) | Shares | | Amount | | | | Total |
| Balance at September 30, 2014 | 1,972,052 |
| | $ | — |
| | $ | 503.9 |
| | $ | 345.7 |
| | $ | 849.6 |
|
| Net income | — |
| | — |
| | — |
| | 48.0 |
| | 48.0 |
|
| Return of capital to Spire | — |
| | — |
| | (27.0 | ) | | — |
| | (27.0 | ) |
| Purchase accounting adjustments | — |
| | — |
| | 4.0 |
| | — |
| | 4.0 |
|
| Balance at September 30, 2015 | 1,972,052 |
| | — |
| | 480.9 |
| | 393.7 |
| | 874.6 |
|
| Net income | — |
| | — |
| | — |
| | 53.2 |
| | 53.2 |
|
| Dividends declared | — |
| | — |
| | — |
| | (31.5 | ) | | (31.5 | ) |
| Return of capital to Spire | — |
| | — |
| | (29.0 | ) | | — |
| | (29.0 | ) |
| 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 |
|
|
| | | | | | | |
| LACLEDE GAS COMPANY |
| BALANCE SHEETS |
| (In Millions) | | | |
| September 30 | 2015 | | 2014 |
| ASSETS | | | |
| Utility Plant | $ | 2,579.1 |
| | $ | 2,403.3 |
|
| Less: Accumulated depreciation and amortization | 590.0 |
| | 542.3 |
|
| Net Utility Plant | 1,989.1 |
| | 1,861.0 |
|
| Goodwill | 210.2 |
| | 210.2 |
|
| Other Property and Investments | 55.3 |
| | 55.7 |
|
| Other Property and Investments | 265.5 |
| | 265.9 |
|
| Current Assets: | | | |
| Cash and cash equivalents | 1.7 |
| | 3.7 |
|
| Accounts receivable: | | | |
| Utility | 103.4 |
| | 111.1 |
|
| Other | 25.2 |
| | 19.2 |
|
| Allowance for doubtful accounts | (10.0 | ) | | (10.7 | ) |
| Delayed customer billings | 2.6 |
| | 10.8 |
|
| Receivables from associated companies | 2.5 |
| | 11.4 |
|
| Inventories: | | | |
| Natural gas | 138.2 |
| | 191.1 |
|
| Propane gas | 12.0 |
| | 11.7 |
|
| Materials and supplies | 9.3 |
| | 7.8 |
|
| Unamortized purchased gas adjustments | 12.9 |
| | 54.0 |
|
| Regulatory assets | 16.2 |
| | 18.0 |
|
| Prepayments and other | 12.5 |
| | 15.5 |
|
| Total Current Assets | 326.5 |
| | 443.6 |
|
| Deferred Charges: | | | |
| Regulatory assets | 573.6 |
| | 523.7 |
|
| Other | 12.8 |
| | 10.8 |
|
| Total Deferred Charges | 586.4 |
| | 534.5 |
|
| Total Assets | $ | 3,167.5 |
| | $ | 3,105.0 |
|
|
| | | | | | | |
| LACLEDE GAS COMPANY |
| BALANCE SHEETS (continued) |
| (Millions) | | | |
| September 30 | 2015 | | 2014 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization: | | | |
| Common stock equity | $ | 1,037.8 |
| | $ | 1,007.8 |
|
| Long-term debt | 808.1 |
| | 807.9 |
|
| Total Capitalization | 1,845.9 |
| | 1,815.7 |
|
| Current Liabilities: | | | |
| Notes payable | 233.0 |
| | 238.6 |
|
| Accounts payable | 61.5 |
| | 70.1 |
|
| Accounts payable – associated companies | 5.5 |
| | 6.0 |
|
| Advance customer billings | 25.2 |
| | 15.5 |
|
| Wages and compensation accrued | 26.8 |
| | 30.3 |
|
| Dividends payable | 19.9 |
| | 19.0 |
|
| Customer deposits | 13.0 |
| | 14.8 |
|
| Interest accrued | 7.6 |
| | 8.1 |
|
| Taxes accrued | 25.4 |
| | 43.9 |
|
| Regulatory liabilities | 0.6 |
| | 0.6 |
|
| Other | 18.5 |
| | 41.3 |
|
| Total Current Liabilities | 437.0 |
| | 488.2 |
|
| Deferred Credits and Other Liabilities: | | | |
| Deferred income taxes | 485.2 |
| | 399.8 |
|
| Pension and postretirement benefit costs | 207.8 |
| | 215.3 |
|
| Asset retirement obligations | 72.4 |
| | 71.2 |
|
| Regulatory liabilities | 70.6 |
| | 72.1 |
|
| Other | 48.6 |
| | 42.7 |
|
| Total Deferred Credits and Other Liabilities | 884.6 |
| | 801.1 |
|
|
| |
|
| Total Capitalization and Liabilities | $ | 3,167.5 |
| | $ | 3,105.0 |
|
|
| | | | | | | |
| LACLEDE GAS COMPANY |
| STATEMENTS OF CAPITALIZATION |
| (Dollars in Millions, Except Per Share Amounts) | | | |
| September 30 | 2015 | | 2014 |
| Common Stock Equity: | | | |
| Common stock, par value $1 per share: | | | |
| Authorized – 50,000,000 shares |
|
| | |
| Outstanding – 24,577 shares | 0.1 |
| | 0.1 |
|
| Paid-in capital | 748.2 |
| | 744.0 |
|
| Retained earnings | 291.2 |
| | 265.6 |
|
| Accumulated other comprehensive loss | (1.7 | ) | | (1.9 | ) |
| Total Common Stock Equity | 1,037.8 |
| | 1,007.8 |
|
| Long-Term Debt: | | | |
| First Mortgage Bonds: | | | |
| 2.0% Series, due August 15, 2018 | 100.0 |
| | 100.0 |
|
| 5.5% Series, due May 1, 2019 | 50.0 |
| | 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 |
|
| 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 |
|
| Total | 810.0 |
| | 810.0 |
|
| Unamortized discount, net of premium, on long-term debt | (1.9 | ) | | (2.1 | ) |
| Total Long-Term Debt | 808.1 |
| | 807.9 |
|
| Total Capitalization | $ | 1,845.9 |
| | $ | 1,815.7 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| LACLEDE GAS COMPANY |
| STATEMENTS OF COMMON SHAREHOLDER'S EQUITY |
| | | | | | | | | | |
| | Common Stock Outstanding | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income/(Loss) | | |
| (Dollars in Millions, Except Per Share Amounts) | Shares | | Amount | | | | | Total |
| BALANCE SEPTEMBER 30, 2012 | 12,804 |
| | $ | 0.1 |
| | $ | 257.3 |
| | $ | 236.0 |
| | $ | (2.1 | ) | | $ | 491.3 |
|
| Net income | — |
| | — |
| | — |
| | 48.8 |
| | — |
| | 48.8 |
|
| Stock-based compensation costs | — |
| | — |
| | 3.1 |
| | — |
| | — |
| | 3.1 |
|
| Tax benefit – stock compensation | — |
| | — |
| | 0.5 |
| | — |
| | — |
| | 0.5 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock | — |
| | — |
| | — |
| | (47.0 | ) | | — |
| | (47.0 | ) |
| Issuance of common stock to Laclede Group | 11,745 |
| | — |
| | 477.2 |
| | — |
| | — |
| | 477.2 |
|
| BALANCE SEPTEMBER 30, 2013 | 24,549 |
| | $ | 0.1 |
| | $ | 738.1 |
| | $ | 237.8 |
| | $ | (2.1 | ) | | $ | 973.9 |
|
| Net income | — |
| | — |
| | — |
| | 90.1 |
| | — |
| | 90.1 |
|
| Stock-based compensation costs | — |
| | — |
| | 4.2 |
| | — |
| | — |
| | 4.2 |
|
| Tax benefit – stock compensation | — |
| | — |
| | 0.6 |
| | — |
| | — |
| | 0.6 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock | — |
| | — |
| | — |
| | (62.3 | ) | | — |
| | (62.3 | ) |
| Issuance of common stock to Laclede Group | 28 |
| | — |
| | 1.1 |
| | — |
| | — |
| | 1.1 |
|
| Other comprehensive income, net of tax | — |
| | — |
| | — |
| | — |
| | 0.2 |
| | 0.2 |
|
| BALANCE SEPTEMBER 30, 2014 | 24,577 |
| | $ | 0.1 |
| | $ | 744.0 |
| | $ | 265.6 |
| | $ | (1.9 | ) | | $ | 1,007.8 |
|
| Net income | — |
| | — |
| | — |
|
| 105.3 |
| | — |
| | 105.3 |
|
| Stock-based compensation costs | — |
| | — |
| | 3.7 |
| | — |
| | — |
| | 3.7 |
|
| Tax benefit – stock compensation | — |
| | — |
| | 0.5 |
| | — |
| | — |
| | 0.5 |
|
| Dividends declared: | | | | | | | | | | | |
| Common stock | — |
| | — |
| | — |
| | (79.7 | ) | | — |
| | (79.7 | ) |
| Other comprehensive income, net of tax | — |
| | — |
| | — |
| | — |
| | 0.2 |
| | 0.2 |
|
| BALANCE SEPTEMBER 30, 2015 | 24,577 |
| | $ | 0.1 |
| | $ | 748.2 |
| | $ | 291.2 |
| | $ | (1.7 | ) | | $ | 1,037.8 |
|
|
| | | | | | | | | | | |
| LACLEDE GAS COMPANY |
| STATEMENTS OF CASH FLOWS |
| (In Millions) | | | | | |
| Years Ended September 30 | 2015 | | 2014 | | 2013 |
| Operating Activities: | | | | | |
| Net Income | $ | 105.3 |
| | $ | 90.1 |
| | $ | 48.8 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation, amortization and accretion | 82.6 |
| | 78.5 |
| | 48.3 |
|
| Deferred income taxes and investment tax credits | 45.4 |
| | 35.6 |
| | 22.2 |
|
| Changes in assets and liabilities: | | | | | |
| Accounts receivable – net | 9.9 |
| | (21.5 | ) | | 6.7 |
|
| Unamortized purchased gas adjustments | 41.1 |
| | (36.4 | ) | | 23.1 |
|
| Deferred purchased gas costs | (19.8 | ) | | 13.9 |
| | 13.3 |
|
| Accounts payable | (11.4 | ) | | 6.8 |
| | 16.4 |
|
| Delayed / advance customer billings – net | 17.9 |
| | (19.1 | ) | | (8.3 | ) |
| Taxes accrued | (14.6 | ) | | 10.0 |
| | 1.0 |
|
| Inventories | 51.2 |
| | (26.4 | ) | | (16.2 | ) |
| Other assets and liabilities | (32.8 | ) | | (3.3 | ) | | (29.4 | ) |
| Other | 2.8 |
| | 2.8 |
| | (0.4 | ) |
| Net cash provided by operating activities | 277.6 |
| | 131.0 |
| | 125.5 |
|
| Investing Activities: | | | | | |
| Capital expenditures | (198.6 | ) | | (163.0 | ) | | (128.5 | ) |
| Acquisition of MGE | — |
| | 23.9 |
| | (975.0 | ) |
| Other | 2.9 |
| | 4.1 |
| | (1.3 | ) |
| Net cash used in investing activities | (195.7 | ) | | (135.0 | ) | | (1,104.8 | ) |
| Financing Activities: | | | | | |
| Issuance of first mortgage bonds | — |
| | — |
| | 550.0 |
|
| Repayment of long-term debt | — |
| | (80.0 | ) | | (25.0 | ) |
| Issuance (repayment) of short-term debt - net | (5.7 | ) | | 164.6 |
| | 33.9 |
|
| Borrowings from Laclede Group | 18.4 |
| | 276.1 |
| | 172.0 |
|
| Repayment of borrowings from Laclede Group | (18.4 | ) | | (322.7 | ) | | (162.4 | ) |
| Dividends paid | (78.7 | ) | | (57.2 | ) | | (42.4 | ) |
| Issuance of common stock to Laclede Group | — |
| | 1.2 |
| | 477.2 |
|
| Other | 0.5 |
| | 1.8 |
| | (2.5 | ) |
| Net cash (used in) provided by financing activities | (83.9 | ) | | (16.2 | ) | | 1,000.8 |
|
| Net (Decrease) Increase in Cash and Cash Equivalents | (2.0 | ) | | (20.2 | ) | | 21.5 |
|
| Cash and Cash Equivalents at Beginning of Year | 3.7 |
| | 23.9 |
| | 2.4 |
|
| Cash and Cash Equivalents at End of Year | $ | 1.7 |
| | $ | 3.7 |
| | $ | 23.9 |
|
| | | | | | |
| Supplemental disclosure of cash (paid) refunded for: | | | | | |
| Interest | $ | (31.0 | ) | | $ | (36.4 | ) | | $ | (25.7 | ) |
| Income taxes | 0.7 |
| | (0.2 | ) | | 7.6 |
|
|
| | | | | | | | | | | |
| ALABAMA GAS CORPORATION |
| STATEMENTS OF INCOME |
| (In Millions) | | | | | |
| | Year Ended September 30, | | Nine Months Ended September 30, | | Year Ended December 31, |
| 2015 | | 2014 | | 2013 |
| Operating Revenues: | | | | | |
| Utility | $ | 479.2 |
| | $ | 417.2 |
| | $ | 533.3 |
|
| Total Operating Revenues | 479.2 |
| | 417.2 |
| | 533.3 |
|
| Operating Expenses: | | | | | |
| Utility | | | | | |
| Natural and propane gas | 171.5 |
| | 184.5 |
| | 215.5 |
|
| Other operation and maintenance expenses | 138.0 |
| | 107.5 |
| | 143.1 |
|
| Depreciation and amortization | 47.3 |
| | 34.4 |
| | 43.9 |
|
| Taxes, other than income taxes | 33.2 |
| | 28.6 |
| | 37.1 |
|
| Total Operating Expenses | 390.0 |
| | 355.0 |
| | 439.6 |
|
| Operating Income | 89.2 |
| | 62.2 |
| | 93.7 |
|
| Other Income - Net | 2.0 |
| | 2.2 |
| | 14.0 |
|
| Interest Charges: | | | | | |
| Interest on long-term debt | 11.6 |
| | 10.1 |
| | 13.5 |
|
| Other interest charges | 2.3 |
| | 1.4 |
| | 2.1 |
|
| Total Interest Charges | 13.9 |
| | 11.5 |
| | 15.6 |
|
| Income Before Income Taxes | 77.3 |
| | 52.9 |
| | 92.1 |
|
| Income Tax Expense | 29.3 |
| | 19.9 |
| | 34.7 |
|
| Net Income | $ | 48.0 |
| | $ | 33.0 |
| | $ | 57.4 |
|
|
| | | | | | | | | | | |
| SPIRE ALABAMA INC. |
| STATEMENTS OF CASH FLOWS |
| (In millions) | | | | | |
| Years Ended September 30 | 2017 | | 2016 | | 2015 |
| Operating Activities: | | | | | |
| Net Income | $ | 58.1 |
| | $ | 53.2 |
| | $ | 48.0 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: | | | | | |
| Depreciation and amortization | 49.9 |
| | 47.8 |
| | 47.3 |
|
| Deferred income taxes | 35.8 |
| | 33.2 |
| | 29.2 |
|
| Changes in assets and liabilities: | | | | | |
| Accounts receivable – net | (10.0 | ) | | (11.1 | ) | | (9.1 | ) |
| Unamortized purchased gas adjustments | (39.6 | ) | | (33.8 | ) | | 5.8 |
|
| Accounts payable | 8.8 |
| | 9.1 |
| | (10.4 | ) |
| Advance customer billings | (2.5 | ) | | 2.0 |
| | 2.4 |
|
| Taxes accrued | 1.8 |
| | (5.2 | ) | | (4.0 | ) |
| Inventories | 0.1 |
| | 5.3 |
| | 7.2 |
|
| Other assets and liabilities | (16.6 | ) | | (3.2 | ) | | (18.0 | ) |
| Other | (1.3 | ) | | 0.9 |
| | 2.0 |
|
| Net cash provided by operating activities | 84.5 |
| | 98.2 |
| | 100.4 |
|
| Investing Activities: | | | | | |
| Capital expenditures | (113.9 | ) | | (93.4 | ) | | (85.8 | ) |
| Other | (0.4 | ) | | (2.5 | ) | | (1.0 | ) |
| Net cash used in investing activities | (114.3 | ) | | (95.9 | ) | | (86.8 | ) |
| Financing Activities: | | | | | |
| Issuance of long-term debt | — |
| | 80.0 |
| | 35.0 |
|
| Repayment of long-term debt | — |
| | (80.0 | ) | | (34.8 | ) |
| (Repayment) issuance of short-term debt - net | (82.0 | ) | | 51.0 |
| | 15.0 |
|
| Borrowings from Spire | 169.9 |
| | — |
| | — |
|
| Return of capital to Spire | (31.0 | ) | | (29.0 | ) | | (27.0 | ) |
| Dividends paid | (27.0 | ) | | (31.5 | ) | | — |
|
| Other | — |
| | — |
| | (0.2 | ) |
| Net cash provided by (used in) financing activities | 29.9 |
| | (9.5 | ) | | (12.0 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | 0.1 |
| | (7.2 | ) | | 1.6 |
|
| Cash and Cash Equivalents at Beginning of Period | — |
| | 7.2 |
| | 5.6 |
|
| Cash and Cash Equivalents at End of Period | $ | 0.1 |
| | $ | — |
| | $ | 7.2 |
|
| | | | | | |
| Supplemental disclosure of cash (paid) refunded for: | | | | | |
| Interest | $ | (12.8 | ) | | $ | (12.4 | ) | | $ | (12.3 | ) |
| Income taxes | — |
| | 0.8 |
| | — |
|
|
| | | | | | | |
| ALABAMA GAS CORPORATION |
| BALANCE SHEETS |
| (In Millions) | | | |
| September 30 | 2015 | | 2014 |
| ASSETS | | | |
| Utility Plant | $ | 1,655.4 |
| | $ | 1,525.1 |
|
| Less: Accumulated depreciation and amortization | 717.0 |
| | 626.4 |
|
| Net Utility Plant | 938.4 |
| | 898.7 |
|
| Current Assets: | | | |
| Cash and cash equivalents | 7.2 |
| | 5.6 |
|
| Accounts receivable: | | | |
| Utility | 34.7 |
| | 39.0 |
|
| Other | 5.2 |
| | 5.1 |
|
| Allowance for doubtful accounts | (4.2 | ) | | (5.1 | ) |
| Inventories: | | | |
| Natural gas | 40.4 |
| | 48.0 |
|
| Materials and supplies | 5.4 |
| | 5.1 |
|
| Regulatory assets | 11.4 |
| | 8.8 |
|
| Deferred income tax | 6.2 |
| | 2.3 |
|
| Prepayments and other | 4.6 |
| | 1.6 |
|
| Total Current Assets | 110.9 |
| | 110.4 |
|
| Deferred Charges: | | | |
| Regulatory assets | 163.6 |
| | 90.6 |
|
| Deferred income tax | 248.4 |
| | 277.8 |
|
| Other | 57.7 |
| | 47.1 |
|
| Total Deferred Charges | 469.7 |
| | 415.5 |
|
| Total Assets | $ | 1,519.0 |
| | $ | 1,424.6 |
|
|
| | | | | | | |
| ALABAMA GAS CORPORATION |
| BALANCE SHEETS (continued) |
| (Millions) | | | |
| September 30, | 2015 | | 2014 |
| CAPITALIZATION AND LIABILITIES | | | |
| Capitalization: | | | |
| Common stock equity | $ | 874.6 |
| | $ | 849.6 |
|
| Long-term debt | 170.0 |
| | 249.8 |
|
| Total Capitalization | 1,044.6 |
| | 1,099.4 |
|
| Current Liabilities: | | | |
| Current portion of long-term debt | 80.0 |
| | — |
|
| Notes payable | 31.0 |
| | 16.0 |
|
| Accounts payable | 21.8 |
| | 34.2 |
|
| Accounts payable – associated companies | 0.2 |
| | 0.4 |
|
| Advance customer billings | 19.1 |
| | 16.7 |
|
| Wages and compensation accrued | 5.8 |
| | 5.7 |
|
| Customer deposits | 19.1 |
| | 19.1 |
|
| Interest accrued | 3.5 |
| | 3.9 |
|
| Unamortized purchase gas adjustment | 28.2 |
| | 22.4 |
|
| Taxes accrued | 26.0 |
| | 30.0 |
|
| Regulatory liabilities | 31.8 |
| | 40.7 |
|
| Other | 5.4 |
| | 6.8 |
|
| Total Current Liabilities | 271.9 |
| | 195.9 |
|
| Deferred Credits and Other Liabilities: | | | |
| Pension and postretirement benefit costs | 45.6 |
| | 29.6 |
|
| Asset retirement obligations | 86.6 |
| | 27.7 |
|
| Regulatory liabilities | 48.7 |
| | 53.7 |
|
| Other | 21.6 |
| | 18.3 |
|
| Total Deferred Credits and Other Liabilities | 202.5 |
| | 129.3 |
|
|
| |
|
| Total Capitalization and Liabilities | $ | 1,519.0 |
| | $ | 1,424.6 |
|
|
| | | | | | | |
| ALABAMA GAS CORPORATION |
| STATEMENTS OF CAPITALIZATION |
| (Dollars in Millions, Except Per Share Amounts) | | | |
| September 30 | 2015 | | 2014 |
| Common Stock Equity: | | | |
| Common stock, par value $1 per share, and paid-in capital: | | | |
| Authorized – 3,000,000 shares | | | |
| Outstanding – 1,972,052 shares | $ | 480.9 |
| | $ | 503.9 |
|
| Retained earnings | 393.7 |
| | 345.7 |
|
| Total Common Stock Equity | 874.6 |
| | 849.6 |
|
| Long-Term Debt: | | | |
| 5.368% Notes, due December 1, 2015 | — |
| | 80.0 |
|
| 5.2% Notes, due January 15, 2020 | 40.0 |
| | 40.0 |
|
| 3.86% Notes, due December 23, 2021 | 50.0 |
| | 50.0 |
|
| 3.21% Notes, due September 15, 2025 | 35.0 |
| | — |
|
| 5.7% Notes, due January 15, 2035 | — |
| | 34.8 |
|
| 5.9% Notes, due January 15, 2037 | 45.0 |
| | 45.0 |
|
| Total Long-Term Debt | 170.0 |
| | 249.8 |
|
| Total Capitalization | $ | 1,044.6 |
| | $ | 1,099.4 |
|
|
| | | | | | | | | | | | | | | | | | |
| ALABAMA GAS CORPORATION |
| STATEMENTS OF COMMON SHAREHOLDER'S EQUITY |
| | | | | | | | |
| | Common Stock Outstanding | | Paid-in Capital | | Retained Earnings | | |
| (Dollars in Millions, Except Per Share Amounts) | Shares | | Amount | | | | Total |
| BALANCE DECEMBER 31, 2012 | 1,972,052 |
| | $ | — |
| | $ | 34.5 |
| | $ | 326.0 |
| | $ | 360.5 |
|
| Net income | — |
| | — |
| | — |
| | 57.4 |
| | 57.4 |
|
| Dividends declared: | | | | | | | | | |
| Common stock | — |
| | — |
| | — |
| | (33.3 | ) | | (33.3 | ) |
| BALANCE DECEMBER 31, 2013 | 1,972,052 |
| | — |
| | 34.5 |
| | 350.1 |
| | 384.6 |
|
| Net income | — |
| | — |
| | — |
| | 33.0 |
| | 33.0 |
|
| Dividends declared: | | | | | | | | | |
| Common stock | — |
| | — |
| | — |
| | (37.4 | ) | | (37.4 | ) |
| Purchase accounting adjustments | — |
| | — |
| | 469.4 |
| | — |
| | 469.4 |
|
| BALANCE SEPTEMBER 30, 2014 | 1,972,052 |
| | — |
| | 503.9 |
| | 345.7 |
| | 849.6 |
|
| Net income | — |
| | — |
| | — |
| | 48.0 |
| | 48.0 |
|
| Purchase accounting adjustments | — |
| | | | 4.0 |
| | — |
| | 4.0 |
|
| Return of capital to Laclede Group | — |
| | — |
| | (27.0 | ) | | — |
| | (27.0 | ) |
| BALANCE SEPTEMBER 30, 2015 | 1,972,052 |
| | $ | — |
| | $ | 480.9 |
| | $ | 393.7 |
| | $ | 874.6 |
|
|
| | | | | | | | | | | |
| ALABAMA GAS CORPORATION |
| STATEMENTS OF CASH FLOWS |
| | | | | | |
| | Year Ended September 30, | | Nine Months Ended September 30, | | Year Ended December 31, |
| (In Millions) | 2015 | | 2014 | | 2013 |
| Operating Activities: | | | | | |
| Net Income | $ | 48.0 |
| | $ | 33.0 |
| | $ | 57.4 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: | | | | | |
| Depreciation, amortization and accretion | 47.3 |
| | 34.4 |
| | 43.9 |
|
| Deferred income taxes and investment tax credits | 29.2 |
| | 4.0 |
| | 15.0 |
|
| Changes in assets and liabilities: | | | | | |
| Accounts receivable – net | (9.1 | ) | | 26.4 |
| | (23.2 | ) |
| Unamortized purchased gas adjustments | 5.8 |
| | 24.8 |
| | 40.3 |
|
| Accounts payable | (10.4 | ) | | (11.5 | ) | | (3.1 | ) |
| Advance customer billings – net | 2.4 |
| | (0.3 | ) | | (2.7 | ) |
| Taxes accrued | (4.0 | ) | | 1.9 |
| | 3.9 |
|
| Inventories | 7.2 |
| | (11.8 | ) | | — |
|
| Other assets and liabilities | (18.0 | ) | | 17.1 |
| | 9.9 |
|
| Other | 2.0 |
| | (3.0 | ) | | (11.4 | ) |
| Net cash provided by operating activities | 100.4 |
| | 115.0 |
| | 130.0 |
|
| Investing Activities: | | | | | |
| Capital expenditures | (85.8 | ) | | (46.2 | ) | | (86.0 | ) |
| Proceeds from the sale of assets | — |
| | 0.8 |
| | 13.8 |
|
| Other | (1.0 | ) | | — |
| | — |
|
| Net cash used in investing activities | (86.8 | ) | | (45.4 | ) | | (72.2 | ) |
| Financing Activities: | | | | | |
| Issuance of first mortgage bonds | 35.0 |
| | — |
| | — |
|
| Repayment of long-term debt | (34.8 | ) | | — |
| | — |
|
| Issuance (repayments) of short-term debt - net | 15.0 |
| | (34.0 | ) | | (27.0 | ) |
| Return of capital to Laclede Group | (27.0 | ) | | — |
| | — |
|
| Dividends paid | — |
| | (37.4 | ) | | (33.3 | ) |
| Other | (0.2 | ) | | 4.4 |
| | (0.1 | ) |
| Net cash used in financing activities | (12.0 | ) | | (67.0 | ) | | (60.4 | ) |
| Net Increase (Decrease) in Cash and Cash Equivalents | 1.6 |
| | 2.6 |
| | (2.6 | ) |
| Cash and Cash Equivalents at Beginning of Period | 5.6 |
| | 3.0 |
| | 5.6 |
|
| Cash and Cash Equivalents at End of Period | $ | 7.2 |
| | $ | 5.6 |
| | $ | 3.0 |
|
| | | | | | |
| Supplemental disclosure of cash (paid) refunded for: | | | | | |
| Interest | $ | (12.3 | ) | | $ | (9.6 | ) | | $ | (13.5 | ) |
| Income taxes | — |
| | (20.4 | ) | | (23.1 | ) |
THE LACLEDE GROUP,SPIRE INC., LACLEDE GAS COMPANY,SPIRE MISSOURI INC., AND SPIRE ALABAMA GAS CORPORATIONINC.
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 The Laclede Group,Spire Inc. (Laclede Grouppresented on a consolidated basis (Spire or the Company), as well as Laclede Gas Company (Laclede GasSpire Missouri Inc. (Spire Missouri or the Missouri Utilities) and Spire Alabama Gas Corporation (Alagasco or theInc. (Spire Alabama). Spire Missouri and Spire Alabama Utility). Laclede Gas, which includes the operations of Missouri Gas Energy (MGE), and Alagasco are wholly owned subsidiaries of the Company. Collectively,Spire Missouri changed its name from Laclede Gas Company on August 30, 2017, and AlagascoSpire Alabama changed its name from Alabama Gas Corporation on September 1, 2017. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth Inc. (formerly known as EnergySouth, Inc.) are collectively referred to as the Utilities. The subsidiaries of Spire EnergySouth Inc. (Spire EnergySouth) are Spire Gulf Inc. (Spire Gulf, formerly known as Mobile Gas Service Corporation) and Spire Mississippi Inc. (Spire Mississippi, formerly known as Willmut Gas & Oil Company). 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 Laclede GroupSpire are primarily derived from the financial position, results of operations, and cash flows of the Utilities. In compliance with GAAP, transactions between the UtilitiesSpire Missouri and Spire Alabama and their affiliates, as well as intercompany balances on the Utilities'their balance sheets, have not been eliminated from the Utilities'their separate financial statements. The Company's August 31, 2014Company’s September 12, 2016 acquisition of Alagasco and Laclede Gas' September 1, 2013 acquisition of MGE areSpire EnergySouth is included in the results of operations since their respectivethe acquisition datesdate and impactimpacts the comparability of the financial statement periods presented for the Company and Laclede Gas.Company. For a further discussion of the acquisitions,acquisition, see Note 2, Acquisitions. The Utilities are regulated natural gas distribution utilities. Due to the seasonal nature of the Utilities, Laclede Group'sthe earnings of Spire, Spire Missouri and Spire Alabama are typically concentrated during the heating season of November through April each fiscal year. Effective September 2, 2014, Alagasco amended its bylaws to change Alagasco's fiscal year from beginning January 1 and ending on December 31, to beginning October 1 and ending on September 30. As a result, the financial statements covering the nine-month period from January 1, 2014 through September 30, 2014 (the “transition period”) were included in the Alagasco’s transition report on Form 10-K/T for such period and are presented in the financial statements and notes herein. The period beginning January 1, 2013 through December 31, 2013 is referred to as “calendar 2013.” For the fiscal year 2015, Alagasco's financial statements cover the fiscal year October 1, 2014 to September 30, 2015.
NATURE OF OPERATIONS – The Laclede Group,Spire Inc. (NYSE: LG), headquartered in St. Louis, Missouri,SR) is a public utility holding company.company with principal offices in St. Louis, Missouri. The Company has two operatingreportable 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 Laclede GroupSpire in terms of revenue and earnings generation. The Gas Utility segment is comprised of the operations ofof: the Missouri Utilities, and the Alabama Utility and servesserving St. Louis and eastern Missouri (Spire Missouri East) and Kansas City and western Missouri (through(Spire Missouri West, formerly Missouri Gas Energy, or MGE), and; Spire Alabama, serving central and northern Alabama. Laclede Group’sAlabama; and the subsidiaries of Spire EnergySouth, serving southern Alabama and south-central Mississippi. Spire’s primary non-utility business, Laclede Energy Resources,Spire Marketing Inc. (LER)(Spire Marketing), included in the Gas Marketing segment, provides non-regulated natural gas services. The activities of other subsidiaries are described in Note 14, Information by Operating Segment, and are reported as Other. 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 Missouri Utilities are maintained in accordance with the Uniform System of Accounts prescribed by the Missouri Public Service Commission (MoPSC),applicable state public service commissions, which systemsystems substantially conformsconform to that prescribed by the Federal Energy Regulatory Commission (FERC). The accounts of Alagasco are maintained in accordance with the Uniform System of Accounts prescribed by the Alabama Public Service Commission (APSC), which system substantially conforms to that prescribed by the FERC.
UTILITYPROPERTY, PLANT, DEPRECIATION AND AMORTIZATIONEQUIPMENT –
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 Laclede Gas,Spire Missouri, utility plant is depreciated on a straight-line basis at rates based on estimated service lives of the various classes of property. In fiscal yearyears 2017, 2016 and 2015, annual depreciation and amortization expense averaged 3.0% of the original cost of depreciable and amortizable property, compared to 3.0% and 3.2% in both fiscal years 2014 and 2013, respectively.
Laclede Gas' capital expenditures were $198.6, $163.0 and $128.5 for fiscal years 2015, 2014, and 2013, respectively. Additionally, Laclede Gas had recorded accruals for capital expenditures totaling $9.6 at September 30, 2015, $3.0 at September 30, 2014, and $4.7 at September 30, 2013.property.
For Alagasco,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 APSC. On June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, for Alagasco with the revised prospective composite depreciation rate approximating 3.1%Alabama Public Service Commission (APSC). As required by the ASPC, Alagasco performed another depreciation study in 2015. The composite depreciation rate from this study was alsois approximately 3.1%. Alagasco anticipates refunding approximately $10.8
Non-utility Property – Non-utility property is recorded at the original cost of refundable negative salvage costs through lower tariff ratesacquisition 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 next twelve months.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.
Related to the lower depreciation rates, an estimated $27.0 of refundable negative salvage costs will be refunded to eligible customers on a declining basis through lower tariff rates over a four year period through 2019.
Alagasco's capital expenditures were $85.8, $46.2 and $86.0 for fiscal years 2015, 2014, and 2013, respectively. Additionally, Alagasco recorded accruals for capital expenditures totaling $3.1 at September 30, 2015, $5.0 at September 30, 2014 and $5.5 at December 31, 2013.
Accrued Capital Expenditures – Accrued capital expenditures, shown in the following table, are excluded from the capital expenditures included in the statements of cash flows of the Company, Laclede Gas and Alagasco.flows.
|
| | | | | | | | | | | |
| September 30 | 2017 | | 2016 | | 2015 |
| Spire | $ | 41.0 |
| | $ | 30.4 |
| | $ | 13.4 |
|
| Spire Missouri | 28.9 |
| | 14.8 |
| | 9.6 |
|
| Spire Alabama | 9.4 |
| | 6.8 |
| | 3.1 |
|
ASSET RETIREMENT OBLIGATIONS – Laclede Group, Laclede Gas,Spire, Spire Missouri, and AlagascoSpire 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, Laclede GasSpire Missouri and AlagascoSpire 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 AlagascoSpire Missouri’s, Spire Alabama’s and Laclede Gas’Spire Gulf’s distribution systemsystems and general plant. Asset retirement obligations recorded by Laclede Group’sSpire’s other subsidiaries are not material. As authorized by the MoPSCMissouri Public Service Commission (MoPSC) and APSC, Laclede GasSpire Missouri, Spire Alabama and AlagascoSpire 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 the Utilitiesthose 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 liabilityliabilities or asset is deductedregulatory assets are excluded from the rate base upon which the Utilitiesthose utilities have the opportunity to earn their allowed rates of return. The costs associated with asset retirement obligations of Spire Missouri, Spire Alabama and Spire Gulf are either currently being recovered in rates or are probable of recovery in future rates.
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.
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014 | | 2015 | | 2014 | | 2015 | | 2014 | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Asset retirement obligations, beginning of year | $ | 99.2 |
| | $ | 74.6 |
| | $ | 71.2 |
| | $ | 74.3 |
| | $ | 27.7 |
| | $ | 27.5 |
| $ | 206.4 |
| | $ | 159.2 |
| | $ | 75.2 |
| | $ | 72.4 |
| | $ | 120.1 |
| | $ | 86.6 |
|
| Liabilities incurred during the period | 2.3 |
| | 0.5 |
| | 0.6 |
| | 0.5 |
| | 1.7 |
| | 0.5 |
| 5.5 |
| | 4.1 |
| | 0.3 |
| | 1.2 |
| | 5.2 |
| | 2.9 |
|
| Liabilities settled during the period | (2.0 | ) | | (1.5 | ) | | (1.9 | ) | | (1.5 | ) | | (0.1 | ) | | (0.1 | ) | (4.6 | ) | | (9.5 | ) | | (1.1 | ) | | (1.9 | ) | | (1.9 | ) | | (6.8 | ) |
| Accretion | 4.5 |
| | 3.7 |
| | 3.4 |
| | 3.7 |
| | 1.1 |
| | 0.7 |
| 9.1 |
| | 13.2 |
| | 3.6 |
| | 3.5 |
| | 5.0 |
| | 9.7 |
|
| Revisions in estimated cash flows | 55.2 |
| | (5.8 | ) | | (0.9 | ) | | (5.8 | ) | | 56.2 |
| | (0.9 | ) | 80.2 |
| | 27.5 |
| | 80.6 |
| | — |
| | — |
| | 27.7 |
|
| Addition of Alagasco asset retirement obligation | — |
| | 27.7 |
| | — |
| | — |
| | — |
| | — |
| |
| Addition of Spire EnergySouth asset retirement obligations | | — |
| | 11.9 |
| | — |
| | — |
| | — |
| | — |
|
| Asset retirement obligations, end of year | $ | 159.2 |
| | $ | 99.2 |
| | $ | 72.4 |
| | $ | 71.2 |
| | $ | 86.6 |
| | $ | 27.7 |
| $ | 296.6 |
| | $ | 206.4 |
| | $ | 158.6 |
| | $ | 75.2 |
| | $ | 128.4 |
| | $ | 120.1 |
|
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. As
authorized by the MoPSC,discussed below for Spire Missouri and Spire Alabama, the Purchased Gas Adjustment (PGA) clauses
and Gas Supply Adjustment (GSA) riders allow the
Missouri Utilities to
flowpass through to customers
subject to prudence review by the MoPSC, the cost of purchased gas supplies.
Similarly, Alagasco's rate schedules for natural gas distribution charges contain a Gas Supply Adjustment (GSA) rider, which permits the pass-through to customers of changes in the cost of gas supply. Regulatory assets and
regulatory liabilities related to the PGA clauses and the GSA rider are both labeled Unamortized Purchased Gas Adjustments herein.
See additional discussion on regulated operations in Note 15 - Regulatory Matters.NATURAL GAS AND PROPANE GAS – For Laclede Gas, inventory of natural gas in storage is priced on a LIFO basis and inventory of propane gas in storage is priced on a FIFO basis. For MGE and Alagasco, inventory of natural gas in storage is priced on the weighted average cost basis. The replacement cost of Laclede Gas' natural gas for current use at September 30, 2015 and September 30, 2014 was less than the LIFO cost by $20.4 and $11.4, respectively. The carrying value of Laclede Gas' inventory is not adjusted to the lower of cost or market prices because, pursuant to both Laclede Gas' and MGE's PGA clauses, actual gas costs are recovered in customer rates. Natural gas and propane gas storage inventory in Laclede Group’s other operating segments is recorded at the lower of average cost or market.
BUSINESS COMBINATIONS – The acquisitions of MGE and Alagasco were accounted for by Laclede Gas and Laclede Group 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. For additional information on the acquisitions of MGE and Alagasco, refer to Note 2, Acquisitions.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. In accordance with ASC Topic 805, “Business Combinations,” Laclede Gas recorded adjustments during the measurement period ended August 31, 2014 to finalize the allocation of purchase price for the 2013 acquisition of MGE. As part of the Alagasco acquisition (discussed in Note 2, Acquisitions), the Company initially recorded $727.6 of goodwill as of September 30, 2014. As part of the final reconciliation of net assets, $8.2of additional consideration was paid by the Company to Energen Corporation (Energen) on January 6, 2015. This payment, offset partly by other immaterial purchase price adjustments, resulted in goodwill of $735.8 as of September 30, 2015 related to the Alagasco acquisition. The Alagasco related goodwill is included in Other for segment reporting purposes. Alagasco has no goodwill on its balance sheet as push down accounting was not applied. For Laclede Group and Laclede Gas, goodwill related to the 2013 acquisition of MGE, included in the Gas Utility segment, was $210.2 as of September 30, 2015 and 2014.
Laclede Group and Laclede Gas evaluate goodwill for impairment as of July 1st of each year, or more frequently if events and circumstances indicate that goodwill might be impaired. The goodwill impairment test compares the fair value of the determined reporting unit to its carrying amount, including goodwill. Laclede Group has one reporting unit, which is the Gas Utility segment, and Laclede Gas has one reporting unit, which is the entire Laclede Gas Company. At July 1, 2015 and 2014, Laclede Group and Laclede Gas each applied a quantitative goodwill evaluation model to its reporting unit and concluded goodwill was not impaired because the fair value exceeded the carrying amount.
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.
REVENUE RECOGNITION – The Utilities read meters and bill customers on monthly cycles. TheSpire Missouri Utilities 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. The amounts of accrued unbilled revenues for Laclede Gas at September 30, 2015 and 2014 were $27.6 and $29.4, respectively.
Alagasco records natural gas distribution revenues in accordance with the tariff established by the APSC. The amount of accrued unbilled revenues, which are not recorded as revenues until billed, for Alagasco at September 30, 2015 and 2014 were $6.4 and $5.2, respectively. All related costs and margins are also deferred.
Laclede Group's other subsidiaries, including LER, record revenues when earned, either when the product is delivered or when services are performed.
In the course of its business, LER enters into commitments associated with the purchase or sale of natural gas. Certain of LER’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, “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 using a gross presentation. 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. For additional information on derivative instruments, refer to Note 10, Derivative Instruments and Hedging Activities. Certain of LER’s wholesale purchase and sale transactions are classified as trading activities for financial reporting purposes. Under GAAP, revenues and expenses associated with trading activities are presented on a net basis in Gas Marketing Operating Revenues in the Statements of Consolidated Income. This net presentation has no effect on operating income or net income.PURCHASED GAS ADJUSTMENTS AND DEFERRED ACCOUNT –
Laclede Gas
As authorized by the MoPSC, the PGA clause allows Laclede GasSpire 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, Laclede GasSpire 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:
Laclede GasSpire Missouri has a risk management policy that allows for the purchase of natural gas derivative instruments with the goal of managing price risk associated with purchasing natural gas on behalf of its customers. The MoPSC clarified that costs, cost reductions, and carrying costs associated with the Utility’s use of natural gas derivative instruments are gas costs recoverable through the PGA mechanism.
The tariffs allow Laclede GasSpire Missouri 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 months..
Laclede GasSpire Missouri is authorized to apply carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions associated with the use of derivative instruments, including cash payments for margin deposits. Laclede Gas' easternSpire Missouri service territoryEast is also authorized to recover gas inventory carrying costs through its PGA rates to recover costs it incurs to finance its investment in gas supplies that are purchased during the storage injection season for sale during the heating season.
The MoPSC approved a plan applicable to Laclede Gas'Spire Missouri’s gas supply commodity costs under which it retains a portion of cost savings associated with the acquisition of natural gas below an established benchmark level. This gas supply cost management program allows Laclede GasSpire Missouri to retain 10% of cost savings, up to a maximum of $3.0 annually. Laclede GasSpire Missouri did not record any incomesuch incentive compensation under the plan during the three fiscal years reported. IncomeIncentives recorded under the plan, if any, isare included in Gas Utility Operating Revenues on the Consolidated Statements of Income and under Operating Revenues on Laclede Gas'Spire Missouri’s Statements of Income.
Pursuant to the provisions of the PGA clause, the difference between actual costs incurred and costs recovered through the application of the PGA clause are reflected as a deferred charge or credit at the end of the fiscal year. These costs include costs and cost reductions associated with the use of derivative instruments and gas inventory carrying costs, amounts due to or from customers related to operation of the gas supply cost management program, refunds received from the Company’s suppliers in connection with gas supply, transportation, and storage services, and carrying costs on such over- or under-recoveries. At that time, the balance is classified as a current asset or current liability and recovered from, or credited to, customers over an annual period commencing in November. The balance in the current account is amortized as amounts are reflected in customer billings.
The PGA clause also provides for the treatment of income from off-system sales and capacity release revenues. Pre-tax income from off-system sales and capacity release revenues is shared with customers, with an estimated amount assumed in PGA rates. The difference between the actual amount allocated to customers for each fiscal year and the estimated amount assumed in PGA rates is recovered from, or credited to, customers over an annual period commencing in the subsequent November.
The customer share of such income is determined in accordance with the following tables, shown for each service territory for which the PGA clauses were approved by the MoPSC.
|
| | |
| Laclede Gas Company (eastern Missouri) | | |
| Pre-tax Income | Customer Share | Company Share |
| First $2.0* | 100% | —% |
| Next $2.0 | 80% | 20% |
| Next $2.0 | 75% | 25% |
| Amounts exceeding $6.0 | 70% | 30% |
| * Customer share reverts to 85% and company share reverts to 15% in 2017. | | |
| | | |
| MGE (western Missouri) | | |
| Pre-tax Income | Customer Share | Company Share |
| First $1.2 | 85% | 15% |
| Next $1.2 | 80% | 20% |
| Next $1.2 | 75% | 25% |
| Amounts exceeding $3.6 | 70% | 30% |
|
| | |
| | Customer Share | Company Share |
| Spire Missouri East | | |
| First $2.0 of pre-tax income* | 85% | 15% |
| Next $2.0 of pre-tax income | 80% | 20% |
| Next $2.0 of pre-tax income | 75% | 25% |
| Amounts of pre-tax income exceeding $6.0 | 70% | 30% |
| * Customer share was set to 85% and company share set to 15% in fiscal 2017. For fiscal 2016 and 2015, the customer share and company share were 100% and 0%, respectively. |
| Spire Missouri West | | |
| First $1.2 of pre-tax income | 85% | 15% |
| Next $1.2 of pre-tax income | 80% | 20% |
| Next $1.2 of pre-tax income | 75% | 25% |
| Amounts of pre-tax income exceeding $3.6 | 70% | 30% |
AlagascoSpire Alabama
Alagasco’sSpire 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. Alagasco’sSpire 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 Alagasco’sSpire 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.
NATURAL GAS AND PROPANE GAS – For Spire Missouri East, 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, 2017 and September 30, 2016 was less than the LIFO cost by $20.8 and $11.4, respectively. The carrying value of the Utilities’ inventory is not adjusted to the lower of cost or market prices because, pursuant to PGA or GSA, 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 market.
BUSINESS COMBINATIONS – The Spire EnergySouth acquisition was accounted for by Spire 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. For additional information on the acquisition of Spire EnergySouth, refer to Note 2, Acquisitions.
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. 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, 2017, 2016 and 2015, Spire and Spire Missouri each applied a quantitative goodwill evaluation model to their reporting units and concluded goodwill was not impaired because the fair value exceeded the carrying amount. The changes in the carrying amount of goodwill by reportable segment were as follows:
|
| | | | | | | | | | | | | | | |
| | Gas Utility | | Gas Marketing | | Other | | Total |
| Balance as of September 30, 2014 | $ | 210.2 |
| | $ | — |
| | $ | 727.6 |
| | $ | 937.8 |
|
| Adjustments to finalize the acquisition of Spire Alabama | — |
| | — |
| | 8.2 |
| | 8.2 |
|
| Balance as of September 30, 2015 | 210.2 |
| | — |
| | 735.8 |
| | 946.0 |
|
| Acquisition of Spire EnergySouth | — |
| | — |
| | 218.9 |
| | 218.9 |
|
| Balance as of September 30, 2016 | 210.2 |
| | — |
| | 954.7 |
| | 1,164.9 |
|
| Adjustments to finalize the acquisition of Spire EnergySouth | — |
| | — |
| | 6.7 |
| | 6.7 |
|
| Balance as of September 30, 2017 | $ | 210.2 |
| | $ | — |
| | $ | 961.4 |
| | $ | 1,171.6 |
|
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.
REVENUE RECOGNITION – The Utilities read meters and bill customers on monthly cycles. The 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. The amounts of accrued unbilled revenues for Spire Missouri at September 30, 2017 and 2016 were $30.1 and $26.1, respectively. 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. The amounts of accrued unbilled revenues for Spire Alabama at September 30, 2017 and 2016 were $1.9 and $5.9. Spire’s other subsidiaries, including Spire Marketing, record revenues when earned, either when the product is delivered or when services are performed.
In the course of its business, Spire Marketing enters into commitments associated with the purchase or sale of natural gas. Certain of its derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of 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 using a gross presentation. 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. For additional information on derivative instruments, refer to Note 10, Derivative Instruments and Hedging Activities. Certain of Spire Marketing’s wholesale purchase and sale transactions are classified as trading activities for financial reporting purposes. Under GAAP, revenues and expenses associated with trading activities are presented on a net basis in Gas Marketing operating revenues (or expenses, if negative) in the Consolidated Statements of Income. This net presentation has no effect on operating income or net income. INCOME TAXES – Laclede GroupSpire and its subsidiaries account for income taxes under the asset and liabilitiesliability 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 recovered or settled. The effects on deferred tax assets and liabilities of a change in enacted tax rates is recognized in income or loss for a non-regulated company, and in a regulatory asset or regulatory liability for a regulated company. 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. Laclede GroupSpire 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.
CASH AND CASH EQUIVALENTS – 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'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.
NATURAL GAS RECEIVABLE – LERSpire Marketing enters into natural gas transactions with natural gas pipeline companies known as park and loan arrangements. Under the terms of the arrangements, LERSpire Marketing purchases natural gas from a third party and delivers that natural gas to the pipeline company for the right to receive the same quantity of natural gas from the pipeline 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 on the Consolidated Balance Sheets at cost, which includes related pipeline fees associated with the transactions. In the period that the natural gas is returned to LER,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, LERSpire 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-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. GROSS RECEIPTS AND SALES TAXES – Gross receipts taxes associated with the Company’s natural gas utility services are imposed on the Company, Laclede Gas,Spire Missouri, and AlagascoSpire Alabama and billed to its customers. The revenue and expense amounts are recorded gross in the "Operating Revenues"“Operating Revenues” and "Taxes,“Taxes, other than income taxes"taxes” lines, respectively, in the statements of income.
The following table presents gross receipts taxes recorded:recorded as revenues:
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Laclede Group | $ | 97.3 |
| | $ | 77.5 |
| | $ | 40.8 |
|
| Laclede Gas | 74.5 |
| | 76.3 |
| | 40.8 |
|
| Alagasco | 22.6 |
| | 20.6 |
| | 25.9 |
|
| All Other | 0.2 |
| | 0.2 |
| | — |
|
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Spire | $ | 84.6 |
| | $ | 75.5 |
| | $ | 97.3 |
|
| Spire Missouri | 60.7 |
| | 57.4 |
| | 74.5 |
|
| Spire Alabama | 19.5 |
| | 17.9 |
| | 22.6 |
|
Sales taxes imposed on applicable AlagascoSpire Alabama and Laclede GasSpire 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“Other” line of the Current Liabilities section of the balance sheets.
TRANSACTIONS WITH AFFILIATES – Transactions between affiliates of the Company and its affiliates have been eliminated from the consolidated financial statements of Laclede Group. In addition toSpire. Spire Missouri and Spire Alabama borrowed funds from the Company and incurred related interest, as reflected in their separate financial statements, and participated in normal intercompany shared services transactions, there were approximately $2.8 of employee-related integration transactions between Alagasco and Laclede Group in the year ended September 30, 2015. Laclede Gas had the followingtransactions. In addition, Spire Missouri’s other transactions with affiliates:affiliates included:
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Sales of natural gas from Laclede Gas to LER | $ | 4.0 |
| | $ | 5.1 |
| | $ | 10.4 |
|
| Sales of natural gas from LER to Laclede Gas | 74.1 |
| | 89.1 |
| | 34.6 |
|
| Transportation services provided by Laclede Pipeline Company to Laclede Gas | 1.0 |
| | 1.0 |
| | 1.0 |
|
| Insurance services provided by Laclede Risk Services, Inc. to Laclede Gas | 1.0 |
| | 0.6 |
| | 0.7 |
|
| CNG sales from Laclede Gas to Laclede Venture Corporation | 0.1 |
| | — |
| | — |
|
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Purchases of natural gas from Spire Marketing | $ | 74.4 |
| | $ | 46.3 |
| | $ | 74.1 |
|
| Sales of natural gas to Spire Marketing | 7.8 |
| | 1.9 |
| | 4.0 |
|
| Transportation services received from Spire NGL Inc. | 1.0 |
| | 1.0 |
| | 1.0 |
|
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS – 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. Laclede Group'sSpire’s provision for uncollectible accounts includes the amortization of previously deferred uncollectible expenses for Spire Missouri and Spire Alabama, as approved by the MoPSC and the APSC.APSC, respectively.
FINANCE RECEIVABLES – AlagascoSpire Alabama finances third party contractor sales of merchandise including gas furnaces and appliances. At September 30, 20152017 and September 30, 2014,2016, the Company’s finance receivable totaled approximately $11.2$12.5 and $10.9,$11.8, respectively. Financing is available only to qualified customers who meet creditworthiness thresholds for customer payment history and external agency credit reports. AlagascoSpire 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 applied to an aging of the finance receivable balance. 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. AlagascoSpire Alabama had finance receivables past due 90 days or more of $0.4 and $0.3 as ofat September 30, 20152017 and September 30, 2014, respectively. Alagasco2016. Spire Alabama recorded ana related allowance for credit losses at September 30, 20152017 and September 30, 20142016 of $0.4 and $0.3, respectively.$0.4.
GROUP MEDICAL AND 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 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. ForfeituresEffective with the adoption of Accounting Standards Update No. 2016-09 at the beginning of fiscal 2017 (described under New Accounting Pronouncements below), forfeitures are recognized in the period they occur. In fiscal 2016 and fiscal 2015, forfeitures were estimated at the time of grant and revised, ifwhen necessary, in subsequent periods ifwhen the actual forfeitures differdiffered from those estimates. Refer to Note 3, Stock-Based Compensation, for further discussion of the accounting for the Company’s stock-based compensation plans. REVISIONS TO PRIOR FINANCIAL STATEMENTS – In the Statements of Common Shareholder’s Equity in Alagasco's most recent Annual Report on Form 10-KT, $31.7 was misclassified between common stock and paid-in capital, with no impact on total shareholder’s equity. TheCertain prior period balances have been corrected in this filing. In addition, certain amounts in the prior period have been adjusted to conform with the current period presentation for Laclede Group, Laclede Gaspresentation. Net income and Alagasco. Those adjustments primarily related to classification between current and noncurrent assets and liabilities and between categories of regulatory assets and liabilities. The Company considered the impact of the adjustments on prior period results and determined that the amountstotal equity were not material to those periods.affected by these reclassifications.
NEW ACCOUNTING STANDARDSPRONOUNCEMENTS – In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs. Under prior GAAP, debt issuance costs were recorded as a deferred charge (asset), while debt discount and debt premium costs were recorded as a liability adjustment. This amendment requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Spire, Spire Missouri and Spire Alabama adopted this ASU as of December 31, 2016. Retrospective adjustments have been made to the previous year balance sheets as of September 30, 2016, and the amounts of unamortized debt issuance costs are shown separately on the statements of capitalization. The ASU does not address the presentation of debt issuance costs related to line-of-credit arrangements, and those continue to be reported as deferred charges.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. Spire, Spire Missouri and Spire Alabama adopted this ASU in the interim quarterly reporting period ended June 30, 2017. Amendments related to the timing of excess tax benefits recognition, minimum statutory withholding requirements, and forfeitures were applied using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of October 1, 2016, and amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement were applied prospectively as of that date. Amendments related to the presentation of excess tax benefits on the statement of cash flows and the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement were applied retrospectively. There were no material impacts on the financial statements of the Company, Spire Missouri or Spire Alabama, all of which adopted a policy of accounting for forfeitures when they occur.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ThisCustomers. Under the new standard, is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principles-based approach to the recognition of revenue. The core principle of the standard is when an entity will recognize revenue when it transfers promised goods or services to customers it will recognize revenue in an amount that reflects the consideration to which the entitycompany expects to be entitled toin exchange for those goods or services. The standard outlines a five-step modelIn doing so, companies may need to use more judgment and related application guidance, which replaces most existing revenue recognitionmake more estimates than under current guidance. ASU No. 2014-09 also requires disclosures that will enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Existing alternative revenue program guidance, though excluded by the FASB in updating specific guidance associated with revenue from contracts with customers, was relocated without substantial modification to accounting guidance for rate-regulated entities. It will require separate presentation of such revenues (subject to the above-noted deliberations) in the statement of income. Entities have the option of using either a full retrospective or modified retrospective approach to adopting this guidance. In August 2015, the FASB issued ASU No. 2015-14, which made the guidance in ASU No. 2014-09 effective for fiscal years beginning after December 15, 2017 and interim periods within those years, but companies may chooseyears. In 2016, the FASB issued related ASU Nos. 2016-08, 2016-10, 2016-11, 2016-12, and 2016-20 which further modified the standards for accounting for revenue. The Company, Spire Missouri and Spire Alabama have nearly completed their evaluation of their sources of revenue and related contracts and plan to adopt it one year earlier. The Company, Laclede Gas and Alagasco are currently assessing the available transition methods and the potential impacts of the standard, which must be adopted bynew guidance in the first quarter of fiscal 2019.2019 using the modified retrospective approach, and they expect no material effect on their financial position, results of operations, or cash flows.
In April 2015,January 2016, the FASB issued ASU No. 2015-03, Interest2016-01, Financial Instruments – ImputationOverall: Recognition and Measurement of Interest: SimplifyingFinancial Assets and Financial Liabilities, which provides revised guidance concerning certain matters involving the Presentationrecognition, measurement, and disclosure of Debt Issuance Costs. Currently different balance sheet presentation requirements exist for debt issuance costs and debt discount and premium. Debt issuance costs are recorded as a deferred charge (asset), while debt discount and debt premium costs are recorded as a liability adjustment. This standard will require debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt
discounts. The recognition and measurement guidance for debt issuance costs is not affected by this standard, and ASU No. 2015-15, issued in 2015, clarifies that ASU No. 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. The new guidancefinancial instruments. It is effective for fiscal years beginning after December 15, 2015 and2017, including interim periods within those years, with early adoption permitted. The applicationfiscal years. Unrealized gains and losses on equity securities previously classified as available-for-sale will be recognized immediately in earnings rather than recorded in other comprehensive income. Entities will record a cumulative-effect adjustment as of the beginning of the fiscal year in which the guidance is adopted, which requires amounts reported in accumulated other comprehensive income for such equity securities to be reclassified to retained earnings. Based on an assessment of their current financial instruments, the Company, Spire Missouri and Spire Alabama expect to adopt this standard in the first quarter of fiscal 2019 with no significant impact.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard 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. There is an exemption for short-term leases. The ASU provides new guidelines for identifying and classifying a lease, and classification affects the pattern and income statement line item for the related expense. This update will be applied using a modified retrospective whereintransition approach for leases existing at, or entered into after, the balance sheetbeginning of each individualthe earliest comparative period presented will be adjusted to reflectin the period-specific impacts of applying the new guidance.financial statements. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company, Laclede GasSpire Missouri and AlagascoSpire Alabama are currently assessing the timing and impacts of adopting this standard, which must be adopted by the first quarter of fiscal year 2017.2020.
In July 2015,June 2016, the FASB issued ASU No. 2015-112016-13, Financial Instruments – Inventory: Simplifying theCredit Losses: Measurement of Inventory. ThisCredit Losses on Financial Instruments. The standard providesintroduces new guidance for the subsequent measurement of inventory and requires that inventory that is measured using average cost be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. When evidence exists that the net realizable value of inventory is lower thanaccounting for credit losses on instruments within its cost, the difference will be recognized as a loss in earnings in the period in which it occurs. ASU No. 2015-11scope, including trade receivables. It is effective for fiscal years beginning after December 15, 2016,2019, including interim periods within those fiscal years, and ismay be adopted a year earlier. The new guidance will be initially applied through a cumulative-effect adjustment to be applied prospectively, with early application permitted.retained earnings as of the beginning of the period of adoption. The Company, Laclede GasSpire Missouri and AlagascoSpire Alabama are currently evaluatingassessing the impacttiming and impacts of the adoption ofadopting this new standard, which must be adopted by the first quarter of fiscal year 2018.2021.
In September 2015,January 2017, the FASB issued ASU No. 2015-16 – Business Combinations:2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the AccountingTest for Measurement-Period Adjustments. The provisions of this guidance apply to acquiring companies that have reported provisional amounts for items in a business combination. Under previous guidance, when an acquirer identified an adjustment to provisional amounts, the acquirer was required to revise comparative information for the prior periods as if the accounting for the business combination had been completed asGoodwill Impairment, which eliminates Step 2 of the acquisition date. Undergoodwill test, where the measurement of a goodwill impairment loss was determined by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Upon adoption, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This new guidance is required for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. The Company and Spire Missouri do not expect this standard change to have a material impact on their financial statements and will adjust their goodwill impairment procedures accordingly upon adoption, no later than their annual tests for fiscal 2021. Step 1 of the tests for fiscal 2017 did not indicate potential impairment, so Step 2 was not necessary.
In March 2017, the FASB issued ASU No. 2015-16, an acquirer must recognize adjustments to provisional amounts in2017-07, Compensation – Retirement Benefits: Improving the reporting period in which the adjustment amounts are determined.Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The effect on earnings as a result of the change, calculated as if the accounting had been completed as of the acquisition date, must be recorded in the reporting period in which the adjustment amounts are determined rather than retrospectively. ASU No. 2015-16 alsoamended guidance requires that the acquirer present separately onservice cost component of pension and postretirement benefit costs be presented within the face ofsame line item in the income statement or discloseas 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. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amended guidance will be applied retrospectively for income statement presentation and prospectively for capitalization. The Company, Spire Missouri and Spire Alabama are currently assessing the regulatory and other impacts of adopting this standard, which must be adopted by the first quarter of fiscal 2019.
In August 2017, 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 notes, the portion of the amount recorded in current period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The guidance of ASU No. 2015-16 isfinancial statements. They are effective for fiscal years beginning after December 15, 2015, including2018, and interim periods within those fiscal years, and is to be applied prospectively, with early application is permitted. The timingCompany, Spire Missouri and Spire Alabama are currently assessing the effects of adoption by the Company, Laclede Gas and Alagasco will be affected bythis new guidance, as well as the timing of any future business combination activity and the nature and amounts of related measurement-period adjustments.adoption.
2. ACQUISITIONS
Effective September 12, 2016, Spire completed the acquisition of 100% of the common stock of Spire EnergySouth, the parent company of Spire Gulf and Spire Mississippi, serving natural gas utility customers in Alabama and Mississippi. This acquisition is supportive of the strategic focus on growing Spire’s gas utility business and creating geographic and regulatory diversity. Total cash consideration paid, net of cash acquired, debt assumed, and a working capital settlement payment received, was $313.9. The goodwill of $225.6 arising from this acquisition, which is not deductible for tax purposes, is attributable to the assembled workforce and the expected cost efficiencies and strategic benefits of the transaction. The Company did not elect pushdown accounting, so the goodwill was recorded on the Spire parent company balance sheet rather than the Spire EnergySouth subsidiary balance sheet and is included in disclosures of segment assets under Other. The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed at the acquisition date, and the acquisitions are described below. Measurement period adjustments were immaterial.date.
|
| | | | | | | |
| | MGE | | Alagasco |
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | |
| Utility plant | $ | 671.1 |
| | $ | 892.7 |
|
| Cash | — |
| | 12.1 |
|
| Inventories | 62.7 |
| | 47.7 |
|
| Other current assets | 36.0 |
| | 51.7 |
|
| Deferred tax assets | — |
| | 282.0 |
|
| Other assets | 99.0 |
| | 143.4 |
|
| Current portion of long-term debt | — |
| | (15.0 | ) |
| Long-term debt | — |
| | (249.8 | ) |
| Other current liabilities | (65.9 | ) | | (173.4 | ) |
| Other liabilities | (72.9 | ) | | (130.4 | ) |
| Total identifiable net assets | 730.0 |
| | 861.0 |
|
| Goodwill | 210.2 |
| | 735.8 |
|
| Deferred tax elimination (Laclede Group) | — |
| | (271.3 | ) |
| Consideration (cash) | $ | 940.2 |
| | $ | 1,325.5 |
|
Acquisition of MGE |
| | | | | | | | | | | |
| | As originally recorded | | Measurement period adjustments | | As adjusted |
Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | |
| Utility plant | $ | 199.5 |
| | $ | — |
| | $ | 199.5 |
|
| Cash | 2.0 |
| | — |
| | 2.0 |
|
| Other current assets | 17.5 |
| | 0.2 |
| | 17.7 |
|
| Other assets | 79.8 |
| | (10.7 | ) | | 69.1 |
|
| Long-term debt | (67.0 | ) | | — |
| | (67.0 | ) |
| Other current liabilities | (42.7 | ) | | — |
| | (42.7 | ) |
| Deferred tax liabilities | (35.5 | ) | | — |
| | (35.5 | ) |
| Other liabilities | (52.8 | ) | | — |
| | (52.8 | ) |
| Total identifiable net assets | 100.8 |
| | (10.5 | ) | | 90.3 |
|
| Goodwill | 218.9 |
| | 6.7 |
| | 225.6 |
|
| Consideration (cash) | $ | 319.7 |
| | $ | (3.8 | ) | | $ | 315.9 |
|
Effective September 1, 2013, Laclede Gas completed the purchase from Southern Union Company (SUG), and affiliate of Energy Transfer Equity, L.P. (ETE) and Energy Transfer Partners, L.P., of substantially all of the assets and liabilities of MGE for a preliminary cash purchase price of $975.0. A subsequent reconciliation of net assets transferred resulted in a payment by ETE to Laclede Gas on February 14, 2014 of approximately $23.9.
On December 14, 2012, Plaza Massachusetts Acquisition, Inc. (Plaza Mass), a subsidiary of Laclede Group, agreed to purchase New England Gas Company (NEG) from SUG in a transaction related to the acquisition of MGE. On February 11, 2013, Laclede Group agreed to sell Plaza Mass to Algonquin Power and Utilities Corp. (APUC) immediately prior to the closing of the acquisition of NEG. On December 20, 2013, Laclede Group closed the sale of Plaza Mass to APUC and received $11.0, which was transferred to Laclede Gas.
The original payment offset by the subsequent receipts of funds resulted in a final net purchase price of approximately $940.2 for MGE. The goodwill of $210.2 arising from this acquisition, $177.2 of which is expected to be deductible for tax purposes, was assigned to the Company's Gas Utility reporting unit. The goodwill is attributable to MGE's assembled workforce and the expected cost efficiencies and strategic benefits of the transaction. The acquisition allows the Company to leverage its core gas utility expertise and further expand its footprint, enabling it to support growth initiatives in new markets with new customers.
Acquisition of Alagasco
Laclede Group completed the acquisition of 100% of the common stock of Alagasco from Energen effective on August 31, 2014. Total cash consideration paid at closing, net of cash acquired and debt assumed was $1,305.2. Subsequently, the Company and Energen agreed to a final reconciliation of net assets, and $8.2 was paid by the Company to Energen on January 6, 2015, effectively increasing the total net consideration to $1,313.4.
Goodwill of $735.8 arising from this acquisition, $717.6 of which is expected to be deductible for tax purposes, was assigned to the Company's Gas Utility reporting unit. The goodwill is attributable to Alagasco's assembled workforce and the expected cost efficiencies and strategic benefits of the transaction. The acquisition was supportive of the strategic focus on growing the Company's regulated footprint and created geographic and regulatory diversity. The Company determined that the Alagasco acquisition met the scope exceptions for pushdown accounting; therefore, the goodwill was recorded on the Laclede Group parent company balance sheet rather than the Alagasco subsidiary balance sheet and included in disclosures of segment assets under Other rather than the Gas Utility segment.
The Company and Energen made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the Alagasco acquisition as a deemed purchase and sale of assets for tax purposes. As a result of the election, goodwill was generated for tax purposes at Alagasco. For book purposes, goodwill was recorded on the Laclede Group parent entity and not pushed down to Alagasco. Consequently, a Deferred Tax Asset (DTA) was recorded at Alagasco related to the excess of tax deductible goodwill over book goodwill for the stand-alone entity. That initial goodwill DTA is eliminated (along with the investment in subsidiary and Alagasco’s equity) in the Laclede Group consolidated balance sheet because, at that consolidated level, there is no excess of tax deductible goodwill over book goodwill. As the tax goodwill is amortized and deducted for tax purposes, the DTA at Alagasco is reduced, and for Laclede Group, a deferred tax liability (DTL) is created. For both Alagasco and consolidated Laclede Group, the changes to the goodwill DTA/DTL is reported as a component of deferred tax expense in the income statement. Because the deferred tax expense impact will be offset by an opposite current tax expense impact, there will be no significant impact on the effective tax rate of the Company.
Actual and Pro Forma Results
TheSpire EnergySouth’s results of operations of each of the acquisitions are included in the statementSpire statements of income from the date of acquisition, as shown in the following table.
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Total Operating Revenues: | | | | | |
| MGE | $ | 556.8 |
| | $ | 554.2 |
| | $ | 22.0 |
|
| Alagasco | 479.2 |
| | 19.7 |
| | — |
|
| Net Income (Loss): | | | | | |
| MGE | $ | 39.9 |
| | $ | 39.5 |
| | $ | 1.8 |
|
| Alagasco | 48.0 |
| | (2.9 | ) | | — |
|
| Earnings (Loss) Per Share: | | | | | |
| MGE | $ | 0.92 |
| | $ | 1.10 |
| | $ | 0.07 |
|
| Alagasco | 1.11 |
| | (0.08 | ) | | — |
|
|
| | | | | | | |
| | 2017 | | 2016 |
| Total Operating Revenues | $ | 95.5 |
| | $ | 3.3 |
|
| Net Income (Loss) | 9.4 |
| | (0.2 | ) |
| Earnings Per Share | $ | 0.20 |
| | $ | — |
|
The following unaudited pro forma financial information presents theSpire’s combined results of operations as though the acquisitionsSpire EnergySouth acquisition had occurred as of October 1, 2012. The pro forma financial information does not reflect the costsbeginning of any integration activities. The pro forma results include estimates and assumptions, which management believes are reasonable.fiscal 2015. The unaudited pro forma financial information is not necessarily indicative of either future results of operations or results that mightwould have been achieved if the acquisition had Alagasco or MGE been part of the Companyoccurred as of the beginningearlier date. It includes estimates and assumptions which management believes are reasonable. The timing of fiscal 2013.integration costs was not changed.
| | | | Laclede Group | | Laclede Gas | | | | | | | | | | | |
| | 2014 | 2013 | | 2013 | 2017 | | 2016 | | 2015 |
| Total Operating Revenues | $ | 2,187.1 |
| $ | 2,051.5 |
| | $ | 1,518.2 |
| $ | 1,740.7 |
| | $ | 1,632.4 |
| | $ | 2,081.6 |
|
| Net Income | 133.5 |
| 102.0 |
| | 83.6 |
| 161.6 |
| | 153.9 |
| | 143.6 |
|
| Basic Earnings Per Share | $ | 3.11 |
| $ | 2.50 |
| |
|
| $ | 3.44 |
| | $ | 3.48 |
| | $ | 3.32 |
|
| Diluted Earnings Per Share | 3.10 |
| 2.49 |
| |
|
| 3.43 |
| | 3.46 |
| | 3.31 |
|
3. STOCK-BASED COMPENSATION
Spire’s 2015 incentive plan, The Laclede Group 2015 Equity Incentive Plan (the 2015 Plan), was approved at the annual meeting of shareholders of Laclede GroupSpire on January 29, 2015. The purpose of the 2015 Plan is to encourage directors, officers, and 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 the Board of Directors may grant awards under the 2015 Plan that may be earned by achieving performance objectives and/or other criteria as determined by the Committee. Under the terms of the 2015 Plan, officers and employees of the Company and its subsidiaries, as determined by the Committee, are eligible to be selected for awards. The 2015 Plan 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 2015 Plan 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-year vesting period. The maximum number of shares reserved for issuance under the 2015 Plan is 1,000,000. The 2015 Plan replaced theThe Laclede Group 2006 Equity Incentive Plan (the 2006 Plan), which in turn replaced theThe Laclede Group, 2003Inc. 2002 Equity Incentive Plan (the 20032002 Plan). Shares reserved under the 2006 Plan and 2003the 2002 Plan, other than those needed for currently outstanding awards, were canceled upon shareholder approval of the 2015 Plan.
The Company issues new shares to satisfy employee restricted stock awards and stock option exercises.
Restricted Stock Awards
During fiscal year 2015,2017, the Company granted 216,476196,400 performance-contingent restricted share units to executive officers and key employees at a weighted average grant date fair value of $36.69$45.01 per share. This number represents the maximum shares that can be earned pursuant to the terms of the awards. The share units have a performance period ending September 30, 2017.2019. 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 companies. This TSR provision is considered a market condition under GAAP and is discussed further below.
The weighted average grant date fair value of performance-contingent restricted shares and share units granted during fiscal years 20142016 and 20132015 was $37.21$45.95 and $34.49$36.69 per share, respectively.
Fiscal year 20152017 activity of restricted stock and restricted stock units subject to performance and/or market conditions is presented below:
| | | | Shares/ Units | | Weighted Average Grant Date Fair Value Per Share | Shares/ Units | | Weighted Average Grant Date Fair Value Per Share |
| Nonvested at September 30, 2014 | 293,019 |
| | $ | 36.18 |
| |
| Nonvested at September 30, 2016 | | 510,583 |
| | $ | 40.37 |
|
| Granted (maximum shares that can be earned) | 216,476 |
| | $ | 36.69 |
| 196,400 |
| | $ | 45.01 |
|
| Vested | (60,388 | ) | | $ | 40.01 |
| (78,825 | ) | | $ | 42.37 |
|
| Forfeited | (51,837 | ) | | $ | 33.06 |
| (64,128 | ) | | $ | 33.03 |
|
| Nonvested at September 30, 2015 | 397,270 |
| | $ | 36.28 |
| |
| Nonvested at September 30, 2017 (at maximum) | | 564,030 |
| | $ | 42.51 |
|
| Nonvested at September 30, 2017 (at target) | | 282,015 |
| | $ | 56.32 |
|
During fiscal year 2015,2017, the Company granted 46,04733,240 shares of time-vested restricted stock to executive officers and key employees at a weighted average grant date fair value of $50.90$63.05 per share. These shares were awarded between December 2014 and September 2015 and vest between December 2017 and September 2018Unless forfeited based on terms of the agreements.agreements, these shares will vest in fiscal 2020. 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 year 2014years 2016 and 20132015 was $45.66$59.40 and $40.03$50.90 per share, respectively.
During fiscal year 2015,2017, the Company granted 15,20010,850 shares of time-vested restricted stock to non-employee directors at a weighted average grant date fair value of $54.66$63.45 per share. These shares vested in fiscal 2017, six months after the grant date. The weighted average grant date fair value of restricted stock awarded to non-employee directors during fiscal years 20142016 and 20132015 was $46.02$63.93 and $39.92$54.66 per share, respectively.
Time-vested restricted stock and stock unit activity for fiscal year 20152017 is presented below:
| | | | Shares/ Units | | Weighted Average Grant Date Fair Value Per Share | Shares/ Units | | Weighted Average Grant Date Fair Value Per Share |
| Nonvested at September 30, 2014 | 141,093 |
| | $ | 42.02 |
| |
| Nonvested at September 30, 2016 | | 132,779 |
| | $ | 49.83 |
|
| Granted | 61,247 |
| | $ | 51.78 |
| 44,090 |
| | $ | 63.15 |
|
| Vested | (67,747 | ) | | $ | 43.95 |
| (58,200 | ) | | $ | 47.67 |
|
| Forfeited | (5,289 | ) | | $ | 45.45 |
| (7,729 | ) | | $ | 55.58 |
|
| Nonvested at September 30, 2015 | 129,304 |
| | $ | 44.89 |
| |
| Nonvested at September 30, 2017 | | 110,940 |
| | $ | 55.85 |
|
During fiscal year 2015, 128,135 shares ofFor restricted stock and stock units (performance-contingent and time-vested), awarded on December 1, 2011, May 1, 2012, December 2, 2013 that vested during fiscal years 2017, 2016, and January 1, 2014 vested. The2015, the Company withheld 35,514 shares, 30,712 shares, and 31,688, of the vested sharesrespectively, at a weighted average priceprices of $63.83, $57.29, and $50.65 per share, respectively, pursuant to elections by employees to satisfy tax withholding obligations. During fiscal year 2014, 88,533 shares of restricted stock and stock units (performance-contingent and time-vested), awarded on December 1, 2010, September 1, 2011, October 1, 2012, January 30, 2014 and February 21, 2014 vested. The Company withheld 23,776 of these vested shares at a weighted average price of $45.96 per share pursuant to elections by employees to satisfy tax withholding obligations. During fiscal year 2013, 91,221 shares of restricted stock (performance-contingent and time vested) awarded on November 4, 2008, December 1, 2009, January 4, 2010, May 3, 2010 and July 1, 2010 vested. The Company withheld 23,311 of these vested shares at a weighted average price of $39.96 per share 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 2017, 2016, and 2015 2014,was $8.9, $6.3, and 2013 was $6.4, $4.1, and $3.8, respectively, and the related actual tax benefit realized was $3.3, $2.4, $1.6 and $1.4,$2.4, respectively. None of the tax benefits have been realized.
Stock Option Awards
No stock options were granted during fiscal years 2015, 2014,2017, 2016, and 2013. Stock2015. There was no stock option activity forin fiscal year 2015 is presented below:
|
| | | | | | | | | | | | |
| | Stock Options | | Weighted Average Exercise Price Per Share | | Weighted Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value |
| Outstanding at September 30, 2014 | 79,750 |
| | $ | 32.42 |
| | | | |
| Exercised | (47,000 | ) | | $ | 31.76 |
| | | | |
| Forfeited | (4,250 | ) | | $ | 30.95 |
| | | | |
| Outstanding at September 30, 2015 | 28,500 |
| | $ | 33.65 |
| | 0.8 | | $ | 0.6 |
|
| Fully Vested and Expected to Vest at September 30, 2015 | 28,500 |
| | $ | 33.65 |
| | 0.8 | | $ | 0.6 |
|
| Exercisable at September 30, 2015 | 28,500 |
| | $ | 33.65 |
| | 0.8 | | $ | 0.6 |
|
Exercise prices of2017, as all outstanding stock options outstanding at September 30, 2015 range from $30.46 to $34.95 per share.either vested or forfeited in fiscal 2016. During fiscal year2016, cash received from the exercise of stock options was $0.7 and the related intrinsic value was $0.7. During fiscal 2015, cash received from the exercise of stock options was $1.5 the intrinsic value of the options exercised was $0.9 and the related actual tax benefit realized was $0.3. During fiscal year 2014, cash received from the exercise of stock options was $1.7, the intrinsic value was $0.9. Related tax benefits were not material in any of the options exercised was $0.9 and the related actual tax benefit realized was $0.3. During fiscal year 2013, cash received from the exercise of stock options was $2.7, the intrinsic value of the options exercised was $1.0 and the related actual tax benefit realized was $0.4.those years.
The closing price of the Company’s common stock was $54.53 per share at September 30, 2015.
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 date of the grant.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 USUnited States (US) 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 2015, 2014,2017, 2016, and 20132015 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:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Risk free interest rate | 0.83% | | 0.53% | | 0.32% | |
| Risk-free interest rate | | 1.39% | | 1.14% | | 0.83% |
| Expected dividend yield of stock | — | | — | | — | — | | — | | — |
| Expected volatility of stock | 14.0% | | 18.0% | | 19.6% | 16.3% | | 15.0% | | 14.0% |
| Vesting period | 2.8 years | �� | 2.8 years | | 2.8 years | 2.8 years | | 2.8 years | | 2.8 years |
The risk freerisk-free interest rate was based on the yield on US Treasury securities matching the vesting period. A zero 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:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Total equity compensation cost | $ | 6.7 |
| | $ | 5.8 |
| | $ | 4.5 |
| |
| Total compensation cost | | $ | 7.4 |
| | $ | 6.7 |
| | $ | 6.7 |
|
| Compensation cost capitalized | (1.8 | ) | | (1.8 | ) | | (1.4 | ) | (3.3 | ) | | (2.2 | ) | | (1.8 | ) |
| Compensation cost recognized in net income | $ | 4.9 |
| | $ | 4.0 |
| | $ | 3.1 |
| $ | 4.1 |
| | $ | 4.5 |
| | $ | 4.9 |
|
| Income tax benefit recognized in net income | (1.9 | ) | | (1.5 | ) | | (1.2 | ) | (1.5 | ) | | (1.7 | ) | | (1.9 | ) |
| Compensation cost recognized in net income, net of income tax | $ | 3.0 |
| | $ | 2.5 |
| | $ | 1.9 |
| $ | 2.6 |
| | $ | 2.8 |
| | $ | 3.0 |
|
As of September 30, 2015,2017, there was $7.8$8.9 of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.8 years.
4. EARNINGS PER COMMON SHARE
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Basic EPS: | | | | | | | | | | |
| Net Income | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
|
| Less: Income allocated to participating securities | 0.5 |
| | 0.3 |
| | 0.3 |
| 0.4 |
| | 0.5 |
| | 0.5 |
|
| Net Income Available to Common Shareholders | $ | 136.4 |
| | $ | 84.3 |
| | $ | 52.5 |
| $ | 161.2 |
| | $ | 143.7 |
| | $ | 136.4 |
|
| Weighted Average Shares Outstanding | 43.2 |
| | 35.8 |
| | 25.9 |
| |
| Weighted Average Shares Outstanding (millions) | | 46.9 |
| | 44.1 |
| | 43.2 |
|
| Earnings Per Share of Common Stock | $ | 3.16 |
| | $ | 2.36 |
| | $ | 2.03 |
| $ | 3.44 |
| | $ | 3.26 |
| | $ | 3.16 |
|
| Diluted EPS: | | | | | | | | | | |
| Net Income | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
|
| Less: Income allocated to participating securities | 0.5 |
| | 0.3 |
| | 0.3 |
| 0.4 |
| | 0.5 |
| | 0.5 |
|
| Net Income Available to Common Shareholders | $ | 136.4 |
| | $ | 84.3 |
| | $ | 52.5 |
| $ | 161.2 |
| | $ | 143.7 |
| | $ | 136.4 |
|
| Weighted Average Shares Outstanding | 43.2 |
| | 35.8 |
| | 25.9 |
| |
| Dilutive Effect of Stock Options, Restricted Stock, and Restricted Stock Units | 0.1 |
| | 0.1 |
| | 0.1 |
| |
| Weighted Average Diluted Shares | 43.3 |
| | 35.9 |
| | 26.0 |
| |
| Weighted Average Shares Outstanding (millions) | | 46.9 |
| | 44.1 |
| | 43.2 |
|
| Dilutive Effect of Stock Options, Restricted Stock, and Restricted Stock Units (millions) | | 0.1 |
| | 0.2 |
| | 0.1 |
|
| Weighted Average Diluted Shares (millions) | | 47.0 |
| | 44.3 |
| | 43.3 |
|
| Earnings Per Share of Common Stock | $ | 3.16 |
| | $ | 2.35 |
| | $ | 2.02 |
| $ | 3.43 |
| | $ | 3.24 |
| | $ | 3.16 |
|
| Outstanding Shares Excluded from the Calculation of Diluted EPS Attributable to: | | | | | | |
| Outstanding Shares (in millions) Excluded from the Calculation of Diluted EPS Attributable to: | | | | | | |
| Restricted stock and stock units subject to performance and/or market conditions | 0.3 |
| | 0.3 |
| | 0.2 |
| 0.5 |
| | 0.3 |
| | 0.3 |
|
Laclede Group's 2014 2.0% Series Equity UnitsSpire’s 2.875 million equity units issued in June 2014 are potentially dilutive securities, but were anti-dilutive for the periods they were outstanding. Accordingly, they were also excluded from the calculation of weighted average diluted EPSshares for those periods. On April 3, 2017, Spire settled the years ended September 30, 2015 and 2014. The potentialpurchase contracts underlying those equity units by issuing approximately 2.5 million shares were not included in the outstanding shares excluded from the calculation of Diluted EPS in the table above.its common stock. See Note 5 for more information.
5. STOCKHOLDERS'SHAREHOLDERS’ EQUITY
Equity UnitsSpire
In June 2014, Laclede GroupSpire issued 2.875 million equity units initially consistingas a portion of Corporate Units, for anthe Spire Alabama acquisition financing. The equity units were originally issued at $50 per unit pursuant to the Purchase Contract and Pledge Agreement (Purchase Contract) dated as of June 11, 2014 between Spire and U.S. Bank National Association, as purchase contract agent, collateral agent, custodial agent and securities intermediary. These units consisted of $143.8 aggregate statedprincipal amount of approximately $143.8. Each Corporate Unit has a stated amount of fifty dollars2014 Series A 2.00% remarketable junior subordinated notes due 2022 and consists of (i) a stock purchase contractthe Purchase Contract obligating the holder to purchase shares of Laclede Group's common stock, par value $1.00 per share (Common Stock) and (ii) a 1/20, or 5%, undivided beneficial ownership interest in one thousand dollars principal amount of Laclede Group's 2014 Series A 2.00% Remarketable Junior Subordinated Notes due 2022 (RSNs). The stock purchase contracts obligate the holders to purchase shares of Common Stock at a future settlement date prior to the relevant RSN maturity date. The equity unit investments were effectively replaced as planned in a series of transactions outlined in Note 6, resulting in the issuance of 2,504,684 shares of the Company’s common stock at a purchase price to be paid underof $57.3921 per share. Under the stock purchase contracts is fifty dollars per Corporate Unit andcontract terms, the number of sharesequity units were converted to be purchased will be determined as follows: |
| | |
If the applicable market value per share of Laclede Group common stock is:
| | Number of shares to be purchased
per purchase contract is:
|
Equal to or greater than $57.8125 | | 0.8649 |
Less than $57.8125, but greater than $46.25 | | $50 ÷ applicable market value |
Less than or equal to $46.25 | | 1.0811 |
The RSNs are pledged as collateral to secure the purchase of Common Stock under the related stock purchase contracts.
The Company makes quarterly interest payments on the RSNs and quarterly contract adjustment payments on the stock purchase contracts, at the rates described below. The Company may defer payments on the stock purchase contracts and the RSNs for one or more consecutive periods but generally not beyond the purchase contract settlement date. If payments are deferred, interest on the RSNs and contractrate of 0.8712 shares per unit, with a corresponding adjustment payments will compound on each respective payment date in which the payment was deferred. Also, during the deferral period, the Company may not make any cash distributions related to its capital stock, including dividends, redemptions, repurchases, liquidation payments or guarantee payments. Additionally, the Company may not make any payments on or redeem or repurchase any debt securities that are equal in right of payment with, or subordinated to, the RSNs during the deferral period.
The Company has recorded the present value of the stock purchase contract payments as a liability offset by a charge to additional paid-in capital in equity. 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 did not have an effect on diluted EPS for the years ended September 30, 2015 and 2014.
Under the terms of the stock purchase contracts, assuming no anti-dilution or other adjustments, Laclede Group will issue between approximately 2.5 million and 3.1 million shares of its common stock in April 2017. A total of approximately 4.2 million shares of Common Stock have been reserved for issuance in connection with the stock purchase contracts. The stock purchase contracts obligate the holders to purchase shares of Common Stock at a future settlement date (April 1, 2017, or if such day is not a business day, the following business day) prior to the relevant RSN maturity date.price.
Selected information about the Company’s equity units is presented below:
|
| | | | | | | | | | | | |
| Issuance Date | | Units Issued (Millions) | | Total Net Proceeds | | Total Long-term Debt | | RSN Annual Interest Rate | | Stock Purchase Contract Annual Rate | | Stock Purchase Contract Liability |
| 6/11/2014 | | 2.875 | | $139.4 | | $143.8 | | 2.00% | | 4.75% | | $19.7 |
Other Stock Information
Laclede Group
On June 20, 2014, Laclede GroupSpire filed a registration statement on Form S-3 with the US Securities and Exchange Commission (SEC) on June 15, 2017 for the issuance and sale of up to 168,698250,000 shares of its common stock under its Dividend Reinvestment and Direct Stock Purchase Program.Plan. There were 129,413244,130 and 123,889239,945 shares at September 30, 20152017 and November 24, 2015,10, 2017, respectively, remaining available for issuance under this Form S-3.
On August 6, 2013, Laclede GroupMay 17, 2016, Spire completed a public offering of 2,185,000 shares of its common stock, generating $133.2 of proceeds net of issuance costs. On September 23, 2016, Spire and Laclede GasSpire Missouri filed with the SEC a joint shelf registration statement on Form S-3 for issuance of various types of debt and equity securities, which registration statement will expire August 5, 2016. Bonds totaling $450.0 were issued by Laclede Gas from this shelf registration statement on August 13, 2013.September 22, 2019. The amount, timing, and type of additional financing to be issued under this shelf registration statement will depend on cash requirements and market conditions.
At September 30, 20152017 and 2014, Laclede Group2016, Spire had authorized 5,000,000 shares of preferred stock, but none were issued and outstanding.
Laclede Gas
Laclede Gas periodically sells shares of its stock to Laclede Group at prices per share equal to book value on the last day of the quarter preceding each sale. There was no sale of shares to Laclede Group during fiscal 2015. Laclede Gas sold 28 shares to Laclede Group for $1.1 during fiscal year 2014 and 11,745 shares for $477.2 during fiscal year 2013. Exemption from registration for all of the sales was claimed under section 4(a)(2) of the Securities Act of 1933, as amended.Spire Missouri
Substantially all of Laclede GasSpire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains several restrictions on Laclede Gas'Spire Missouri’s ability to pay cash dividends on its common stock.stock or to make loans to its parent company. These provisionsmortgage restrictions are applicable regardless of whether the stock is publicly held or as has been the case since the formation of Laclede Group, held solely by Laclede Gas'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, 20152017 and 2014,2016, the amount under the mortgage’s formula that was available to pay dividends was $891.7$1,010.8 and $936.2,$916.8, respectively. Thus, all of Laclede Gas'Spire Missouri’s retained earnings were free from such dividend restrictions as of those dates.
On August 6, 2013, Laclede GroupSeptember 23, 2016, Spire and Laclede GasSpire Missouri filed with the SEC a joint shelf registration statement on Form S-3 for issuance of various types of debt and equity securities, which registration statement will expire August 5, 2016. Bonds totaling $450.0 were issued by Laclede Gas from this shelf registration statement on August 13, 2013.September 22, 2019. The amount, timing, and type of additional financing to be issued under this shelf registration statement will depend on cash requirements and market conditions.conditions, as well as future MoPSC authorizations.
Laclede GasSpire Missouri has authority from the MoPSC to issue debt securities and preferred stock, including on a private placement basis, as well as to issue common stock, receive paid-in capital, and enter into capital lease agreements, all for a total of up to $518.0. This authorization was effective through June 30, 2015. During the year ended$300.0. On September 30, 2015, Laclede Gas15, 2017, Spire Missouri issued no securities$170.0 in first mortgage bonds, leaving $130.0 available under this authorization. On April 15, 2015, Laclede Gas filed with the MoPSC for a new financing authorization. On June 24, 2015, the MoPSC granted an extension of the current authorization until the pending application is
resolved. As of November 24, 2015, $369.7 remains available under this authorization. The amount, timing, and type of additional financing to be issued will depend on cash requirements and market conditions.
At September 30, 20152017 and 2014, Laclede Gas2016, Spire Missouri had authorized1,480,000authorized 1,480,000 shares of preferred stock, but none were issued and outstanding.
Spire Alabama
At September 30, 2017 and 2016, Spire Alabama had authorized 120,000 shares of preferred stock, but none were issued and outstanding.
Other Comprehensive Income
The components of accumulated other comprehensive income (loss), 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 Securities | | Total |
| Laclede Group | | | | | | | | |
| Balance at September 30, 2013 | | $ | 1.4 |
| | $ | (2.2 | ) | | $ | — |
| | $ | (0.8 | ) |
| Other comprehensive (loss) income | | (1.2 | ) | | 0.3 |
| | — |
| | (0.9 | ) |
| Balance at September 30, 2014 | | 0.2 |
| | (1.9 | ) | | — |
| | (1.7 | ) |
| Other comprehensive (loss) income | | (0.6 | ) | | 0.4 |
| | (0.1 | ) | | (0.3 | ) |
| Balance at September 30, 2015 | | $ | (0.4 | ) | | $ | (1.5 | ) | | $ | (0.1 | ) | | $ | (2.0 | ) |
| Laclede Gas | | | | | | | | |
| Balance at September 30, 2013 | | $ | 0.1 |
| | $ | (2.2 | ) | | $ | — |
| | $ | (2.1 | ) |
| Other comprehensive (loss) income | | (0.1 | ) | | 0.3 |
| | — |
| | 0.2 |
|
| Balance at September 30, 2014 | | — |
| | (1.9 | ) | | — |
| | (1.9 | ) |
| Other comprehensive (loss) income | | (0.2 | ) | | 0.4 |
| | — |
| | 0.2 |
|
| Balance at September 30, 2015 | | $ | (0.2 | ) | | $ | (1.5 | ) | | $ | — |
| | $ | (1.7 | ) |
|
| | | | | | | | | | | | | | | | |
| | | Net Unrealized Gains (Losses) on Cash Flow Hedges | | Defined Benefit Pension and Other Postretirement Benefit Plans | | Net Unrealized Losses on Available for Sale Securities | | Total |
| Spire | | | | | | | | |
| Balance at September 30, 2015 | | $ | (0.4 | ) | | $ | (1.5 | ) | | $ | (0.1 | ) | | $ | (2.0 | ) |
| Other comprehensive loss | | (1.9 | ) | | (0.3 | ) | | — |
| | (2.2 | ) |
| Balance at September 30, 2016 | | (2.3 | ) | | (1.8 | ) | | (0.1 | ) | | (4.2 | ) |
| Other comprehensive income (loss) | | 7.2 |
| | 0.3 |
| | (0.1 | ) | | 7.4 |
|
| Balance at September 30, 2017 | | $ | 4.9 |
| | $ | (1.5 | ) | | $ | (0.2 | ) | | $ | 3.2 |
|
| | | | | | | | | |
| Spire Missouri | | | | | | | | |
| Balance at September 30, 2015 | | (0.2 | ) | | (1.5 | ) | | — |
| | $ | (1.7 | ) |
| Other comprehensive income (loss) | | 0.3 |
| | (0.3 | ) | | (0.1 | ) | | (0.1 | ) |
| Balance at September 30, 2016 | | 0.1 |
| | (1.8 | ) | | (0.1 | ) | | (1.8 | ) |
| Other comprehensive income (loss) | | — |
| | 0.2 |
| | (0.1 | ) | | 0.1 |
|
| Balance at September 30, 2017 | | $ | 0.1 |
| | $ | (1.6 | ) | | $ | (0.2 | ) | | $ | (1.7 | ) |
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, AlagascoSpire Alabama had no accumulated other comprehensive income (loss) balances.
Composition of long-term debt for Laclede Group, Laclede GasSpire, Spire Missouri and AlagascoSpire Alabama are shown in each registrant'sregistrant’s statements of capitalization as part of the financial statements. Maturities of long-term debt for Laclede Group, Laclede GasSpire on a consolidated basis, Spire Missouri and AlagascoSpire Alabama for the five fiscal years subsequent to September 30, 20152017 are as follows:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| 2016 | $ | 80.0 |
| | $ | — |
| | $ | 80.0 |
| |
| 2017 | 250.0 |
| | — |
| | — |
| |
| 2018 | 100.0 |
| | 100.0 |
| | — |
| $ | 100.0 |
| | $ | 100.0 |
| | $ | — |
|
| 2019 | 175.0 |
| | 50.0 |
| | — |
| 180.0 |
| | 50.0 |
| | — |
|
| 2020 | 40.0 |
| | — |
| | 40.0 |
| 40.0 |
| | — |
| | 40.0 |
|
| 2021 | | 55.0 |
| | — |
| | — |
|
| 2022 | | 50.0 |
| | — |
| | 50.0 |
|
Laclede Group
On August 19, 2014 Laclede Group issued $625.0 aggregate principal amount in long-term debt. Of this, $250.0 were floating rate senior notes with an interest rate of three-month LIBOR + 0.75% per annum maturing in August 2017, $125.0 were senior notes with an interest rate of 2.55% maturing in August 2019,Spire’s, Spire Missouri’s and $250.0 were senior notes with an interest rate of 4.70% maturing in August 2044. The proceeds were used to fund a portion of the Alagasco acquisition.
At September 30, 2015, including the current portion but excluding unamortized discounts and net hedging gains, the Laclede Group had fixed-rate long-term debt totaling $1,603.8 and floating rate long-term debt totaling $250.0, of which $810.0 was issued by Laclede Gas and $250.0 was issued by Alagasco. With the exception of the $250.0 floating rate senior notes issued by Laclede Group, 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 typically would be deferred as regulatory assets or liabilities and amortized over a future period.
Of the Company’s $1,710.0 senior long-term debt, $25.0 have no call options, $710.0 have make-whole call options, $725.0 are callable at par between one to six months prior to maturity and $250.0 are callable at par one year prior to maturity. The remainder of the Company's long-term debt is $143.8 of 2% Remarketable Junior Subordinated Notes due in 2022. None of the debt has put options.
Laclede Group has a shelf registration statement on Form S-3 on file with the SEC for the issuance and sale of up to 168,698 shares on common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 129,413 and 123,889 at September 30, 2015 and November 20, 2015, respectively, remaining available for issuance under this Form S-3. Laclede Group also has a shelf registration statement on Form S-3 on file with the SEC for the issuance of equity and debt securities.
The Company's capitalization at September 30, 2015 consisted of 47.0% of Laclede Group common stock equity and 53.0% long-term debt, compared to 44.9% of Laclede Group common stock equity and 55.1% of long-term debt at September 30, 2014. The decline in the proportion of long-term debt is due primarily to the reclassification of $80.0 of Alagasco long-term debt to "current".
Laclede Gas
On December 6, 2013, Laclede Gas provided a notice of redemption to holders for the entire $80.0 aggregate principal amount outstanding of its previously issued 6.35% Series first mortgage bonds due in 2038. The redemption, which was for cash and included accrued interest, was completed on January 6, 2014.
At September 30, 2015, Laclede Gas had fixed-rate long-term debt, including the current portion, totaling $810.0. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. Of Laclede Gas' $810.0 in long-term debt, $25.0 have no call options, $435.0 have make-whole call options and $350.0 are callable at par three to six months prior to maturity. None of the debt has any put options.
Laclede Gas has authority from the MoPSC to issue debt securities and preferred stock, including on a private placement basis, as well as to issue common stock, receive paid-in-capital, and enter into capital lease agreements, all for a total of up to $518.0. This authorization was effective through June 30, 2015. On April 15, 2015, Laclede Gas filed with the MoPSC for a new financing authorization. On June 24, 2015, the MoPSC granted an extension of the current authorization until the pending application is resolved. During the year ended September 30, 2015, Laclede Gas issued no securities under this authorization. As of November 20, 2015, $369.7 remains available under this authorization. Laclede Gas has a shelf registration on Form S-3 on file with the SEC for issuance of first mortgage bonds, unsecured debt, and preferred stock, which expires on August 6, 2016. The amount, timing, and type of additional financing to be issued under this shelf registration will depend on cash requirements and market conditions, as well as future MoPSC authorizations. This authorization is more fully described in Note 5, Shareholder's Equity.Laclede Gas' capitalization at September 30, 2015 consisted of 56.2% of Laclede Gas common stock equity and 43.8% long-term debt compared to 55.5% of Laclede Gas common stock equity and 44.5% of long-term debt at September 30, 2014.
Substantially all of Laclede Gas' plant is subject to the liens of its first mortgage bonds. The mortgage contains several restrictions on Laclede Gas' ability to pay cash dividends on its common stock, which are described more fully in Note 5, Stockholders’ Equity.Alagasco
Because Alagasco has no standing authority to issue long-term debt, it must petition the APSC for each planned issuance. On November 3, 2014, Alagasco received authorization and approval from the APSC to borrow $35.0 for the purpose of redeeming, without penalty, $34.8 in existing long-term, callable debt financed at 5.7%. Pursuant to a call notice issued on December 15, 2014, Alagasco redeemed $34.8 of debt effective January 15, 2015. On February 3, 2015, Alagasco received authorization and approval from the APSC to borrow $80.0 for the purpose of refinancing the scheduled maturity on December 1, 2015 of $80.0 of existing debt. Pursuant to these authorizations, Alagasco committed to issue $115.0 unsecured notes in the private placement market:$35.0 at a rate of 3.21% for 10 years issued on September 15, 2015, and $80.0 at a rate of 4.31% for 30 years settling December 1, 2015. As of September 30, 2015, the current portion of long-term debt for Alagasco consisted of this $80.0 fixed-rate note maturing December 1, 2015. The Notes are senior unsecured obligations of Alagasco and rank equal in right to payment with all other senior unsecured indebtedness. Alagasco will use the proceeds from the sale of the Notes to refinance existing indebtedness and for general corporate purposes.
At September 30, 2015, Alagasco had fixed-rate long-term debt, including the current portion, totaling $250.0. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. All of Alagasco's $250.0 in long-term debt has make-whole call options.
Alagasco's capitalization at September 30, 2015 consisted of 83.7% of Alagasco common stock equity and 16.3% long-term debt compared to 77.3% of Alagasco common stock equity and 22.7% of long-term debt at September 30, 2014. The decline in the proportion of long-term debt is due primarily to the reclassification of $80.0 of Alagasco long-term to "current".
Other
Laclede Group's, Laclede Gas' and Alagasco'sSpire Alabama’s short-term credit facilities and long-term debt agreements contain customary covenants and default provisions. As of September 30, 2015,2017, there were no events of default under these covenants.
The Company’s, Laclede Gas’,Spire Missouri’s and Alagasco'sSpire 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. The credit ratings of the Company, Laclede GasSpire Missouri and AlagascoSpire Alabama remain at investment grade, but are subject to review and change by the rating agencies.
It is management’s view that the Company, Laclede GasSpire Missouri and AlagascoSpire 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.
Spire
On March 10, 2017, Spire redeemed in full at par its $250.0 floating rate notes due August 15, 2017, plus accrued and unpaid interest.
On March 15, 2017, Spire completed the issuance and sale of $100.0 in aggregate principal amount of Senior Notes due March 15, 2027. The notes bear interest at the rate of 3.93% per annum, payable semi-annually. The notes are senior unsecured obligations of the Company. The Company used the proceeds from the sale of the notes for the repayment of other debt.
In 2014, Spire issued 2.875 million equity units as a portion of the Spire Alabama acquisition financing. The equity units were originally issued at $50 per unit pursuant to the Purchase Contract dated as of June 11, 2014 between Spire and U.S. Bank National Association, as purchase contract agent, collateral agent, custodial agent and securities intermediary. These units consisted of $143.8 aggregate principal amount of 2014 Series A 2.00% remarketable junior subordinated notes due 2022 (the Junior Notes) and the Purchase Contract obligating the holder to purchase common shares at a future settlement date.
The equity unit investments were effectively replaced as planned in a series of transactions outlined below:
On February 22, 2017, the selling securityholders (as defined below) agreed to purchase the Junior Notes in connection with the remarketing of the junior subordinated notes that comprised a component of the equity units.
On the same day, Spire entered two related agreements: (1) a Securities Purchase and Registration Rights Agreement (the SPRRA), among Spire and the several purchasers named therein (the selling securityholders), obligating the selling securityholders to sell the Junior Notes to Spire in exchange for $143.8 aggregate principal amount of Spire’s 3.543% Senior Notes due 2024 (the Senior Notes) and a cash payment, and (2) an underwriting agreement with the selling securityholders and the several underwriters named therein in connection with the public offering of $150.0 aggregate principal amount of Senior Notes consisting of $6.2 principal amount of the Senior Notes issued and sold by Spire and $143.8 principal amount of the Senior Notes sold by the selling securityholders. The SPRRA granted the selling securityholders the right to offer the Senior Notes to the public in secondary public offerings.
The public offering was completed on February 27, 2017. Spire used its net proceeds from its sale of the Senior Notes to repay short-term debt. Spire did not receive any proceeds from the sale of the Senior Notes by the selling securityholders.
On April 3, 2017, Spire settled the Purchase Contracts underlying its 2.875 million equity units by issuing 2,504,684 shares of its common stock at a purchase price of $57.3921 per share. Fractional shares were settled in cash at $67.50 per share. The purchase price was funded with the proceeds from the Junior Notes. Under the contract terms, the equity units were converted to common stock at the rate of 0.8712, with a corresponding adjustment to purchase price. Spire received net cash proceeds of approximately $142.0, which it used to repay short-term debt incurred the previous month to redeem the floating rate notes.
At September 30, 2017, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $2,112.0, of which $980.0 was issued by Spire Missouri, $250.0 was issued by Spire Alabama, and $67.0 was issued by other subsidiaries. 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.
Of the Company’s $2,112.0 long-term debt (including the current portion), $25.0 has no call options, $1,037.0 has make-whole call options, $5.0 is callable currently, and $1,045.0 is callable at par one to six months prior to maturity.
As indicated in Note 5, Shareholders’ Equity, Spire has a shelf registration statement on Form S-3 on file with the SEC for the issuance of equity and debt securities. Including the current portion of long-term debt, the Company’s capitalization at September 30, 2017 consisted of 48.7% of common stock equity and 51.3% long-term debt, compared to 46.1% of common stock equity and 53.9% of long-term debt at September 30, 2016.
Spire Missouri
On September 15, 2017, Spire Missouri issued and sold in a private placement $50.0 in aggregate principal amount of its first mortgage bonds due September 15, 2032, $70.0 in aggregate principal amount of its first mortgage bonds due September 15, 2047 and $50.0 in aggregate principal amount of its first mortgage bonds due September 15, 2057. Spire Missouri used the proceeds to refinance existing indebtedness and for other general corporate purposes. The 2032 bonds, 2047 bonds and 2057 bonds bear interest at a rate per annum of 3.68%, 4.23% and 4.38%, respectively, payable semi-annually on the 15th day of March and September of each year.
Spire Missouri has authority from the MoPSC to issue debt securities and preferred stock, including on a private placement basis, as well as to issue common stock, receive paid-in-capital, and enter into capital lease agreements, all for a total of up to $300.0 for financings placed any time before September 30, 2018. During the year ended September 30, 2017, Spire Missouri issued $170.0 in securities under this authorization, so as of that date, $130.0 remains available to be issued.
At September 30, 2017, including the current portion but excluding unamortized discounts and debt issuance costs, Spire Missouri had long-term debt totaling $980.0. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. Of Spire Missouri’s $980.0 in long-term debt, $25.0 has no call options, $435.0 has make-whole call options and $520.0 is callable at par three to six months prior to maturity.
As indicated in Note 5, Shareholders’ Equity, Spire Missouri has a shelf registration on Form S-3 on file with the SEC for issuance of first mortgage bonds, unsecured debt, and preferred stock, which expires on September 22, 2019. 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. Including the current portion of long-term debt, Spire Missouri’s capitalization at September 30, 2017 consisted of 54.6% of common stock equity and 45.4% long-term debt compared to 57.1% of common stock equity and 42.9% of long-term debt at September 30, 2016.
Spire Alabama
At September 30, 2017, excluding unamortized debt issuance costs, Spire Alabama had fixed-rate long-term debt totaling $250.0. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. All of Spire Alabama’s $250.0 long-term debt has make-whole call options.
Spire Alabama’s capitalization at September 30, 2017 consisted of 77.8% of common stock equity and 22.2% long-term debt, consistent with 77.8% of common stock equity and 22.2% of long-term debt at September 30, 2016.
Because Spire Alabama has no standing authority to issue long-term debt, it must petition the APSC for each planned issuance. On October 3, 2017, Spire Alabama received authorization and approval from the APSC to borrow up to $75.0 for general corporate purposes and to retire short-term debt.
7. NOTES PAYABLE AND CREDIT AGREEMENTS
Short-term cash requirements outside of the Utilities have generally been funded by Laclede GroupSpire or met with internally generated funds. Atfunds September 30, 2015, Laclede Group had a $150.0 syndicated line of credit from nine banks maturing on September 3, 2019, with the largest portion provided by a single bank being 15.6%. The line of credit has a covenant limiting the total debt of the consolidated Laclede Group to no more than 70% of the Company's total capitalization. As defined in the line of credit, this ratio was 58% on September 30, 2015. Laclede Group's line may be used to provide for the funding needs of various subsidiaries. Borrowing under Laclede's Group's line during fiscal year 2015 ranged from $32.5 to $80.0, with the balance at September 30, 2015 of $74.0. Borrowings under Laclede Group's line during fiscal year 2014 ranged from $0 to $40.0, with the balance at September 30, 2014 of $32.5. The maturity date of the loan agreement is September 3, 2019.
The Utilities’ short-termshort term borrowing requirements typically peak during the colder months while the Company's needs are less seasonal. Thesemonths. Total short-term cashborrowing requirements can be met through the sale of commercial paper supported by lines ofa revolving credit with banksfacility or through direct use of the lines of credit. At September 30, 2015, Laclede Gas hadrevolving credit facility.
On December 14, 2016, Spire, Spire Missouri, and Spire Alabama entered into a new syndicated line ofrevolving credit of $450.0 in place from nine banks.facility pursuant to a loan agreement with 11 banks, expiring December 14, 2021. The largest portion provided by a single bank under the line is 15.6%12.3%. Laclede Gas'The loan agreement replaced Spire’s and Spire Missouri’s existing loan agreements dated as of September 3, 2013 and amended September 3, 2014, which were set to expire on September 3, 2019, and Spire Alabama’s existing loan agreement dated September 2, 2014, which was set to expire September 2, 2019. All three previous agreements were terminated on December 14, 2016.
The loan agreement has an aggregate credit commitment of $975.0, including sublimits of $300.0 for Spire, $475.0 for Spire Missouri, and $200.0 for Spire Alabama. These sublimits may be reallocated from time to time among the three borrowers within the $975.0 aggregate commitment. Spire may use its line to provide for the funding needs of credit includes a covenantvarious subsidiaries. Spire, Spire Missouri, and Spire Alabama expect to use the loan agreement for general corporate purposes, including short-term borrowings and letters of credit. 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, 20152017, total debt was 50%56% of total capitalization. Borrowing under Laclede Gas' commercial paper program during fiscal year 2015 ranged from $102.1 - $341.0, with the balance at September 30, 2015 at $233.0. Borrowing under Laclede Gas' commercial paper program during fiscal 2014 ranged from $0.0 to $244.5, with the balance at September 30, 2014 of $238.6. Laclede Gas' commercial paper program is backed by the line of credit. The maturity date of the line of credit is September 3, 2019.
On September 2, 2014, Alagasco entered into a new $150.0 syndicated line of credit with twelve banks and extinguished the line that was in place prior to its acquisition by Laclede Group. The largest portion provided by a single bank is 10%. The line of credit, which matures on September 2, 2019, has a covenant limiting total debt to no more than 70% of Alagasco's total capitalization. As defined in the line of credit, this ratio stood at 24% on September 30, 2015. Borrowing under Alagasco's line during fiscal year 2015 ranged from $0.0 to $69.5, with the balance at September 30, 2015 of $31.0. Borrowings under Alagasco's linecapitalization for the month of September of fiscal 2014 ranged from $9.0 to $16.0, with the balance at September 30, 2014 of $16.0.
Laclede Group
Information about the Laclede Group’s short-termconsolidated Company, 50% for Spire Missouri, and 33% for Spire Alabama. There were no borrowings (excluding intercompany borrowings) during the twelve months ended September 30, andagainst this credit facility as of September 30, 2017.
On December 21, 2016, Spire established a commercial paper program (Program) pursuant to which Spire may issue short-term, unsecured commercial paper notes (Notes). Amounts available under the 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 Program at any time not to exceed $975.0. The Notes may have maturities of up to 365 days from date of issue. The net proceeds of the issuances of the Notes are expected to be used for general corporate purposes, including to provide working capital for both utility and non-utility subsidiaries. As of September 30, 2017, Notes outstanding under the Program totaled $477.3.
Information about Spire’s consolidated short-term borrowings is presented below for 2015 and 2014:
|
| | | | |
| | Laclede Gas Commercial Paper Borrowings | Laclede Group Bank Line Borrowings*** | Alagasco Bank Line Borrowings * | Total Short-Term Borrowings ** |
| Year Ended September 30, 2015 | | | | |
| Weighted average borrowings outstanding | $212.7 | $65.6 | $22.3 | $300.6 |
| Weighted average interest rate | 0.4% | 1.4% | 1.1% | 0.7% |
| Range of borrowings outstanding | $ 102.1 - $341.0 | $32.5 - $80.0 | $0 - $69.5 | $180.1 - $488.5 |
| As of September 30, 2015 | | | | |
| Borrowings outstanding at end of period | $233.0 | $74.0 | $31.0 | $338.0 |
| Weighted average interest rate | 0.5% | 1.5% | 1.2% | 0.8% |
| Year Ended September 30, 2014 | | | | |
| Weighted average borrowings outstanding | $77.6 | $3.6 | $13.2 | $82.3 |
| Weighted average interest rate | 0.3% | 1.4% | 1.2% | 0.5% |
| Range of borrowings outstanding | $0 – $244.5 | $0 – $40.0 | $9.0 – $16.0 | $0 – $300.5 |
| As of September 30, 2014 | | | | |
| Borrowings outstanding at end of period | $238.6 | $32.5 | $16.0 | $287.1 |
| Weighted average interest rate | 0.3% | 1.4% | 1.2% | 0.5% |
* Weighted average borrowings for Alagasco represents Laclede Group's ownership period of one month. The one month average approximates the Alagasco daily outstanding balance for the fiscal year ended September 30, 2014.
** Represents twelve month weighted average for Laclede Group***, Laclede Gas, and Alagasco.
*** The Laclede Group, Inc., excluding its wholly owned subsidiaries.
below. Based on average short-term borrowings for the twelve monthsyear ended September 30, 2015,2017, an increase in the average interest rate of 100 basis points would decrease Laclede Group'sSpire’s pre-tax earnings and cash flows by approximately $3.0$4.9 on an annual basis, portions of which may be offset through the application of PGA or GSA carrying costs.
|
| | | | |
| | Spire Short‑term Borrowings1 | Spire Missouri Commercial Paper Borrowings2 | Spire Alabama
Bank Line Borrowings | Total Short‑term Borrowings |
| Year Ended September 30, 2017 | | | | |
| Weighted average borrowings outstanding | $369.0 | $88.5 | $28.3 | $485.8 |
| Weighted average interest rate | 1.3% | 0.9% | 1.6% | 1.2% |
| Range of borrowings outstanding | $73.0 - $675.6 | $0.0 - $329.7 | $0.0 - $102.5 | $395.5 - $675.6 |
| As of September 30, 2017 | | | | |
| Borrowings outstanding | $477.3 | $— | $— | $477.3 |
| Weighted average interest rate | 1.5% | —% | —% | 1.5% |
| Year Ended September 30, 2016 | | | | |
| Weighted average borrowings outstanding | $42.7 | $201.0 | $30.2 | $273.9 |
| Weighted average interest rate | 1.6% | 0.7% | 1.4% | 0.9% |
| Range of borrowings outstanding | $0.0 - $82.0 | $43.0 - $307.2 | $0.0 - $82.0 | $73.1 - $427.2 |
| As of September 30, 2016 | | | | |
| Borrowings outstanding | $73.0 | $243.7 | $82.0 | $398.7 |
| Weighted average interest rate | 1.8% | 0.8% | 1.5% | 1.1% |
| |
1 | Spire Short-term Borrowings includes bank line borrowings of Spire Inc. (excluding its subsidiaries) and, since January 1, 2017, commercial paper. Of Spire’s $477.3 borrowings outstanding as of September 30, 2017, $440.0 was used to provide funding to its subsidiaries, including Spire Missouri ($203.0), Spire Alabama ($169.9), Spire EnergySouth and subsidiaries ($12.9), Spire STL Pipeline LLC ($26.6), and others ($27.6). |
2 The commercial paper program for Spire Missouri terminated February 2, 2017.
Spire Missouri
Information about Laclede Gas'Spire Missouri’s short-term borrowings during the twelve months ended September 30, and as of September 30, is presented below for 2015 and 2014:
|
| | | |
| | Commercial Paper Borrowings | Borrowings from Laclede Group | Total Short-Term Borrowings |
| | | | |
| Year Ended September 30, 2015 | | | |
| Weighted average borrowings outstanding | $212.7 | $0.3 | $213.0 |
| Weighted average interest rate | 0.4% | 0.5% | 0.4% |
| Range of borrowings outstanding | $102.1 - $341.0 | $0 - $10.4 | $104.2 - $ 341.0 |
| As of September 30, 2015 | | | |
| Borrowings outstanding at end of period | $233.0 | $— | $233.0 |
| Weighted average interest rate | 0.5% | —% | 0.5% |
| Year Ended September 30, 2014 | | | |
| Weighted average borrowings outstanding | $77.6 | $63.4 | $141.0 |
| Weighted average interest rate | 0.3% | 0.3% | 0.3% |
| Range of borrowings outstanding | $0 – $244.5 | $0 – $189.0 | $45.5 – $272.1 |
| As of September 30, 2014 | | | |
| Borrowings outstanding at end of period | $238.6 | $— | $238.6 |
| Weighted average interest rate | 0.3% | —% | 0.3% |
below. Based on average short-term borrowings for the twelve monthsyear ended September 30, 2015,2017, an increase in the average interest rate of 100 basis points would decrease Laclede Gas'Spire Missouri’s pre-tax earnings and cash flows by approximately $2.1$2.8 on an annual basis, portions of which may be offset through the application of PGA carrying costs.
|
| | | |
| | Commercial Paper Borrowings | Borrowings from Spire | Total Short-term Borrowings |
| Year Ended September 30, 2017 | | | |
| Weighted average borrowings outstanding | $88.5 | $195.5 | $284.0 |
| Weighted average interest rate | 0.9% | 1.3% | 1.2% |
| Range of borrowings outstanding | $0.0 - $329.7 | $0.0 - $338.6 | $168.3 - $358.9 |
| As of September 30, 2017 | | | |
| Borrowings outstanding | $— | $203.0 | $203.0 |
| Weighted average interest rate | —% | 1.5% | 1.5% |
| Year Ended September 30, 2016 | | | |
| Weighted average borrowings outstanding | $201.0 | $14.7 | $215.7 |
| Weighted average interest rate | 0.7% | 0.8% | 0.7% |
| Range of borrowings outstanding | $43.0 - $307.2 | $0.0 - $114.2 | $127.8 - $ 307.2 |
| As of September 30, 2016 | | | |
| Borrowings outstanding | $243.7 | $— | $243.7 |
| Weighted average interest rate | 0.8% | —% | 0.8% |
Spire Alabama
Information about Alagasco'sSpire Alabama’s short-term borrowings during the twelve months ended September 30, and as of September 30, is presented below for 2015 and 2014:
|
| |
| Bank Line Borrowings |
| |
Year Ended September 30, 2015 | |
Weighted average borrowings outstanding | $22.3 |
Weighted average interest rate | 1.1% |
Range of borrowings outstanding | $0 - $69.5 |
As of September 30, 2015 | |
Borrowings outstanding at end of period | $31.0 |
Weighted average interest rate | 1.2% |
9/30/2014 | |
Weighted average borrowings outstanding | $13.7 |
Weighted average interest rate | 1.3% |
Range of borrowings outstanding | $0.0 - $55.0 |
As of September 30, 2014 | |
Borrowings outstanding at end of period | $16.0 |
Weighted average interest rate | 1.2% |
below. Based on average short-term borrowings for the twelve monthsyear ended September 30, 2015,2017, an increase in the average interest rate of 100 basis points would decrease Alagasco's Gas'Spire Alabama’s pre-tax earnings and cash flows by approximately $0.2$1.1 on an annual basis, portions of which may be offset through the application of GSA carrying costs.
|
| | | |
| | Bank Line Borrowings | Borrowings from Spire | Total Short-term Borrowings |
| Year Ended September 30, 2017 | | | |
| Weighted average borrowings outstanding | $28.3 | $78.6 | $106.9 |
| Weighted average interest rate | 1.6% | 1.4% | 1.5% |
| Range of borrowings outstanding | $0.0 - $102.5 | $0.0 - $171.0 | $74.0 - $171.0 |
| As of September 30, 2017 | | | |
| Borrowings outstanding | $— | $169.9 | $169.9 |
| Weighted average interest rate | —% | 1.5% | 1.5% |
| Year Ended September 30, 2016 | | | |
| Weighted average borrowings outstanding | $30.2 | $12.4 | $42.6 |
| Weighted average interest rate | 1.4% | 1.4% | 1.4% |
| Range of borrowings outstanding | $0.0 - $82.0 | $0.0 - $61.9 | $19.0 - $82.0 |
| As of September 30, 2016 | | | |
| Borrowings outstanding | $82.0 | $— | $82.0 |
| Weighted average interest rate | 1.5% | —% | 1.5% |
| |
| 8. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
Laclede GroupSpire
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis for the Company are as follows:
| | | | | | | | Classification of Estimated Fair Value | | | | | Classification of Estimated Fair Value |
| | Carrying Amount | | Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | Carrying Amount |
| | Fair Value |
| | Quoted Prices in Active Markets (Level 1) |
| | Significant Observable Inputs (Level 2) |
|
| As of September 30, 2015 | | | | | | | | | | |
| As of September 30, 2017 | | | | | | | | |
| Cash and cash equivalents | $ | 13.8 |
| | $ | 13.8 |
| | $ | 13.8 |
| | $ | — |
| | $ | — |
| $ | 7.4 |
| | $ | 7.4 |
| | $ | 7.4 |
| | $ | — |
|
| Short-term debt | 338.0 |
| | 338.0 |
| | — |
| | 338.0 |
| | — |
| 477.3 |
| | 477.3 |
| | — |
| | 477.3 |
|
| Long-term debt, including current portion | 1,851.5 |
| | 1,944.2 |
| | — |
| | 1,944.2 |
| | — |
| 2,095.0 |
| | 2,210.3 |
| | — |
| | 2,210.3 |
|
| | | | | | | | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | | | |
| As of September 30, 2016 | | | | | | | | |
| Cash and cash equivalents | $ | 16.1 |
| | $ | 16.1 |
| | $ | 16.1 |
| | $ | — |
| | $ | — |
| $ | 5.2 |
| | $ | 5.2 |
| | $ | 5.2 |
| | $ | — |
|
| Short-term debt | 287.1 |
| | 287.1 |
| | — |
| | 287.1 |
| | — |
| 398.7 |
| | 398.7 |
| | — |
| | 398.7 |
|
| Long-term debt, including current portion | 1,851.0 |
| | 1,937.3 |
| | — |
| | 1,937.3 |
| | — |
| 2,070.7 |
| | 2,257.1 |
| | — |
| | 2,257.1 |
|
Laclede GasSpire Missouri
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis for Laclede GasSpire Missouri are as follows: | | | | | | | | Classification of Estimated Fair Value | | | | | Classification of Estimated Fair Value |
| | Carrying Amount | | Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | Carrying Amount |
| | Fair Value |
| | Quoted Prices in Active Markets (Level 1) |
| | Significant Observable Inputs (Level 2) |
|
| As of September 30, 2015 | | | | | | | | | | |
| As of September 30, 2017 | | | | | | | | |
| Cash and cash equivalents | | $ | 2.5 |
| | $ | 2.5 |
| | $ | 2.5 |
| | $ | — |
|
| Short-term debt | | 203.0 |
| | 203.0 |
| | — |
| | 203.0 |
|
| Long-term debt, including current portion | | 973.9 |
| | 1,056.9 |
| | — |
| | 1,056.9 |
|
| | | | | | | | | |
| As of September 30, 2016 | | | | | | | | |
| Cash and cash equivalents | $ | 1.7 |
| | $ | 1.7 |
| | $ | 1.7 |
| | $ | — |
| | $ | — |
| $ | 2.1 |
| | $ | 2.1 |
| | $ | 2.1 |
| | $ | — |
|
| Short-term debt | 233.0 |
| | 233.0 |
| | — |
| | 233.0 |
| | — |
| 243.7 |
| | 243.7 |
| | — |
| | 243.7 |
|
| Long-term debt | 808.1 |
| | 880.2 |
| | — |
| | 880.2 |
| | — |
| 804.1 |
| | 900.4 |
| | — |
| | 900.4 |
|
| | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | | | |
| Cash and cash equivalents | $ | 3.7 |
| | $ | 3.7 |
| | $ | 3.7 |
| | $ | — |
| | $ | — |
| |
| Short-term debt | 238.6 |
| | 238.6 |
| | — |
| | 238.6 |
| | — |
| |
| Long-term debt | 807.9 |
| | 876.2 |
| | — |
| | 876.2 |
| | — |
| |
Alagasco
Spire Alabama
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis for AlagascoSpire Alabama are as follows: | | | | | | | | Classification of Estimated Fair Value | | | | | Classification of Estimated Fair Value |
| | Carrying Amount | | Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | Carrying Amount |
| | Fair Value |
| | Quoted Prices in Active Markets (Level 1) |
| | Significant Observable Inputs (Level 2) |
|
| As of September 30, 2015 | | | | | | | | | | |
| Cash and cash equivalents | $ | 7.2 |
| | $ | 7.2 |
| | $ | 7.2 |
| | $ | — |
| | $ | — |
| |
| Short-term debt | 31.0 |
| | 31.0 |
| | — |
| | 31.0 |
| | — |
| |
| Long-term debt, including current portion | 250.0 |
| | 263.2 |
| | — |
| | 263.2 |
| | — |
| |
| | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | | | |
| As of September 30, 2017 | | | | | | | | |
| Cash and cash equivalents | $ | 5.6 |
| | $ | 5.6 |
| | $ | 5.6 |
| | $ | — |
| | $ | — |
| $ | 0.1 |
| | $ | 0.1 |
| | $ | 0.1 |
| | $ | — |
|
| Short-term debt | 16.0 |
| | 16.0 |
| | — |
| | 16.0 |
| | — |
| 169.9 |
| | 169.9 |
| | — |
| | 169.9 |
|
| Long-term debt | 249.8 |
| | 266.4 |
| | — |
| | 266.4 |
| | — |
| 247.8 |
| | 269.4 |
| | — |
| | 269.4 |
|
| | | | | | | | | |
| As of September 30, 2016 | | | | | | | | |
| Short-term debt | | $ | 82.0 |
| | $ | 82.0 |
| | $ | — |
| | $ | 82.0 |
|
| Long-term debt, including current portion | | 247.6 |
| | 275.5 |
| | — |
| | 275.5 |
|
The carrying amounts for cash and cash equivalents and short-term debt approximate fair value due to the short maturity of these instruments. The fair values of long-term debt are estimated based on market prices for similar issues. Refer to Note 9, Fair Value Measurements, for information on financial instruments measured at fair value on a recurring basis.
9. FAIR VALUE MEASUREMENTS
Laclede GroupSpire
The following tables for Laclede Group and Laclede Gasinformation 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. Alagasco had no such assets or liabilities as of September 30, 2015 or 2014.
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 New York Mercantile Exchange (NYMEX).NYMEX. Derivative instruments classified as Level 2 include physical commodity derivatives that are valued using Over-the-Counter Bulletin Board (OTCBB), 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'smanagement’s assumptions about how market participants would price the asset or liability. There were no material Level 3 balances as of September 30, 20152017 or 2014.2016. The Company'sCompany’s and the Utilities'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 "Other investments" line of theCompany’s balance sheets and in “Property and other investments” on Spire Missouri’s balance sheets. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net inon the balance sheets when a legally enforceable netting agreement exist between the Company or Laclede GasSpire Missouri and the counterparty to the derivative contract. For additional information on derivative instruments, see Note 10, Derivative Instruments and Hedging Activities.
|
| | | | | | | | | | | | | | | | | | | |
| | 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, 2015 | | | | | | | | | |
| ASSETS | | | | | | | | | |
| Gas Utility | | | | | | | | | |
| U. S. Stock/Bond Mutual Funds | $ | 15.5 |
| | $ | 4.0 |
| | $ | — |
| | $ | — |
| | $ | 19.5 |
|
| NYMEX/ICE natural gas contracts | 1.3 |
| | — |
| | — |
| | (1.3 | ) | | — |
|
| Subtotal | 16.8 |
| | 4.0 |
| | — |
| | (1.3 | ) | | 19.5 |
|
| Gas Marketing | | | | | | | | | |
| NYMEX/ICE natural gas contracts | 6.3 |
| | 4.3 |
| | — |
| | (6.6 | ) | | 4.0 |
|
| Natural gas commodity contracts | — |
| | 1.5 |
| | 0.2 |
| | (0.5 | ) | | 1.2 |
|
| Total | $ | 23.1 |
| | $ | 9.8 |
| | $ | 0.2 |
| | $ | (8.4 | ) | | $ | 24.7 |
|
| LIABILITIES | | | | | | | | | |
| Gas Utility | | | | | | | | | |
| NYMEX/ICE natural gas contracts | $ | 16.4 |
| | $ | — |
| | $ | — |
| | $ | (16.4 | ) | | $ | — |
|
| OTCBB natural gas contracts | — |
| | 5.9 |
| | — |
| | — |
| | 5.9 |
|
| NYMEX gasoline and heating oil contracts | 0.3 |
| | — |
| | — |
| | (0.3 | ) | | — |
|
| Subtotal | 16.7 |
| | 5.9 |
| | — |
| | (16.7 | ) | | 5.9 |
|
| Gas Marketing | | | | | | | | | |
| NYMEX/ICE natural gas contracts | 1.2 |
| | 3.9 |
| | — |
| | (5.1 | ) | | — |
|
| Natural gas commodity contracts | — |
| | 2.2 |
| | — |
| | (0.5 | ) | | 1.7 |
|
| Total | $ | 17.9 |
| | $ | 12.0 |
| | $ | — |
| | $ | (22.3 | ) | | $ | 7.6 |
|
| | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | | |
| ASSETS | | | | | | | | | |
| Gas Utility | | | | | | | | | |
| U. S. Stock/Bond Mutual Funds | $ | 15.7 |
| | $ | 3.9 |
| | $ | — |
| | $ | — |
| | $ | 19.6 |
|
| NYMEX/ICE natural gas contracts | 2.4 |
| | — |
| | — |
| | (2.4 | ) | | — |
|
| OTCBB natural gas contracts | — |
| | 0.1 |
| | — |
| | (0.1 | ) | | — |
|
| Subtotal | 18.1 |
| | 4.0 |
| | — |
| | (2.5 | ) | | 19.6 |
|
| Gas Marketing | | | | | | | | | |
| NYMEX natural gas contracts | 1.0 |
| | 1.2 |
| | — |
| | (1.8 | ) | | 0.4 |
|
| Natural gas commodity contracts | — |
| | 2.7 |
| | 0.2 |
| | (0.2 | ) | | 2.7 |
|
| Total | $ | 19.1 |
| | $ | 7.9 |
| | $ | 0.2 |
| | $ | (4.5 | ) | | $ | 22.7 |
|
| LIABILITIES |
| |
| |
| |
| |
|
| Gas Utility | | | | | | | | | |
| NYMEX/ICE natural gas contracts | $ | 5.2 |
| | $ | — |
| | $ | — |
| | $ | (5.2 | ) | | $ | — |
|
| OTCBB natural gas contracts | — |
| | 4.1 |
| | — |
| | (0.1 | ) | | 4.0 |
|
| NYMEX gasoline and heating oil contracts | 0.2 |
| | — |
| | — |
| | (0.2 | ) | | — |
|
| Subtotal | 5.4 |
| | 4.1 |
| | — |
| | (5.5 | ) | | 4.0 |
|
| Gas Marketing | | | | | | | | | |
| NYMEX/ICE natural gas contracts | 1.1 |
| | 0.7 |
| | — |
| | (1.8 | ) | | — |
|
| Natural gas commodity contracts | — |
| | 0.7 |
| | — |
| | (0.2 | ) | | 0.5 |
|
| Total | $ | 6.5 |
| | $ | 5.5 |
| | $ | — |
| | $ | (7.5 | ) | | $ | 4.5 |
|
Laclede Gas
| | | | 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 | 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, 2015 | | | | | | | | | | |
| As of September 30, 2017 | | | | | | | | | | |
| ASSETS | | | | | | | | | | | | | | | | | | |
| U. S. Stock/Bond Mutual Funds | $ | 15.5 |
| | $ | 4.0 |
| | $ | — |
| | $ | — |
| | $ | 19.5 |
| |
| Gas Utility: | | | | | | | | | | |
| US stock/bond mutual funds | | $ | 18.3 |
| | $ | 4.1 |
| | $ | — |
| | $ | — |
| | $ | 22.4 |
|
| NYMEX/ICE natural gas contracts | 1.3 |
| | — |
| | — |
| | (1.3 | ) | | — |
| 3.4 |
| | — |
| | — |
| | (3.4 | ) | | — |
|
| Gasoline and heating oil contracts | | 0.1 |
| | — |
| | — |
| | — |
| | 0.1 |
|
| Gas Marketing: | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | | 1.3 |
| | 1.3 |
| | — |
| | (2.1 | ) | | 0.5 |
|
| Natural gas commodity contracts | | — |
| | 6.8 |
| | 0.1 |
| | (1.2 | ) | | 5.7 |
|
| Total | $ | 16.8 |
| | $ | 4.0 |
| | $ | — |
| | $ | (1.3 | ) | | $ | 19.5 |
| $ | 23.1 |
| | $ | 12.2 |
| | $ | 0.1 |
| | $ | (6.7 | ) | | $ | 28.7 |
|
| LIABILITIES | | | | | | | | | | | | | | | | | | |
| Gas Utility: | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | | $ | 1.9 |
| | $ | — |
| | $ | — |
| | $ | (1.9 | ) | | $ | — |
|
| Gas Marketing: | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | | 1.8 |
| | 0.3 |
| | — |
| | (2.1 | ) | | — |
|
| Natural gas commodity contracts | | — |
| | 8.4 |
| | — |
| | (1.2 | ) | | 7.2 |
|
| Other: | | | | | | | | | | |
| Interest rate swaps | | — |
| | 0.9 |
| | — |
| | — |
| | 0.9 |
|
| Total | | $ | 3.7 |
| | $ | 9.6 |
| | $ | — |
| | $ | (5.2 | ) | | $ | 8.1 |
|
| | | | | | | | | | | |
| As of September 30, 2016 | | | | | | | | | | |
| ASSETS | | | | | | | | | | |
| Gas Utility: | | | | | | | | | | |
| US stock/bond mutual funds | | $ | 16.8 |
| | $ | 4.1 |
| | $ | — |
| | $ | — |
| | $ | 20.9 |
|
| NYMEX/ICE natural gas contracts | | 5.3 |
| | — |
| | — |
| | (0.4 | ) | | 4.9 |
|
| Gasoline and heating oil contracts | | 0.4 |
| | — |
| | — |
| | (0.3 | ) | | 0.1 |
|
| Gas Marketing: | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | | 0.4 |
| | 3.4 |
| | — |
| | (3.4 | ) | | 0.4 |
|
| Natural gas commodity contracts | | — |
| | 8.7 |
| | 0.2 |
| | (0.9 | ) | | 8.0 |
|
| Total | | $ | 22.9 |
| | $ | 16.2 |
| | $ | 0.2 |
| | $ | (5.0 | ) | | $ | 34.3 |
|
| LIABILITIES | |
| |
| |
| |
| |
|
| Gas Utility: | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | $ | 16.4 |
| | $ | — |
| | $ | — |
| | $ | (16.4 | ) | | $ | — |
| $ | 1.6 |
| | $ | — |
| | $ | — |
| | $ | (1.6 | ) | | $ | — |
|
| OTCBB natural gas contracts | — |
| | 5.9 |
| | — |
| | — |
| | 5.9 |
| — |
| | 0.2 |
| | — |
| | — |
| | 0.2 |
|
| Gasoline and heating oil contracts | 0.3 |
| | — |
| | — |
| | (0.3 | ) | | — |
| |
| Gas Marketing: | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | | 3.5 |
| | 1.6 |
| | — |
| | (5.1 | ) | | — |
|
| Natural gas commodity contracts | | — |
| | 2.6 |
| | — |
| | (0.9 | ) | | 1.7 |
|
| Other: | | | | | | | | | | |
| Interest rate swaps | | — |
| | 3.0 |
| | — |
| | — |
| | 3.0 |
|
| Total | $ | 16.7 |
| | $ | 5.9 |
| | $ | — |
| | $ | (16.7 | ) | | $ | 5.9 |
| $ | 5.1 |
| | $ | 7.4 |
| | $ | — |
| | $ | (7.6 | ) | | $ | 4.9 |
|
| | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | | | |
| ASSETS | | | | | | | | | | |
| U. S. Stock/Bond Mutual Funds | $ | 15.7 |
| | $ | 3.9 |
| | $ | — |
| | $ | — |
| | $ | 19.6 |
| |
| NYMEX/ICE natural gas contracts | 2.4 |
| | — |
| | — |
| | (2.4 | ) | | — |
| |
| OTCBB natural gas contracts | — |
| | 0.1 |
| | — |
| | (0.1 | ) | | — |
| |
| Total | $ | 18.1 |
| | $ | 4.0 |
| | $ | — |
| | $ | (2.5 | ) | | $ | 19.6 |
| |
| LIABILITIES | | | | | | | | | | |
| NYMEX/ICE natural gas contracts | $ | 5.2 |
| | $ | — |
| | $ | — |
| | $ | (5.2 | ) | | $ | — |
| |
| OTCBB natural gas contracts | — |
| | 4.1 |
| | — |
| | (0.1 | ) | | 4.0 |
| |
| NYMEX gasoline and heating oil contracts | 0.2 |
| | — |
| | — |
| | (0.2 | ) | | — |
| |
| Total | $ | 5.4 |
| | $ | 4.1 |
| | $ | — |
| | $ | (5.5 | ) | | $ | 4.0 |
| |
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 |
| As of September 30, 2017 | | | | | | | | | |
| ASSETS | | | | | | | | | |
| US stock/bond mutual funds | $ | 18.3 |
| | $ | 4.1 |
| | $ | — |
| | $ | — |
| | $ | 22.4 |
|
| NYMEX/ICE natural gas contracts | 3.4 |
| | — |
| | — |
| | (3.4 | ) | | — |
|
| Gasoline and heating oil contracts | 0.1 |
| | — |
| | — |
| | — |
| | 0.1 |
|
| Total | $ | 21.8 |
| | $ | 4.1 |
| | $ | — |
| | $ | (3.4 | ) | | $ | 22.5 |
|
| LIABILITIES | | | | | | | | | |
| NYMEX/ICE natural gas contracts | $ | 1.9 |
| | $ | — |
| | $ | — |
| | $ | (1.9 | ) | | $ | — |
|
| Total | $ | 1.9 |
| | $ | — |
| | $ | — |
| | $ | (1.9 | ) | | $ | — |
|
| | | | | | | | | | |
| As of September 30, 2016 | | | | | | | | | |
| ASSETS | | | | | | | | | |
| US stock/bond mutual funds | $ | 16.8 |
| | $ | 4.1 |
| | $ | — |
| | $ | — |
| | $ | 20.9 |
|
| NYMEX/ICE natural gas contracts | 5.3 |
| | — |
| | — |
| | (0.4 | ) | | 4.9 |
|
| Gasoline and heating oil contracts | 0.3 |
| | — |
| | — |
| | (0.3 | ) | | — |
|
| Total | $ | 22.4 |
| | $ | 4.1 |
| | $ | — |
| | $ | (0.7 | ) | | $ | 25.8 |
|
| LIABILITIES | | | | | | | | | |
| NYMEX/ICE natural gas contracts | $ | 1.6 |
| | $ | — |
| | $ | — |
| | $ | (1.6 | ) | | $ | — |
|
| OTCBB natural gas contracts | — |
| | 0.2 |
| | — |
| | — |
| | 0.2 |
|
| Total | $ | 1.6 |
| | $ | 0.2 |
| | $ | — |
| | $ | (1.6 | ) | | $ | 0.2 |
|
Spire Alabama
During the fiscal second quarter of 2016 Spire Alabama commenced a gasoline derivative program to stabilize the cost of fuel used in operations. As of September 30, 2017, the fair value of related gasoline contracts was not significant.
| |
| 10. | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
Laclede GroupSpire
Laclede GasSpire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options, swaps and over-the-counter instruments,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 the Missouri Utilities'Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. ThisFurther discussion of this policy strictly prohibits speculation and permits the Missouri Utilities 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 the Missouri Utilities' use of natural gas derivative instruments are allowed tocan be passed on to the Missouri Utilities’ customers through the operation of their PGA clauses, through which the MoPSC allows the Missouri Utilities to recover gas supply costs, subject to prudence review by the MoPSC. Accordingly, the Missouri Utilities do not expect any adverse earnings impact as a result of the use of these derivative instruments. In prior years, Alagasco entered into cash flow derivative commodity instruments to hedge its exposure to price fluctuations on its gas supply. Alagasco 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 Alagasco’s APSC approved tariff. At September 30, 2015, Alagasco had no open derivative positions. The Utilities do 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 and GSA rider may cause interim variations in short-term cash flows, because the Utilities are subject to cash margin requirements associated with changesfound in the values of these instruments. Nevertheless, carrying costs associated with such requirements are recovered through the PGA clauses and GSA rider.Spire Missouri section.
From time to time Laclede Gas purchasesSpire 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 used in the course of itstheir business. At September 30, 2015, Laclede Gas held 1.8 million gallons of gasoline futures contracts at an average price of $1.63 per gallon. Most of these contracts, the longest of which extends to December 2016, are designated as cash flow hedges of forecasted transactions pursuant to ASC Topic 815. The gains or lossesFurther information on these derivative instruments are not subject to Laclede Gas’ PGA clause.derivatives can be found in the Spire Missouri and Spire Alabama sections, respectively.
In the course of its business, Laclede Group’sSpire’s gas marketing subsidiary, LER,Spire Marketing, which includes its 100%wholly owned subsidiary LERSpire Storage Services, Inc., enters into commitments associated with the purchase or sale of natural gas. Certain of LER’sSpire 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 LER’sSpire 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, 2015,2017, the fair values of 104.7202.1 million MMBtu of non-exchange traded natural gas commodity contracts were reflected in the Consolidated Balance Sheet. Of these contracts, 88.0156.8 million MMBtu will settle during fiscal year 2016,2018, and 14.934.3 million MMBtu, 1.75.9 million MMBtu, 4.1 million MMBtu, 0.9 million MMBtu, and 0.1 million MMBtu will settle during 2017, 2018,fiscal years 2019, 2020, 2021, 2022, and 2019,2023, 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, LERSpire 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 Clear Europe (ICE) futures, swap, and option contracts to lock in margins.
At September 30, 2015, LER’s2017, Spire Marketing’s unmatched fixed-price positions were not material to Laclede Group’sSpire’s financial position or results of operations. LER’sSpire 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.
On April 14, 2014, as amended on July 8, 2014, Laclede GroupDuring fiscal 2015, Spire Alabama entered into certain interest rate swap agreements, with a notional amount $375.0,transactions to effectively lockprotect itself against adverse movement in interest rates on a portionin anticipation of theits issuance of $115.0 of long-term debt it anticipated issuing to finance its acquisitiondebt. The notional amount of Alagasco.
these interest rate swaps was$104.5. These derivative instruments were designated as cash flow hedges of forecasted transactions. These forward starting swaps involved the payment of a fixed interest rate and the receipt of a floating interest rate (thethe London Interbank Offered Rate also known as LIBOR)(LIBOR) over the terms specified in the contracts. On August 6, 2014, theTermination of these interest rate swap agreements were terminated and the settlement resultedlater in a $19.0 loss by Laclede Group, which assigned the loss as a regulatory asset since the interest rate swaps were entered into to hedge the interest payments on the $625.0 of long-term debt issued on August 19, 2014 by Laclede Group.
During the second quarter of fiscal year 2015 Alagasco entered into certain interest rate swap transactions to protect itself against adverse movement in interest rates in anticipation of its issuance of $115.0 of long-term debt. Alagasco received prior approval from the APSC to enter into these hedges. The notional amount of interest rate swaps outstanding was $80.5 with stated maturities ranging from 2025 to 2045 and fixed interest rates ranging between 2.18% and 2.85%. In April 2015, Alagasco entered into an additional hedge with a notional amount of $24.0 and terms within the same range. These derivative instruments were designated as cash flow hedges of forecasted transactions. These forward starting swaps involved the payment of a fixed interest rate and the receipt of a floating interest rate (the London Interbank Offered Rate, also known as LIBOR) over the terms specified in the contracts. On May 21, 2015, the interest rate swap agreements were terminated and the settlement resulted in a $2.7 gain which was recorded as a regulatory liability. Of the total anticipated issuance of long-term debt, $35.0 was issued on September 15, 2015 and the remaining $80.0 will bewas issued on December 1, 2015.2015, and the gain is being amortized to reduce interest expense over the hedged periods.
TableDuring fiscal 2016, Spire entered into interest rate swap agreements, with a notional amount of Contents$85.0, to effectively lock in interest rates on a portion of the long-term debt it anticipated issuing to finance its acquisition of Spire EnergySouth. These derivative instruments were designated as cash flow hedges of forecasted transactions. Termination of the interest rate swap agreements later in fiscal 2016 resulted in a $0.4 loss recorded in accumulated other comprehensive loss to be amortized to interest expense over the life of the related debt issuances.Also during fiscal 2016, Spire entered into interest rate swap transactions with a notional amount of $225.0 to protect itself against adverse movement in interest rates in anticipation of the issuance of long-term debt in fiscal 2017. These hedge positions were settled during fiscal 2017, resulting in a gain of $14.1 which will be amortized to reduce interest expense over the hedged periods. Also during fiscal 2017, Spire entered into a ten-year 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. The Company recorded a $0.9 mark-to-market loss on these swaps as part of other comprehensive income for the year ended September 30, 2017.
The Company’s and Laclede Gas'Spire Missouri’s exchange-traded/cleared derivative instruments consist primarily of NYMEX OTCBB, and ICE positions. The NYMEX and OTCBB is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX/ICE and OTCBB natural gas futures and swap positions at September 30, 20152017 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 | | | | | | | |
| Fiscal 2016 | — |
| | $ | — |
| | 13.34 |
| | $ | 3.26 |
|
| Fiscal 2017 | — |
| | — |
| | 2.13 |
| | 3.42 |
|
| NYMEX/ICE Open long futures/swap positions | |
| | |
| | |
| | |
|
| Fiscal 2016 | 29.02 |
| | 3.19 |
| | 7.06 |
| | 3.17 |
|
| Fiscal 2017 | 1.57 |
| | 3.04 |
| | 2.77 |
| | 3.43 |
|
| Fiscal 2018 | — |
| | — |
| | 0.12 |
| | 3.37 |
|
| ICE Open long basis swap positions | | | | | | | |
| Fiscal 2016 | — |
| | — |
| | 23.29 |
| | 0.27 |
|
| Fiscal 2017 | — |
| | — |
| | 9.04 |
| | 0.45 |
|
| Fiscal 2018 | — |
| | — |
| | 1.09 |
| | 0.50 |
|
| ICE Open short basis swap positions | | | | | | | |
| Fiscal 2016 | — |
| | — |
| | 10.62 |
| | 0.17 |
|
| Fiscal 2017 | — |
| | — |
| | 1.40 |
| | 0.20 |
|
| OTC Open long futures/swap positions | | | | | | | |
| Fiscal 2016 | 4.43 |
| | 3.99 |
| | — |
| | — |
|
| Fiscal 2017 | 0.32 |
| | 3.64 |
| | — |
| | — |
|
|
| | | | | | | | | | | | | |
| | 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 2018 | — |
| | $ | — |
| | 8.66 |
| | $ | 3.34 |
|
| Fiscal 2019 | — |
| | — |
| | 2.07 |
| | 3.13 |
|
| NYMEX/ICE open long futures/swap positions | |
| | |
| | |
| | |
|
| Fiscal 2018 | 14.18 |
| | 2.98 |
| | 3.78 |
| | 3.16 |
|
| Fiscal 2019 | 1.68 |
| | 2.89 |
| | 1.84 |
| | 3.02 |
|
| Fiscal 2020 | — |
| | — |
| | 0.66 |
| | 2.91 |
|
| Fiscal 2021 | — |
| | — |
| | 0.28 |
| | 2.90 |
|
| Fiscal 2022 | — |
| | — |
| | 0.22 |
| | 3.00 |
|
| ICE open short daily swap positions | | | | | | | |
| Fiscal 2018 | — |
| | — |
| | 1.32 |
| | 2.87 |
|
| ICE open long daily swap positions | | | | | | | |
| Fiscal 2018 | — |
| | — |
| | 0.78 |
| | 2.79 |
|
| ICE open short basis swap positions | | | | | | | |
| Fiscal 2018 | — |
| | — |
| | 14.04 |
| | 0.10 |
|
| Fiscal 2019 | — |
| | — |
| | 3.35 |
| | 0.27 |
|
| Fiscal 2020 | — |
| | — |
| | 0.31 |
| | 0.36 |
|
| ICE open long basis swap positions | | | | | | | |
| Fiscal 2018 | — |
| | — |
| | 11.12 |
| | 0.38 |
|
| Fiscal 2019 | — |
| | — |
| | 4.51 |
| | 0.45 |
|
| Fiscal 2020 | — |
| | — |
| | 0.62 |
| | 0.45 |
|
At September 30, 2015, Laclede Gas2017, Spire Missouri also had 20.333.9 million MMBtu of other price mitigation in place through the use of NYMEX and OTCBB natural gas option-based strategies while LERSpire Marketing had none.
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 the 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, 2015,2017, 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 Consolidated Statements of Comprehensive Income | | | Location of Gain (Loss) | | | | | | Location of Gain (Loss) | | | | | |
| | Recorded in Income | 2015 | | 2014 | | 2013 | Recorded in Income | 2017 | | 2016 | | 2015 |
| 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 Marketing natural gas contracts | | $ | (4.3 | ) | | $ | (4.6 | ) | | $ | 4.9 |
| | $ | — |
| | $ | (0.6 | ) | | $ | (4.3 | ) |
| Gas Utility gasoline and heating oil contracts | | (1.2 | ) | | 0.1 |
| | 0.1 |
| | 0.1 |
| | — |
| | (1.2 | ) |
| Interest rate swaps | | | 11.4 |
| | (3.4 | ) | | — |
|
| Total | | $ | (5.5 | ) | | $ | (4.5 | ) | | $ | 5.0 |
| | $ | 11.5 |
| | $ | (4.0 | ) | | $ | (5.5 | ) |
| Effective portion of gain (loss) reclassified from AOCI to income: | Effective portion of gain (loss) reclassified from AOCI to income: | | | | | | Effective portion of gain (loss) reclassified from AOCI to income: | | | | | |
| Natural gas contracts | Gas Marketing Operating Revenues | $ | 1.7 |
| | $ | 4.2 |
| | $ | — |
| Gas Marketing Operating Revenues | $ | (0.4 | ) | | $ | 4.3 |
| | $ | 1.7 |
|
| | Gas Marketing Operating Expenses | (5.2 | ) | | (1.5 | ) | | (0.5 | ) | Gas Marketing Operating Expenses | 0.1 |
| | (4.9 | ) | | (5.2 | ) |
| Subtotal | | (3.5 | ) | | 2.7 |
|
| (0.5 | ) | | (0.3 | ) | | (0.6 | ) |
| (3.5 | ) |
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | (0.9 | ) | | (0.2 | ) | | 0.2 |
| Gas Utility Other Operating Expenses | 0.2 |
| | (0.5 | ) | | (0.9 | ) |
| Interest rate swaps | | Interest Expense | 0.1 |
| | — |
| | — |
|
| Total | | $ | (4.4 | ) | | $ | 2.5 |
| | $ | (0.3 | ) | | $ | — |
| | $ | (1.1 | ) | | $ | (4.4 | ) |
Ineffective portion of gain (loss) on derivatives recognized in income: | | | | | | | Ineffective portion of gain (loss) on derivatives recognized in income: | | | | | |
| Natural gas contracts | Gas Marketing Operating Revenues | $ | — |
| | $ | (0.1 | ) | | $ | (0.4 | ) | Gas Marketing Operating Revenues | $ | — |
| | $ | 0.1 |
| | $ | — |
|
| | Gas Marketing Operating Expenses | (0.5 | ) | | 0.1 |
| | (0.3 | ) | Gas Marketing Operating Expenses | — |
| | 0.1 |
| | (0.5 | ) |
| Subtotal | | (0.5 | ) | | — |
| | (0.7 | ) | | — |
| | 0.2 |
| | (0.5 | ) |
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | 0.1 |
| | (0.2 | ) | | (0.1 | ) | Gas Utility Other Operating Expenses | — |
| | 0.1 |
| | 0.1 |
|
| Interest rate swaps | | Interest Expense | 0.5 |
| | — |
| | — |
|
| Total | | $ | (0.4 | ) | | $ | (0.2 | ) | | $ | (0.8 | ) | | $ | 0.5 |
| | $ | 0.3 |
| | $ | (0.4 | ) |
| 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: | | | | | | | | | | | | |
| Natural gas commodity contracts | Gas Marketing Operating Revenues | $ | (1.3 | ) | | $ | (8.7 | ) | | $ | (0.9 | ) | Gas Marketing Operating Revenues | $ | 0.7 |
| | $ | 12.3 |
| | $ | (1.3 | ) |
| NYMEX / ICE natural gas contracts | Gas Marketing Operating Revenues | (9.6 | ) | | 3.0 |
| | — |
| Gas Marketing Operating Revenues | (4.4 | ) | | (1.7 | ) | | (9.6 | ) |
| Gasoline and heating oil contracts | Other Income and (Income Deductions) - Net | (0.2 | ) | | — |
| | 0.1 |
| Other Income and (Income Deductions) - Net | — |
| | — |
| | (0.2 | ) |
| Total | | $ | (11.1 | ) | | $ | (5.7 | ) | | $ | (0.8 | ) | | $ | (3.7 | ) | | $ | 10.6 |
| | $ | (11.1 | ) |
| |
| * | Gains and losses on Laclede Gas’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'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 Regulated Gas Distribution Natural and Propane Gas operating expenses when they are recovered through the PGA clause and reflected in customer billings. |
| | | Fair Value of Derivative Instruments in the Consolidated Balance Sheet at September 30, 2015 | |
| Fair Value of Derivative Instruments in the Consolidated Balance Sheets | | Fair Value of Derivative Instruments in the Consolidated Balance Sheets |
| | Asset Derivatives* | | Liability Derivatives* | Asset Derivatives* | | Liability Derivatives* |
| | Balance Sheet Location | Fair Value | | Balance Sheet Location | Fair Value | |
| September 30, 2017 | | Balance Sheet Location | Fair Value | | Balance Sheet Location | Fair Value |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | Derivatives designated as hedging instruments | | | |
| Gas Utility: | | | | | | | | |
| Gasoline and heating oil contracts | Accounts Receivable – Other | $ | — |
| | Accounts Receivable – Other | $ | 0.3 |
| Derivative Instrument Assets | $ | 0.1 |
| | Derivative Instrument Assets | $ | — |
|
| Gas Marketing: | | | |
| | | | |
| |
| Natural gas contracts | Derivative Instrument Assets | 4.1 |
| | Derivative Instrument Assets | 3.2 |
| Derivative Instrument Assets | 0.3 |
| | Derivative Instrument Assets | 0.2 |
|
| | Deferred Charges – Other | 1.1 |
| | Deferred Charges – Other | 0.5 |
| Deferred Charges – Other | 0.3 |
| | Deferred Charges – Other | — |
|
| Other: | | | | | |
| Interest rate swaps | | Current Liabilities - Other | — |
| | Current Liabilities - Other | 0.9 |
|
| Subtotal | | 5.2 |
| | | 4.0 |
| | 0.7 |
| | | 1.1 |
|
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | | | Derivatives not designated as hedging instruments | | | |
| Gas Utility: | | | | | | | | |
| Natural gas contracts | Accounts Receivable – Other | 1.2 |
| | Accounts Receivable – Other | 16.4 |
| Accounts Receivable – Other | 3.4 |
| | Accounts Receivable – Other | 1.9 |
|
| | Derivative Instrument Assets | — |
| | Derivative Instrument Assets | 5.7 |
| |
| | Deferred Charges – Other | — |
| | Deferred Charges – Other | 0.2 |
| |
| Subtotal | | 1.2 |
| | 22.3 |
| |
| Gas Marketing: | | | | | | | | |
| NYMEX / ICE natural gas contracts | Derivative Instrument Assets | 4.7 |
| | Derivative Instrument Assets | 0.6 |
| Derivative Instrument Assets | 1.7 |
| | Derivative Instrument Assets | 1.4 |
|
| | Deferred Charges – Other | 0.7 |
| | Deferred Charges – Other | 0.7 |
| Deferred Charges – Other | 0.3 |
| | Deferred Charges – Other | 0.5 |
|
| Natural gas commodity | Derivative Instrument Assets | 1.4 |
| | Derivative Instrument Assets | 0.1 |
| Derivative Instrument Assets | 5.3 |
| | Derivative Instrument Assets | 0.1 |
|
| | Current Liabilities – Other | 0.2 |
| | Current Liabilities – Other | 1.4 |
| Other Deferred Charges | 0.4 |
| | Other Deferred Charges | — |
|
| | Deferred Credits – Other | 0.1 |
| | Deferred Credits – Other | 0.7 |
| Current Liabilities – Other | 0.8 |
| | Current Liabilities – Other | 5.0 |
|
| | | Deferred Credits – Other | 0.4 |
| | Deferred Credits – Other | 3.3 |
|
| Subtotal | | 7.1 |
| | | 3.5 |
| | 12.3 |
| | | 12.2 |
|
| Total derivatives | | $ | 13.5 |
| | | $ | 29.8 |
| | $ | 13.0 |
| | | $ | 13.3 |
|
| | | | | | | | | |
| Fair Value of Derivative Instruments in the Consolidated Balance Sheet at September 30, 2014 | |
| | Asset Derivatives* | | Liability Derivatives* | |
| | Balance Sheet Location | Fair Value | | Balance Sheet Location | Fair Value | |
| September 30, 2016 | | | | |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | | Derivatives designated as hedging instruments | | | | |
| Gas Utility: | | | | | | | | |
| Gasoline and heating oil contracts | Accounts Receivable – Other | $ | — |
| | Accounts Receivable – Other | $ | 0.2 |
| Derivative Instrument Assets | $ | 0.3 |
| | Derivative Instrument Assets | $ | — |
|
| Gas Marketing: | | | | | | | | |
| Natural gas contracts | Derivative Instrument Assets | 0.7 |
| | Derivative Instrument Assets | 0.4 |
| Derivative Instrument Assets | 2.5 |
| | Derivative Instrument Assets | 0.8 |
|
| | Deferred Charges – Other | 0.7 |
| | Deferred Charges – Other | 0.2 |
| Deferred Charges - Other | 0.4 |
| | Deferred Charges - Other | 0.1 |
|
Other: Interest rate swaps | | Derivative Instrument Assets | — |
| | Derivative Instrument Assets | 3.0 |
|
| Subtotal | | 1.4 |
| | | 0.8 |
| | 3.2 |
| | | 3.9 |
|
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | | | | Derivatives not designated as hedging instruments | | | | |
| Gas Utility: | | | |
| | | | |
| |
| Natural gas contacts | Accounts Receivable – Other | 2.4 |
| | Accounts Receivable – Other | 5.2 |
| |
| Natural gas contracts | | Accounts Receivable – Other | 5.4 |
| | Accounts Receivable – Other | 1.6 |
|
| | Derivative Instrument Assets | 0.1 |
| | Derivative Instrument Assets | 3.7 |
| Derivative Instrument Assets | — |
| | Derivative Instrument Assets | 0.2 |
|
| Gas Marketing: | | | | | |
| NYMEX / ICE natural gas contracts | | Derivative Instrument Assets | 0.8 |
| | Derivative Instrument Assets | 4.1 |
|
| | Deferred Charges – Other | — |
| | Deferred Charges – Other | 0.4 |
| Deferred Charges – Other | — |
| | Deferred Charges – Other | 0.1 |
|
| Subtotal | | 2.5 |
| | 9.3 |
| |
| Gas Marketing: | | | | | |
| Natural gas contacts | Derivative Instrument Assets | 3.5 |
| | Derivative Instrument Assets | 1.4 |
| |
| Natural gas commodity | | Derivative Instrument Assets | 6.5 |
| | Derivative Instrument Assets | 0.2 |
|
| | | Other Deferred Charges | 2.1 |
| | Other Deferred Charges | 0.3 |
|
| | Deferred Charges – Other | 0.3 |
| | Deferred Charges – Other | — |
| Current Liabilities – Other | 0.2 |
| | Current Liabilities – Other | 2.0 |
|
| | Current Liabilities – Other | — |
| | Current Liabilities – Other | 0.5 |
| Deferred Credits – Other | 0.2 |
| | Deferred Credits – Other | 0.1 |
|
| Subtotal | | 3.8 |
| | | 1.9 |
| | 15.2 |
| | | 8.6 |
|
| Total derivatives | | $ | 7.7 |
| | | $ | 12.0 |
| | $ | 18.4 |
| | | $ | 12.5 |
|
| |
| * | The fair values of Asset Derivatives and Liability Derivatives 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:
| | | | 2015 | | 2014 | 2017 | | 2016 |
| Fair value of asset derivatives presented above | $ | 13.5 |
| | $ | 7.7 |
| $ | 13.0 |
| | $ | 18.4 |
|
| Fair value of cash margin receivables offset with derivatives | 13.9 |
| | 3.0 |
| |
| Fair value of cash margin (payable) receivable offset with derivatives | | (1.5 | ) | | 2.5 |
|
| Netting of assets and liabilities with the same counterparty | (22.2 | ) | | (7.9 | ) | (5.3 | ) | | (7.6 | ) |
| Total | $ | 5.2 |
| | $ | 2.8 |
| $ | 6.2 |
| | $ | 13.3 |
|
| Derivative Instrument Assets, per Consolidated Balance Sheets: | | | | | | |
| Derivative instrument assets | $ | 4.6 |
| | $ | 3.2 |
| $ | 5.9 |
| | $ | 11.4 |
|
| Deferred Charges – Other | 0.6 |
| | (0.4 | ) | 0.3 |
| | 1.9 |
|
| Total | $ | 5.2 |
| | $ | 2.8 |
| $ | 6.2 |
| | $ | 13.3 |
|
| | | | | | | |
| Fair value of liability derivatives presented above | $ | 29.8 |
| | $ | 12.0 |
| $ | 13.3 |
| | $ | 12.5 |
|
| Netting of assets and liabilities with the same counterparty | (22.2 | ) | | (7.9 | ) | (5.3 | ) | | (7.6 | ) |
| Total | $ | 7.6 |
| | $ | 4.1 |
| $ | 8.0 |
| | $ | 4.9 |
|
| Derivative Instrument Liabilities, per Consolidated Balance Sheets: | | | | | | |
| Current Liabilities – Other | $ | 6.8 |
| | $ | — |
| $ | 4.9 |
| | $ | 4.8 |
|
| Deferred Credits – Other | 0.8 |
| | 4.1 |
| 3.1 |
| | 0.1 |
|
| Total | $ | 7.6 |
| | $ | 4.1 |
| $ | 8.0 |
| | $ | 4.9 |
|
Additionally, at September 30, 20152017 and 2014,2016, the Company had $5.9$4.0 and $4.4,$2.9, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Laclede GasSpire Missouri
Laclede GasSpire 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 Laclede Gas'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 Laclede GasSpire 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 Laclede Gas’Spire Missouri’s use of natural gas derivative instruments are allowed to be passed on to Laclede GasSpire Missouri customers through the operation of its PGA clause, through which the MoPSC allows Laclede GasSpire Missouri to recover gas supply costs, subject to prudence review by the MoPSC. Accordingly, Laclede GasSpire Missouri does not expect any adverse earnings impact as a result of the use of these derivative instruments.
Laclede GasSpire 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 Laclede GasSpire 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, Laclede GasSpire 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. At September 30, 2015, Laclede Gas2017, Spire Missouri held 1.80.3 million gallons of gasoline futures contracts at an average price of $1.63$1.27 per gallon. Most of these contracts, the longest of which extends to December 2016,2017, 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 Laclede Gas’Spire Missouri’s PGA clause.
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 other comprehensive income (OCI). Accumulated other comprehensive income (AOCI)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, 2015,2017, it is expected that an immaterial amount of pre-tax gains will be reclassified into the statements of income during fiscal year 2016.2018. 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.
Laclede Gas’Spire Missouri’s derivative instruments consist primarily of NYMEX and OTCBB positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX and OTCBB natural gas futures positions at September 30, 20152017 were as follows:
|
| | | | | | |
| | MMBtu (millions) | | Avg. Price Per MMBtu |
| NYMEX/ICE Open long futures/swap positions | |
| | |
|
| Fiscal 2016 | 29.02 |
| | $ | 3.19 |
|
| Fiscal 2017 | 1.57 |
| | 3.04 |
|
| OTC Open long futures/swap positions | | | |
| Fiscal 2016 | 4.43 |
| | $ | 3.99 |
|
| Fiscal 2017 | 0.32 |
| | 3.64 |
|
|
| | | | | | |
| | MMBtu (millions) | | Avg. Price Per MMBtu |
| NYMEX/ICE open long futures/swap positions | |
| | |
|
| Fiscal 2018 | 14.18 |
| | $ | 2.98 |
|
| Fiscal 2019 | 1.68 |
| | 2.89 |
|
At September 30, 2015, Laclede Gas2017, Spire Missouri also had 20.333.9 million MMBtu of other price mitigation in place through the use of NYMEX and OTCBB natural gas option-based strategies.
| | Effect of Derivative Instruments on the Statements of Income and Statements of Comprehensive Income | | | Location of Gain (Loss) | | | | | | Location of Gain (Loss) | | | | | |
| | Recorded in Income | 2015 | | 2014 | | 2013 | Recorded in Income | 2017 | | 2016 | | 2015 |
| 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: | | | | | |
| Gasoline and heating oil contracts | | $ | (1.2 | ) | | $ | 0.1 |
| | $ | 0.1 |
| | $ | 0.1 |
| | $ | — |
| | $ | (1.2 | ) |
| Effective portion of gain (loss) reclassified from AOCI to income: | Effective portion of gain (loss) reclassified from AOCI to income: | | | | | | Effective portion of gain (loss) reclassified from AOCI to income: | | | | | |
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | $ | (0.9 | ) | | $ | (0.2 | ) | | $ | 0.2 |
| Gas Utility Other Operating Expenses | $ | 0.2 |
| | $ | (0.5 | ) | | $ | (0.9 | ) |
Ineffective portion of gain (loss) on derivatives recognized in income: | | | | | | | Ineffective portion of gain (loss) on derivatives recognized in income: | | | | | |
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | $ | 0.1 |
| | $ | (0.2 | ) | | $ | (0.1 | ) | Gas Utility Other Operating Expenses | $ | — |
| | $ | 0.1 |
| | $ | 0.1 |
|
| 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: | | | | | | | | | | | | |
| Gasoline and heating oil contracts | Other Income and (Income Deductions) - Net | $ | (0.2 | ) | | $ | — |
| | $ | 0.1 |
| Other Income and (Income Deductions) - Net | $ | — |
| | $ | — |
| | $ | (0.2 | ) |
| |
| * | Gains and losses on Laclede Gas’Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments for financial reporting purposes, are deferred pursuant to the Laclede Gas’Spire Missouri’s 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 Regulated Gas Distribution Natural and Propane Gas operating expenses when they are recovered through the PGA clause and reflected in customer billings. |
| | | Fair Value of Derivative Instruments in the Balance Sheet at September 30, 2015 | |
| Fair Value of Derivative Instruments in the Balance Sheets | | Fair Value of Derivative Instruments in the Balance Sheets |
| | Asset Derivatives* | | Liability Derivatives* | Asset Derivatives* | | Liability Derivatives* |
| September 30, 2017 | | Balance Sheet Location | Fair Value | | Balance Sheet Location | Fair Value |
| Derivatives designated as hedging instruments | | Derivatives designated as hedging instruments | | | |
| Gasoline and heating oil contracts | | Derivative Instrument Assets | $ | 0.1 |
| | Derivative Instrument Assets | $ | — |
|
| Derivatives not designated as hedging instruments | | Derivatives not designated as hedging instruments | | | |
| Natural gas contracts | | Accounts Receivable – Other | 3.4 |
| | Accounts Receivable – Other | 1.9 |
|
| Total derivatives | | | $ | 3.5 |
| | | $ | 1.9 |
|
| | Balance Sheet Location | Fair Value | | Balance Sheet Location | Fair Value | | | | |
| September 30, 2016 | | | | | |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | Derivatives designated as hedging instruments | | | | |
| Gasoline and heating oil contracts | Accounts Receivable – Other | $ | — |
| | Accounts Receivable – Other | $ | 0.3 |
| Derivative Instrument Assets | $ | 0.3 |
| | Derivative Instrument Assets | $ | — |
|
| Subtotal | | — |
| | | 0.3 |
| | 0.3 |
| | | — |
|
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | | | Derivatives not designated as hedging instruments | | | |
| Natural gas contracts | Accounts Receivable – Other | 1.2 |
| | Accounts Receivable – Other | 16.4 |
| Accounts Receivable – Other | 5.4 |
| | Accounts Receivable – Other | 1.6 |
|
| OTCBB natural gas contracts | Derivative Instrument Assets | — |
| | Derivative Instrument Assets | 5.7 |
| Derivative Instrument Assets | — |
| | Derivative Instrument Assets | 0.2 |
|
| | Deferred Charges – Other | — |
| | Deferred Charges – Other | 0.2 |
| |
| Subtotal | | 1.2 |
| | 22.3 |
| | 5.4 |
| | 1.8 |
|
| Total derivatives | | $ | 1.2 |
| | | $ | 22.6 |
| | $ | 5.7 |
| | | $ | 1.8 |
|
| | | | | | |
| Fair Value of Derivative Instruments in the Balance Sheet at September 30, 2014 | |
| | Asset Derivatives | | Liability Derivatives* | |
| | Balance Sheet Location | Fair Value | * | Balance Sheet Location | Fair Value | |
| Derivatives designated as hedging instruments | | | | | |
| Gasoline and heating oil contracts | Accounts Receivable – Other | $ | — |
| | Accounts Receivable – Other | $ | 0.2 |
| |
| Subtotal | | — |
| | | 0.2 |
| |
| Derivatives not designated as hedging instruments | | | | |
| Natural gas contacts | Accounts Receivable – Other | 2.4 |
| | Accounts Receivable – Other | 5.2 |
| |
| | Derivative Instrument Assets | 0.1 |
| | Derivative Instrument Assets | 3.7 |
| |
| Gasoline and heating oil contracts | Accounts Receivable – Other | — |
| | Accounts Receivable – Other | 0.4 |
| |
| Subtotal | | 2.5 |
| | 9.3 |
| |
| Total derivatives | | $ | 2.5 |
| | | $ | 9.5 |
| |
| |
| * | The fair values of Asset Derivatives and Liability Derivatives 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 Laclede Gas'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 Laclede Gas'Spire Missouri’s Balance Sheets:
| | | | 2015 | | 2014 | 2017 | | 2016 |
| Fair value of asset derivatives presented above | $ | 1.2 |
| | $ | 2.5 |
| $ | 3.5 |
| | $ | 5.7 |
|
| Fair value of cash margin receivables offset with derivatives | 15.5 |
| | 3.0 |
| |
| Fair value of cash margin (payable) receivable offset with derivatives | | (1.5 | ) | | 0.8 |
|
| Netting of assets and liabilities with the same counterparty | (16.7 | ) | | (5.9 | ) | (1.9 | ) | | (1.6 | ) |
| Total | $ | — |
| | $ | (0.4 | ) | $ | 0.1 |
| | $ | 4.9 |
|
| Derivative Instrument Assets, per Balance Sheets: | | | | | | |
| Derivative instrument assets | $ | — |
| | $ | (0.4 | ) | $ | 0.1 |
| | $ | 4.9 |
|
| Total | $ | — |
| | $ | (0.4 | ) | $ | 0.1 |
| | $ | 4.9 |
|
| | | | | | | |
| Fair value of liability derivatives presented above | $ | 22.6 |
| | $ | 9.5 |
| $ | 1.9 |
| | $ | 1.8 |
|
| Netting of assets and liabilities with the same counterparty | (16.7 | ) | | (5.9 | ) | (1.9 | ) | | (1.6 | ) |
| Total | $ | 5.9 |
| | $ | 3.6 |
| $ | — |
| | $ | 0.2 |
|
| Derivative Instrument Liabilities, per Balance Sheets: | | | | | | |
| Current Liabilities – Other | $ | 5.7 |
| | $ | — |
| $ | — |
| | $ | 0.2 |
|
| Deferred Credits – Other | 0.2 |
| | 3.6 |
| |
| Total | $ | 5.9 |
| | $ | 3.6 |
| $ | — |
| | $ | 0.2 |
|
Additionally, at September 30, 20152017 and 2014, Laclede Gas2016, Spire Missouri had $5.9$4.0 and $4.4,$0.5, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Alagasco
Spire Alabama
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.
During the second quarter of fiscal 2015, AlagascoSpire Alabama entered into certain interest rate swap transactions to protect itself against adverse movement in interest rates in anticipation of theits issuance of $115.0 of long-term debt. AlagascoSpire Alabama received prior approval from the APSC to enter into these hedges. The notional amount of interest rate swaps outstanding was $80.5 with stated maturities ranging from 2025 to 2045 and fixed interest rates ranging between 2.18% and 2.85%. In April 2015, AlagascoSpire Alabama entered into an additional hedge with a notional amount of $24.0 and terms within the same range. These derivative instruments were designated as cash flow hedges of forecasted transactions. These forward starting swaps involved the payment of a fixed interest rate and the receipt of a floating interest rate (the London Interbank Offered Rate, also known as LIBOR)LIBOR over the terms specified in the contracts. On May 21, 2015, the interest rate swap agreements were terminated and the settlement resulted in a $2.7 gain which was recorded as a regulatory liability sinceliability. Of the interest rate swaps were entered into to hedge the interest payments on the $115.0total issuance of long-term debt, of which $35.0 was issued on September 15, 2015 withand the remaining $80.0 to bewas issued on December 1, 2015.
During the fiscal second quarter of 2016, Spire Alabama commenced 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. At September 30, 2017, Spire Alabama held 0.1 million gallons of gasoline futures contracts at an average price of $1.28 per gallon. Most of these contracts, the longest of which extends to December 2017, 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. As of September 30, 2017 and 2016, the fair value of gasoline contracts was not significant.
| |
11. | CONCENTRATION OF CREDIT RISK |
11. CONCENTRATIONS OF CREDIT RISK
Other than in LER (the GasSpire Marketing, segment), Laclede GroupSpire has no significant concentration of credit risk.
A significant portion of LER’sSpire Marketing’s transactions are with (or are associated with) energy producers, utility companies, and pipelines. These concentrationsThe concentration of transactions with these counterparties havehas 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. To manage this risk, as well as credit risk from significant counterparties in these and other industries, LERSpire 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, LERSpire Marketing may require credit assurances such as prepayments, letters of credit, or parental guarantees. In addition, LERSpire Marketing may enter into netting arrangements to mitigate credit risk with counterparties in the energy industry from which LERwith whom it conducts both sellssales and purchases of natural gas. 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. LERSpire Marketing records accounts receivable, accounts payable, and prepayments for physical sales and purchases of natural gas on a gross basis. The amount included in accounts receivable attributable to energy producers and their marketing affiliates amounted to $15.7$17.9 at September 30, 2015. Net receivable amounts from these customers on that same date,2017 ($8.9 reflecting netting arrangements, were $13.4. LER'Sarrangements). Spire Marketing’s accounts receivable attributable to utility companies and their
marketing affiliates comprised $21.6$58.2 of total accounts receivable at September 30, 2015, while net receivable amounts from these customers,2017 ($55.8 reflecting netting arrangements, were $20.5.arrangements).
LERSpire Marketing also has concentrations of credit risk with certain individually significant counterparties and with pipeline companies associated with its natural gas receivable amount. At September 30, 2015,2017, the amounts included in accounts receivable from LER’sSpire Marketing’s five largest counterparties (in terms of net accounts receivable exposure), were $13.7. These totaled $23.8 ($23.1 reflecting netting arrangements). Four of these five counterparties are either investment-grade rated or owned by investment-grade rated companies. Net receivable amounts from these five customers on the same date, reflecting netting arrangements, were $12.5.The fifth is not rated, but each of its owners is investment-grade.
Laclede GroupSpire
The Company'sCompany’s provision for income taxes charged during the fiscal years ended September 30, 2015, 2014,2017, 2016, and 20132015 are as follows:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Federal | | | | | | | | | | |
| Current | $ | (3.3 | ) | | $ | 0.3 |
| | $ | (4.2 | ) | $ | 0.1 |
| | $ | 0.1 |
| | $ | (3.3 | ) |
| Deferred | 58.8 |
| | 30.6 |
| | 19.9 |
| 67.7 |
| | 62.0 |
| | 58.8 |
|
| Investment tax credits | (0.2 | ) | | (0.2 | ) | | (0.2 | ) | (0.2 | ) | | (0.2 | ) | | (0.2 | ) |
| State and local | | | | | | | | | | |
| Current | — |
| | 0.6 |
| | (0.3 | ) | 0.5 |
| | 0.6 |
| | — |
|
| Deferred | 6.9 |
| | 1.0 |
| | 2.4 |
| 9.5 |
| | 7.0 |
| | 6.9 |
|
| Total income tax expense | $ | 62.2 |
| | $ | 32.3 |
| | $ | 17.6 |
| $ | 77.6 |
| | $ | 69.5 |
| | $ | 62.2 |
|
The Company'sCompany’s effective income tax rate varied from the federal statutory income tax rate for each year due to the following:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Federal income tax statutory rate | 35.0 | % | | 35.0 | % | | 35.0 | % | 35.0 | % | | 35.0 | % | | 35.0 | % |
| State and local income taxes, net of federal income tax benefits | 3.0 |
| | 1.8 |
| | 3.5 |
| 2.8 |
| | 2.8 |
| | 3.0 |
|
| Certain expenses capitalized on books and deducted on tax return | (3.7 | ) | | (4.9 | ) | | (9.7 | ) | (2.3 | ) | | (3.4 | ) | | (3.7 | ) |
| Taxes related to prior years | (0.6 | ) | | (0.7 | ) | | (1.6 | ) | (0.9 | ) | | (0.2 | ) | | (0.6 | ) |
| Other items – net * | (2.5 | ) | | (3.6 | ) | | (2.2 | ) | (2.2 | ) | | (1.7 | ) | | (2.5 | ) |
| Effective income tax rate | 31.2 | % | | 27.6 | % | | 25.0 | % | 32.4 | % | | 32.5 | % | | 31.2 | % |
* Other consists primarily of property adjustments.
The Company'sCompany’s significant items comprising the net deferred tax liability recorded in the Consolidated Balance Sheets as of September 30 are as follows:
| | | | 2015 | | 2014 | 2017 | | 2016 |
| Deferred tax assets: | | | | | | |
| Reserves not currently deductible | $ | 14.8 |
| | $ | 16.0 |
| $ | 31.5 |
| | $ | 21.3 |
|
| Pension and other postretirement benefits | 62.5 |
| | 67.3 |
| 58.6 |
| | 68.3 |
|
| Operating losses | 47.3 |
| | 8.0 |
| 169.6 |
| | 102.3 |
|
| Unamortized investment tax credits | 1.5 |
| | 1.6 |
| |
| Other | — |
| | 28.9 |
| 26.0 |
| | — |
|
| Deferred tax assets | | 285.7 |
| | 191.9 |
|
| Less: valuation allowance | | 0.5 |
| | 0.9 |
|
| Total deferred tax assets | $ | 126.1 |
| | $ | 121.8 |
| 285.2 |
| | 191.0 |
|
| Deferred tax liabilities: | | | | | | |
| Relating to property | 472.1 |
| | 366.9 |
| 728.3 |
| | 623.1 |
|
| Regulatory pension and other postretirement benefits | 110.6 |
| | 108.5 |
| 108.0 |
| | 106.8 |
|
| Deferred gas costs | 8.1 |
| | 20.4 |
| 30.6 |
| | 20.0 |
|
| Other | 11.6 |
| | 19.7 |
| |
| Other** | | 125.8 |
| | 48.4 |
|
| Total deferred tax liabilities | $ | 602.4 |
| | $ | 515.5 |
| 992.7 |
| | 798.3 |
|
| Net deferred tax liability | 476.3 |
| | 393.7 |
| $ | 707.5 |
| | $ | 607.3 |
|
| Net deferred tax asset (liability) – current | 5.8 |
| | (9.9 | ) | |
| Net deferred tax liability – noncurrent | $ | 482.1 |
| | $ | 383.8 |
| |
** Other consists primarily of Goodwill related liabilities.
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 will realize the benefits of these deferred tax assets.assets, except for the contribution carryforward valuation allowance noted below.
The Company has federal and state loss carryforwards of approximately $123.9$478.6 at September 30, 2015.2017. The Company also has contribution carryforwards of approximately $11.0$12.1 at September 30, 2015.2017. The loss carryforwards begin to expire in the fiscal year ending 2030 for certain state purposes and fiscal 2035 for federal and other states purposes. The contribution carryforwards begin to expire in fiscal year 2018. The Company has a valuation allowance of $0.5 as a portion of the contribution carryforward will not be realized prior to its expiration. The Company also has various tax credit carryforwards of approximately $2.8$2.5 that begin to expire in 2018.2020.
The Company recognizes the tax benefit from a tax position only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company records potential interest and penalties related to its uncertain tax positions as interest expense and other income deductions, respectively. Unrecognized tax benefits accrued interest payable, and accrued penalties payable are included in the Other linereported as a reduction of the Deferred Credits and Other Liabilities section of the Consolidated Balance Sheets.a deferred tax asset for an operating loss carryforward.
The following table presents a reconciliation of the beginning and ending balances of the Company'sCompany’s unrecognized tax benefits:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Unrecognized tax benefits, beginning of year | $ | 4.6 |
| | $ | 2.4 |
| | $ | 5.8 |
| $ | 10.0 |
| | $ | 7.1 |
| | $ | 4.6 |
|
| Increases related to prior year tax positions | — |
| | — |
| | 0.1 |
| |
| Increases related to tax positions taken in current year | 2.9 |
| | 2.6 |
| | 1.5 |
| 2.4 |
| | 3.4 |
| | 2.9 |
|
| Reductions due to lapse of applicable statute of limitations | (0.4 | ) | | (0.4 | ) | | (5.0 | ) | (1.4 | ) | | (0.5 | ) | | (0.4 | ) |
| Unrecognized tax benefits, end of year | $ | 7.1 |
| | $ | 4.6 |
| | $ | 2.4 |
| $ | 11.0 |
| | $ | 10.0 |
| | $ | 7.1 |
|
The amount of unrecognized tax benefits which, if recognized, would affect the Company’s effective tax rate were $3.1$5.1 and $2.5$3.3 as of September 30, 20152017 and 2014,2016, respectively. It is reasonably possible that events will occur in the next 12 months that could increase or decrease the amount of the Company’s unrecognized tax benefits. The Company does not expect that any such change will be significant to the Consolidated Balance Sheets.
As of September 30, 20152017 and 2014,2016, interest accrued associated with the Company’s uncertain tax positions was de minimis, and no penalties were accrued as of September 30, 2015.2017.
The Company is subject to US federal income tax as well as income tax in various state and local jurisdictions. The Company is no longer subject to examination for fiscal years prior to 2012.2014.
Laclede Group completedRegarding the Company’s recent Spire EnergySouth acquisition, of 100% of the common shares of Alagasco from Energen on August 31, 2014. The Companytax returns for calendar years 2013 through 2015 remain open and Energen made an election under Section 338(h)(10) ofsubject to examination by the Internal Revenue CodeService and state taxing jurisdictions. These returns cover periods during which Spire EnergySouth was owned by Sempra Global. The impact of 1986, as amended,any adjustments made to treatthese returns by the Alagasco acquisition as a deemedrelevant taxing authorities would be addressed by the indemnification provisions of the stock purchase and sale of assets for tax purposes.agreement with Sempra Global.
Laclede GasSpire Missouri
Laclede Gas'Spire Missouri’s provision for income taxes charged during the fiscal years ended September 30, 2015, 2014,2017, 2016, and 20132015 are as follows:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Federal | | | | | | | | | | |
| Current | $ | (2.1 | ) | | $ | (0.1 | ) | | $ | (6.6 | ) | $ | — |
| | $ | — |
| | $ | (2.1 | ) |
| Deferred | 40.9 |
| | 34.3 |
| | 20.1 |
| 42.0 |
| | 37.5 |
| | 40.9 |
|
| Investment tax credits | (0.2 | ) | | (0.2 | ) | | (0.2 | ) | (0.2 | ) | | (0.2 | ) | | (0.2 | ) |
| State and local | | | | | | | | | | |
| Current | (0.1 | ) | | — |
| | (1.0 | ) | — |
| | 0.1 |
| | (0.1 | ) |
| Deferred | 4.7 |
| | 1.5 |
| | 2.3 |
| 5.7 |
| | 8.0 |
| | 4.7 |
|
| Total income tax expense | $ | 43.2 |
| | $ | 35.5 |
| | $ | 14.6 |
| $ | 47.5 |
| | $ | 45.4 |
| | $ | 43.2 |
|
Laclede Gas'
Spire Missouri’s effective income tax rate varied from the federal statutory income tax rate for each year due to the following:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Federal income tax statutory rate | 35.0 | % | | 35.0 | % | | 35.0 | % | 35.0 | % | | 35.0 | % | | 35.0 | % |
| State and local income taxes, net of federal income tax benefits | 2.8 |
| | 1.8 |
| | 3.3 |
| 2.8 |
| | 2.8 |
| | 2.8 |
|
| Certain expenses capitalized on books and deducted on tax return | (4.9 | ) | | (4.5 | ) | | (10.8 | ) | (3.5 | ) | | (4.8 | ) | | (4.9 | ) |
| Taxes related to prior years | (0.8 | ) | | (0.7 | ) | | (1.6 | ) | (1.4 | ) | | (0.2 | ) | | (0.8 | ) |
| Other items – net * | (3.0 | ) | | (3.3 | ) | | (2.8 | ) | (3.3 | ) | | (2.8 | ) | | (3.0 | ) |
| Effective income tax rate | 29.1 | % | | 28.3 | % | | 23.1 | % | 29.6 | % | | 30.0 | % | | 29.1 | % |
* Other consists primarily of property adjustments.
Laclede Gas'Spire Missouri’s significant items comprising the net deferred tax liability reported in the Balance Sheets as of September 30 are as follows: | | | | 2015 | | 2014 | 2017 | | 2016 |
| Deferred tax assets: | | | | | | |
| Reserves not currently deductible | $ | 15.4 |
| | $ | 16.0 |
| $ | 25.3 |
| | $ | 14.9 |
|
| Pension and other postretirement benefits | 62.5 |
| | 67.3 |
| 52.7 |
| | 56.9 |
|
| Operating losses | 3.7 |
| | 2.9 |
| 52.0 |
| | 29.9 |
|
| Unamortized investment tax credits | 1.5 |
| | 1.6 |
| |
| Other | — |
| | 17.8 |
| |
| Deferred tax assets | | 130.0 |
| | 101.7 |
|
| Less: valuation allowance | | 0.5 |
| | 0.9 |
|
| Total deferred tax assets | $ | 83.1 |
| | $ | 105.6 |
| 129.5 |
| | 100.8 |
|
| Deferred tax liabilities: | | | | | | |
| Relating to utility property | 425.0 |
| | 361.2 |
| 563.2 |
| | 497.0 |
|
| Regulatory pension and other postretirement benefits | 120.2 |
| | 119.2 |
| 108.0 |
| | 106.8 |
|
| Deferred gas costs | 8.2 |
| | 20.4 |
| 25.0 |
| | 20.0 |
|
| Other | 14.5 |
| | 15.9 |
| 57.1 |
| | 33.9 |
|
| Total deferred tax liabilities | $ | 567.9 |
| | $ | 516.7 |
| 753.3 |
| | 657.7 |
|
| Net deferred tax liability | 484.8 |
| | 411.1 |
| $ | 623.8 |
| | $ | 556.9 |
|
| Net deferred tax asset (liability) – current | 0.4 |
| | (11.3 | ) | |
| Net deferred tax liability – noncurrent | $ | 485.2 |
| | $ | 399.8 |
| |
Laclede GroupSpire files a consolidated federal return and various state income tax returns and allocates income taxes to Laclede GasSpire Missouri and its other subsidiaries as if each entity were a separate taxpayer.
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 that Laclede GasSpire Missouri will realize the benefits of these deferred tax assets.assets, except for the contribution carryforward valuation allowance noted below.
Laclede GasSpire Missouri has statefederal and federalstate loss carryforwards of approximately $10.0,$166.0, at September 30, 20152017, based on a separate company basis. For federal tax purposes, these loss carryforwards may be utilized against income from another member of the consolidated group. Laclede GasSpire Missouri also has contribution carryforwards of approximately $10.9$11.2 at September 30, 2015.2017. The loss carryforwards begin to expire in the fiscal year ending 2035 for federal and state purposes. The contribution carryforwards begin to expire in fiscal year ending 2018. Laclede GasSpire Missouri has a valuation allowance of $0.5 as a portion of the contribution carryforward will not be realized prior to its expiration. Spire Missouri also has approximately $1.5$2.0 of various tax credit carryforwards with expiration dates which begin to expire in 2024.2020.
Laclede GasSpire Missouri recognizes 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. Laclede GasSpire Missouri records potential interest and penalties related to its uncertain tax positions as interest expense and other income deductions, respectively. Unrecognized tax benefits accrued interest payable, and accrued penalties payable are included in the Other linereported as a reduction of the Deferred Credits and Other Liabilities section of the Balance Sheets.a deferred tax asset for an operating loss carryforward.
The following table presents a reconciliation of the beginning and ending balances of Laclede GasSpire Missouri unrecognized tax benefits:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Unrecognized tax benefits, beginning of year | $ | 4.2 |
| | $ | 2.0 |
| | $ | 5.6 |
| $ | 9.7 |
| | $ | 6.9 |
| | $ | 4.2 |
|
| Increases related to tax positions taken in current year | 2.9 |
| | 2.5 |
| | 1.4 |
| 2.4 |
| | 3.3 |
| | 2.9 |
|
| Reductions due to lapse of applicable statute of limitations | (0.2 | ) | | (0.3 | ) | | (5.0 | ) | (1.4 | ) | | (0.5 | ) | | (0.2 | ) |
| Unrecognized tax benefits, end of year | $ | 6.9 |
| | $ | 4.2 |
| | $ | 2.0 |
| $ | 10.7 |
| | $ | 9.7 |
| | $ | 6.9 |
|
The amount of unrecognized tax benefits, which, if recognized, would affect Laclede Gas'Spire Missouri’s effective tax rate were $2.9$4.8 and $2.1$3.1 as of September 30, 20152017 and 2014,2016, respectively. It is reasonably possible that events will occur in the next 12 months that could increase or decrease the amount of Laclede Gas'Spire Missouri’s unrecognized tax benefits. Laclede GasSpire Missouri does not expect that any such change will be significant to Laclede Gas'Spire Missouri’s Balance Sheets.
As of September 30, 20152017 and 2014,2016, interest accrued associated with Laclede Gas'Spire Missouri’s uncertain tax positions was de minimis, and no penalties were accrued.
Laclede GasSpire Missouri is subject to US federal income tax as well as income tax in various state and local jurisdictions, and is no longer subject to examination for fiscal yearyears prior to 2012.2014.
AlagascoSpire Alabama
Alagasco'sSpire Alabama’s provision for income taxes charged during the fiscal yearyears ended September 30, 2015, the nine months ended September 30, 2014,2017, 2016, and the year ended December 31, 20132015, are as follows:
| | | | Year Ended September 30, | | Nine Months Ended September 30, | | Year Ended December 31, | | | | | | | |
| | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Federal | | | | | | | | | | |
| Current | $ | — |
| | $ | 14.1 |
| | $ | 17.5 |
| $ | — |
| | $ | (0.8 | ) | | $ | — |
|
| Deferred | 25.9 |
| | 3.5 |
| | 13.3 |
| 31.6 |
| | 29.4 |
| | 25.9 |
|
| State and local | | | | | | | | | | |
| Current | 0.1 |
| | 1.8 |
| | 2.2 |
| — |
| | — |
| | 0.1 |
|
| Deferred | 3.3 |
| | 0.5 |
| | 1.7 |
| 4.2 |
| | 3.8 |
| | 3.3 |
|
| Total income tax expense | $ | 29.3 |
| | $ | 19.9 |
| | $ | 34.7 |
| $ | 35.8 |
| | $ | 32.4 |
| | $ | 29.3 |
|
Alagasco'sSpire Alabama’s effective income tax rate varied from the federal statutory income tax rate for each year due to the following:
| | | | Year Ended September 30, | | Nine Months Ended September 30, | | Year Ended December 31, | | | | | | |
| | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Federal income tax statutory rate | 35.0 | % | | 35.0 | % | | 35.0 | % | 35.0 | % | | 35.0 | % | | 35.0 | % |
| State and local income taxes, net of federal income tax benefits | 2.8 |
| | 2.8 |
| | 2.8 |
| 2.8 |
| | 2.8 |
| | 2.8 |
|
| Other items – net | 0.1 |
| | (0.2 | ) | | (0.1 | ) | 0.3 |
| | 0.1 |
| | 0.1 |
|
| Effective income tax rate | 37.9 | % | | 37.6 | % | | 37.7 | % | 38.1 | % | | 37.9 | % | | 37.9 | % |
Alagasco's
Spire Alabama’s significant items comprising the net deferred tax asset reported in the Balance Sheets as of September 30 are as follows:
| | | | 2015 | | 2014 | 2017 | | 2016 |
| Deferred tax assets: | | | | | | |
| Reserves not currently deductible | $ | 7.0 |
| | $ | 2.5 |
| $ | 6.0 |
| | $ | 6.3 |
|
| Pension and other postretirement benefits | 9.6 |
| | 10.6 |
| 4.4 |
| | 11.4 |
|
| Goodwill | 251.5 |
| | 266.1 |
| 214.4 |
| | 233.4 |
|
| Operating losses | 32.4 |
| | 5.1 |
| 88.3 |
| | 60.2 |
|
| Other | 1.4 |
| | 0.2 |
| |
| Total deferred tax assets | $ | 301.9 |
| | $ | 284.5 |
| 313.1 |
| | 311.3 |
|
| Deferred tax liabilities: | | | | | | |
| Relating to utility property | 45.1 |
| | 4.0 |
| 119.3 |
| | 87.6 |
|
| Other | 2.2 |
| | 0.4 |
| 8.2 |
| | 2.3 |
|
| Total deferred tax liabilities | $ | 47.3 |
| | $ | 4.4 |
| 127.5 |
| | 89.9 |
|
| Net deferred tax asset | 254.6 |
| | 280.1 |
| $ | 185.6 |
| | $ | 221.4 |
|
| Net deferred tax asset – current | 6.2 |
| | 2.3 |
| |
| Net deferred tax asset – noncurrent | $ | 248.4 |
| | $ | 277.8 |
| |
Laclede GroupSpire files a consolidated federal return and various state income tax returns and allocates income taxes to AlagascoSpire Alabama and its other subsidiaries as if each entity were a separate taxpayer.
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 that AlagascoSpire Alabama will realize the benefits of these deferred tax assets.
On a separate company basis, AlagascoSpire Alabama has statefederal and federalstate loss carryforwards of approximately $85.0,$233.5, at September 30, 20152017 generated since the acquisition. The loss carryforwards begin to expire in the fiscal year ending 2030 for state purposes and fiscal 2035 for federal purposes. For federal tax purposes, these loss carryforwards may be utilized against income from another member of the consolidated group.
Laclede Group completed the acquisition of 100% of the common shares of Alagasco from Energen on August 31, 2014. The Company and Energen made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the Alagasco acquisition as a deemed purchase and sale of assets for tax purposes.
AlagascoSpire Alabama recognizes 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. AlagascoSpire Alabama records potential interest and penalties related to its uncertain tax positions as interest expense and other income deductions, respectively. UnrecognizedSpire Alabama has reported no unrecognized tax benefits accrued interest payable,for fiscal years 2017, 2016, and accrued penalties payable are included in the Other line of the Deferred Credits and Other Liabilities section of the Balance Sheets.
The following table presents a reconciliation of the beginning and ending balances of Alagasco's unrecognized tax benefits:2015.
|
| | | | | | | | | | | |
| | Year Ended September 30, | | Nine Months Ended September 30, | | Year Ended December 31, |
| | 2015 | | 2014 | | 2013 |
| Unrecognized tax benefits, beginning of period | $ | — |
| | $ | 0.3 |
| | $ | 0.3 |
|
| Reduction for transfer of balance to Energen | — |
| | (0.3 | ) | | — |
|
| Unrecognized tax benefits, end of period | $ | — |
| | $ | — |
| | $ | 0.3 |
|
AlagascoSpire Alabama is subject to US federal income tax as well as income tax in various state and local jurisdictions. Alagasco'sSpire Alabama’s tax returns for the calendar years 2010-2013periods after 2013 remain open and subject to examination by the Internal Revenue Service and state taxing jurisdictions. TheseThe returns cover periodscovering 2014 include the period during which AlagascoSpire Alabama was owned by Energen. The impact of any adjustments made to thesethose returns by the relevant taxing authorities would be addressed by the indemnification provisions of the agreement.stock purchase agreement with Energen.
13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
This footnote includesThe Spire information in this note reflects all pension plans of the Company, whether historicalincluding information for plans or those acquired as part of the purchase of certain assets and liabilities of MGE onSpire EnergySouth since September 1, 2013 or those acquired in the Alagasco Transaction effective August 31, 2014.12, 2016. The net pension and postretirement obligations were re-measured at the applicablethat acquisition datesdate as well as at the fiscal year end.
Pension Plans
The pension plans of Laclede GroupSpire consist of plans for employees at the Missouri Utilities, and plans covering the employees of Alagasco.Spire Alabama, and plans covering employees of the subsidiaries of Spire EnergySouth.
The Missouri Utilities have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Plan assets consist primarily of corporate and US government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments and investments in diversified mutual funds.instruments.
AlagascoSpire Alabama has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its employees. Qualified plan assets are comprised of United States equities consisting of mutual and commingled funds consisting of US equities with varying strategies, global equities, consisting of mutual funds, alternative investments, of limited partnerships and commingled and mutual funds, and fixed income investments.
The net periodic pension costs include the following components:
| | | | 2015 | | 2014* | | 2013 | Spire | | Spire Missouri | | Spire Alabama |
| Laclede Group | | | | | | |
| | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 |
| Service cost – benefits earned during the period | $ | 17.3 |
| | $ | 10.2 |
| | $ | 9.2 |
| $ | 20.5 |
| | $ | 15.3 |
| | $ | 17.3 |
| | $ | 12.7 |
| | $ | 10.0 |
| | $ | 11.5 |
| | $ | 6.2 |
| | $ | 5.3 |
| | $ | 5.8 |
|
| Interest cost on projected benefit obligation | 29.5 |
| | 24.5 |
| | 17.0 |
| 27.9 |
| | 28.0 |
| | 29.5 |
| | 19.5 |
| | 21.7 |
| | 23.3 |
| | 6.1 |
| | 6.3 |
| | 6.2 |
|
| Expected return on plan assets | (37.4 | ) | | (27.2 | ) | | (19.4 | ) | (38.5 | ) | | (34.9 | ) | | (37.4 | ) | | (28.1 | ) | | (26.7 | ) | | (29.2 | ) | | (7.2 | ) | | (8.2 | ) | | (8.2 | ) |
| Amortization of prior other comprehensive income | — |
| | 0.4 |
| | — |
| |
| Amortization of prior service cost | 0.5 |
| | 0.5 |
| | 0.5 |
| 1.0 |
| | 0.4 |
| | 0.5 |
| | 1.0 |
| | 0.4 |
| | 0.5 |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss | 7.5 |
| | 7.1 |
| | 10.7 |
| 12.5 |
| | 8.0 |
| | 7.5 |
| | 10.7 |
| | 7.9 |
| | 7.5 |
| | 1.8 |
| | 0.1 |
| | — |
|
| Loss on lump-sum settlements | 19.6 |
| | 1.5 |
| | 27.0 |
| |
| Loss on lump-sum settlements and curtailments | | 17.9 |
| | 3.3 |
| | 19.6 |
| | 13.5 |
| | — |
| | 18.0 |
| | 4.6 |
| | 3.3 |
| | 1.6 |
|
| Special termination benefits | | 0.9 |
| | 1.6 |
| | — |
| | — |
| | 1.6 |
| | — |
| | — |
| | — |
| | — |
|
| Subtotal | 37.0 |
| | 17.0 |
| | 45.0 |
| 42.2 |
| | 21.7 |
| | 37.0 |
| | 29.3 |
| | 14.9 |
| | 31.6 |
| | 11.5 |
| | 6.8 |
| | 5.4 |
|
| Regulatory adjustment | (2.1 | ) | | 10.4 |
| | (27.5 | ) | (2.4 | ) | | 17.8 |
| | (2.1 | ) | | (4.1 | ) | | 11.7 |
| | (5.2 | ) | | 1.8 |
| | 6.1 |
| | 3.1 |
|
| Net pension cost | $ | 34.9 |
| | $ | 27.4 |
| | $ | 17.5 |
| $ | 39.8 |
| | $ | 39.5 |
| | $ | 34.9 |
| | $ | 25.2 |
| | $ | 26.6 |
| | $ | 26.4 |
| | $ | 13.3 |
| | $ | 12.9 |
| | $ | 8.5 |
|
| | * Includes Alagasco. | | | |
|
| | | | | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Laclede Gas | | | | | |
| Service cost – benefits earned during the period | $ | 11.5 |
| | $ | 9.7 |
| | $ | 9.2 |
|
| Interest cost on projected benefit obligation | 23.3 |
| | 24.0 |
| | 17.0 |
|
| Expected return on plan assets | (29.2 | ) | | (26.5 | ) | | (19.4 | ) |
| Amortization of prior service cost | 0.5 |
| | 0.5 |
| | 0.5 |
|
| Amortization of actuarial loss | 7.5 |
| | 7.1 |
| | 10.7 |
|
| Loss on lump-sum settlements | 18.0 |
| | 1.5 |
| | 27.0 |
|
| Subtotal | 31.6 |
| | 16.3 |
| | 45.0 |
|
| Regulatory adjustment | (5.2 | ) | | 10.4 |
| | (27.5 | ) |
| Net pension cost | $ | 26.4 |
| | $ | 26.7 |
| | $ | 17.5 |
|
|
| | | | | | | | | | | |
| | 2015 | | 2014* | | 2013** |
| Alagasco | | | | | |
| Service cost – benefits earned during the period | $ | 5.8 |
| | $ | 5.1 |
| | $ | 14.2 |
|
| Interest cost on projected benefit obligation | 6.2 |
| | 4.1 |
| | 11.2 |
|
| Expected return on plan assets | (8.2 | ) | | (5.2 | ) | | (14.7 | ) |
| Amortization of prior service cost | — |
| | 0.1 |
| | 0.5 |
|
| Amortization of actuarial loss | — |
| | 2.2 |
| | 14.0 |
|
| Loss on lump-sum settlements | 1.6 |
| | 10.1 |
| | 1.4 |
|
| Subtotal | 5.4 |
| | 16.4 |
| | 26.6 |
|
| Regulatory adjustment | 3.1 |
| | 0.4 |
| | — |
|
| Net pension cost | $ | 8.5 |
| | $ | 16.8 |
| | $ | 26.6 |
|
| | * Nine months ended September 30, |
| | ** Year ended December 31, 2013 |
Other changes in plan assets and pension benefit obligations recognized in other comprehensive income or loss include the following:
| | | | 2015 | | 2014 | | 2013 | Spire | | Spire Missouri | | Spire Alabama |
| Laclede Group | | | | | | |
| | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 |
| Current year actuarial loss | $ | 48.3 |
| | $ | 15.7 |
| | $ | 17.0 |
| $ | 14.1 |
| | $ | 46.8 |
| | $ | 48.3 |
| | $ | 14.8 |
| | $ | 21.6 |
| | $ | 26.0 |
| | $ | 3.3 |
| | $ | 25.2 |
| | $ | 22.3 |
|
| Amortization of actuarial loss | (7.5 | ) | | (7.1 | ) | | (10.7 | ) | (12.5 | ) | | (8.0 | ) | | (7.5 | ) | | (10.7 | ) | | (7.9 | ) | | (7.5 | ) | | (1.8 | ) | | (0.1 | ) | | — |
|
| Acceleration of loss recognized due to settlement | (19.6 | ) | | (1.5 | ) | | (27.0 | ) | (18.2 | ) | | (3.3 | ) | | (19.6 | ) | | (13.5 | ) | | — |
| | (18.0 | ) | | (4.5 | ) | | (3.3 | ) | | (1.6 | ) |
| Current year service cost | | — |
| | 5.0 |
| | — |
| | — |
| | 5.0 |
| | — |
| | — |
| | — |
| | — |
|
| Current year prior year service cost | | (20.7 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (20.7 | ) | | — |
| | — |
|
| Amortization of prior service cost | (0.5 | ) | | (0.5 | ) | | (0.5 | ) | (1.0 | ) | | (0.4 | ) | | (0.5 | ) | | (1.0 | ) | | (0.4 | ) | | (0.5 | ) | | — |
| | — |
| | — |
|
| Subtotal | 20.7 |
| | 6.6 |
| | (21.2 | ) | (38.3 | ) | | 40.1 |
| | 20.7 |
| | (10.4 | ) | | 18.3 |
| | — |
| | (23.7 | ) | | 21.8 |
| | 20.7 |
|
| Regulatory adjustment | (21.2 | ) | | (6.1 | ) | | 21.1 |
| 38.0 |
| | (39.8 | ) | | (21.2 | ) | | 10.1 |
| | (18.0 | ) | | (0.5 | ) | | 23.7 |
| | (21.8 | ) | | (20.7 | ) |
| Total recognized in other comprehensive income | $ | (0.5 | ) | | $ | 0.5 |
| | $ | (0.1 | ) | |
| | * Includes Alagasco. | | | |
| | | | | | | |
| Laclede Gas | 2015 | | 2014 | | 2013 | |
| Current year actuarial loss | $ | 26.0 |
| | $ | 14.2 |
| | $ | 17.0 |
| |
| Amortization of actuarial loss | (7.5 | ) | | (7.1 | ) | | (10.7 | ) | |
| Acceleration of loss recognized due to settlement | (18.0 | ) | | (1.5 | ) | | (27.0 | ) | |
| Amortization of prior service cost | (0.5 | ) | | (0.5 | ) | | (0.5 | ) | |
| Subtotal | — |
| | 5.1 |
| | (21.2 | ) | |
| Regulatory adjustment | (0.5 | ) | | (4.7 | ) | | 21.1 |
| |
| Total recognized in other comprehensive income | $ | (0.5 | ) | | $ | 0.4 |
| | $ | (0.1 | ) | |
| | | | | | | |
| | | | | | | |
| Alagasco | 2015 | | 2014* | | 2013** | |
| Current year actuarial loss | $ | 22.3 |
| | $ | 1.5 |
| | $ | (14.1 | ) | |
| Amortization of actuarial loss | — |
| | — |
| | (8.9 | ) | |
| Acceleration of loss recognized due to settlement | (1.6 | ) | | — |
| | — |
| |
| Amortization of prior service cost | — |
| | — |
| | (0.3 | ) | |
| Subtotal | 20.7 |
| | 1.5 |
| | (23.3 | ) | |
| Regulatory adjustment | (20.7 | ) | | (1.5 | ) | | — |
| |
| Total recognized in other comprehensive income | $ | — |
| | $ | — |
| | $ | (23.3 | ) | |
| | * Nine months ended September 30 | |
| | ** Year ended December 31 | |
| Total recognized in OCI | | $ | (0.3 | ) | | $ | 0.3 |
| | $ | (0.5 | ) | | $ | (0.3 | ) | | $ | 0.3 |
| | $ | (0.5 | ) | | $ | — |
| | $ | — |
| | $ | — |
|
Laclede GroupSpire pension obligations are driven by separate plan and regulatory provisions governing Laclede GasSpire Missouri, Spire Alabama and AlagascoSpire EnergySouth pension plans.
Pursuant to the provisions of the Missouri Utilities'Utilities’ and Alagasco'sSpire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments.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 100% of 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. Two Laclede GasSpire Alabama plans and one AlagascoSpire Missouri plan met the criteria for settlement recognition in the fiscal year ended September 30, 2015,2017, requiring re-measurement of the obligation under those plans using updated census data and assumptions for discount rate and mortality. Lump-sum payments recognized as settlements during fiscal yearyears 2017, 2016, and 2015 2014,were $62.2 ($43.5 attributable to Spire Missouri and 2013 were$18.7 to Spire Alabama), $16.6 (attributable to Spire Alabama), and $71.1 ($58.2 attributable to Laclede GasSpire Missouri and $12.9 attributable to Alagasco)Spire Alabama), $22.1, and $79.5, 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 losses not yet includible in pension cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-related value of plan assets. Such excess is amortized over the average remaining service life of active participants. The recovery in rates for Laclede Gas' easternSpire Missouri East’s qualified pension plan is based on an annual allowance of $15.5 effective January 1, 2011. The recovery in rates for MGE'sSpire Missouri West’s qualified pension plan is based on an annual allowance of $10.0approximately $10 effective February 20, 2010. 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.
The following table shows the reconciliation of the beginning and ending balances of the pension benefit obligation at September 30:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Laclede Group | | Laclede Gas | | Alagasco |
| | 2015 | | 2014** | | 2015 | | 2014 | | 2015 | | 2014*** |
| Benefit obligation, beginning of year | $ | 692.4 |
| | $ | 503.8 |
| | $ | 543.6 |
| | $ | 503.8 |
| | $ | 148.8 |
| | $ | 293.4 |
|
| Service cost | 17.3 |
| | 10.2 |
| | 11.5 |
| | 9.7 |
| | 5.8 |
| | 5.1 |
|
| Interest cost | 29.5 |
| | 24.5 |
| | 23.3 |
| | 24.0 |
| | 6.2 |
| | 4.1 |
|
| Actuarial (gain) loss | (12.8 | ) | | 39.4 |
| | (20.7 | ) | | 41.5 |
| | 7.9 |
| | 7.8 |
|
| Energen divestiture | — |
| | — |
| | — |
| | — |
| | — |
| | (127.8 | ) |
| Alagasco acquisition | — |
| | 150.2 |
| | — |
| | — |
| | — |
| | — |
|
| Settlement loss | 16.5 |
| | 1.2 |
| | 14.5 |
| | 1.2 |
| | 2.0 |
| | — |
|
| Gross benefits paid * | (90.6 | ) | | (36.9 | ) | | (74.6 | ) | | (36.6 | ) | | (16.0 | ) | | (33.8 | ) |
| Benefit obligation, end of year | $ | 652.3 |
| | $ | 692.4 |
| | $ | 497.6 |
| | $ | 543.6 |
| | $ | 154.7 |
| | $ | 148.8 |
|
| Accumulated benefit obligation, end of year | 591.4 |
| | $ | 613.7 |
| | 456.9 |
| | $ | 484.1 |
| | 134.5 |
| | $ | 129.6 |
|
| |
* | Includes $71.1 ($58.2 attributable to Laclede Gas and $12.9 to Alagasco) and $22.1 lump-sum payments recognized as settlements in fiscal years 2015 and 2014, respectively.
|
** Includes Alagasco.
*** Nine-month transition period ended September 30. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Benefit obligation, beginning of year | $ | 794.7 |
| | $ | 652.3 |
| | $ | 560.0 |
| | $ | 497.6 |
| | $ | 174.3 |
| | $ | 154.7 |
|
| Service cost | 20.5 |
| | 15.3 |
| | 12.7 |
| | 10.0 |
| | 6.2 |
| | 5.3 |
|
| Interest cost | 27.9 |
| | 28.0 |
| | 19.5 |
| | 21.7 |
| | 6.1 |
| | 6.3 |
|
| Actuarial (gain) loss | (0.9 | ) | | 85.8 |
| | (0.5 | ) | | 59.2 |
| | 1.6 |
| | 26.6 |
|
| Plan amendments | (20.7 | ) | | 5.1 |
| | — |
| | 5.1 |
| | (20.7 | ) | | — |
|
| Spire EnergySouth acquisition | — |
| | 60.4 |
| | — |
| | — |
| | — |
| | — |
|
| Settlement loss | 14.6 |
| | 1.1 |
| | 12.2 |
| | — |
| | 2.4 |
| | 1.1 |
|
| Special termination benefits | 0.9 |
| | 1.6 |
| | — |
| | 1.6 |
| | — |
| | — |
|
| Settlement benefits paid | (62.2 | ) | | (16.6 | ) | | (43.5 | ) | | — |
| | (18.7 | ) | | (16.6 | ) |
| Regular benefits paid | (26.0 | ) | | (38.3 | ) | | (20.8 | ) | | (35.2 | ) | | (3.0 | ) | | (3.1 | ) |
| Benefit obligation, end of year | $ | 748.8 |
| | $ | 794.7 |
| | $ | 539.6 |
| | $ | 560.0 |
| | $ | 148.2 |
| | $ | 174.3 |
|
| Accumulated benefit obligation, end of year | $ | 701.4 |
| | $ | 724.5 |
| | $ | 500.4 |
| | $ | 517.7 |
| | $ | 142.8 |
| | $ | 149.8 |
|
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Laclede Group | | Laclede Gas | | Alagasco |
| | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014** |
| Fair value of plan assets, beginning of year | $ | 506.6 |
| | $ | 345.4 |
| | $ | 387.4 |
| | $ | 345.4 |
| | $ | 119.2 |
| | $ | 219.5 |
|
| Actual return on plan assets | (7.2 | ) | | 52.1 |
| | (3.0 | ) | | 55.0 |
| | (4.2 | ) | | 7.8 |
|
| Employer contributions | 40.1 |
| | 23.6 |
| | 30.1 |
| | 23.6 |
| | 10.0 |
| | 1.6 |
|
| Settlements | (71.1 | ) | | — |
| | (58.2 | ) | | — |
| | (12.9 | ) | | — |
|
| Energen divestiture | — |
| | — |
| | — |
| | — |
| | — |
| | (75.9 | ) |
| Alagasco acquisition | — |
| | 122.4 |
| | — |
| | — |
| | — |
| | — |
|
| Gross benefits paid | (19.5 | ) | | (36.9 | ) | | (16.4 | ) | | (36.6 | ) | | (3.1 | ) | | (33.8 | ) |
| Fair value of plan assets, end of year | $ | 448.9 |
| | $ | 506.6 |
| | $ | 339.9 |
| | $ | 387.4 |
| | $ | 109.0 |
| | $ | 119.2 |
|
| Funded status of plans, end of year | $ | (203.4 | ) | | $ | (185.8 | ) | | $ | (157.7 | ) | | $ | (156.2 | ) | | $ | (45.7 | ) | | $ | (29.6 | ) |
* Includes Alagasco.
** Nine-month transition period ended September 30. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Fair value of plan assets, beginning of year | $ | 540.5 |
| | $ | 448.9 |
| | $ | 395.7 |
| | $ | 339.9 |
| | $ | 100.0 |
| | $ | 109.0 |
|
| Actual return on plan assets | 38.0 |
| | 75.1 |
| | 25.1 |
| | 64.4 |
| | 7.7 |
| | 10.7 |
|
| Employer contributions | 41.3 |
| | 26.6 |
| | 29.4 |
| | 26.6 |
| | 11.9 |
| | — |
|
| Spire EnergySouth acquisition | — |
| | 44.8 |
| | — |
| | — |
| | — |
| | — |
|
| Settlement benefits paid | (62.2 | ) | | (16.6 | ) | | (43.5 | ) | | — |
| | (18.7 | ) | | (16.6 | ) |
| Regular benefits paid | (26.0 | ) | | (38.3 | ) | | (20.8 | ) | | (35.2 | ) | | (3.0 | ) | | (3.1 | ) |
| Fair value of plan assets, end of year | $ | 531.6 |
| | $ | 540.5 |
| | $ | 385.9 |
| | $ | 395.7 |
| | $ | 97.9 |
| | $ | 100.0 |
|
| Funded status of plans, end of year | $ | (217.2 | ) | | $ | (254.2 | ) | | $ | (153.7 | ) | | $ | (164.3 | ) | | $ | (50.3 | ) | | $ | (74.3 | ) |
The following table sets forth the amounts recognized in the balance sheets at September 30:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014** | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Current liabilities | $ | (0.5 | ) | | $ | (0.5 | ) | | $ | (0.5 | ) | | $ | (0.5 | ) | | $ | — |
| | $ | — |
| $ | (0.5 | ) | | $ | (0.6 | ) | | $ | (0.5 | ) | | $ | (0.6 | ) | | $ | — |
| | $ | — |
|
| Noncurrent liabilities | (202.9 | ) | | (185.4 | ) | | (157.2 | ) | | (155.7 | ) | | (45.7 | ) | | (29.6 | ) | (216.7 | ) | | (253.6 | ) | | (153.2 | ) | | (163.7 | ) | | (50.3 | ) | | (74.3 | ) |
| Total | $ | (203.4 | ) | | $ | (185.9 | ) | | $ | (157.7 | ) | | $ | (156.2 | ) | | $ | (45.7 | ) | | $ | (29.6 | ) | $ | (217.2 | ) | | $ | (254.2 | ) | | $ | (153.7 | ) | | $ | (164.3 | ) | | $ | (50.3 | ) | | $ | (74.3 | ) |
* Includes Alagasco.
** Nine-month transition period ended September 30.
Pre-tax amounts recognized in accumulated other comprehensive incomeloss not yet recognized as components of net periodic pension cost consist of:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014** | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Net actuarial loss | $ | 143.9 |
| | $ | 7.7 |
| | $ | 121.9 |
| | $ | 7.7 |
| | $ | 22.0 |
| | $ | 1.5 |
| $ | 163.0 |
| | $ | 179.4 |
| | $ | 126.2 |
| | $ | 135.5 |
| | $ | 40.9 |
| | $ | 43.9 |
|
| Prior service costs | 3.5 |
| | 0.5 |
| | 3.5 |
| | 0.5 |
| | — |
| | — |
| |
| Prior service (credit) cost | | (13.4 | ) | | 8.2 |
| | 7.3 |
| | 8.2 |
| | (20.7 | ) | | — |
|
| Subtotal | 147.4 |
| | 8.2 |
| | 125.4 |
| | 8.2 |
| | 22.0 |
| | 1.5 |
| 149.6 |
| | 187.6 |
| | 133.5 |
| | 143.7 |
| | 20.2 |
| | 43.9 |
|
| Adjustments for amounts included in Regulatory Assets | (144.9 | ) | | (7.9 | ) | | (122.9 | ) | | (7.9 | ) | | (22.0 | ) | | (1.5 | ) | |
| Adjustments for amounts included in regulatory assets | | (147.1 | ) | | (184.8 | ) | | (131.0 | ) | | (140.9 | ) | | (20.2 | ) | | (43.9 | ) |
| Total | $ | 2.5 |
| | $ | 0.3 |
| | $ | 2.5 |
| | $ | 0.3 |
| | $ | — |
| | $ | — |
| $ | 2.5 |
| | $ | 2.8 |
| | $ | 2.5 |
| | $ | 2.8 |
| | $ | — |
| | $ | — |
|
* Includes Alagasco.
** Nine-month transition period ended September 30.
At September 30, 2015,2017, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive incomeloss into net periodic pension cost during fiscal year 2016:2018:
|
| | | | | | | | | | | |
| | Laclede Group | | Laclede Gas | | Alagasco |
| Amortization of net actuarial loss | $ | 7.8 |
| | $ | 7.8 |
| | $ | — |
|
| Amortization of prior service cost | 0.4 |
| | 0.4 |
| | — |
|
| Subtotal | 8.2 |
| | 8.2 |
| | — |
|
| Regulatory adjustment | (7.9 | ) | | (7.9 | ) | | — |
|
| Total | $ | 0.3 |
| | $ | 0.3 |
| | $ | — |
|
Alagasco has no amounts to be amortized from accumulated other comprehensive income into net periodic pension cost during fiscal 2016. |
| | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| Amortization of net actuarial loss | $ | 12.6 |
| | $ | 10.5 |
| | $ | 2.1 |
|
| Amortization of prior service (credit) cost | (0.9 | ) | | 0.9 |
| | (1.8 | ) |
| Subtotal | 11.7 |
| | 11.4 |
| | 0.3 |
|
| Regulatory adjustment | (11.4 | ) | | (11.1 | ) | | (0.3 | ) |
| Total | $ | 0.3 |
| | $ | 0.3 |
| | $ | — |
|
The assumptions used to calculate net periodic pension costs for Laclede GasSpire Missouri are as follows:
|
| | | | | |
| | 2015 | | 2014 | | 2013 |
| Weighted average discount rate - Laclede Gas plans | 4.30% | | 4.70% | | 3.95% |
| Weighted average discount rate - MGE plans | 4.45% | | 5.00% | | 5.05% |
| Weighted average rate of future compensation increase * | 3.00% | | 3.00% | | 3.00% |
| Expected long-term rate of return on plan assets * | 7.75% | | 7.75% | | 7.75% |
|
| | | | | |
| | 2017 | | 2016 | | 2015 |
| Weighted average discount rate - Spire Missouri East plans | 3.50% | | 4.40% | | 4.30% |
| Weighted average discount rate - Spire Missouri West plans | 3.50% | | 4.50% | | 4.45% |
| Weighted average rate of future compensation increase | 3.00% | | 3.00% | | 3.00% |
| Expected long-term rate of return on plan assets | 7.75% | | 7.75% | | 7.75% |
| |
*
| Assumptions for weighted average rate of future compensation increase and expected long-term rate of return on plan assets are the same for both Laclede Gas and MGE plans. |
The assumptions used to calculate net periodic pension costs for AlagascoSpire Alabama are as follows:
|
| | | | | |
| | 2015 | | 2014 * | | 2013 ** |
| Weighted average discount rate | 4.15% /4.25% | | 4.00% / 4.05% | | 3.63% |
| Weighted average rate of future compensation increase | 2.92% | | 2.92% | | 3.71% |
| Expected long-term rate of return on plan assets | 7.00% / 7.25% | | 7.00% / 7.25% | | 7.00% |
* Nine-month transition period ended September 30.
** Year Ended December 31. |
| | | | | |
| | 2017 | | 2016 | | 2015 |
| Weighted average discount rate | 3.45%/3.50% | | 4.25%/4.30% | | 4.15%/4.25% |
| Weighted average rate of future compensation increase | 3.00% | | 3.00% | | 2.92% |
| Expected long-term rate of return on plan assets | 7.25% | | 7.50% | | 7.00%/7.25% |
The weighted average 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 expected return is a long-term assumption that generally does not change annually. However, in 2012 and 2011, the expected return assumption was adjusted to reflect capital market volatility in recent years.
The assumptions used to calculate the benefit obligations are as follows:
|
| | | |
| | 2015 | | 2014 |
| Weighted average discount rate - Laclede Gas | 4.40% | | 4.30% |
| Weighted average discount rate - MGE | 4.50% | | 4.45% |
| Weighted average discount rate - Alagasco | 4.25%/4.30% | | 4.15% / 4.25% |
| Weighted average rate of future compensation increase (Laclede Gas and MGE) | 3.00% | | 3.00% |
| Weighted average rate of future compensation increase (Alagasco) | 3.00% | | 2.92% |
|
| | | |
| | 2017 | | 2016 |
| Weighted average discount rate - Spire Missouri East plans | 3.75% | | 3.50% |
| Weighted average discount rate - Spire Missouri West plans | 3.70% | | 3.50% |
| Weighted average discount rate - Spire Alabama plans | 3.65%/3.70% | | 3.45%/3.50% |
| Weighted average rate of future compensation increase | 3.00% | | 3.00% |
Following are 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:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014 | | 2015 | | 2014 | | 2015 | | 2014 | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Projected benefit obligation | $ | 652.3 |
| | $ | 692.4 |
| | $ | 497.6 |
| | $ | 543.6 |
| | $ | 154.7 |
| | $ | 148.8 |
| $ | 748.8 |
| | $ | 794.7 |
| | $ | 539.6 |
| | $ | 560.0 |
| | $ | 148.2 |
| | $ | 174.3 |
|
| Accumulated benefit obligation | 591.4 |
| | 613.7 |
| | 456.9 |
| | 484.1 |
| | 134.5 |
| | 129.6 |
| 701.4 |
| | 724.5 |
| | 500.4 |
| | 517.7 |
| | 142.8 |
| | 149.8 |
|
| Fair value of plan assets | 448.9 |
| | 506.6 |
| | 339.9 |
| | 387.4 |
| | 109.0 |
| | 119.2 |
| 531.6 |
| | 540.5 |
| | 385.9 |
| | 395.7 |
| | 97.9 |
| | 100.0 |
|
Following are the targeted and actual plan assets by category as of September 30 of each year for Laclede Gas:Spire Missouri and Spire Alabama:
| | | | 2015 Target | | 2015 Actual | 2014 Target | | 2014 Actual | |
| Growth Strategy | | | | | | | |
| Spire Missouri | | 2017
Target | | 2017
Actual | | 2016
Target | | 2016
Actual |
| Equity markets | 52.0 | % | | 48.4 | % | 50.0 | % | | 51.2 | % | 56.4 | % | | 56.8 | % | | 56.2 | % | | 56.9 | % |
| Debt securities | 48.0 | % | | 50.1 | % | 50.0 | % | | 48.7 | % | 43.6 | % | | 42.0 | % | | 43.8 | % | | 43.1 | % |
| Other* | — | % | | 1.5 | % | — | % | | 0.1 | % | |
| Cash equivalents | | — | % | | 1.2 | % | | — | % | | — | % |
| Total | 100.0 | % | | 100.0 | % | 100.0 | % | | 100.0 | % | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
* Other investments in 2015 and 2014 consist of cash equivalents.Laclede Gas' |
| | | | | | | | | | | |
| Spire Alabama | 2017
Target | | 2017
Actual | | 2016
Target | | 2016
Actual |
| Equity markets | 60.0 | % | | 58.5 | % | | 60.0 | % | | 59.2 | % |
| Debt securities | 29.0 | % | | 28.7 | % | | 29.0 | % | | 28.8 | % |
| Other* | 11.0 | % | | 12.8 | % | | 11.0 | % | | 12.0 | % |
| Total | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
| |
| * | Includes cash and funds invested in real estate, commodities, natural resources and inflation-protected securities. |
Spire Missouri’s investment policies are designed to maximize, to the extent possible, the funded status of the planplans over time, and minimize volatility of funding and costs. The policy seeks to maximize investment returns consistent with these objectives and Laclede Gas'Spire Missouri’s tolerance for risk. The duration of plan liabilities and the impact of potential changes 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 accordance with the policy. The policy seeks to avoid significant concentrations of risk by investing in a diversified portfolio of assets.assets, currently including a growth (equity) component and a liability-driven (debt) component. Investments in corporate, US 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. During 2012,There are also exposures to additional asset types were added toin the target portfolio: commodities, real estate and inflation-indexed securities. During 2015,For the target portfolio was rebalanced to include a higher weighting forMissouri East plan, the growth (equity) component and a lower weighting to the liability-driven (debt) component. 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 Strategygrowth 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. The assets acquired with the MGE pension plan include diversified funds that are equity-oriented and larger holdings of cash. These are being evaluated along with the liabilities of the MGE plan. Performance and compliance with the guidelines is regularly monitored. The policy calls for increased allocations to debt securities as the funded status improves.
Following are the targeted and actual plan assets by category as of September 30 of each year for Alagasco:
|
| | | | | | | | | | | |
| | 2015 Target | | 2015 Actual | | 2014 Target | | 2014 Actual |
| Equity markets | 60.0 | % | | 52.9 | % | | 46.0 | % | | 46.0 | % |
| Debt securities | 29.0 | % | | 27.9 | % | | 33.0 | % | | 29.0 | % |
| Other* | 11.0 | % | | 19.2 | % | | 21.0 | % | | 25.0 | % |
| Total | 100.0 | % | | 100.0 | % | | 100.0 | % | | 100.0 | % |
* Other investments in 2015 and 2014 include cash and cash equivalents, hedge funds, real estate, and all asset funds, which can invest in equities or fixed income.
AlagascoSpire Alabama 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. AlagascoSpire Alabama 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 planplans by providing above average risk-adjusted returns with a risk exposure in the mid-range of comparable funds. Investment managers are retained Alagascoby 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. AlagascoSpire Alabama 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 and the postretirement health care and life insurance benefit plan do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund. During 2015, the target portfolio was rebalanced to include a higher weighting for the growth (equity) component and a lower weighting to the liability-driven (debt) component and the inflation hedging / cash (other) component.
Following are expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five fiscal years thereafter, for Laclede Group, Laclede Gas,Spire, Spire Missouri, and Alagasco:Spire Alabama:
|
| | | | | | | | | | | | | | | | | | | | |
| | | Laclede Group | | Laclede Gas | | Alagasco |
| | | Pensions from Qualified Trust | | Pensions from Company Funds | | Pensions from Qualified Trust | | Pensions from Laclede Gas Funds | | Pensions from Qualified Trust |
| 2016 | | $ | 45.9 |
| | $ | 0.5 |
| | $ | 36.4 |
| | $ | 0.5 |
| | $ | 9.5 |
|
| 2017 | | 45.7 |
| | 0.6 |
| | 35.7 |
| | 0.6 |
| | 10.0 |
|
| 2018 | | 43.5 |
| | 0.5 |
| | 33.9 |
| | 0.5 |
| | 9.6 |
|
| 2019 | | 44.9 |
| | 0.4 |
| | 35.0 |
| | 0.4 |
| | 9.9 |
|
| 2020 | | 46.4 |
| | 0.5 |
| | 35.4 |
| | 0.5 |
| | 11.0 |
|
| 2021 – 2025 | | 235.0 |
| | 2.1 |
| | 177.3 |
| | 2.1 |
| | 57.7 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023- 2027 |
| Spire | $ | 63.5 |
| | $ | 63.2 |
| | $ | 63.2 |
| | $ | 58.1 |
| | $ | 57.9 |
| | $ | 281.1 |
|
| Spire Missouri | 50.7 |
| | 49.5 |
| | 49.1 |
| | 43.5 |
| | 42.1 |
| | 198.1 |
|
| Spire Alabama | 10.3 |
| | 11.1 |
| | 11.5 |
| | 11.9 |
| | 13.0 |
| | 67.8 |
|
The funding policy of Laclede GasSpire 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. ContributionsSpire Missouri contributions to the pension plans in fiscal year 20162018 are anticipated to be $26.0$35.5 into the qualified trusts, and $0.5 into the non-qualified plans.
The funding policy of Alagasco 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. There are Spire Alabama had no required contributions to the qualified pension plans during 2016.2017. Additionally, it is not anticipated that the funded status of the qualified pension plans will fall below statutory thresholds requiring accelerated funding or constraints on benefit levels or plan administration. During fiscal 2016 the Company may make additional2017, Spire Alabama made discretionary contributions to the qualified pension plans depending on the amount and timing of employee retirements and market conditions.totaling $11.9; none are expected in fiscal 2018.
Postretirement Benefits
The Utilities provide certain life insurance benefits at retirement. Laclede GasSpire Missouri plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, the MGESpire Missouri West plans provided medical insurance after retirement until death. For retirements after January 1, 2015, the MGESpire Missouri West plans provide medical insurance after early retirement until age 65. The transition obligation not yet included in postretirement benefit cost is being amortized over 20 years. Under the AlagascoSpire Alabama plans, medical insurance is currently available 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:
| | | Laclede Group | 2015 | | 2014* | | 2013 | |
| | | Spire | | Spire Missouri | | Spire Alabama |
| | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 |
| Service cost – benefits earned during the period | $ | 12.8 |
| | $ | 11.3 |
| | $ | 10.2 |
| $ | 11.0 |
| | $ | 10.9 |
| | $ | 12.8 |
| | $ | 10.4 |
| | $ | 10.6 |
| | $ | 12.3 |
| | $ | 0.3 |
| | $ | 0.3 |
| | $ | 0.5 |
|
| Interest cost on accumulated postretirement benefit obligation | 11.2 |
| | 8.9 |
| | 5.2 |
| 8.6 |
| | 10.2 |
| | 11.2 |
| | 6.8 |
| | 8.1 |
| | 8.6 |
| | 1.6 |
| | 2.1 |
| | 2.6 |
|
| Expected return on plan assets | (13.2 | ) | | (7.3 | ) | | (4.5 | ) | (13.6 | ) | | (13.5 | ) | | (13.2 | ) | | (9.0 | ) | | (8.5 | ) | | (8.1 | ) | | (4.4 | ) | | (5.0 | ) | | (5.1 | ) |
| Amortization of prior other comprehensive loss | — |
| | (0.2 | ) | | — |
| |
| Amortization of transition obligation | — |
| | — |
| | 0.1 |
| |
| Amortization of prior service credit | 0.8 |
| | — |
| | — |
| |
| Amortization of actuarial loss | 5.1 |
| | 6.0 |
| | 5.3 |
| |
| Amortization of prior service cost (credit) | | — |
| | 0.3 |
| | 0.8 |
| | 0.2 |
| | 0.3 |
| | 0.8 |
| | (0.2 | ) | | — |
| | — |
|
| Amortization of actuarial loss (gain) | | 2.5 |
| | 3.6 |
| | 5.1 |
| | 2.6 |
| | 3.8 |
| | 5.1 |
| | (0.1 | ) | | (0.2 | ) | | — |
|
| Special termination benefits | | — |
| | 2.6 |
| | — |
| | — |
| | 2.6 |
| | — |
| | — |
| | — |
| | — |
|
| Subtotal | 16.7 |
| | 18.7 |
| | 16.3 |
| 8.5 |
| | 14.1 |
| | 16.7 |
| | 11.0 |
| | 16.9 |
| | 18.7 |
| | (2.8 | ) | | (2.8 | ) | | (2.0 | ) |
| Regulatory adjustment | (11.0 | ) | | (9.6 | ) | | (6.8 | ) | (3.2 | ) | | (6.6 | ) | | (11.0 | ) | | (1.5 | ) | | (4.8 | ) | | (9.2 | ) | | (1.8 | ) | | (1.8 | ) | | (1.8 | ) |
| Net postretirement benefit cost | $ | 5.7 |
| | $ | 9.1 |
| | $ | 9.5 |
| $ | 5.3 |
| | $ | 7.5 |
| | $ | 5.7 |
| | $ | 9.5 |
| | $ | 12.1 |
| | $ | 9.5 |
| | $ | (4.6 | ) | | $ | (4.6 | ) | | $ | (3.8 | ) |
| | * Includes Alagasco. | | | |
| | | | | | | |
| Laclede Gas | 2015 | | 2014 | | 2013 | |
| Service cost – benefits earned during the period | $ | 12.3 |
| | $ | 11.2 |
| | $ | 10.2 |
| |
| Interest cost on accumulated postretirement benefit obligation | 8.6 |
| | 8.7 |
| | 5.2 |
| |
| Expected return on plan assets | (8.1 | ) | | (6.8 | ) | | (4.5 | ) | |
| Amortization of transition obligation | — |
| | — |
| | 0.1 |
| |
| Amortization of prior service credit | 0.8 |
| | — |
| | — |
| |
| Amortization of actuarial loss | 5.1 |
| | 6.0 |
| | 5.3 |
| |
| Subtotal | 18.7 |
| | 19.1 |
| | 16.3 |
| |
| Regulatory adjustment | (9.2 | ) | | (9.6 | ) | | (6.8 | ) | |
| Net postretirement benefit cost | $ | 9.5 |
| | $ | 9.5 |
| | $ | 9.5 |
| |
| | | | | | | |
| Alagasco | 2015 | | 2014 * | | 2013 ** | |
| Service cost – benefits earned during the period | $ | 0.5 |
| | $ | 0.4 |
| | $ | 1.7 |
| |
| Interest cost on accumulated postretirement benefit obligation | 2.6 |
| | 1.9 |
| | 3.5 |
| |
| Expected return on plan assets | (5.1 | ) | | (3.6 | ) | | (5.0 | ) | |
| Amortization of transition obligation | — |
| | — |
| | 1.3 |
| |
| Amortization of actuarial loss | — |
| | (1.0 | ) | | (0.1 | ) | |
| Curtailment gain | — |
| | — |
| | (1.2 | ) | |
| Subtotal | (2.0 | ) | | (2.3 | ) | | 0.2 |
| |
| Regulatory adjustment | (1.8 | ) | | (0.2 | ) | | — |
| |
| Net postretirement benefit cost | $ | (3.8 | ) | | $ | (2.5 | ) | | $ | 0.2 |
| |
| | * Nine months ended September 30 | |
| | ** Year ended December 31 | |
Other changes in plan assets and postretirement benefit obligations recognized in other comprehensive incomeOCI include the following:
|
| | | | | | | | | | | |
| Laclede Group | 2015 | | 2014* | | 2013 |
| Current year actuarial (gain) loss | $ | (8.5 | ) | | $ | (3.1 | ) | | $ | 16.3 |
|
| Amortization of actuarial loss | (5.1 | ) | | (6.0 | ) | | (5.3 | ) |
| Amortization of prior service credit | (0.8 | ) | | 2.5 |
| | — |
|
| Current year prior service credit | (4.9 | ) | | — |
| | — |
|
| Amortization of transition obligation | — |
| | — |
| | (0.1 | ) |
| Subtotal | (19.3 | ) | | (6.6 | ) | | 10.9 |
|
| Regulatory adjustment | 19.3 |
| | 6.6 |
| | (10.9 | ) |
| Total recognized in other comprehensive income | $ | — |
| | $ | — |
| | $ | — |
|
*Includes Alagasco.
| | | | | |
| | | | | | |
| Laclede Gas | 2015 | | 2014 | | 2013 |
| Current year actuarial (gain) loss | $ | (2.4 | ) | | $ | (4.2 | ) | | $ | 16.3 |
|
| Amortization of actuarial loss | (5.1 | ) | | (6.0 | ) | | (5.3 | ) |
| Amortization of prior service credit | (0.8 | ) | | 2.5 |
| | — |
|
| Current year prior service credit | (4.9 | ) | | — |
| | — |
|
| Amortization of transition obligation | — |
| | — |
| | (0.1 | ) |
| Subtotal | (13.2 | ) | | (7.7 | ) | | 10.9 |
|
| Regulatory adjustment | 13.2 |
| | 7.7 |
| | (10.9 | ) |
| Total recognized in other comprehensive income | $ | — |
| | $ | — |
| | $ | — |
|
| | | | | | |
| Alagasco | 2015 | | 2014 | | 2013 |
| Current year actuarial (gain) loss | $ | (6.1 | ) | | $ | 1.1 |
| | $ | (8.1 | ) |
| Amortization of actuarial loss | — |
| | — |
| | 0.6 |
|
| Amortization of transition obligation | — |
| | — |
| | (0.3 | ) |
| Subtotal | (6.1 | ) | | 1.1 |
| | (7.8 | ) |
| Regulatory adjustment | 6.1 |
| | (1.1 | ) | | — |
|
| Total recognized in other comprehensive income | $ | — |
| | $ | — |
| | $ | (7.8 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 | | 2017 | | 2016 | | 2015 |
| Current year actuarial (gain) loss | $ | (34.1 | ) | | $ | 0.8 |
| | $ | (8.5 | ) | | $ | (28.5 | ) | | $ | 1.4 |
| | $ | (2.4 | ) | | $ | (4.5 | ) | | $ | (0.6 | ) | | $ | (6.1 | ) |
| Amortization of actuarial (loss) gain | (2.5 | ) | | (3.6 | ) | | (5.1 | ) | | (2.6 | ) | | (3.8 | ) | | (5.1 | ) | | 0.1 |
| | 0.2 |
| | — |
|
| Current year prior service credit | (1.4 | ) | | (1.8 | ) | | (4.9 | ) | | — |
| | — |
| | (4.9 | ) | | (1.4 | ) | | (1.8 | ) | | — |
|
| Amortization of prior service (cost) credit | — |
| | (0.3 | ) | | (0.8 | ) | | (0.2 | ) | | (0.3 | ) | | (0.8 | ) | | 0.2 |
| | — |
| | — |
|
| Subtotal | (38.0 | ) | | (4.9 | ) | | (19.3 | ) | | (31.3 | ) | | (2.7 | ) | | (13.2 | ) | | (5.6 | ) | | (2.2 | ) | | (6.1 | ) |
| Regulatory adjustment | 38.0 |
| | 4.9 |
| | 19.3 |
| | 31.3 |
| | 2.7 |
| | 13.2 |
| | 5.6 |
| | 2.2 |
| | 6.1 |
|
| 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-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. The recovery in rates for Laclede Gas'Spire Missouri’s postretirement benefit plans is based on an annual allowance of $9.5 effective January 1, 2011. The difference between these amounts and postretirement benefit cost based on the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
The following table sets forth the reconciliation of the beginning and ending balances of the postretirement benefit obligation at September 30:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| ($ Millions) | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014 ** | |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Benefit obligation, beginning of year | $ | 258.5 |
| | $ | 180.1 |
| | $ | 197.9 |
| | $ | 180.1 |
| | $ | 60.6 |
| | $ | 63.3 |
| $ | 259.2 |
| | $ | 239.2 |
| | $ | 207.9 |
| | $ | 191.9 |
| | $ | 45.4 |
| | $ | 47.3 |
|
| Service cost | 12.8 |
| | 11.3 |
| | 12.3 |
| | 11.2 |
| | 0.5 |
| | 0.4 |
| 11.0 |
| | 10.9 |
| | 10.4 |
| | 10.6 |
| | 0.3 |
| | 0.3 |
|
| Interest cost | 11.2 |
| | 8.9 |
| | 8.6 |
| | 8.7 |
| | 2.6 |
| | 1.9 |
| 8.6 |
| | 10.2 |
| | 6.8 |
| | 8.1 |
| | 1.6 |
| | 2.1 |
|
| Actuarial loss (gain) | (23.7 | ) | | 1.2 |
| | (10.9 | ) | | 2.2 |
| | (12.8 | ) | | 4.3 |
| |
| Actuarial (gain) loss | | (22.1 | ) | | 7.1 |
| | (20.9 | ) | | 6.7 |
| | — |
| | 0.4 |
|
| Plan amendments | (4.9 | ) | | 2.5 |
| | (4.9 | ) | | 2.5 |
| | — |
| | — |
| (1.4 | ) | | (1.8 | ) | | — |
| | — |
| | (1.4 | ) | | (1.8 | ) |
| Energen divestiture | — |
| | — |
| | — |
| | — |
| | — |
| | (5.6 | ) | |
| Alagasco acquisition | — |
| | 61.8 |
| | — |
| | — |
| | — |
| | — |
| |
| Spire EnergySouth acquisition | | — |
| | 5.9 |
| | — |
| | — |
| | — |
| | — |
|
| Special termination benefits | | — |
| | 2.6 |
| | — |
| | 2.6 |
| | — |
| | — |
|
| Curtailments | | 0.4 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Retiree drug subsidy program | 0.4 |
| | — |
| | — |
| | — |
| | 0.4 |
| | 0.3 |
| 0.3 |
| | 0.2 |
| | 0.3 |
| | — |
| | — |
| | 0.2 |
|
| Gross benefits paid | (15.1 | ) | | (7.3 | ) | | (11.1 | ) | | (6.8 | ) | | (4.0 | ) | | (4.0 | ) | (17.5 | ) | | (15.1 | ) | | (12.0 | ) | | (12.0 | ) | | (5.3 | ) | | (3.1 | ) |
| Benefit obligation, end of year | $ | 239.2 |
| | $ | 258.5 |
| | $ | 191.9 |
| | $ | 197.9 |
| | $ | 47.3 |
| | $ | 60.6 |
| $ | 238.5 |
| | $ | 259.2 |
| | $ | 192.5 |
| | $ | 207.9 |
| | $ | 40.6 |
| | $ | 45.4 |
|
| | * Includes Alagasco. | |
| | ** Nine-month transition period ended September 30. | |
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014 | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Fair value of plan assets at beginning of year | $ | 222.5 |
| | $ | 111.6 |
| | $ | 137.2 |
| | $ | 111.6 |
| | $ | 85.3 |
| | $ | 98.6 |
| $ | 246.4 |
| | $ | 223.3 |
| | $ | 159.7 |
| | $ | 143.6 |
| | $ | 82.8 |
| | $ | 79.7 |
|
| Actual return on plan assets | (2.0 | ) | | 11.6 |
| | (0.4 | ) | | 13.3 |
| | (1.6 | ) | | 1.4 |
| 26.2 |
| | 19.9 |
| | 16.8 |
| | 13.8 |
| | 8.9 |
| | 6.2 |
|
| Employer contributions | 17.9 |
| | 19.1 |
| | 17.9 |
| | 19.1 |
| | — |
| | 0.3 |
| 10.4 |
| | 14.3 |
| | 10.4 |
| | 14.3 |
| | — |
| | — |
|
| Energen divestiture | — |
| | — |
| | — |
| | — |
| | — |
| | (11.0 | ) | |
| Alagasco acquisition | — |
| | 87.5 |
| | — |
| | — |
| | — |
| | — |
| |
| Spire EnergySouth acquisition | | — |
| | 4.0 |
| | — |
| | — |
| | — |
| | — |
|
| Gross benefits paid | (15.1 | ) | | (7.3 | ) | | (11.1 | ) | | (6.8 | ) | | (4.0 | ) | | (4.0 | ) | (17.5 | ) | | (15.1 | ) | | (12.0 | ) | | (12.0 | ) | | (5.3 | ) | | (3.1 | ) |
| Fair value of plan assets, end of year | $ | 223.3 |
| | $ | 222.5 |
| | $ | 143.6 |
| | $ | 137.2 |
| | $ | 79.7 |
| | $ | 85.3 |
| $ | 265.5 |
| | $ | 246.4 |
| | $ | 174.9 |
| | $ | 159.7 |
| | $ | 86.4 |
| | $ | 82.8 |
|
| Funded status of plans, end of year | $ | (15.9 | ) | | $ | (36.0 | ) | | $ | (48.3 | ) | | $ | (60.7 | ) | | $ | 32.4 |
| | $ | 24.7 |
| $ | 27.0 |
| | $ | (12.8 | ) | | $ | (17.6 | ) | | $ | (48.2 | ) | | $ | 45.8 |
| | $ | 37.4 |
|
| | * Includes Alagasco. | |
| | ** Nine-month transition period ended September 30. | |
The following table sets forth the amounts recognized in the balance sheets at September 30:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014 | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Current assets | | $ | 1.4 |
| | $ | 0.3 |
| | $ | 1.4 |
| | $ | 0.3 |
| | $ | — |
| | $ | — |
|
| Noncurrent assets | $ | 35.5 |
| | $ | 25.0 |
| | $ | 3.1 |
| | $ | 0.3 |
| | $ | 32.4 |
| | $ | 24.7 |
| 47.0 |
| | 37.4 |
| | 1.2 |
| | — |
| | 45.8 |
| | 37.4 |
|
| Current liabilities | (0.3 | ) | | (0.3 | ) | | (0.3 | ) | | (0.3 | ) | | — |
| | — |
| (0.4 | ) | | (0.4 | ) | | (0.4 | ) | | (0.4 | ) | | — |
| | — |
|
| Noncurrent liabilities | (51.1 | ) | | (60.7 | ) | | (51.1 | ) | | (60.7 | ) | | — |
| | — |
| (21.0 | ) | | (50.1 | ) | | (19.8 | ) | | (48.1 | ) | | — |
| | — |
|
| Total | $ | (15.9 | ) | | $ | (36.0 | ) | | $ | (48.3 | ) | | $ | (60.7 | ) | | $ | 32.4 |
| | $ | 24.7 |
| $ | 27.0 |
| | $ | (12.8 | ) | | $ | (17.6 | ) | | $ | (48.2 | ) | | $ | 45.8 |
| | $ | 37.4 |
|
Pre-tax amounts recognized in accumulated other comprehensive incomeloss not yet recognized as components of net periodic postretirement benefit cost consist of:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| | 2015 | | 2014* | | 2015 | | 2014 | | 2015 | | 2014 | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Net actuarial loss | $ | 40.8 |
| | $ | 54.4 |
| | $ | 45.8 |
| | $ | 53.3 |
| | $ | (5.0 | ) | | $ | 1.1 |
| |
| Net actuarial loss (gain) | | $ | 1.5 |
| | $ | 38.0 |
| | $ | 12.3 |
| | $ | 43.4 |
| | $ | (9.7 | ) | | $ | (5.4 | ) |
| Prior service credit | (3.1 | ) | | 2.5 |
| | (3.1 | ) | | 2.5 |
| | — |
| | — |
| (6.6 | ) | | (5.2 | ) | | (3.7 | ) | | (3.4 | ) | | (2.9 | ) | | (1.8 | ) |
| Subtotal | 37.7 |
| | 56.9 |
| | 42.7 |
| | 55.8 |
| | (5.0 | ) | | 1.1 |
| (5.1 | ) | | 32.8 |
| | 8.6 |
| | 40.0 |
| | (12.6 | ) | | (7.2 | ) |
| Adjustments for amounts included in Regulatory Assets | $ | (37.7 | ) | | $ | (56.9 | ) | | $ | (42.7 | ) | | $ | (55.8 | ) | | $ | 5.0 |
| | $ | (1.1 | ) | |
| Adjustments for amounts included in regulatory assets | | 5.1 |
| | (32.8 | ) | | (8.6 | ) | | (40.0 | ) | | 12.6 |
| | 7.2 |
|
| Total | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
At September 30, 2015,2017, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive incomeloss into net periodic postretirement benefit cost during fiscal year 2016:2018:
| | | | Laclede Group | | Laclede Gas | | Alagasco | Spire | | Spire Missouri | | Spire Alabama |
| Amortization of net actuarial loss | $ | 3.7 |
| | $ | 3.9 |
| | $ | (0.2 | ) | $ | 0.9 |
| | $ | 0.9 |
| | $ | — |
|
| Amortization of prior service cost | 0.3 |
| | 0.3 |
| | — |
| |
| Amortization of prior service (credit) cost | | (0.1 | ) | | 0.3 |
| | (0.4 | ) |
| Subtotal | 4.0 |
| | 4.2 |
| | (0.2 | ) | 0.8 |
| | 1.2 |
| | (0.4 | ) |
| Regulatory adjustment | (4.0 | ) | | (4.2 | ) | | 0.2 |
| (0.8 | ) | | (1.2 | ) | | 0.4 |
|
| Total | $ | — |
| | $ | — |
| | $ | — |
| $ | — |
| | $ | — |
| | $ | — |
|
The assumptions used to calculate net periodic postretirement benefit costs for Laclede GasSpire Missouri are as follows:
|
| | | | | | | | |
| | 2015 | | 2014 | | 2013 |
| Weighted average discount rate Laclede Gas plans | 4.15 | % | | 4.60 | % | | 3.80 | % |
| Weighted average discount rate MGE plans | 4.40 | % | | 4.95 | % | | 5.00 | % |
| Weighted average rate of future compensation increase (Laclede Gas and MGE Plans) | 3.00 | % | | 3.00 | % | | 3.00 | % |
| Expected long-term rate of return on plan assets - Laclede Gas plans | 6.25% / 7.75% |
| | 6.25% / 7.75% |
| | 7.75 | % |
| Expected long-term rate of return on plan assets - MGE plans | 5.00 | % | | 3.75% / 5.75% |
| | 5.75 | % |
|
| | | | | |
| | 2017 | | 2016 | | 2015 |
| Weighted average discount rate - Spire Missouri East plans | 3.15% | | 4.00% | | 4.15% |
| Weighted average discount rate - Spire Missouri West plans | 3.45% | | 4.30% | | 4.40% |
| 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 | 5.75%/7.75% | | 6.00%/7.75% | | 6.25%/7.75% |
| Expected long-term rate of return on plan assets - Spire Missouri West plans | 5.50% | | 4.75% | | 5.00% |
The assumptions used to calculate net periodic postretirement benefit costs for AlagascoSpire Alabama are as follows:
| | | | 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Weighted average discount rate | 4.40 | % | | 4.25 | % | | 4.26 | % | 3.60% | | 4.50% | | 4.40% |
| Expected long-term rate of return on plan assets | 4.75% / 7.50% |
| | 4.75% / 7.25% |
| | 7.00 | % | 4.00%/6.25% | | 4.50%/7.25% | | 4.75%/7.50% |
The weighted average 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 expected return is a long-term assumption that generally does not change annually. However, in 2012 and 2011, the expected return assumption was adjusted to reflect capital market volatility in recent years.
The assumptions used to calculate the accumulated postretirement benefit obligations for Laclede Gas are as follows:
|
| | | | | |
| | 2015 | | 2014 |
| Weighted average discount rate - Laclede Gas plans | 4.00 | % | | 4.15 | % |
| Weighted average discount rate - MGE Plans | 4.30 | % | | 4.40 | % |
| Weighted average rate of future compensation increase | 3.00 | % | | 3.00 | % |
The assumptions used to calculate the accumulated postretirement benefit obligations for Alagasco are as follows:
|
| | | | | |
| | 2015 | | 2014 |
| Weighted average discount rate | 4.50 | % | | 4.40 | % |
| Weighted average rate of future compensation increase | n/a |
| | n/a |
|
|
| | | |
| | 2017 | | 2016 |
| Weighted average discount rate - Spire Alabama plans | 3.80% | | 3.60% |
| Weighted average discount rate - Spire Missouri East plans | 3.60% | | 3.15% |
| Weighted average discount rate - Spire Missouri West plans | 3.60% | | 3.45% |
| Weighted average rate of future compensation increase - Spire Missouri East plans | 3.00% | | 3.00% |
The assumed medical cost trend rates at September 30 are as follows:
| | | | 2015 | | 2014 | 2017 | | 2016 |
| Medical cost trend assumed for next year - Laclede Gas & MGE | 7.00 | % | | 7.50 | % | |
| Medical cost trend assumed for next year - Alagasco | 7.00 | % | | 7.25 | % | |
| Medical cost trend assumed for next year - Spire Missouri | | 7.25% | | 7.50% |
| Medical cost trend assumed for next year - Spire Alabama | | 7.25% | | 7.50% |
| 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 | 2020 |
| | 2020 |
| 2023 | | 2023 |
The following table presents the effecteffects of an assumed 1% change in the assumed medical cost trend rate:
|
| | | | | | | |
| | 1% Increase | | 1% Decrease |
| Laclede Group | | | |
| Effect on net periodic postretirement benefit cost | $ | 1.6 |
| | $ | (1.5 | ) |
| Effect on accumulated postretirement benefit obligation | 9.2 |
| | (8.5 | ) |
| | | | |
| Laclede Gas | | | |
| Effect on net periodic postretirement benefit cost | $ | 1.5 |
| | $ | (1.4 | ) |
| Effect on accumulated postretirement benefit obligation | 8.7 |
| | (8.0 | ) |
| | | | |
| Alagasco | | | |
| Effect on net periodic postretirement benefit cost | $ | 0.1 |
| | $ | (0.1 | ) |
| Effect on accumulated postretirement benefit obligation | 0.5 |
| | (0.5 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| | 1% Increase | | 1% Decrease | | 1% Increase | | 1% Decrease | | 1% Increase | | 1% Decrease |
| Net periodic postretirement benefit cost | $ | 1.7 |
| | $ | (1.4 | ) | | $ | 1.6 |
| | $ | (1.3 | ) | | $ | 0.1 |
| | $ | (0.1 | ) |
| Accumulated postretirement benefit obligation | 10.0 |
| | (9.2 | ) | | 8.0 |
| | (7.4 | ) | | 1.4 |
| | (1.3 | ) |
Following are the targeted and actual plan assets by category as of September 30 of each year for Laclede Gas:Spire Missouri and Spire Alabama:
| | | | Target | | 2015 Actual | | 2014 Actual | |
| Spire Missouri | | Target | | 2017 Actual | | 2016 Actual |
| Equity securities | 60.0 | % | | 59.6 | % | | 59.0 | % | 60.0 | % | | 59.0 | % | | 59.1 | % |
| Debt securities | 40.0 | % | | 39.7 | % | | 39.0 | % | 40.0 | % | | 39.4 | % | | 39.4 | % |
| Other | — | % | | 0.7 | % | | 2.0 | % | |
| Other (cash and cash equivalents held to make benefit payments) | | — | % | | 1.6 | % | | 1.5 | % |
| Total | 100.0 | % | | 100.0 | % | | 100.0 | % | 100.0 | % | | 100.0 | % | | 100.0 | % |
|
| | | | | | | | |
| Spire Alabama | Target | | 2017 Actual | | 2016 Actual |
| Equity securities | 60.0 | % | | 60.1 | % | | 60.5 | % |
| Debt securities | 40.0 | % | | 39.9 | % | | 39.5 | % |
| Total | 100.0 | % | | 100.0 | % | | 100.0 | % |
Missouri and Alabama state law provideslaws provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. Laclede GasSpire Missouri and Spire Alabama have established Voluntary Employees’ Beneficiary Association and Rabbi Trusts as its external funding mechanisms. Laclede Gas’Their investment policy seekspolicies seek to maximize investment returns consistent with Laclede Gas'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. Laclede Gas' current investment policy targets an asset allocation of 60% to equity securitiesSpire Missouri and 40% to debt securities, excluding cash heldSpire Alabama currently invest in short-term debt securities for the purpose of making benefit payments. Laclede Gas currently invests in a mutual fundfunds which isare rebalanced on an ongoing basisperiodically to the target allocation. The mutual fund isfunds are diversified across US stock and bond markets.
Following are the targetedmarkets, and actual plan assets by category as of September 30 of each year for Alagasco:
|
| | | | | | | | |
| | Target | | 2015 Actual | | 2014 Actual |
| Equity securities | 60.0 | % | | 59.7 | % | | 60.0 | % |
| Debt securities | 40.0 | % | | 40.3 | % | | 40.0 | % |
| Total | 100.0 | % | | 100.0 | % | | 100.0 | % |
Following are expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the five fiscal years thereafter for Laclede Group, Laclede Gas,Spire, Spire Missouri, and Alagasco:Spire Alabama:
|
| | | | | | | | | | | | | | | | | | | | |
| | | Laclede Group | | Laclede Gas | | Alagasco |
| | | Benefits from Qualified Trust | | Benefits from Company Funds | | Benefits from Qualified Trust | | Benefits from Laclede Gas Funds | | Benefits from Qualified Trust |
| 2016 | | $ | 15.1 |
| | $ | 0.4 |
| | $ | 12.3 |
| | $ | 0.4 |
| | $ | 2.8 |
|
| 2017 | | 16.2 |
| | 0.4 |
| | 13.3 |
| | 0.4 |
| | 2.9 |
|
| 2018 | | 17.5 |
| | 0.4 |
| | 14.6 |
| | 0.4 |
| | 2.9 |
|
| 2019 | | 18.3 |
| | 0.4 |
| | 15.4 |
| | 0.4 |
| | 2.9 |
|
| 2020 | | 19.2 |
| | 0.4 |
| | 16.3 |
| | 0.4 |
| | 2.9 |
|
| 2021 – 2025 | | 104.9 |
| | 2.3 |
| | 90.4 |
| | 2.3 |
| | 14.5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2023- 2027 |
| Spire | $ | 15.0 |
| | $ | 16.0 |
| | $ | 17.1 |
| | $ | 18.3 |
| | $ | 18.9 |
| | $ | 101.3 |
|
| Spire Missouri | 11.8 |
| | 12.8 |
| | 14.0 |
| | 15.2 |
| | 15.9 |
| | 86.5 |
|
| Spire Alabama | 2.8 |
| | 2.8 |
| | 2.8 |
| | 2.8 |
| | 2.7 |
| | 13.0 |
|
Laclede Gas'Spire Missouri’s and Spire Alabama’s funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. ContributionsFor Spire Missouri, contributions to the postretirement plans in fiscal year 20162018 are anticipated to be $14.3$7.2 to the qualified trusts and $0.4$0.2 paid directly to participants from Laclede GasSpire Missouri funds.
Alagasco's funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. In fiscal 2016 it It is not anticipated that contributions will be made to the Spire Alabama postretirement plans.plans in fiscal 2018.
Other Plans
Laclede GasSpire Missouri and AlagascoSpire Alabama sponsor 401(k) plans that cover substantially all employees. The plans allow employees to contribute a portion of their base pay in accordance with specific guidelines. Laclede GasSpire Missouri provides a match of such contributions within specific limits. The cost of the defined contribution plans of Laclede GasSpire Missouri amounted to $8.0, $6.7,$8.4, $8.2, and $5.0$8.0 for fiscal years 2017, 2016, and 2015, 2014, and 2013, respectively. AlagascoSpire Alabama also provides a match of employee contributions within specific limits. The cost of the defined contribution plans of AlagascoSpire Alabama amounted to $2.7, $2.3, and $3.0 $4.7,for fiscal years 2017, 2016, and $7.1 for the fiscal year 2015, the transition period ended September 30, 2014, and calendar year 2013, respectively.
Fair Value Measurements of Pension and Other Postretirement Plan Assets
Laclede GroupSpire
The table below categorizes the fair value measurements of the Laclede Group'sSpire pension plan assets:
| | | | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2015 | | | | | | | | |
| As of September 30, 2017 | | | | | | | | |
| Cash and cash equivalents | $ | 43.4 |
| | $ | 0.2 |
| | $ | — |
| | $ | 43.6 |
| $ | 37.3 |
| | $ | — |
| | $ | — |
| | $ | 37.3 |
|
| Stock/bond mutual fund | 46.4 |
| | 74.6 |
| | 9.6 |
| | 130.6 |
| |
| Debt Securities | | | | | | | | |
| Equity mutual funds - domestic | | 42.1 |
| | 25.4 |
| | — |
| | 67.5 |
|
| Equity mutual funds - international | | 37.4 |
| | 11.2 |
| | — |
| | 48.6 |
|
| Debt securities: | | | | | | | | |
| US bond mutual funds | — |
| | 9.3 |
| | — |
| | 9.3 |
| 34.4 |
| | 68.5 |
| | — |
| | 102.9 |
|
| US government | 58.7 |
| | — |
| | — |
| | 58.7 |
| 33.2 |
| | 4.5 |
| | — |
| | 37.7 |
|
| US corporate | 123.7 |
| | 42.9 |
| | — |
| | 166.6 |
| 183.7 |
| | — |
| | — |
| | 183.7 |
|
| US municipal | — |
| | 5.9 |
| | — |
| | 5.9 |
| 4.2 |
| | — |
| | — |
| | 4.2 |
|
| International | — |
| | 31.3 |
| | — |
| | 31.3 |
| 45.1 |
| | 7.2 |
| | — |
| | 52.3 |
|
| Derivative instruments (a) | — |
| | 2.9 |
| | — |
| | 2.9 |
| |
| Derivatives and margin (payable) | | (2.6 | ) | | — |
| | — |
| | (2.6 | ) |
| Total | $ | 272.2 |
| | $ | 167.1 |
| | $ | 9.6 |
| | $ | 448.9 |
| $ | 414.8 |
| | $ | 116.8 |
| | $ | — |
| | $ | 531.6 |
|
| | | | | | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | |
| As of September 30, 2016 | | | | | | | | |
| Cash and cash equivalents | $ | 8.6 |
| | $ | 1.6 |
| | $ | — |
| | $ | 10.2 |
| $ | 51.2 |
| | $ | — |
| | $ | — |
| | $ | 51.2 |
|
| Stock/bond mutual fund | 54.2 |
| | 74.7 |
| | 9.3 |
| | 138.2 |
| |
| Debt Securities | | | | | | | | |
| Stock/bond mutual funds | | 99.3 |
| | 26.7 |
| | 0.1 |
| | 126.1 |
|
| Debt securities: | | | | | | | | |
| US bond mutual funds | 73.6 |
| | — |
| | — |
| | 73.6 |
| 23.0 |
| | 126.0 |
| | — |
| | 149.0 |
|
| US government | — |
| | 64.5 |
| | — |
| | 64.5 |
| 42.1 |
| | 3.0 |
| | — |
| | 45.1 |
|
| US corporate | — |
| | 164.0 |
| | — |
| | 164.0 |
| 137.4 |
| | — |
| | — |
| | 137.4 |
|
| US municipal | — |
| | 8.2 |
| | — |
| | 8.2 |
| 6.3 |
| | — |
| | — |
| | 6.3 |
|
| International | — |
| | 35.5 |
| | — |
| | 35.5 |
| 25.3 |
| | — |
| | — |
| | 25.3 |
|
| Derivative instruments (b) | — |
| | (1.0 | ) | | — |
| | (1.0 | ) | |
| Other | — |
| | 13.4 |
| | — |
| | 13.4 |
| |
| Derivatives and margin (payable) | | (1.0 | ) | | 1.1 |
| | — |
| | 0.1 |
|
| Total | $ | 136.4 |
| | $ | 360.9 |
| | $ | 9.3 |
| | $ | 506.6 |
| $ | 383.6 |
| | $ | 156.8 |
| | $ | 0.1 |
| | $ | 540.5 |
|
| |
(a) | Cash collateral of $8.3 net of derivative liabilities of $5.4.
|
| |
(b) | Derivative assets of $2.9 net of cash margin payable of $3.9.
|
The table below categorizes the fair value measurements of Laclede Group'sSpire’s postretirement plan assets: | | | | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2015 | | | | | | | | |
| As of September 30, 2017 | | | | | | | | |
| Cash and cash equivalents | $ | 1.6 |
| | $ | — |
| | $ | — |
| | $ | 1.6 |
| $ | 4.0 |
| | $ | — |
| | $ | — |
| | $ | 4.0 |
|
| US stock/bond mutual fund | 115.5 |
| | 92.8 |
| | — |
| | 208.3 |
| |
| US stock/bond mutual funds | | 174.1 |
| | 71.7 |
| | — |
| | 245.8 |
|
| International fund | — |
| | 13.4 |
| | — |
| | 13.4 |
| 1.0 |
| | 14.7 |
| | — |
| | 15.7 |
|
| Total | $ | 117.1 |
| | $ | 106.2 |
| | $ | — |
| | $ | 223.3 |
| $ | 179.1 |
| | $ | 86.4 |
| | $ | — |
| | $ | 265.5 |
|
| | | | | | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | |
| As of September 30, 2016 | | | | | | | | |
| Cash and cash equivalents | $ | 2.3 |
| | $ | — |
| | $ | — |
| | $ | 2.3 |
| $ | 4.8 |
| | $ | — |
| | $ | — |
| | $ | 4.8 |
|
| US stock/bond mutual fund | 213.0 |
| | — |
| | — |
| | 213.0 |
| |
| US stock/bond mutual funds | | 157.9 |
| | 68.5 |
| | — |
| | 226.4 |
|
| International fund | 7.2 |
| | — |
| | — |
| | 7.2 |
| 0.9 |
| | 14.3 |
| | — |
| | 15.2 |
|
| Total | $ | 222.5 |
| | $ | — |
| | $ | — |
| | $ | 222.5 |
| $ | 163.6 |
| | $ | 82.8 |
| | $ | — |
| | $ | 246.4 |
|
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.
Laclede Gas
Spire Missouri
The table below categorizes the fair value measurements of Laclede Gas'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, 2015 | | | | | | | |
| Cash and cash equivalents | $ | 31.8 |
| | $ | — |
| | $ | — |
| | $ | 31.8 |
|
| Stock/bond mutual fund | — |
| | 67.6 |
| | 0.1 |
| | 67.7 |
|
| Debt Securities | | | | | | | |
| US government | 37.7 |
| | — |
| | — |
| | 37.7 |
|
| US corporate | 123.7 |
| | 42.9 |
| | — |
| | 166.6 |
|
| US municipal | — |
| | 5.9 |
| | — |
| | 5.9 |
|
| International | — |
| | 27.3 |
| | — |
| | 27.3 |
|
| Derivative instruments (a) | — |
| | 2.9 |
| | — |
| | 2.9 |
|
| Total | $ | 193.2 |
| | $ | 146.6 |
| | $ | 0.1 |
| | $ | 339.9 |
|
| | | | | | | | |
| As of September 30, 2014 | | | | | | | |
| Cash and cash equivalents | $ | 8.3 |
| | $ | — |
| | $ | — |
| | $ | 8.3 |
|
| Stock/bond mutual fund | — |
| | 39.2 |
| | 9.3 |
| | 48.5 |
|
| Debt Securities | | | | | | | |
| US bond mutual funds | 73.6 |
| | — |
| | — |
| | 73.6 |
|
| US government | — |
| | 60.5 |
| | — |
| | 60.5 |
|
| US corporate | — |
| | 154.5 |
| | — |
| | 154.5 |
|
| US municipal | — |
| | 8.2 |
| | — |
| | 8.2 |
|
| International | — |
| | 34.8 |
| | — |
| | 34.8 |
|
| Derivative instruments (b) | — |
| | (1.0 | ) | | — |
| | (1.0 | ) |
| Total | $ | 81.9 |
| | $ | 296.2 |
| | $ | 9.3 |
| | $ | 387.4 |
|
| |
(a) | Cash collateral of $8.3net of derivative liabilities of $5.4.
|
| |
(b) | Derivative assets of $2.9 net of cash margin payable of $3.9.
|
|
| | | | | | | | | | | | | | | |
| | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2017 | | | | | | | |
| Cash and cash equivalents | $ | 31.7 |
| | $ | — |
| | $ | — |
| | $ | 31.7 |
|
| Equity mutual funds - domestic | — |
| | 11.9 |
| | — |
| | 11.9 |
|
| Equity mutual funds - international | — |
| | 5.7 |
| | — |
| | 5.7 |
|
| Debt securities: | | | | | | | |
| US bond mutual funds | — |
| | 68.5 |
| | — |
| | 68.5 |
|
| US government | 33.2 |
| | 4.5 |
| | — |
| | 37.7 |
|
| US corporate | 183.7 |
| | — |
| | — |
| | 183.7 |
|
| US municipal | 4.2 |
| | — |
| | — |
| | 4.2 |
|
| International | 45.1 |
| | — |
| | — |
| | 45.1 |
|
| Derivatives and margin (payable) | (2.6 | ) | | — |
| | — |
| | (2.6 | ) |
| Total | $ | 295.3 |
| | $ | 90.6 |
| | $ | — |
| | $ | 385.9 |
|
| As of September 30, 2016 | | | | | | | |
| Cash and cash equivalents | $ | 46.5 |
| | $ | — |
| | $ | — |
| | $ | 46.5 |
|
| Stock/bond mutual funds | — |
| | 14.8 |
| | 0.1 |
| | 14.9 |
|
| Debt securities: | | | | | | | |
| US bond mutual funds | — |
| | 120.2 |
| | — |
| | 120.2 |
|
| US government | 42.1 |
| | 3.0 |
| | — |
| | 45.1 |
|
| US corporate | 137.4 |
| | — |
| | — |
| | 137.4 |
|
| US municipal | 6.3 |
| | — |
| | — |
| | 6.3 |
|
| International | 25.2 |
| | — |
| | — |
| | 25.2 |
|
| Derivatives and margin (payable) | (1.0 | ) | | 1.1 |
| | — |
| | 0.1 |
|
| Total | $ | 256.5 |
| | $ | 139.1 |
| | $ | 0.1 |
| | $ | 395.7 |
|
The table below categorizes the fair value measurements of Laclede Gas'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 in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2015 | | | | | | | | |
| As of September 30, 2017 | | | | | | | | |
| Cash and cash equivalents | $ | 1.6 |
| | $ | — |
| | $ | — |
| | $ | 1.6 |
| $ | 3.9 |
| | $ | — |
| | $ | — |
| | $ | 3.9 |
|
| US stock/bond mutual fund | 115.5 |
| | 26.5 |
| | — |
| | 142.0 |
| |
| US stock/bond mutual funds | | 171.0 |
| | — |
| | — |
| | 171.0 |
|
| Total | $ | 117.1 |
| | $ | 26.5 |
| | $ | — |
| | $ | 143.6 |
| $ | 174.9 |
| | $ | — |
| | $ | — |
| | $ | 174.9 |
|
| | | | | | | | | | | | | | | |
| As of September 30, 2014 | | | | | | | | |
| As of September 30, 2016 | | | | | | | | |
| Cash and cash equivalents | $ | 2.3 |
| | $ | — |
| | $ | — |
| | $ | 2.3 |
| $ | 4.6 |
| | $ | — |
| | $ | — |
| | $ | 4.6 |
|
| US stock/bond mutual fund | 134.9 |
| | — |
| | — |
| | 134.9 |
| |
| US stock/bond mutual funds | | 155.1 |
| | — |
| | — |
| | 155.1 |
|
| Total | $ | 137.2 |
| | $ | — |
| | $ | — |
| | $ | 137.2 |
| $ | 159.7 |
| | $ | — |
| | $ | — |
| | $ | 159.7 |
|
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.
Alagasco
Spire Alabama
The table below categorizes the fair value measurements of Alagasco'sSpire 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, 2015 | | | | | | | |
| Cash and cash equivalents | $ | 11.6 |
| | $ | 0.2 |
| | $ | — |
| | $ | 11.8 |
|
| Stock/bond mutual fund | 46.4 |
| | 7.0 |
| | 9.5 |
| | 62.9 |
|
| Debt Securities | | | | | | | |
| US bond mutual funds | — |
| | 9.3 |
| | — |
| | 9.3 |
|
| US government | — |
| | 21.0 |
| | — |
| | 21.0 |
|
| International | — |
| | 4.0 |
| | — |
| | 4.0 |
|
| Derivative instruments (a) | — |
| | — |
| | — |
| | — |
|
| Total | $ | 58.0 |
| | $ | 41.5 |
| | $ | 9.5 |
| | $ | 109.0 |
|
| | | | | | | | |
| As of September 30, 2014 | | | | | | | |
| Cash and cash equivalents | $ | 0.3 |
| | $ | 1.6 |
| | $ | — |
| | $ | 1.9 |
|
| Stock/bond mutual fund | 54.2 |
| | 35.5 |
| | — |
| | 89.7 |
|
| Debt Securities | | | | | | | |
| US government | — |
| | 4.0 |
| | — |
| | 4.0 |
|
| US corporate |
|
| | 9.5 |
| | — |
| | 9.5 |
|
| International |
|
| | 0.7 |
| | — |
| | 0.7 |
|
| Other | — |
| | 13.4 |
| | — |
| | 13.4 |
|
| Total | $ | 54.5 |
| | $ | 64.7 |
| | $ | — |
| | $ | 119.2 |
|
|
| | | | | | | | | | | | | | | |
| | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2017 | | | | | | | |
| Cash and cash equivalents | $ | 3.4 |
| | $ | — |
| | $ | — |
| | $ | 3.4 |
|
| Equity mutual funds - domestic | 28.4 |
| | 9.1 |
| | — |
| | 37.5 |
|
| Equity mutual funds - international | 25.2 |
| | 3.7 |
| | — |
| | 28.9 |
|
| Debt securities: | | | | | | | |
| US bond mutual funds | 23.2 |
| | — |
| | — |
| | 23.2 |
|
| International | — |
| | 4.9 |
| | — |
| | 4.9 |
|
| Total | $ | 80.2 |
| | $ | 17.7 |
| | $ | — |
| | $ | 97.9 |
|
| | | | | | | | |
| As of September 30, 2016 | | | | | | | |
| Cash and cash equivalents | $ | 0.4 |
| | $ | — |
| | $ | — |
| | $ | 0.4 |
|
| Stock/bond mutual funds | 59.0 |
| | 11.9 |
| | — |
| | 70.9 |
|
| Debt securities: | | | | | | | |
| US bond mutual funds | 23.0 |
| | 5.7 |
| | — |
| | 28.7 |
|
| Total | $ | 82.4 |
| | $ | 17.6 |
| | $ | — |
| | $ | 100.0 |
|
The table below categorizes the fair value measurements of Alagasco'sSpire Alabama’s postretirement plan assets:
|
| | | | | | | | | | | | | | | |
| | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2015 | | | | | | | |
| US stock/bond mutual fund | $ | — |
| | $ | 66.3 |
| | $ | — |
| | $ | 66.3 |
|
| International Fund | — |
| | 13.4 |
| | — |
| | 13.4 |
|
| Total | $ | — |
| | $ | 79.7 |
| | $ | — |
| | $ | 79.7 |
|
| | | | | | | | |
| As of September 30, 2014 | | | | | | | |
| Cash and cash equivalents | $ | 0.1 |
| | $ | — |
| | $ | — |
| | $ | 0.1 |
|
| US stock/bond mutual fund | 43.6 |
| | 34.4 |
| | — |
| | 78.0 |
|
| International Fund | 7.2 |
| | — |
| | — |
| | 7.2 |
|
| Total | $ | 50.9 |
| | $ | 34.4 |
| | $ | — |
| | $ | 85.3 |
|
|
| | | | | | | | | | | | | | | |
| | Quoted Prices in Active Markets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total |
| As of September 30, 2017 | | | | | | | |
| US stock/bond mutual funds | $ | — |
| | $ | 71.7 |
| | $ | — |
| | $ | 71.7 |
|
| International fund | — |
| | 14.7 |
| | — |
| | 14.7 |
|
| Total | $ | — |
| | $ | 86.4 |
| | $ | — |
| | $ | 86.4 |
|
| | | | | | | | |
| As of September 30, 2016 | | | | | | | |
| US stock/bond mutual funds | $ | — |
| | $ | 68.5 |
| | $ | — |
| | $ | 68.5 |
|
| International fund | — |
| | 14.3 |
| | — |
| | 14.3 |
|
| Total | $ | — |
| | $ | 82.8 |
| | $ | — |
| | $ | 82.8 |
|
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
Laclede GroupSpire
The Company has two key operatingreportable segments: Gas Utility and Gas Marketing. The Gas Utility segment is the aggregation of the regulated operations of the Utilities. The Gas Marketing segment includes the results of LER,Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities, and LERSpire Storage Services, Inc., which utilizes natural gas storage contracts for providing natural gas sales. Other includes:
unallocated corporate items, including certain debt and associated interest costs,costs;
LacledeSpire STL Pipeline, Company, a subsidiary of Laclede Group which operatesSpire planning construction and operation of a proposed 65-mile FERC regulated pipeline to deliver natural gas into eastern Missouri; and
Spire’s subsidiaries engaged in the operation of a propane pipeline, under Federal Energy Regulatory Commission (FERC) jurisdiction, and
Laclede Group’s subsidiaries that are engaged in compression of natural gas oil production, real estate development,and risk management, and financial investments in other enterprises, among other activities. All subsidiaries are wholly owned.
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, sales of natural gas from Spire Missouri to Spire Marketing, propane transportation services provided by Spire NGL Inc. (formerly Laclede GasPipeline Company) to LER,Spire Missouri, and propane storage services provided by Laclede GasSpire Missouri to Laclede Pipeline Company, sales of natural gas from LER to Laclede Gas, and propane transportation services provided by Laclede Pipeline Company to Laclede Gas.Spire NGL Inc. 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 net unrealized gains and losses and other timing differences associated with energy-related transactions. Net economic earnings also exclude the after-tax impacts related to acquisition, divestiture, and restructuring activities.
| | | | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| 2015 | | | | |
| 2017 | | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| Revenues from external customers | $ | 1,891.8 |
| | $ | 82.9 |
| | $ | 1.7 |
| | $ | — |
| | $ | 1,976.4 |
| | | |
| Intersegment revenues | 4.0 |
| | 70.5 |
| | 2.0 |
| | (76.5 | ) | | — |
| 7.9 |
| | — |
| | 6.3 |
| | (14.2 | ) | | — |
|
| Total Operating Revenues | 1,895.8 |
| | 153.4 |
| | 3.7 |
| | (76.5 | ) | | 1,976.4 |
| 1,667.9 |
| | 79.3 |
| | 7.7 |
| | (14.2 | ) | | 1,740.7 |
|
| Operating Expenses | | | | | | | | | | | | | | | | | | |
| Gas Utility | | | | | | | | | | | | | | | | | | |
| Natural and propane gas | 957.6 |
| | — |
| | — |
| | (75.2 | ) | | 882.4 |
| 645.9 |
| | — |
| | — |
| | (75.4 | ) | | 570.5 |
|
| Other operation and maintenance | 391.6 |
| | — |
| | — |
| | (1.0 | ) | | 390.6 |
| 409.1 |
| | — |
| | — |
| | (4.1 | ) | | 405.0 |
|
| Depreciation and amortization | 129.9 |
| | — |
| | — |
| | — |
| | 129.9 |
| 153.5 |
| | — |
| | — |
| | — |
| | 153.5 |
|
| Taxes, other than income taxes | 142.1 |
| | — |
| | — |
| | — |
| | 142.1 |
| 137.8 |
| | — |
| | — |
| | — |
| | 137.8 |
|
| Total Gas Utility Operating Expenses | 1,621.2 |
| | — |
| | — |
| | (76.2 | ) | | 1,545.0 |
| 1,346.3 |
| | — |
| | — |
| | (79.5 | ) | | 1,266.8 |
|
| Gas Marketing and Other | — |
| | 146.6 |
| (a) | 12.6 |
| (b) | (0.3 | ) | | 158.9 |
| |
| Gas Marketing and Other * | | — |
| | 74.1 |
|
| 12.8 |
|
| 65.3 |
| | 152.2 |
|
| Total Operating Expenses | 1,621.2 |
| | 146.6 |
| | 12.6 |
| | (76.5 | ) | | 1,703.9 |
| 1,346.3 |
| | 74.1 |
| | 12.8 |
| | (14.2 | ) | | 1,419.0 |
|
| Operating Income (Loss) | 274.6 |
| | 6.8 |
| | (8.9 | ) | | — |
| | 272.5 |
| $ | 321.6 |
| | $ | 5.2 |
| | $ | (5.1 | ) | | $ | — |
| | $ | 321.7 |
|
| Net Economic Earnings (Loss) | 150.4 |
| | 4.2 |
| | (16.3 | ) | | — |
| | 138.3 |
| $ | 181.5 |
| | $ | 6.8 |
| | $ | (20.7 | ) | | $ | — |
| | $ | 167.6 |
|
| Capital Expenditures | 284.4 |
| | — |
| | 5.4 |
| | — |
| | 289.8 |
| $ | 412.6 |
| | $ | — |
| | $ | 25.5 |
| | $ | — |
| | $ | 438.1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| 2016 | | | | |
| Revenues from external customers | $ | 1,457.2 |
| | $ | 78.5 |
| | $ | 1.6 |
| | $ | — |
| | $ | 1,537.3 |
|
| Intersegment revenues | 2.2 |
| | — |
| | 3.2 |
| | (5.4 | ) | | — |
|
| Total Operating Revenues | 1,459.4 |
| | 78.5 |
| | 4.8 |
| | (5.4 | ) | | 1,537.3 |
|
| Operating Expenses | | | | | | | | | |
| Gas Utility | | | | | | | | | |
| Natural and propane gas | 539.7 |
| | — |
| | — |
| | (47.5 | ) | | 492.2 |
|
| Other operation and maintenance | 379.3 |
| | — |
| | — |
| | (1.8 | ) | | 377.5 |
|
| Depreciation and amortization | 136.9 |
| | — |
| | — |
| | — |
| | 136.9 |
|
| Taxes, other than income taxes | 125.2 |
| | — |
| | — |
| | — |
| | 125.2 |
|
| Total Gas Utility Operating Expenses | 1,181.1 |
| | — |
| | — |
| | (49.3 | ) | | 1,131.8 |
|
| Gas Marketing and Other * | — |
| | 66.7 |
|
| 12.6 |
|
| 43.9 |
| | 123.2 |
|
| Total Operating Expenses | 1,181.1 |
| | 66.7 |
| | 12.6 |
| | (5.4 | ) | | 1,255.0 |
|
| Operating Income (Loss) | $ | 278.3 |
| | $ | 11.8 |
| | $ | (7.8 | ) | | $ | — |
| | $ | 282.3 |
|
| Net Economic Earnings (Loss) | $ | 160.3 |
| | $ | 6.4 |
| | $ | (17.6 | ) | | $ | — |
| | $ | 149.1 |
|
| Capital Expenditures | $ | 291.7 |
| | $ | — |
| | $ | 1.6 |
| | $ | — |
| | $ | 293.3 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| 2014 | | | | |
| Revenues from external customers | $ | 1,462.6 |
| | $ | 162.6 |
| | $ | 2.0 |
| | $ | — |
| | $ | 1,627.2 |
|
| Intersegment revenues | 5.2 |
| | 84.0 |
| | 1.8 |
| | (91.0 | ) | | — |
|
| Total Operating Revenues | 1,467.8 |
| | 246.6 |
| | 3.8 |
| | (91.0 | ) | | 1,627.2 |
|
| Operating Expenses | | | | | | | | | |
| Gas Utility | | | | | | | | | |
| Natural and propane gas | 821.8 |
| | — |
| | — |
| | (90.1 | ) | | 731.7 |
|
| Other operation and maintenance | 288.7 |
| | — |
| | — |
| | (0.9 | ) | | 287.8 |
|
| Depreciation and amortization | 82.4 |
| | — |
| | — |
| | — |
| | 82.4 |
|
| Taxes, other than income taxes | 112.0 |
| | — |
| | — |
| | — |
| | 112.0 |
|
| Total Gas Utility Operating Expenses | 1,304.9 |
| | — |
| | — |
| | (91.0 | ) | | 1,213.9 |
|
| Gas Marketing and Other | — |
| | 226.4 |
| (a) | 20.5 |
| (b) | — |
| | 246.9 |
|
| Total Operating Expenses | 1,304.9 |
| | 226.4 |
| | 20.5 |
| | (91.0 | ) | | 1,460.8 |
|
| Operating Income (Loss) | 162.9 |
| | 20.2 |
| | (16.7 | ) | | — |
| | 166.4 |
|
| Net Economic Earnings (Loss) | 92.8 |
| | 10.2 |
| | (2.9 | ) | | — |
| | 100.1 |
|
| Capital Expenditures | 168.6 |
| | — |
| | 2.4 |
| | — |
| | 171.0 |
|
| | | | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| 2013 | | | | |
| 2015 | | Gas Utility | | Gas Marketing | | Other | | Eliminations | | Consolidated |
| Revenues from external customers | $ | 847.2 |
| | $ | 165.1 |
| | $ | 4.7 |
| | $ | — |
| | $ | 1,017.0 |
| | | |
| Intersegment revenues | 10.6 |
| | 24.3 |
| | 1.5 |
| | (36.4 | ) | | — |
| 4.0 |
| | 70.5 |
| | 2.0 |
| | (76.5 | ) | | — |
|
| Total Operating Revenues | 857.8 |
| | 189.4 |
| | 6.2 |
| | (36.4 | ) | | 1,017.0 |
| 1,895.8 |
| | 153.4 |
| | 3.7 |
| | (76.5 | ) | | 1,976.4 |
|
| Operating Expenses | | | | | | | | | | | | | | | | | | |
| Gas Utility | | | | | | | | | | | | | | | | | | |
| Natural and propane gas | 469.1 |
| | — |
| | — |
| | (35.7 | ) | | 433.4 |
| 957.6 |
| | — |
| | — |
| | (75.2 | ) | | 882.4 |
|
| Other operation and maintenance | 180.7 |
| | — |
| | — |
| | (0.4 | ) | | 180.3 |
| 391.6 |
| | — |
| | — |
| | (1.0 | ) | | 390.6 |
|
| Depreciation and amortization | 48.3 |
| | — |
| | — |
| | — |
| | 48.3 |
| 129.9 |
| | — |
| | — |
| | — |
| | 129.9 |
|
| Taxes, other than income taxes | 60.1 |
| | — |
| | — |
| | — |
| | 60.1 |
| 142.1 |
| | — |
| | — |
| | — |
| | 142.1 |
|
| Total Gas Utility Operating Expenses | 758.2 |
| | — |
| | — |
| | (36.1 | ) | | 722.1 |
| 1,621.2 |
| | — |
| | — |
| | (76.2 | ) | | 1,545.0 |
|
| Gas Marketing and Other | — |
| | 176.6 |
| (a) | 22.1 |
| (b) | (0.3 | ) | | 198.4 |
| |
| Gas Marketing and Other * | | — |
| | 146.6 |
| | 12.6 |
|
| (0.3 | ) | | 158.9 |
|
| Total Operating Expenses | 758.2 |
| | 176.6 |
| | 22.1 |
| | (36.4 | ) | | 920.5 |
| 1,621.2 |
| | 146.6 |
| | 12.6 |
| | (76.5 | ) | | 1,703.9 |
|
| Operating Income (Loss) | 99.6 |
| | 12.8 |
| | (15.9 | ) | | — |
| | 96.5 |
| $ | 274.6 |
| | $ | 6.8 |
| | $ | (8.9 | ) | | $ | — |
| | $ | 272.5 |
|
| Net Economic Earnings (Loss) | 56.6 |
| | 8.9 |
| | (0.5 | ) | | — |
| | 65.0 |
| $ | 150.4 |
| | $ | 4.2 |
| | $ | (16.3 | ) | | $ | — |
| | $ | 138.3 |
|
| Capital Expenditures | 128.5 |
| | — |
| | 2.3 |
| | — |
| | 130.8 |
| $ | 284.4 |
| | $ | — |
| | $ | 5.4 |
| | $ | — |
| | $ | 289.8 |
|
| |
(a)* | DepreciationOperating Expenses for “Gas Marketing and Other” include depreciation and amortization for Gas Marketing are included in Gas Marketing Expenses on the Consolidated Statements of Income ($0.30.1 for 20152017, $0.40.1 for 20142016, and $0.3 for 20132015).
|
| |
(b) | Depreciation, amortization, and accretion for Other are included in the Other Operating Expenses on the Consolidated Statements of Income ($0.60.5 for 20152017, $0.5 for 20142016, and $0.6 for 20132015).
|
| | | Total Assets | 2015 | | 2014 | | 2013 | |
| Total Assets at End of Year | | 2017 | | 2016 | | 2015 |
| Gas Utility | $ | 4,686.2 |
| | $ | 4,520.0 |
| | $ | 2,981.0 |
| $ | 5,551.2 |
| | $ | 5,184.7 |
| | $ | 4,679.3 |
|
| Gas Marketing | 160.6 |
| | 156.7 |
| | 163.9 |
| 246.2 |
| | 205.0 |
| | 160.6 |
|
| Other | 1,560.2 |
| | 1,575.7 |
| | 115.6 |
| 2,239.5 |
| | 1,836.6 |
| | 1,554.5 |
|
| Eliminations | (1,116.8 | ) | | (1,178.4 | ) | | (135.1 | ) | (1,490.2 | ) | | (1,161.9 | ) | | (1,116.8 | ) |
| Total Assets | $ | 5,290.2 |
| | $ | 5,074.0 |
| | $ | 3,125.4 |
| $ | 6,546.7 |
| | $ | 6,064.4 |
| | $ | 5,277.6 |
|
| | Reconciliation of Consolidated Net Income to Consolidated Net Economic Earnings
| 2015 | | 2014 | | 2013 | 2017 | | 2016 | | 2015 |
| Net Income (GAAP) | $ | 136.9 |
| | $ | 84.6 |
| | $ | 52.8 |
| |
| Net Income | | $ | 161.6 |
| | $ | 144.2 |
| | $ | 136.9 |
|
| Adjustments, pre-tax: | | | | | | |
| Unrealized loss (gain) on energy-related derivatives | (1.8 | ) | | (0.9 | ) | | 0.5 |
| 6.0 |
| | (0.1 | ) | | (2.8 | ) |
| Lower of cost or market inventory adjustments | 0.3 |
| | (0.7 | ) | | 0.9 |
| — |
| | 0.2 |
| | 0.4 |
|
Realized (gain) loss on economic hedges prior to the sale of the physical commodity | 1.5 |
| | (0.2 | ) | | — |
| (0.3 | ) | | (1.6 | ) | | 2.4 |
|
| Acquisition, divestiture and restructuring activities | 6.1 |
| | 17.3 |
| | 10.8 |
| 4.0 |
| | 9.2 |
| | 9.8 |
|
| Gain on sale of property | (4.7 | ) | | — |
| | — |
| — |
| | — |
| | (7.6 | ) |
| Net Economic Earnings (Non-GAAP) | $ | 138.3 |
| | $ | 100.1 |
| | $ | 65.0 |
| |
| Income tax effect of adjustments | | (3.7 | ) | | (2.8 | ) | | (0.8 | ) |
| Net Economic Earnings | | $ | 167.6 |
| | $ | 149.1 |
| | $ | 138.3 |
|
Laclede Gas and AlagascoThe Utilities account for regulated operations in accordance with ASC Topic 980, "Regulated“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. 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 following regulatory assets and regulatory liabilities were reflected in the Balance Sheets as of September 30, 20152017 and 2014.2016. Unamortized Purchased Gas Adjustments are also included below, which are reported separately in the current assets and liabilities sections of each balance sheet.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Laclede Group | | Laclede Gas | | Alagasco |
| | 2015 | | 2014 | | 2015 | | 2014 | | 2015 | | 2014 |
| Regulatory Assets: | | | | | | | | | | | |
| Current: | | | | | | | | | | | |
| Pension and postretirement benefit costs | $ | 22.0 |
| | $ | 21.4 |
| | $ | 15.5 |
| | $ | 15.0 |
| | $ | 6.5 |
| | $ | 6.4 |
|
| Unamortized purchased gas adjustments | 12.9 |
| | 54.0 |
| | 12.9 |
| | 54.0 |
| | — |
| | — |
|
| Other | 5.6 |
| | 5.4 |
| | 0.7 |
| | 3.0 |
| | 4.9 |
| | 2.4 |
|
| Total Current Regulatory Assets | 40.5 |
| | 80.8 |
| | 29.1 |
| | 72.0 |
| | 11.4 |
| | 8.8 |
|
| Noncurrent: | | | | | | | | | | | |
| Future income taxes due from customers | 134.5 |
| | 117.0 |
| | 134.5 |
| | 117.0 |
| | — |
| | — |
|
| Pension and postretirement benefit costs | 448.7 |
| | 431.5 |
| | 368.0 |
| | 365.4 |
| | 80.7 |
| | 66.1 |
|
| Cost of removal | 78.9 |
| | 21.2 |
| | — |
| | — |
| | 78.9 |
| | 21.2 |
|
| Purchased gas costs | 24.1 |
| | 4.3 |
| | 24.1 |
| | 4.3 |
| | — |
| | — |
|
| Energy efficiency | 22.3 |
| | 18.9 |
| | 22.3 |
| | 18.9 |
| | — |
| | — |
|
| Other | 29.1 |
| | 21.4 |
| | 24.7 |
| | 18.1 |
| | 4.0 |
| | 3.3 |
|
| Total Noncurrent Regulatory Assets | 737.6 |
| | 614.3 |
| | 573.6 |
| | 523.7 |
| | 163.6 |
| | 90.6 |
|
| Total Regulatory Assets | $ | 778.1 |
| | $ | 695.1 |
| | $ | 602.7 |
| | $ | 595.7 |
| | $ | 175.0 |
| | $ | 99.4 |
|
| | | | | | | | | | | | |
| Regulatory Liabilities: | | | | | | | | | | | |
| Current: | | | | | | | | | | | |
| RSE adjustment | 12.2 |
| | 19.8 |
| | — |
| | — |
| | 12.2 |
| | 19.8 |
|
| Unbilled service margin | 6.4 |
| | 5.2 |
| | — |
| | — |
| | 6.4 |
| | 5.2 |
|
| Refundable negative salvage | 10.8 |
| | 13.4 |
| | — |
| | — |
| | 10.8 |
| | 13.4 |
|
| Unamortized purchased gas adjustments | 28.2 |
| | 22.4 |
| | — |
| | — |
| | 28.2 |
| | 22.4 |
|
| Other | 3.0 |
| | 2.9 |
| | 0.6 |
| | 0.6 |
| | 2.4 |
| | 2.3 |
|
| Total Current Regulatory Liabilities | 60.6 |
| | 63.7 |
| | 0.6 |
| | 0.6 |
| | 60.0 |
| | 63.1 |
|
| Noncurrent: | | | | | | | | | | | |
| Postretirement liabilities | 28.9 |
| | 26.2 |
| | — |
| | — |
| | 28.9 |
| | 26.2 |
|
| Refundable negative salvage | 16.2 |
| | 26.8 |
| | — |
| | — |
| | 16.2 |
| | 26.8 |
|
| Accrued cost of removal | 58.7 |
| | 60.5 |
| | 58.7 |
| | 60.5 |
| | — |
| | — |
|
| Other | 15.5 |
| | 12.3 |
| | 11.9 |
| | 11.6 |
| | 3.6 |
| | 0.7 |
|
| Total Noncurrent Regulatory Liabilities | 119.3 |
| | 125.8 |
| | 70.6 |
| | 72.1 |
| | 48.7 |
| | 53.7 |
|
| Total Regulatory Liabilities | 179.9 |
| | 189.5 |
| | 71.2 |
| | 72.7 |
| | 108.7 |
| | 116.8 |
|
Regulatory assets are expected to be recovered in rates charged to customers. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Spire | | Spire Missouri | | Spire Alabama |
| September 30 | 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| Regulatory Assets: | | | | | | | | | | | |
| Current: | | | | | | | | | | | |
| Pension and postretirement benefit costs | $ | 42.2 |
| | $ | 27.0 |
| | $ | 34.9 |
| | $ | 20.2 |
| | $ | 7.2 |
| | $ | 6.8 |
|
| Unamortized purchased gas adjustments | 102.6 |
| | 49.7 |
| | 57.4 |
| | 43.1 |
| | 45.2 |
| | 5.6 |
|
| Other | 30.7 |
| | 17.2 |
| | 3.3 |
| | 3.7 |
| | 12.2 |
| | 8.1 |
|
| Total Current Regulatory Assets | 175.5 |
| | 93.9 |
| | 95.6 |
| | 67.0 |
| | 64.6 |
| | 20.5 |
|
| Noncurrent: | | | | | | | | | | | |
| Future income taxes due from customers | 170.5 |
| | 151.3 |
| | 170.5 |
| | 151.3 |
| | — |
| | — |
|
| Pension and postretirement benefit costs | 404.7 |
| | 487.9 |
| | 322.7 |
| | 375.7 |
| | 72.6 |
| | 98.9 |
|
| Cost of removal | 123.3 |
| | 130.6 |
| | — |
| | — |
| | 123.3 |
| | 130.6 |
|
| Unamortized purchased gas adjustments | 9.9 |
| | 12.6 |
| | 9.9 |
| | 12.6 |
| | — |
| | — |
|
| Energy efficiency | 29.0 |
| | 25.5 |
| | 29.0 |
| | 25.5 |
| | — |
| | — |
|
| Other | 53.7 |
| | 30.1 |
| | 25.7 |
| | 24.7 |
| | 1.1 |
| | 1.2 |
|
| Total Noncurrent Regulatory Assets | 791.1 |
| | 838.0 |
| | 557.8 |
| | 589.8 |
| | 197.0 |
| | 230.7 |
|
| Total Regulatory Assets | $ | 966.6 |
| | $ | 931.9 |
| | $ | 653.4 |
| | $ | 656.8 |
| | $ | 261.6 |
| | $ | 251.2 |
|
| | | | | | | | | | | | |
| Regulatory Liabilities: | | | | | | | | | | | |
| Current: | | | | | | | | | | | |
| RSE adjustment | $ | 1.4 |
| | $ | 7.5 |
| | $ | — |
| | $ | — |
| | $ | 1.4 |
| | $ | 5.0 |
|
| Unbilled service margin | — |
| | 5.9 |
| | — |
| | — |
| | — |
| | 5.9 |
|
| Refundable negative salvage | 8.2 |
| | 9.3 |
| | — |
| | — |
| | 8.2 |
| | 9.3 |
|
| Unamortized purchased gas adjustments | 1.0 |
| | 1.7 |
| | — |
| | — |
| | — |
| | — |
|
| Other | 12.0 |
| | 6.2 |
| | 2.7 |
| | 1.3 |
| | 2.4 |
| | 2.5 |
|
| Total Current Regulatory Liabilities | 22.6 |
| | 30.6 |
| | 2.7 |
| | 1.3 |
| | 12.0 |
| | 22.7 |
|
| Noncurrent: | | | | | | | | | | | |
| Pension and postretirement benefit costs | 32.2 |
| | 28.9 |
| | — |
| | — |
| | 32.2 |
| | 28.9 |
|
| Refundable negative salvage | 4.1 |
| | 9.4 |
| | — |
| | — |
| | 4.1 |
| | 9.4 |
|
| Accrued cost of removal | 83.8 |
| | 74.8 |
| | 54.5 |
| | 55.1 |
| | — |
| | — |
|
| Other | 37.1 |
| | 17.6 |
| | 26.7 |
| | 12.2 |
| | 3.3 |
| | 3.4 |
|
| Total Noncurrent Regulatory Liabilities | 157.2 |
| | 130.7 |
| | 81.2 |
| | 67.3 |
| | 39.6 |
| | 41.7 |
|
| Total Regulatory Liabilities | $ | 179.8 |
| | $ | 161.3 |
| | $ | 83.9 |
| | $ | 68.6 |
| | $ | 51.6 |
| | $ | 64.4 |
|
A portion of the Company'sCompany’s regulatory assets are not earning a return and are shown in the schedule below:
| | | | Laclede Group | | Laclede Gas | Spire | | Spire Missouri |
| | 2015 | | 2014 | | 2015 | | 2014 | |
| Regulatory Assets Not Earning a Return: | | | | | | | | |
| September 30 | | 2017 | | 2016 | | 2017 | | 2016 |
| Future income taxes due from customers | $ | 134.5 |
| | $ | 117.0 |
| | $ | 134.5 |
| | $ | 117.0 |
| $ | 170.5 |
| | $ | 151.3 |
| | $ | 170.5 |
| | $ | 151.3 |
|
| Pension and postretirement benefit costs | 223.7 |
| | 240.9 |
| | 223.7 |
| | 240.9 |
| 198.5 |
| | 240.6 |
| | 198.5 |
| | 240.6 |
|
| Other | 14.2 |
| | 16.0 |
| | 14.2 |
| | 16.0 |
| 11.3 |
| | 12.9 |
| | 11.3 |
| | 12.9 |
|
| Total Regulatory Assets Not Earning a Return | $ | 372.4 |
| | $ | 373.9 |
| | $ | 372.4 |
| | $ | 373.9 |
| $ | 380.3 |
| | $ | 404.8 |
| | $ | 380.3 |
| | $ | 404.8 |
|
All of Alagasco'sLike all the Company’s regulatory assets, currently earn a return.
Thesethese regulatory assets are expected to be recovered from customers in future rates. Excluding deferredThe recovery period for the future income taxes due from customers and purchased gas adjustmentpension and postretirement benefit costs could be as long as 20 years, based on current Internal Revenue Service guidelines and average remaining service life of active participants, respectively. The other items as of September 30, 2015 and 2014, approximately $372.4 and $373.9, respectively, of regulatory assets were not earning a rate of return. The Company expects these itemsreturn are expected to be recovered over a period not to exceed 15 years, consistent with precedent set by the MoPSC. The portion of the regulatory asset related to pensions and other postemployment benefits that relates to unfunded differences between the projected benefit obligation and plan assets alsoSpire Alabama does not earnhave any regulatory assets that are not earning a rate of return.
As authorized by the MoPSC, Laclede Gas discontinued deferring certain costs for future recovery, as expenses associated with those specific areas were included in approved rates effective December 27, 1999. Previously deferred costs of $10.5 were recovered and amortized on a straight-line basis over a fifteen-year period ended in December 2014, without return on investment.
Laclede GasSpire Missouri
On April 17, 2015, Laclede GasSeptember 30, 2016 Spire Missouri filed to increase its Infrastructure System Replacement Surcharge (ISRS) revenues by $5.5 in its Laclede Gas' eastern$5.0 for Spire Missouri service territoryEast and by $2.9 in its MGE service territory,$3.4 for Spire Missouri West, related to recover the cost of gas safety replacementISRS investments from March
2016 through October 2016. On November 29, 2016, MoPSC staff recommended $4.5 and public improvement projects over six months from September 2014 through February 2015. Effective May 22, 2015,$3.4 for Spire Missouri East and Spire Missouri West, respectively, based on updated filings. On January 3, 2017, the MoPSC approved an increaseheld a hearing to decide two issues raised by the Missouri Office of the Public Counsel (OPC) pertaining to the ISRS tariffseligibility of hydrostatic testing done by Spire Missouri West and of the replacement of cast iron main interspersed with portions of plastic pipe. On January 18, 2017, the MoPSC found in favor of the Missouri Utilities on the interspersed plastics issue, but against Spire Missouri West on hydrostatic testing, and issued an order setting the ISRS increases at $4.5 and $3.2 for Spire Missouri East and Spire Missouri West, respectively, bringing total annualized ISRS revenue to $29.5 and $13.4, respectively. Rates were effective January 28, 2017. On March 3, 2017, the OPC filed an appeal to Missouri’s Western District Court of Appeals of the MoPSC’s decision permitting Spire Missouri to include in the amountsISRS the replacement of $5.4 for Laclede Gas' eastern Missouri service territory and $2.8 for MGE's service territory.cast iron main interspersed with plastic pipe. The appeal will be heard in November 2017.
On AugustFebruary 3, 2015, Laclede Gas2017, Spire Missouri filed applications to increase its ISRS revenues, by $4.3 in its Laclede Gas eastern$3.3 for Spire Missouri service territoryEast and by $1.8 in its MGE service territory, to recover the cost of replacement investments$2.9 for Spire Missouri West, related to gas safetyISRS investments from November 2016 through February 2017. Following the submission of updated information, on April 4, 2017, MoPSC staff submitted its recommendation for an increase in rates of approximately $3.0 each, for a cumulative total of $32.6 and public improvement projects over six months from March through August 2015.$16.4 for Spire Missouri East and Spire Missouri West, respectively. On November 12, 2015,that same date, the OPC again raised an objection to the ISRS eligibility of replacing cast iron main interspersed with portions of plastic. On April 18, 2017, the parties filed with the MoPSC a unanimous stipulation and agreement proposing to apply the judicial outcome of the OPC’s March 3, 2017 appeal on the plastics issue to both the ISRS cases on appeal and the current ISRS cases. The agreement was approved an incrementalby the MoPSC on April 26, 2017. ISRS rates for each of the two service territories were increased by the MoPSC staff-recommended amounts, effective June 1, 2017.
On April 15, 2015, Spire Missouri applied to the MoPSC for a new authorization of long-term financing in the amount of $4.4$550.0. On February 10, 2016, the MoPSC issued an order, by a 3-2 vote, authorizing Spire Missouri financing authority of $300.0 for Laclede Gas' easternlong-term financings placed any time before September 30, 2018. Spire Missouri service territoryfiled an application for rehearing, which was denied on March 9, 2016. On March 31, 2016, Spire Missouri filed an appeal with Missouri’s Western District Court of Appeals concerning this matter. The parties filed briefs and $1.9oral arguments were heard on November 17, 2016. On May 30, 2017, Missouri’s Western District Court of Appeals issued a decision upholding the MoPSC’s February 10, 2016 Order granting Spire Missouri $300.0 in long-term financing authority. On July 5, 2017, the Court denied Spire Missouri’s request to transfer the case to the Missouri Supreme Court, and on October 5, 2017, the Missouri Supreme Court declined to hear Spire Missouri’s direct appeal. On March 20, 2017, Spire Missouri entered into a bond purchase agreement for MGE,$170.0 that was funded on September 15, 2017, and applied against the $300.0 authorization.
On April 11, 2017, both Spire Missouri East and Spire Missouri West filed for a general rate case, and did so concurrently as agreed to in GM-2013-0254, as part of the acquisition of Spire Missouri West by Spire Missouri in fiscal 2013. The request for Spire Missouri East represents a net rate increase of $25.5. With the $32.6 already being billed in ISRS, the total base rate increase request was $58.1. Spire Missouri West’s request represents a net rate increase of $34.0. With the $16.4 already being billed in ISRS, the total base rate increase request was $50.4. The rates were premised upon a 10.35% return on equity and the details of the filing can be found in GR-2017-0215 and GR-2017-0216 for Spire Missouri East and Spire Missouri West, respectively. An evidentiary hearing has been set for December 4 through 15, 2017, with a MoPSC decision expected by February 2018. Missouri statutes require new rates to be effective December 1, 2015, bringing total annualized ISRS revenue to $19.6 for Laclede Gas' eastern Missouri service territory and $6.7 for MGE's service territory.within 11 months of the filing, or by March 8, 2018.
AlagascoSpire Alabama
AlagascoSpire Alabama is subject to regulation by the APSC which established the Rate Stabilization and Equalization (RSE) rate-setting process in 1983. Alagasco’sSpire Alabama’s current RSE order has a term extending beyond September 30, 2018, unless the APSC enters an order to the contrary in a manner consistent with law. In the event of unforeseen circumstances, whether physical or economic, of the nature of force majeure and including a change in control, the APSC and AlagascoSpire Alabama will consult in good faith with respect to modifications, if any. Effective January 1, 2014, Alagasco’sSpire Alabama’s allowed range of return on average common equity is 10.5% to 10.95% with an adjusting point of 10.8%. The previous allowed range of return on average common equity was 13.15% to 13.65% through December 31, 2013. AlagascoSpire Alabama is eligible to receive a performance-based adjustment of 5 basis points to the return on equity adjusting point, based on meeting certain customer satisfaction criteria. Under RSE, the APSC conducts quarterly reviews to determine whether Alagasco’sSpire Alabama’s return on average common equity 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 return within the allowed range; increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year revenues. The RSE reduction for the July 31, 2016 quarterly point of test was $4.8 and went into effect October 1, 2016, and for the quarterly point of test at September 30, 2016, Spire Alabama recorded a $2.7 RSE reduction effective December 1, 2016. As part of the annual update for RSE, on November 30, 2016, Spire Alabama filed a reduction for rate year 2017 of $2.5 that also became effective December 1, 2016. There was no RSE
reduction for the January 31, 2017, April 30, 2017 and July 31, 2017 points of test. As of September 30, 2017, Spire Alabama recorded a $2.7 RSE reduction to operating revenues to bring the expected rate of return on average common equity at the end of the year to within the allowed range of return.
The inflation-based Cost Control MechanismMeasure (CCM), established by the APSC, allows for annual increases to operationsoperation and maintenance (O&M) expense. The CCM range is Alagasco’sSpire Alabama’s 2007 actual rate year O&M expense (Base Year) inflation-adjusted using an index range equal to the June Consumer Price Index For All Urban Consumers each rate year plus or minus 1.75% (Index Range). If rate year O&M expense falls within this index range,the Index Range, no adjustment is required. If rate year O&M expense exceeds the index range,Index Range, three-quarters of the difference is returned to customers through future rate adjustments. To the extent that rate year O&M is less than the index range, AlagascoIndex Range, Spire Alabama benefits by one-half of the difference through future rate adjustments. Certain items that fluctuate based on situations demonstrated to be beyond Alagasco’sSpire Alabama’s control may be excluded from the CCM calculation. BenefitAs of September 30, 2017, Spire Alabama recorded a CCM benefit of $10.7 for fiscal 2015rate year 2017, which will be reflected in rates effective December 1, 2017. The CCM benefit was $4.9$7.8 for rate year 2016 and $2.4$4.7 for 2014.rate year 2015.
Alagasco’sOn June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, and a regulatory liability recorded for Spire Alabama. Refunds from such negative salvage liability will be passed back to eligible customers on a declining basis through lower tariff rates through rate schedules for natural gas distribution charges contain a GSA rider, established in 1993, which permitsyear 2019 pursuant to the pass-throughterms of the Negative Salvage Rebalancing (NSR) rider. The total amount refundable to customers of changes inis subject to adjustments over the cost of gas supply. Alagasco’s tariff provides a temperature adjustment mechanism, also included inremaining period for charges made to the GSA, which is designed to moderate the impact of departures from normal temperatures on Alagasco’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 Enhanced Stability Reserve (ESR) and other APSC-approved charges. The refunds are due to a re-estimation of future removal costs provided for through the prior depreciation rates. For fiscal 2017, approximately $6.3 of the customer refund was returned to customers. As of September 30, 2017, $12.3 is remaining to be refunded to customers. The NSR pass back for fiscal 2018 is $8.2 and will be reflected in 1998, which was subsequently modifiedrates effective December 1, 2017 through March 31, 2018.
Spire Alabama has APSC approval for an intercompany revolving credit agreement allowing Spire Alabama to borrow from Spire in a principal amount not to exceed $200.0 at any time outstanding in combination with its bank line of credit, and expandedto loan to Spire in 2010. As currently approved, the ESR provides deferred treatment and recoverya principal amount not to exceed $25.0 at any time outstanding. Borrowings may be used for the following: (1) extraordinary O&M expensesfollowing purposes: (a) meeting increased working capital requirements; (b) financing construction requirements related to environmental response costs; (2) extraordinary O&M expenses relatedadditions, extensions, and replacements of the distribution systems; and (c) financing other expenditures that may arise from time to self-insurancetime in the normal course of business.
On September 18, 2017, Spire Alabama filed an application with the APSC for authorization to issue and sell $75.0 principal amount of debt and to purchase interest rate derivative instruments for the purpose of locking in favorable interest rates and to include the associated interest charges, issuance costs, that exceed $1 million per occurrence; (3) extraordinary O&M expenses, other than environmental response costsfees and self-insurance costs,any gain or loss resulting from a single force majeure event or multiple force majeure events greater than $0.3 and $0.4, respectively, during athe settlement of such interest rate year; and (4) negative individual large commercial and industrial customer budget revenue variances that exceed $0.4 during a rate year. Charges toderivative instruments through rates. The application was approved by the ESR are subject to certain limitations which may disallow deferred treatment and which prescribe the timing of recovery. Funding to the ESR is provided as a reduction to the refundable negative salvage balance over its nine-year term beginning December 1, 2010. Subsequent to the nine-year period and subject to APSC authorization, Alagasco expects to be able to recover underfunded ESR balances over a five-year amortization period with an annual limitation of $0.7. Amounts in excess of this limitation are deferred for recovery in future years.October 3, 2017.
16. COMMITMENTS AND CONTINGENCIES
Commitments
The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through 2021,2031, for the storage, transportation, and supply of natural gas. Minimum payments required by the Company under the contracts in place at September 30, 20152017 are estimated at $1,369.3. Minimum payments required$1,281.8, $563.9 and $285.6 for Laclede Gasthe Company, Spire Missouri and Alagasco under the contracts are estimated at $600.8 and $476.9,Spire Alabama, respectively. Additional contracts are generally entered into prior to or during the heating season of November through April. The Missouri Utilities recover their costs from customers in accordance with their PGA clause and Alagasco recovers its cost through itsclauses or GSA rider.riders.
Alagasco's long-term contracts associated with the delivery and storage of natural gas include fixed charges of approximately $476.9 through August 2020. Alagasco also is committed to purchase minimum quantities of gas at market-related prices or to pay certain costs in the event the minimum quantities are not taken. These purchase commitments are approximately 110 Bcf through August 2020.
Laclede Pipeline Company (Pipeline), a 100% owned subsidiary of Laclede Group,Spire NGL Inc. is providing liquid propane transportation service to Laclede GasSpire Missouri pursuant to an approved FERC tariff and a contractual arrangement between Pipeline and Laclede Gas.with Spire Missouri. In accordance with the terms of that agreement, Laclede GasSpire Missouri is obligated to pay PipelineSpire NGL Inc. approximately $1.0 annually, at current rates. The agreement renews at the end of each contract year, unless terminated by either party upon provision of at least six months’ notice.
Leases and Guarantees
The lease agreement covering the primary office space of Laclede Group and its Missouri Utilities extends through February 2025. The aggregate rental expense for fiscal years 2015, 2014, and 2013 was approximately $2.8, $1.0, and $1.0, respectively. The annual rental payment is anticipated to be approximately $3.8 through fiscal year 2016. The lease agreement covering the primary office space of Alagasco extends through February 2018. Alagasco has an operating lease for additional office space that extends to January 31, 2024. Alagasco has subleased all of this office space to Energen pursuant to a sublease that expires on December 31, 2019 with an option to extend through January 31, 2024.
Laclede Gas has entered into various operating lease agreements for the rental of vehicles and power operated equipment. The rental costs will be approximately $2.2 in fiscal year 2016, $2.5 in fiscal year 2017, and $0.1 in fiscal year 2018. Laclede Gas and LER have other relatively minor rental arrangements that provide for minimum rental payments.
A consolidated subsidiary is a general partner in an unconsolidated partnership that invests in real estate partnerships. The subsidiary and third parties are jointly and severally liable for the payment of mortgage loans in the aggregate outstanding amount of approximately $1.5$1.3 incurred in connection with various real estate ventures. Laclede GroupSpire has no reason to believe that the other principal liable parties will not be able to meet their proportionate
share of these obligations. Laclede GroupSpire further believes that the asset values of the real estate properties are sufficient to support these mortgage loans.
Leases
Aggregate rental expense and annual minimum rental commitments under all leases having an initial or remaining non-cancelable term of more than one year are shown below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Aggregate Rental Expense | | | Minimum Rental Commitments |
| | 2017 | | 2016 | | 2015 | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Later | | Total |
| Spire | $ | 9.7 |
| | $ | 11.9 |
| | $ | 14.1 |
| | $ | 10.1 |
| | $ | 9.3 |
| | $ | 7.8 |
| | $ | 6.1 |
| | $ | 6.0 |
| | $ | 44.4 |
| | $ | 83.7 |
|
| Spire Missouri | 4.8 |
| | 4.3 |
| | 7.6 |
| | 2.1 |
| | 1.3 |
| | 0.2 |
| | 0.2 |
| | — |
| | — |
| | 3.8 |
|
| Spire Alabama | 4.6 |
| | 3.7 |
| | 4.0 |
| | 4.0 |
| | 4.1 |
| | 3.8 |
| | 2.1 |
| | 2.1 |
| | 2.8 |
| | 18.9 |
|
The lease agreement covering the Company’s primary office space in Missouri extends through January 2035. The lease agreement covering the primary office space of Spire Alabama extends through February 2020. Spire Alabama has an operating lease for additional office space that extends to January 31, 2024. Spire Alabama has subleased all of this additional office space to Energen pursuant to a sublease that expires on December 31, 2019 with an option to extend through January 31, 2024. Amounts in the table above have not been reduced for sublease rentals. For Spire Alabama and Spire, sublease rentals were $2.1, $2.1, and $2.1 for fiscal years 2017, 2016, and 2015, and minimum future rentals to be received in fiscal years 2018, 2019, and 2020 are $2.1, $2.1, and $0.5, respectively. Spire Missouri, Spire Alabama and Spire Marketing have other relatively minor rental arrangements that provide for minimum rental payments.
Contingencies
The Company and Utilities account for environmental liabilities and other contingencies in accordance with accounting standards under the loss contingency guidance of ASC Topic 450, "Contingencies,"“Contingencies,” when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Laclede Gas
Similar to other natural gas utility companies, Laclede Gas ownsThe Company and operatesthe 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 Laclede Gas'Utilities’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, the Company or Laclede Gasthe Utilities may incur additional environmental liabilities that may result in additional costs.costs, which may be material.
In addition to matters noted below, the Company, Spire Missouri, and Spire Alabama are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes that 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.
In the natural gas industry, many gas distribution companies like Laclede Gas have incurred environmental liabilities associated with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took place. At this time, Laclede Gas has identified threeThe Utilities each have former manufactured gas plant (MGP) operations in their respective service territories.
Spire
On June 14, 2017, Spire filed a lawsuit against Cellular South, Inc. d/b/a C-Spire in federal district court for the Southern District of Alabama, Civil Action 17-00266-KD-N, seeking a declaratory order that Spire’s SPIRE trademarks do not infringe upon Cellular South’s C-SPIRE trademarks, and that Spire is entitled to federal registration of its trademarks. In prior proceedings before the United States Patent and Trademark Office, Cellular South filed oppositions to Spire’s attempts to register the SPIRE name, the SPIRE logo and the SPIRE LOGO + HANDSHAKE trademarks. In answer to Spire’s lawsuit, Cellular South filed counterclaims alleging infringement and unfair business practices, and seeking a declaration of infringement and that SPIRE marks are not registrable by Spire. On September 11, 2017, a federal district court judge denied Cellular South’s motion for a temporary restraining order and an injunction that would have prohibited Spire from using the SPIRE trademarks in Alabama and Mississippi. After consultation with counsel, the Company does not believe that the final resolution of this matter will have a detrimental impact on the Company’s financial condition or results of operations.
Spire Gulf is in the chain of title of one former MGP site which it still owns in Mobile, Alabama. On September 15, 2010, Spire Gulf filed an application to enroll the site into the Alabama Department of Environmental Management’s (ADEM) Voluntary Cleanup Program. This application was accepted by ADEM on November 16, 2010. Investigation and testing have been completed. Spire Gulf received an approved remediation plan from ADEM and the remedial actions under the plan were completed in fiscal 2017. Spire Gulf and the Company do not expect potential liabilities that may arise from remediating this site to have a material impact on their future financial condition or results of operations.
Since April 2012, a total of 14 lawsuits have been filed against Spire Gulf in Mobile County Circuit Court alleging that in the first half of 2008, Spire Gulf spilled tert-butyl mercaptan, an odorant added to natural gas for safety reasons, in Eight Mile, Alabama. Eleven of the lawsuits have been settled. The remaining three lawsuits, which include approximately 270 individual plaintiffs, allege nuisance, fraud and negligence causes of actions, and seek unspecified compensatory and punitive damages. The Company has resolved all coverage disputes with its insurance carriers relating to this matter. The Company does not expect potential liabilities that may arise from these lawsuits to have a material impact on its future financial condition or results of operations.
Spire Missouri
Spire Missouri has identified four former MGP sites in eastern Missouri where costs have been incurred and claims have been asserted: one in Shrewsbury, Missouri and twothree in the Citycity of St. Louis, Missouri. Laclede GasMissouri (City). Spire Missouri has enrolled two of the two sites in the City of St. Louis in the Missouri Department of Natural Resources Brownfields/Voluntary Cleanup Program (BVCP). In Laclede Gas' western service area, MGE has enrolled all of its owned former manufactured gas plant sitesThe third site in the BVCP.
With regard to the former MGP site located in Shrewsbury, Missouri, Laclede GasSpire Missouri and state and federal environmental regulators agreed upon certain remedial actions to a portion of the site in a 1999 Administrative Order on Consent (AOC), which actions have been completed. On September 22, 2008, Environmental Protection Agency (EPA)EPA Region VII7 issued a letter of Termination and Satisfaction terminating the AOC. However, if after this termination of the AOC, regulators require additional remedial actions, or additional claims are asserted, Laclede GasSpire Missouri may incur additional costs.
In conjunction with redevelopment of one of the sites located in the City, of St. Louis, Laclede GasSpire Missouri and another former owner of the site entered into an agreement (Remediation Agreement) with the City development agencies, the developer, and an environmental consultant that obligates one of the City agencies and the environmental consultant to remediate the site and obtain a No Further Action letter from the Missouri Department of Natural Resources.Resources (MDNR). The Remediation Agreement also provides for a release of Laclede GasSpire Missouri and the other former site owner from certain liabilities related to the past and current environmental condition of the site and requires the developer and the environmental consultant to maintain certain insurance coverage, including remediation cost containment, premises pollution liability, and professional liability. The operative provisions of the Remediation Agreement were triggered on December 20, 2010, on which date Laclede GasSpire Missouri and the other former site owner, as full consideration under the Remediation Agreement, paid a small percentage of the cost of remediation of the site. The amount paid by Laclede GasSpire Missouri did not materially impact the financial condition, results of operations, or cash flows of the Company.
Laclede GasSpire Missouri has not owned the othersecond site located in the City of St. Louis for many years. In a letter dated June 29, 2011, the Attorney General for the state of Missouri informed Laclede GasSpire Missouri that the Missouri Department of Natural ResourcesMDNR had completed an investigation of the site. The Attorney General requested that Laclede GasSpire Missouri participate in the follow up investigations of the site. In a letter dated January 10, 2012, Laclede GasSpire Missouri stated that it would participate in future environmental response activities at the site in conjunction with other potentially responsible parties (PRPs) that are willing to contribute to such efforts in a meaningful and equitable fashion. Accordingly, Laclede GasSpire Missouri entered into a cost sharing agreement for remedial investigation with other potentially responsible parties.PRPs. Pending Missouri Department of Natural ResourcesMDNR approval, which has not occurred as of theto date, of filing, the remedial investigation of the site will begin.
Laclede GasAdditionally, in correspondence dated November 30, 2016, Region 7 of the EPA has asserted that Spire Missouri is liable under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for alleged coal gas waste contamination at a third site in the northern portion of the City on which Spire Missouri operated a MGP. Spire Missouri has not owned or operated the site (also known as Station “B”) for over 70 years. Spire Missouri and the site owner have met with the EPA and reviewed its assertions. Both Spire Missouri and the site owner have notified the EPA that the information and data provided by the EPA to date does not rise to the level of documenting a threat to the public health or environment. As such, Spire Missouri is requesting more information from the EPA, some of which will also be utilized to identify other former owners and operators of the site that could be added as PRPs. To date, Spire Missouri has not received a response from the EPA.
Spire Missouri has notified its insurers that it seeks reimbursement for costs incurred in the past and future potential liabilities associated with the MGP sites. While some of the insurers have denied coverage and reserved their rights, Laclede GasSpire Missouri continues to discuss potential reimbursements with them.
On March 10, 2015, Laclede GasSpire Missouri received a Section 104(e) information request from EPA Region VII7 regarding the former Thompson Chemical/Superior Solvents site in St. Louis, Missouri.the City. In turn, Laclede GasSpire Missouri issued a Freedom of Information Act (FOIA) request to the EPA on April 3, 2015, in an effort to identify the basis of the inquiry. The FOIA response from the EPA was received on July 15, 2015 and a response was provided to the EPA on August 15, 2015. Spire Missouri has received no further inquiry from the EPA regarding this matter.
MGEIn its western service area, Spire Missouri has seven owned MGP sites enrolled in the BVCP, includingBVCP: Joplin MGP #1, St. Joseph MGP #1, Kansas City Coal Gas Station B, Kansas City Station A Railroad area, Kansas City Coal Gas Station A North, Kansas City Coal Gas Station A South, and Independence MGP #2. Source removal has been conducted at all of the owned sites since 2003 with the exception of Joplin, which is inJoplin. On September 15, 2016, a request was made with the early stages of site analysis and characterization.MDNR for a restrictive covenant use limitation with respect to Joplin. Remediation efforts at thesethe seven sites are at various stages of completion, ranging from groundwater monitoring and sampling following source removal activities to early site characterizationthe aforementioned request in respect to Joplin. As part of its participation in the BVCP, MGESpire Missouri communicates regularly with the Missouri Department of Natural ResourcesMDNR with respect to its remediation efforts and monitoring activities at these sites. On May 11, 2015, Missouri Department of Natural ResourcesMDNR approved the next phase of investigation at the Kansas City Station A North and Railroad area.areas.
To date, costs incurred for all Spire Missouri Utilities' MGP sites for investigation, remediation and monitoring these sites 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 Laclede GasSpire Missouri may incur could be materially higher or lower depending upon several factors, including whether remediation actions will be required, final selection and regulatory approval of any remedial actions, changing technologies and government regulations, the ultimate ability of other potential responsible partiesPRPs to pay, the successful completion of remediation efforts required by the Remediation Agreement described above, and any insurance recoveries.
In 2013, Laclede GasSpire Missouri retained an outside consultant to conduct probabilistic cost modeling of 19 former MGP sites owned or operated by Laclede Gas in eastern Missouri or MGE in westernSpire Missouri. The purpose of this analysis was to develop an estimated range of probabilistic future liability for each site. That analysis, completed in August 2014, provided a range of demonstrated possible future expenditures to investigate, monitor and remediate all 19 MGP sites. Laclede GasSpire Missouri has recorded its best estimate of the probable expenditures that relate to these matters. The amount is not material.
Costs associated with environmental remediation activities are accrued when such costs are probable and reasonably estimable. To the extent such costs (less any amounts received from insurance proceeds or as contributions from other potentially responsible parties (PRP)),PRPs) are incurred prior to a rate case, Laclede GasSpire Missouri would request from the MoPSC authority
to defer such costs and collect them in the next rate case. Laclede GasSpire Missouri 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.
AlagascoSpire Alabama
Alagasco owns and operates natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s or Alagasco's financial position and results of operations. As environmental laws, regulations, and their interpretations change, however, Alagasco may be required to incur additional costs.
AlagascoSpire Alabama is in the chain of title of nine former MGP sites, four of which it still owns, and five former manufactured gas distribution sites, one of which it still owns. As of 9/30/2015, AlagascoSpire Alabama does not foresee a probable or reasonably estimable loss associated with these nine sites. AlagascoSpire 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 conditions or results of operations.
In 2012, AlagascoSpire Alabama responded to an EPA Request for Information Pursuant to Section 104 of the Comprehensive Environment Response, Compensation, and Liability Act (CERCLA)CERCLA relating to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama in which Alagasco was identified as a Potentially Responsible Party (“PRP”)PRP under CERCLA for the cleanup of the Sitesite or costs the EPA incurs in cleaning up the site. At this point, AlagascoSpire 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.
On December 17, 2013, an incident occurred at a Housing Authority apartment complex in Birmingham, Alabama whichthat resulted in one fatality, personal injuries and property damage. Alagasco is cooperatingSpire Alabama cooperated with the National Transportation Safety Board (NTSB) which is investigatinginvestigated the incident. AlagascoThe NTSB report of findings was issued on March 30, 2016 and no safety recommendations, fines, or penalties were contained therein. Spire Alabama has been named as a defendant in several lawsuits arising from the incident, and additional lawsuits and claims may be filed against Alagasco.Spire Alabama.
Alagasco is, from time to time, a party to various pending or threatened legal proceedings and has accrued a provision for its estimated liability. Certain of these lawsuits include claims for punitive damages in addition to other specified relief. Alagasco recognizes its liability for contingencies when information available indicates both a loss is probable and the amount of the loss can be reasonably estimated. Based upon information presently available, and in light of available legal and other defenses, contingent liabilities arising from threatened and pending litigation are not considered material in relation to the financial position of Alagasco. It should be noted, however, that there is uncertainty in the valuation of pending claims and prediction of litigation results.
Laclede Group
In addition to matters noted above, the Company, Laclede Gas and Alagasco are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes that the final outcome will not have a material effect on the consolidated statements of income, balance sheets, and statements of cash flows of the Company, Laclede Gas or Alagasco.
17. INTERIM FINANCIAL INFORMATION (UNAUDITED)
Laclede GroupSpire
In the opinion of Laclede Group,Spire, the quarterly information presented below for fiscal years 20152017 and 20142016 includes all adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of operations for such periods. Variations in consolidated operations reported on a quarterly basis primarily reflect the seasonal nature of the
business of Laclede Gas and Alagasco.the Utilities.
| | | Three Months Ended | December 31 | | March 31 | | June 30 | | September 30 | Dec. 31 | | March 31 | | June 30 | | Sept. 30 |
| Fiscal Year 2015 | | | | | | | | |
| Fiscal Year 2017 | | | | | | | | |
| Total Operating Revenues | | $ | 495.1 |
| | $ | 663.4 |
| | $ | 323.5 |
| | $ | 258.7 |
|
| Operating Income | | 89.1 |
| | 180.4 |
| | 50.3 |
| | 1.9 |
|
| Net Income (Loss) | | 45.2 |
| | 108.0 |
| | 21.7 |
| | (13.3 | ) |
| Basic Earnings (Loss) Per Share of Common Stock | | $ | 0.99 |
| | $ | 2.36 |
| | $ | 0.45 |
| | $ | (0.28 | ) |
| Diluted Earnings (Loss) Per Share of Common Stock | | $ | 0.99 |
| | $ | 2.36 |
| | $ | 0.45 |
| | $ | (0.28 | ) |
| Fiscal Year 2016 | | | | | | | | |
| Total Operating Revenues | $ | 619.6 |
| | $ | 877.4 |
| | $ | 275.2 |
| | $ | 204.2 |
| $ | 399.4 |
| | $ | 609.3 |
| | $ | 249.3 |
| | $ | 279.3 |
|
| Operating Income (Loss) | 87.3 |
| | 157.7 |
| | 36.0 |
| | (8.5 | ) | 87.0 |
| | 167.7 |
| | 35.3 |
| | (7.7 | ) |
| Net Income (Loss) | 47.1 |
| | 94.4 |
| | 14.1 |
| | (18.7 | ) | 46.9 |
| | 100.8 |
| | 10.7 |
| | (14.2 | ) |
| Basic Earnings (Loss) Per Share of Common Stock | $ | 1.09 |
| | $ | 2.18 |
| | $ | 0.32 |
| | $ | (0.43 | ) | $ | 1.08 |
| | $ | 2.32 |
| | $ | 0.24 |
| | $ | (0.31 | ) |
| Diluted Earnings (Loss) Per Share of Common Stock | $ | 1.09 |
| | $ | 2.18 |
| | $ | 0.32 |
| | $ | (0.43 | ) | $ | 1.08 |
| | $ | 2.31 |
| | $ | 0.24 |
| | $ | (0.31 | ) |
| | | | | | | | | |
| Three Months Ended | December 31 | | March 31 | | June 30 | | September 30 | |
| Fiscal Year 2014 | | | | | | | | |
| Total Operating Revenues | $ | 468.6 |
| | $ | 694.5 |
| | $ | 241.8 |
| | $ | 222.3 |
| |
| Operating Income | 62.9 |
| | 87.2 |
| | 24.7 |
| | (8.4 | ) | |
| Net Income (Loss) | 35.6 |
| | 52.2 |
| | 11.7 |
| | (14.9 | ) | |
| Basic Earnings (Loss) Per Share of Common Stock | $ | 1.09 |
| | $ | 1.59 |
| | $ | 0.34 |
| | $ | (0.35 | ) | |
| Diluted Earnings (Loss) Per Share of Common Stock | $ | 1.09 |
| | $ | 1.59 |
| | $ | 0.33 |
| | $ | (0.35 | ) | |
All quarters of 2015 include the results of the operations of Alagasco. Further, all quarters of 2015 reflect costs relating to the integration of both Alagasco and MGE, as well as interest expense associated with the debt issued in 2014 to fund the Alagasco acquisition.Spire Missouri
All quarters of 2014 reflect transaction costs incurred associated with the acquisition of Alagasco and the integration of MGE. The fourth quarter of 2014 includes one month of activity of the operations of Alagasco.
Laclede Gas
In the opinion of Laclede Gas,Spire Missouri, the quarterly information presented below for fiscal years 20152017 and 20142016 includes all adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of operations for such periods. Variations in operations reported on a quarterly basis primarily reflect thetheir seasonal nature of the business of Laclede Gas.nature.
|
| | | | | | | | | | | | | | | |
| Three Months Ended | December 31 | | March 31 | | June 30 | | September 30 |
| Fiscal Year 2015 | | | | | | | |
| Total Operating Revenues | $ | 462.4 |
| | $ | 615.7 |
| | $ | 187.5 |
| | $ | 151.0 |
|
| Operating Income | 64.8 |
| | 80.6 |
| | 34.5 |
| | 5.5 |
|
| Net Income (Loss) | 39.0 |
| | 49.9 |
| | 20.0 |
| | (3.6 | ) |
| | | | | | | | |
| Three Months Ended | December 31 | | March 31 | | June 30 | | September 30 |
| Fiscal Year 2014 | | | | | | | |
| Total Operating Revenues | $ | 435.2 |
| | $ | 638.8 |
| | $ | 214.2 |
| | $ | 160.0 |
|
| Operating Income (Loss) | 62.3 |
| | 74.5 |
| | 22.5 |
| | 7.1 |
|
| Net Income (Loss) | 35.3 |
| | 44.2 |
| | 12.0 |
| | (1.4 | ) |
Alagasco |
| | | | | | | | | | | | | | | |
| Three Months Ended | Dec. 31 | | March 31 | | June 30 | | Sept. 30 |
| Fiscal Year 2017 | | | | | | | |
| Total Operating Revenues | $ | 363.6 |
| | $ | 447.2 |
| | $ | 198.5 |
| | $ | 162.6 |
|
| Operating Income | 64.5 |
| | 90.2 |
| | 30.5 |
| | 11.7 |
|
| Net Income | 38.0 |
| | 57.0 |
| | 15.5 |
| | 2.5 |
|
| Fiscal Year 2016 | | | | | | | |
| Total Operating Revenues | $ | 317.2 |
| | $ | 446.7 |
| | $ | 179.3 |
| | $ | 144.3 |
|
| Operating Income | 65.1 |
| | 87.0 |
| | 29.4 |
| | 5.4 |
|
| Net Income (Loss) | 39.4 |
| | 54.3 |
| | 13.9 |
| | (1.7 | ) |
Spire Alabama
In the opinion of Alagasco,Spire Alabama, the quarterly information presented below for fiscal years 20152017 and 20142016 includes all adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of operations for such periods. Variations in operations reported on a quarterly basis primarily reflect thetheir seasonal nature of the business of Alagasco.nature.
| | | Three Months Ended | December 31 | | March 31 | | June 30 | | September 30 | Dec. 31 | | March 31 | | June 30 | | Sept. 30 |
| Fiscal Year 2015 | | | | | | | | |
| Total Operating Revenues | $ | 120.0 |
| | $ | 233.3 |
| | $ | 73.7 |
| | $ | 52.2 |
| |
| Operating Income | 20.4 |
| | 77.4 |
| | 3.9 |
| | (12.5 | ) | |
| Net Income (Loss) | 10.6 |
| | 46.3 |
| | 0.7 |
| | (9.6 | ) | |
| | | | | | | | | |
| Three Months Ended | December 31 | | March 31 | | June 30 | | September 30 | |
| Fiscal Year 2014 | | | | | | | | |
| Fiscal Year 2017 | | | | | | | | |
| Total Operating Revenues | $ | 142.8 |
| | $ | 263.9 |
| | $ | 93.8 |
| | $ | 59.5 |
| $ | 86.7 |
| | $ | 158.8 |
| | $ | 90.5 |
| | $ | 64.5 |
|
| Operating Income (Loss) | 34.8 |
| | 72.4 |
| | 1.8 |
| | (12.0 | ) | 19.8 |
| | 78.9 |
| | 15.5 |
| | (8.4 | ) |
| Net Income (Loss) | 19.8 |
| | 43.1 |
| | (0.6 | ) | | (9.4 | ) | 10.3 |
| | 47.6 |
| | 7.4 |
| | (7.2 | ) |
| Fiscal Year 2016 | | | | | | | | |
| Total Operating Revenues | | $ | 82.3 |
| | $ | 166.0 |
| | $ | 74.0 |
| | $ | 46.2 |
|
| Operating Income (Loss) | | 18.9 |
| | 80.4 |
| | 9.3 |
| | (17.1 | ) |
| Net Income (Loss) | | 9.9 |
| | 48.1 |
| | 4.0 |
| | (8.8 | ) |
ITEM
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Laclede GroupChanges in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in andor disagreements on accounting and financial disclosure with Laclede Group’sSpire’s, Spire Missouri’s, or Spire Alabama’s outside auditors that are required to be disclosed.
Laclede Gas
There have been no changes inItem 9A. Controls and disagreements on accounting and financial disclosure with Laclede Gas’ outside auditors that are required to be disclosed.Procedures
AlagascoSpire
There have been no disagreements on accounting and financial disclosure with Alagasco’s outside auditors that are required to be disclosed.
ITEM 9A. CONTROLS AND PROCEDURES
Laclede Group
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-15e13a-15(e) and Rule 15d-15e15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon thatsuch 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
During our fourth fiscal quarter we converted our MGE customers onto the existing Laclede Gas customer care and billing application. This conversion and related changes to processes have changed our internal control over customer billing and financial reporting.
Other than the system conversion described above, thereThere were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonablyreasonable likely to materially affect, our internal control over financial reporting.
Spire Missouri
137
Laclede Gas
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-15e13a-15(e) and Rule 15d-15e15d-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
During our fourth fiscal quarter we converted our MGE customers onto the Laclede Gas customer care and billing application. This conversion and related changes to processes have changed our internal control over customer billing and financial reporting.
Other than the system conversion discussed above, thereThere were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
AlagascoSpire 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-15e13a-15(e) and Rule 15d-15e15d-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 under Item 8, pages 49 through 54.Financial Statements and Supplementary Data. ITEM 9B. OTHER INFORMATION
None.
Part III
ITEM
Item 9B. Other Information
Amendment to the 2015 Equity Incentive Plan
On November 9, 2017, the Spire Inc. (“Spire” or “the Company”) Board of Directors (“Board”), upon the recommendation of the Compensation Committee (“Compensation Committee”), adopted and approved an amendment to The Laclede Group 2015 Equity Incentive Plan (“EIP”), which becomes effective January 1, 2018. The purpose of the EIP is to encourage directors, officers, and employees of Spire 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 may grant awards under the EIP that may be earned by achieving performance objectives and/or other criteria as determined by the Compensation Committee. Under the terms of the EIP, officers and employees of Spire and its subsidiaries, as determined by the Compensation Committee, are eligible to be selected for awards.
The amendment to the EIP updates the current plan, which was approved by shareholders on January 29, 2015, to reflect the corporate name change of “The Laclede Group, Inc.” to “Spire Inc.,” including changing the plan name to “Spire 2015 Equity Incentive Plan.” The amendment to the EIP also makes certain revisions to the EIP’s definition of “change in control” to align the definition to be consistent with other compensation plans sponsored by Spire, specifically by increasing the triggering percentage from 20% to 30% for an acquisition of the Company’s outstanding shares of common stock or combined voting power of outstanding voting securities, and by specifying that at least 80% of the Company’s assets must be acquired in order for a change in control to occur.
The foregoing description of the amendment to the EIP is qualified in its entirety by reference to the provisions, including defined terms, of the amendment to the EIP, which is filed herewith as Exhibit 10.54 to this Annual Report on Form 10-K and incorporated herein by reference.
Amendment to the Executive Severance Plan
On November 9, 2017, the Spire Board , upon the recommendation of the Compensation Committee, adopted and approved an amendment to Spire Inc. Executive Severance Plan (“2017 Executive Severance Plan”), which becomes effective January 1, 2018. The purpose of the 2017 Executive Severance Plan is to enable Spire, together with its subsidiaries, to offer certain protections to selected participants if their employment with Spire or its subsidiaries is terminated by Spire without cause or by the participant for good reason, with or without a change in control.
The amendment to the 2017 Executive Severance Plan updates the current plan, which was effective June 1, 2017, to change the name of the plan to the “Spire Executive Severance Plan.” The amendment to the 2017 Executive Severance Plan also makes certain revisions to the plan’s definition of “change in control” to align the definition to be consistent with other compensation plans sponsored by Spire, specifically by specifying that at least 80% of the Company’s assets must be acquired in order for a change in control to occur.
The foregoing description of the amendment to the 2017 Executive Severance Plan is qualified in its entirety by reference to the provisions, including defined terms, of the amendment to the 2017 Executive Severance Plan, which is filed herewith as Exhibit 10.55 to this Annual Report on Form 10-K and incorporated herein by reference.
Amendment to the Annual Incentive Plan
On November 9, 2017, the Spire Board, upon the recommendation of the Compensation Committee, adopted and approved an amendment to The Laclede Group Annual Incentive Plan (“AIP”), which becomes effective January 1, 2018. The purpose of the AIP is to provide an incentive to executive officers and other selected key executives of Spire and its subsidiaries to contribute to the growth, profitability and increased shareholder value of the Company and to retain such executives.
The amendment to the AIP updates the current plan, which was approved by shareholders on January 28, 2016, to reflect the corporate name change of “The Laclede Group, Inc.” to “Spire Inc.,” including changing the plan name to “Spire Annual Incentive Plan.” The amendment to the AIP also makes certain revisions to the AIP’s definition of “change in control” to align the definition to be consistent with other compensation plans sponsored by Spire, specifically by increasing the triggering percentage from 20% to 30% for an acquisition of the Company’s outstanding shares of common stock or combined voting power of outstanding voting securities, and by specifying that at least 80% of the Company’s assets must be acquired in order for a change in control to occur.
The foregoing description of the amendment to the AIP is qualified in its entirety by reference to the provisions, including defined terms, of the amendment to the AIP, which is filed herewith as Exhibit 10.53 to this Annual Report on Form 10-K and incorporated herein by reference.
Amendment to the 2011 Management Continuity Protection Plan
On November 8, 2017, the Spire Board , upon the recommendation of the Compensation Committee, adopted and approved an amendment to The Laclede Group 2011 Management Continuity Protection Plan (“2011 MCPP”), which becomes effective January 1, 2018. The 2011 MCPP provides severance benefits to eligible employees of Spire and its designated subsidiaries hired after 2011 in the event an employee is terminated by Spire without cause or by the participant for good reason following a change in control. The 2011 MCPP is closed to new participants.
The amendment to the 2011 MCPP updates the current plan, which was effective January 1, 2011, to reflect the corporate name change of “The Laclede Group, Inc.” to “Spire Inc.,” including changing the plan name to “Spire 2011 Management Continuity Protection Plan.” The amendment to the 2011 MCPP also makes certain revisions to the plan’s definition of “change in control” to align the definition to be consistent with other compensation plans sponsored by Spire. Specifically, the new definition provides that a change in control occurs upon any of the following: acquisition of 30% of the Company’s outstanding shares of common stock or combined voting power of outstanding voting securities is acquired; a change in the majority of the members of the Board without the approval of a majority of the members of the Board; a merger or reorganization after which the shareholders immediately prior to the transaction do not own more than 50% of the surviving entity’s then outstanding shares of common stock or combined voting power; or the acquisition of least 80% of the Company’s assets.
The foregoing description of the amendment to the 2011 MCPP is qualified in its entirety by reference to the provisions, including defined terms, of the amendment to the 2011 MCPP, which is filed herewith as Exhibit 10.56 to this Annual Report on Form 10-K and incorporated herein by reference.
Amendment to the Deferred Income Plan
On November 9, 2017, the Spire Board, upon the recommendation of the Compensation Committee, adopted and approved an amendment to the Spire Inc. Deferred Income Plan (“DIP”), which becomes effective January 1, 2018. The DIP affords eligible directors and officers of Spire (including its named executive officers) and its designated subsidiaries the ability to defer the receipt of a portion of their compensation, which will accrue earnings, with such deferrals forming the basis for benefits upon termination, death, or disability.
The amendment to the DIP updates the current plan, which was last amended and restated effective January 1, 2016, with the following features:
Changes mid-year enrollments to quarterly instead of monthly.
Changes definition of “Change in Control” to align the definition to be consistent with other compensation plans, by providing that a change in control occurs upon any of the following: acquisition of 30% of the Company’s outstanding shares of common stock or combined voting power of outstanding voting securities is acquired; a change in the majority of the members of the Board without the approval of a majority of the members of the Board; a merger or reorganization after which the shareholders immediately prior to the transaction do not own more than 50% of the surviving entity’s then outstanding shares of common stock or combined voting power; or the acquisition of least 80% of the Company’s assets.
Removes annual minimum deferral requirement.
Changes plan name to “Spire Deferred Income Plan.”
Allows daily investment election changes.
Adds “Flexible Distribution Account” and “Separation Distribution Account” options to plan.
Closes “Retirement Distribution Account” and “In-Service Distribution Account” options to new participants.
Adds hardship withdrawal option to plan.
Requires lump sum distribution of small balances not exceeding the limit imposed by Section 402(g) of the Internal Revenue Code.
Allows changes to form of payment in accordance with Section 409A of the Internal Revenue Code.
The foregoing description of the amendment to the DIP is qualified in its entirety by reference to the provisions, including defined terms, of the amendment to the DIP, which is filed herewith as Exhibit 10.57 to this Annual Report on Form 10-K and incorporated herein by reference.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDirectors, Executive Officers and Corporate Governance
Information about:
our directors is incorporated by reference from the discussion under Proposal 1 of our proxy statement to be filed on or about December 18, 2015 (201513, 2017 (2017 proxy statement);
our executive officers areis reported in Part I of this Form 10-K;
compliance with Section 16(a) of the Exchange Act is incorporated by reference from the discussion in our 20152017 proxy statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance”;
our Financial Code of Ethics is posted on our website, www.TheLacledeGroup.comwww.SpireEnergy.com, in the Corporate under Investors/Governance/Governance section under Governance Documents;documents (http://investors.spireenergy.com/governance/governance-documents); and
our audit committee,Audit Committee, our audit committeeAudit Committee financial experts, and submitting nominations to the Corporate Governance Committee is incorporated by reference from the discussion in our 20152017 proxy statement under the heading “Corporate Governance.”
In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters for our audit, compensationAudit, Compensation and corporate governance committeesCorporate 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.
ITEMItem 11. EXECUTIVE COMPENSATIONExecutive Compensation
Information about director and executive compensation is incorporated by reference from the discussion in our 20152017 proxy statement under the headings: “Directors’ Compensation,” “Compensation Discussion and Analysis,” and “Executive Compensation.” The 20152017 proxy statement also includes the “Compensation Committee Report,” which is deemed furnished and not filed.
ITEMItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSSecurity Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information about security ownership of certain beneficial owners and management is incorporated by reference from the discussion in our 20152017 proxy statement under “Beneficial Ownership of Laclede GroupSpire Common Stock.”
The following table sets forth aggregate information regarding the Company’s equity compensation plans as of September 30, 2015:2017:
| | | 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)) | |
| 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) | (a) | | (b) | | (c) |
| Equity compensation plans approved by security holders (1) | 536,374 |
| | $ | 33.65 |
| | 967,555 |
| 674,970 | | $— | | 505,545 |
| Equity compensation plans not approved by security holders | — |
| | — |
| | — |
| — | | — | | — |
| Total | 536,374 |
| | 33.65 |
| | 967,555 |
| 674,970 | | $— | | 505,545 |
| |
| (1) | Reflects the Company’s 2015 and 2006 Equity Incentive Plans. Included in column (a) are 507,874 non-vested restricted stock units issued under the Equity Incentive Plan for which the weighted average exercise price in column (b) does not take into account. |
Information regarding the above referenced plans is set forth in Note 3, Stock-Based Compensation, of the Notes to Financial Statements in Item 8 of this report.
ITEMItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCECertain Relationships and Related Transactions, and Director Independence
Information about:
our policy and procedures for related party transactions and
the independence of our directors
is included in our 20152017 proxy statement under “Corporate Governance” and is incorporated by reference. There were no related party transactions in fiscal year 2015.2017.
ITEMItem 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPrincipal 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 20152017 proxy statement under “Fees of Independent Registered Public Accountant” and “Corporate Governance,” respectively.
Part IV
|
| | | | | | |
ITEMItem 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESExhibits, Financial Statement Schedules | | |
| | | | | |
| (a) | 1.(1) | Financial Statements | | |
| | | See Item 8. Financial Statements and Supplementary Data, filed herewith, for a list of financial statements. |
| | | | | |
| | 2.(2) | ExhibitsFinancial Statement Schedules | | |
| | | Incorporated herein by referenceSchedules 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 Exhibit Index, page 145. | | financial statements. |
| | | | | |
| | |
(b)(3) | | Incorporated herein by reference to Exhibit Index, page 145. | | Exhibits | | |
|
| | |
| Exhibit Number | | Description |
| 2.01* | | |
| 3.01* | | |
| 3.02* | | |
3.03*3 | | |
3.04*3 | | |
3.05*2 | | |
3.06*2 | | |
| 4.01* | | Mortgage and Deed of Trust, dated as of February 1, 1945; filed as Exhibit 7-A to registration statement No. 2-5586. |
| 4.02* | | Fourteenth Supplemental Indenture, dated as of October 26, 1976; filed as Exhibit b-4 to registration statement No. 2-64857 filed June 26, 1979. |
4.03*3 | | |
4.04*3 | | |
4.05*3 | | |
4.06*3 | | |
4.07*3 | | |
4.08*3 | | |
4.09*3 | | |
|
| | |
| Exhibit Number | | Description |
4.10*3 | | 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. |
4.11*3 | | |
| 4.12* | | |
| 4.13* | | |
| 4.14* | | |
4.15*2 | | Indenture dated as of November 1, 1993, between Alagasco and NationsBank of Georgia, National Association, Trustee, (“Alagasco 1993 Indenture”), which was filed as Exhibit 4(k) to Alagasco’s Registration Statement on Form S-3 (Registration No. 33-70466). |
4.16*2 | | |
4.17*2 | | |
4.18*2 | | |
| 4.19* | | |
| 4.20* | | |
| 4.21* | | |
4.22*3 | | |
10.01*†3 | | |
10.02*3 | | |
10.03*3 | | |
10.04*3 | | |
10.05*3 | | |
|
| | |
| Exhibit Number | | Description |
10.06*3 | | Salient Features of Laclede Gas’ Deferred Income Plan for Directors and Selected Executives, including amendments adopted by the Board of Directors on July 26, 1990; filed as Exhibit 10.12 to Laclede Gas’ Annual Report on Form 10-K for the fiscal year ended September 30, 1991. |
10.07*3 | | Amendment to Laclede Gas’ Deferred Income Plan for Directors and Selected Executives, adopted by the Board of Directors on August 27, 1992; filed as Exhibit 10.12a to Laclede Gas’ Annual Report on Form 10-K for the fiscal year ended September 30, 1992. |
10.08*3 | | |
| 10.09* | | |
| 10.10* | | |
10.11*3 | | Form of Indemnification Agreement between Laclede Gas and its Directors and Officers; filed as Exhibit 10.13 to Laclede Gas’ Annual Report on Form 10-K for the fiscal year ended September 30, 1990. |
10.12*3 | | |
| 10.13* | | |
10.14*3 | | |
| 10.15* | | |
| 10.16* | | |
| 10.17* | | |
| 10.18* | | |
| 10.19* | | |
10.20*1 | | |
10.21*1 | | |
| 10.22* | | |
| 10.23* | | |
|
| | |
| Exhibit Number | | Description |
| 10.24* | | |
| 10.25* | | |
| 10.26* | | |
10.27*3 | | |
10.28*3 | | |
10.29*3 | | |
10.30*3 | | |
10.31*3 | | |
| 10.32* | | |
10.33*2 | | |
10.34*2 | | |
10.35*2 | | |
10.36*2 | | |
10.37*2 | | |
10.38*2 | | |
10.39*2 | | |
10.40*2 | | |
10.41*2 | | Form of Service Agreement Under Rate Schedule IT (No. 790420), between Southern Natural Gas Company and Alagasco, which was filed as Exhibit 10(b) to Alagasco’s Annual Report on Form 10-K for the year ended September 30, 1993. |
|
| | |
| Exhibit Number | | Description |
10.42*2 | | |
10.43*2 | | |
10.44*1 | | |
10.45*1 | | |
10.46*2 3 | | Loan Agreement, dated December 14, 2016, by and among Spire Inc., Alabama Gas Corporation, Laclede Gas Company, and the several banks party thereto, including Wells Fargo Bank, National Association, as Administrative Agent; JPMorgan Chase Bank, N.A. and U.S. Bank National Association, as Co-Syndication Agents; Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners; and Bank of America, N.A., Credit Suisse AG, Cayman Islands Branch, Morgan Stanley Bank, N.A., Regions Bank, Royal Bank of Canada, and TD Bank, N.A., as Documentation Agents; filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed December 16, 2016. |
| 10.47* | | |
| 10.48* | | |
| 10.49* | | |
10.50*†3 | | |
10.51*3 | | |
| 10.52* | | |
10.531 | | |
10.541 | | |
| 10.55 | | |
10.561 | | |
| 10.57 | | |
| 12.1 | | |
| 12.2 | | |
| 21 | | |
| 23.1 | | |
23.23 | | |
23.32 | | |
| 31.1 | | |
31.23 | | |
31.32 | | |
| 32.1 | | |
32.23 | | |
|
| | |
| Exhibit Number | | Description |
32.32 | | |
101.INS(×) | | XBRL Instance Document. |
101.SCH(×) | | XBRL Taxonomy Extension Schema. |
101.CAL(×) | | XBRL Taxonomy Extension Calculation Linkbase. |
101.DEF(×) | | XBRL Taxonomy Definition Linkbase. |
101.LAB(×) | | XBRL Taxonomy Extension Labels Linkbase. |
101.PRE(×) | | XBRL Taxonomy Extension Presentation Linkbase. |
| |
(×) | Attached as Exhibit 101 to this Annual Report are the following documents formatted in extensible business reporting language (XBRL): (i) Document and Entity Information; (ii) Consolidated Statements of Income and Statements of Income for the years ended September 30, 2017, 2016, and 2015; (iii) Consolidated Statements of Comprehensive Income and Statements of Comprehensive Income for the years ended September 30, 2017, 2016, and 2015; (iv) Consolidated Statements of Common Shareholders’ Equity and Statements of Common Shareholder’s Equity for the years ended September 30, 2017, 2016, and 2015; (v) Consolidated Statements of Cash Flows and Statements of Cash Flows for the years ended September 30, 2017, 2016, and 2015; (vi) Consolidated Balance Sheets and Balance Sheets at September 30, 2017 and 2016; (vii) Consolidated Statements of Capitalization and Statements of Capitalization at September 30, 2017 and 2016; and (viii) Notes to Financial Statements. We also make available on our website the Interactive Data Files submitted as Exhibit 101 to this Annual Report. |
| |
| * | 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. |
| |
| † | Portions of this exhibit were omitted pursuant to a confidential treatment request submitted pursuant to Rule 24b-2 of the Exchange Act. |
| |
1 | 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, 2017. |
| |
3 | Laclede Gas Company changed its name to Spire Missouri Inc. effective August 30, 2017. |
| |
4 | Laclede Energy Resources, Inc. changed its name to Spire Marketing Inc. effective December 12, 2016. |
Bold items reflect management, contract or compensatory plan or arrangement.
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.
|
| | | | |
| | | | THE LACLEDE GROUP, | SPIRE INC. |
| | | | | |
| Date | November 24, 201515, 2017 | | 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 24, 201515, 2017 | | /s/ Suzanne Sitherwood | Director, President and Chief Executive Officer |
| | | Suzanne Sitherwood | (Principal Executive Officer) |
| | | | |
November 24, 201515, 2017 | | /s/ Steven P. Rasche | Executive Vice President and Chief Financial Officer |
| | | Steven P. Rasche | (Principal FinanceFinancial and Accounting Officer) |
| | | | |
November 24, 201515, 2017 | | /s/ Edward L. Glotzbach | Chairman of the Board |
| | | Edward L. Glotzbach | |
| | | | |
November 24, 201515, 2017 | | /s/ Mark A. Borer | Director |
| | | Mark A. Borer | |
| | | | |
November 24, 201515, 2017 | | /s/ Maria V. Fogarty | Director |
| | | Maria V. Fogarty | |
| | | | |
November 24, 201515, 2017 | | /s/ Anthony V. LenessRob L. Jones | Director |
| | | Anthony V. LenessRob L. Jones | |
| | | | |
November 24, 2015 | | /s/ W. Stephen Maritz | Director |
| | W. Stephen Maritz | |
| | | |
November 24, 201515, 2017 | | /s/ Brenda D. Newberry | Director |
| | | Brenda D. Newberry | |
| | | | |
November 24, 201515, 2017 | | /s/ John P. Stupp, Jr. | Director |
| | | John P. Stupp, Jr. | |
| | | | |
November 24, 201515, 2017 | | /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.
|
| | | | |
| | | | | LACLEDE GAS COMPANYSPIRE MISSOURI INC. |
| | | | | |
Dated:Date | November 24, 201515, 2017 | | By | /s/ Steven P. Rasche |
| | | | | Steven P. Rasche |
| | | | | 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 24, 201515, 2017 | | /s/ Suzanne Sitherwood | Chairman of the Board |
| | | Suzanne Sitherwood | |
| | | | |
| | | |
November 24, 201515, 2017 | | /s/ Steven P. Rasche | Director and Chief Financial Officer |
| | | Steven P. Rasche | (Principal Financial and Accounting Officer) |
| | | | |
November 24, 201515, 2017 | | /s/ Steven L. Lindsey | Director, President and Chief Executive Officer and President |
| | | Steven L. Lindsey | (Principal Executive Officer) |
| | | | |
November 24, 201515, 2017 | | /s/ Mark C. Darrell | Director |
| | | Mark C. Darrell | |
| | | | |
November 24, 201515, 2017 | | /s/ L. C. DowdyScott B. Carter | Director |
| | | L. C. DowdyScott B. Carter | |
| | | | |
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 GAS CORPORATIONINC. |
| | | | | |
Dated:Date | November 24, 201515, 2017 | | By | /s/ Steven P. Rasche |
| | | | | Steven P. Rasche |
| | | | | 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 24, 201515, 2017 | | /s/ Suzanne Sitherwood | Chairman of the Board |
| | | Suzanne Sitherwood | |
| | | | |
| | | |
November 24, 201515, 2017 | | /s/ Steven P. Rasche | Director and Chief Financial Officer |
| | | Steven P. Rasche | (Principal Financial and Accounting Officer) |
| | | | |
November 24, 201515, 2017 | | /s/ Steven L. Lindsey | Director and Chief Executive Officer |
| | | Steven L. Lindsey | (Principal Executive Officer) |
| | | | |
November 24, 201515, 2017 | | /s/ Mark C. Darrell | Director |
| | | Mark C. Darrell | |
| | | | |
November 24, 201515, 2017 | | /s/ L. C. DowdyScott B. Carter | Director |
| | | L. C. DowdyScott B. Carter | |
| | | | |
EXHIBIT INDEX
|
| | |
Exhibit Number | | |
2.01* | | Agreement and Plan of Merger and Reorganization; filed as Appendix A to proxy statement/prospectus contained in the Company's Registration Statement on Form S-4 filed October 27, 2000, No. 333-48794. |
3.01* | | The Company's Articles of Incorporation, as amended; filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed January 26, 2006. |
3.02* | | The Company's Bylaws, as amended, effective as of August 1, 2015; filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed on July 31, 2015. |
3.03* | | Laclede Gas' Restated Articles of Incorporation as amended March 8, 2013; filed as Exhibit 3.1 to Laclede Gas' Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31, 2013. |
3.04* | | Amended and Restated Bylaws of Laclede Gas, effective as of August 1, 2015; filed as Exhibit 3.2 to Laclede Gas' Current Report on Form 8-K filed July 31, 2015. |
3.05* | | Articles of Amendment and Restatement of the Articles of Incorporation of Alagasco, dated September 27, 1995, which was filed as Exhibit 3(i) to Alagasco's Annual Report on Form 10-K for the year ended September 30, 1995 |
3.06* | | Bylaws of Alagasco (as amended September 2, 2014); filed as Exhibit 3(b) to Alagasco's Annual Report on Form 10-KT for the fiscal year ended September 30, 2014. |
4.01* | | Mortgage and Deed of Trust, dated as of February 1, 1945; filed as Exhibit 7-A to registration statement No. 2-5586. |
4.02* | | Fourteenth Supplemental Indenture, dated as of October 26, 1976; filed as Exhibit b-4 to registration statement No. 2-64857 filed June 26, 1979. |
4.03* | | Twenty-Fourth Supplemental Indenture dated as of June 1, 1999, between Laclede Gas and State Street Bank and Trust Company of Missouri, N.A., as trustee; filed as Exhibit 4.01 to Laclede Gas' Current Report on Form 8-K filed June 4, 1999. |
4.04* | | Twenty-Fifth Supplemental Indenture dated as of September 15, 2000, between Laclede Gas and State Street Bank and Trust Company of Missouri, as trustee; filed as Exhibit 4.01 to Laclede Gas' Current Report on Form 8-K filed September 27, 2000. |
4.05* | | Twenty-Seventh Supplemental Indenture dated as of April 15, 2004, between Laclede Gas and UMB Bank & Trust, N.A., as trustee; filed as Exhibit 4.01 to Laclede Gas' Current Report on Form 8-K filed April 28, 2004. |
4.06* | | Twenty-Eighth Supplemental Indenture dated as of April 15, 2004, between Laclede Gas and UMB Bank & Trust, N.A., as trustee; filed as Exhibit 4.02 to Laclede Gas' Current Report on Form 8-K filed April 28, 2004. |
4.07* | | Twenty-Ninth Supplemental Indenture dated as of June 1, 2006, between Laclede Gas and UMB Bank and Trust, N.A., as trustee; filed as Exhibit 4.1 to Laclede Gas' Current Report on Form 8-K filed June 9, 2006. |
4.08* | | Thirty-First Supplemental Indenture, dated as of March 15, 2013, between Laclede Gas and UMB Bank & Trust, N.A., as trustee; filed as Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter ended March 31, 2013. |
4.09* | | Thirty-Second Supplemental indenture, dated as of August 13, 2013, between Laclede Gas and UMB Bank & Trust, N.A., as trustee; filed as Exhibit 4.1 to Laclede Gas' Current Report on Form 8-K filed August 13, 2013. |
4.10* | | 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. |
4.11* | | Laclede Gas' Board of Directors’ Resolutions dated March 27, 2003, updating authority delegated pursuant to August 28, 1986 Laclede Gas resolutions; filed as Exhibit 4.19(a) to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2003. |
4.12* | | Junior Subordinated Indenture, dated as of June 11, 2014, between the Company and U.S. Bank National Association, as trustee; filed as Exhibit 4.1 to The Laclede Group's Current Report on Form 8-K filed June 11, 2014. |
4.13* | | First Supplemental Indenture, dated as of June 11, 2014, between the Company and U.S. Bank National Association, as trustee (including Form of Series A 2.00% Remarketable Junior Subordinated Notes due 2022); filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed June 11, 2014. |
4.14* | | Purchase Contract and Pledge Agreement, dated as of June 11, 2014, between the Company and US Bank National Association, as Purchase Contract Agent, Collateral Agent, Custodial Agent and Securities Intermediary (including Form of Remarketing Agreement, Form of Corporate Units and Form of Treasury Units); filed as Exhibit 4.4 to the Company's Current Report on Form 8-K filed June 11, 2014. |
4.15* | | Indenture, dated as of August 19, 2014, between the Company and UMB Bank & Trust, N.A., as trustee; filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed August 19, 2014. |
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Exhibit Number | | |
4.16* | | First Supplemental Indenture, dated as of August 19, 2014, between the Company and UMB Bank & Trust, N.A., as trustee (including Form of Floating Rate Senior Notes due 2017, Form of 2.55% Senior Notes due 2019 and Form of 4.70% Senior Notes due 2044); filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed August 10, 2014. |
4.17* | | Indenture dated as of November 1, 1993, between Alagasco and NationsBank of Georgia, National Association, Trustee, (“Alagasco 1993 Indenture”), which was filed as Exhibit 4(k) to Alagasco's Registration Statement on Form S-3 (Registration No. 33-70466). |
4.18* | | Officers’ Certificate, dated January 14, 2005, pursuant to Section 301 of the Alagasco 1993 Indenture setting forth the terms of the 5.20 percent Notes due January 15, 2020, which was filed as Exhibit 4.4 to Alagasco's Current Report on Form 8-K filed January 14, 2005. |
4.19* | | Officers’ Certificate, dated November 17, 2005, pursuant to Section 301 of the Alagasco 1993 Indenture setting forth the terms of the 5.368 percent Notes due December 1, 2015, which was filed as Exhibit 4.2 to Alagasco's Current Report on Form 8-K filed November 17, 2005. |
4.20* | | Officers’ Certificate, dated January 16, 2007, pursuant to Section 301 of the Alagasco 1993 Indenture setting forth the terms of the 5.90 percent Notes due January 15, 2037, which was filed as Exhibit 4.2 to Alagasco's Current Report on Form 8-K filed January 16, 2007. |
10.01* | | Lease between Laclede Gas, as Lessee, and First National Bank in St. Louis, Trustee, as Lessor; filed as Exhibit 10.23 to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 2002. |
10.02* | | Automated Meter Reading Services Agreement, dated as of March 11, 2005, between Cellnet Technology, Inc. and Laclede Gas; filed as Exhibit 10.1 to Laclede Gas' Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2005. Confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. |
10.03* | | Restated Laclede Gas Supplemental Retirement Benefit Plan, as amended and restated as of January 1, 2005; filed as Exhibit 10.06 to Laclede Gas' Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.04* | | Laclede Gas Supplemental Retirement Benefit Plan II, effective as of January 1, 2005; filed as Exhibit 10.7 to Laclede Gas' Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.05* | | Amendment and Restatement of Retirement Plan for Non-Employee Directors of Laclede Gas as of November 1, 2002; filed as Exhibit 10.08c to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 2002. |
10.06* | | Amendment to Terms of Retirement Plan for Non-Employee Directors of Laclede Gas as of October 1, 2004; filed as Exhibit 10.2 to Laclede Gas' Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004. |
10.07* | | Salient Features of Laclede Gas' Deferred Income Plan for Directors and Selected Executives, including amendments adopted by the Board of Directors on July 26, 1990; filed as Exhibit 10.12 to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 1991. |
10.08* | | Amendment to Laclede Gas' Deferred Income Plan for Directors and Selected Executives, adopted by the Board of Directors on August 27, 1992; filed as Exhibit 10.12a to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 1992. |
10.09* | | Salient Features of Laclede Gas' Deferred Income Plan II for Directors and Selected Executives (as amended and restated effective as of January 1, 2005); filed as Exhibit 10.1 to Laclede Gas' Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.10* | | Salient Features of the Company's Deferred Income Plan for Directors and Selected Executives (effective as of January 1, 2005); filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.11* | | The Company's Deferred Income Plan for Directors and Selected Executives, as Amended and Restated as of January 1, 2015; filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 4, 2014. |
10.12* | | Form of Indemnification Agreement between Laclede Gas and its Directors and Officers; filed as Exhibit 10.13 to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 1990. |
10.13* | | The Company's Management Continuity Protection Plan, effective as of January 1, 2005; filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.14* | | Form of Management Continuity Protection Agreement; filed as Exhibit 10.05a to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.15* | | The Company's 2011 Management Continuity Protection Plan; filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2010. |
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Exhibit Number | | |
10.16* | | Form of Agreement under the Company's 2011 Management Continuity Protection Plan; filed as Exhibit 10.25a to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2010. |
10.17* | �� | Restricted Stock Plan for Non-Employee Directors as amended and effective January 29, 2009; filed as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A filed December 22, 2008. |
10.18* | | Amendment to Restricted Stock Plan for Non-Employee Directors; filed as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011. |
10.19* | | Form of Non-Qualified Stock Option Award Agreement with Mandatory Retirement Provisions; filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 5, 2004. |
10.20* | | Form of Non-Qualified Stock Option Award Agreement without Mandatory Retirement Provisions; filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed November 5, 2004. |
10.21* | | The Company's 2002 Equity Incentive Plan; filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2002. |
10.22* | | The Company's 2006 Equity Incentive Plan, as amended effective February 1, 2012; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012. |
10.23* | | The Laclede Group 2015 Equity Incentive Plan; filed as the Appendix to the Company's Definitive Proxy Statement on Form DEF 14A filed December 19, 2014. |
10.24* | | The Company's Annual Incentive Plan; filed as Appendix 1 to the Company's Definitive Proxy Statement on Schedule 14A filed December 17, 2010. |
10.25* | | The Company's Form of Restricted Stock Award Agreement; filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008. |
10.26* | | The Company's Form of Performance Contingent Restricted Stock Award Agreement; filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2009. |
10.27* | | The Company's Form of Performance Contingent Restricted Stock Unit Award Agreement; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2011. |
10.28* | | The Company's Form of Performance Contingent Restricted Stock Unit Award Agreement; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2012. |
10.29* | | Severance Benefits Agreement, dated September 1, 2011, between the Company and Suzanne Sitherwood; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011. |
10.30* | | First Amendment to the Severance Benefits Agreement, dated August 1, 2014, between the Company and Suzanne Sitherwood; filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014. |
10.31* | | Performance Contingent Restricted Stock Agreement, dated September 1, 2011, between the Company and Suzanne Sitherwood; filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011. |
10.32* | | Restricted Stock Unit Award Agreement, dated September 1, 2011, between the Company and Suzanne Sitherwood; filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2011. |
10.33* | | Restricted Stock Unit Award Agreement, dated October 1, 2012, between the Company and Steve Lindsey; filed as Ex 10.25 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2012. |
10.34* | | Performance Contingent Restricted Stock Unit Award Agreement, dated October 1, 2012, between the Company and Steve Lindsey; filed as Ex 10.26 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2012. |
10.35* | | Severance Benefits Agreement, dated October 1, 2012, between the Company and Steve Lindsey; filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2012. |
10.36* | | Note Purchase Agreement, dated August 3, 2012, by and among the Company and the Purchasers listed in Schedule A thereto; filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2012. |
10.37* | | Laclede Gas Cash Balance Supplemental Retirement Benefit Plan, effective as of January 1, 2009; filed as Exhibit 10.30 to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 2012. |
10.38* | | Amended and Restated Firm (Rate Schedule FT) Transportation Service Agreement between Laclede Energy Resources, Inc. and CenterPoint Energy Gas Transmission Company TSA #1006667; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012. |
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Exhibit Number | | |
10.39* | | Amended and Restated Storage Service Agreement For Rate Schedule FSS, Contract #3147, dated July 30, 2013, between CenterPoint Energy-Mississippi River Transmission Corporation and Laclede Gas; filed as Exhibit 10.1 to Laclede Gas' Current Report on Form 8-K filed August 2, 2013. |
10.40* | | Amended and Restated Transportation Service Agreement for Rate Schedule FTS, Contract #3310, dated July 30, 2013, between CenterPoint Energy-Mississippi River Transmission Corporation and Laclede Gas; filed as Exhibit 10.2 to Laclede Gas' Current Report on Form 8-K filed August 2, 2013. |
10.41* | | Amended and Restated Transportation Service Agreement for Rate Schedule FTS, Contract #3311, dated July 30, 2013, between CenterPoint Energy-Mississippi River Transmission Corporation and Laclede Gas; filed as Exhibit 10.3 to Laclede Gas' Current Report on Form 8-K filed August 2, 2013. |
10.42* | | Purchase and Sale Agreement for Missouri Gas Energy, dated as of December 14, 2012, by and among Southern Union Company, Plaza Missouri Acquisition, Inc. and the Company (solely for purposes of Section 13.19 of the Agreement); filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed December 17, 2012. |
10.43* | | Purchase and Sale Agreement for New England Gas Company, dated as of December 14, 2012, among Southern Union Company, Plaza Massachusetts Acquisition, Inc. and the Company; filed as Exhibit 2.2 to the Company's Current Report on Form 8-K filed December 17, 2012. |
10.44* | | Employee Agreement for Missouri Gas Energy, dated as of December 14, 2012, among Southern Union Company, Plaza Missouri Acquisition, Inc. and the Company; filed as Exhibit 2.3 to the Company's Current Report on Form 8-K filed December 17, 2012. |
10.45* | | Employee Agreement for New England Gas Company, dated as of December 14, 2012, among Southern Union Company, Plaza Missouri Acquisition, Inc. and the Company; filed as Exhibit 2.4 to the Company's Current Report on Form 8-K filed December 17, 2012. |
10.46* | | Stock Purchase Agreement, dated as of February 11, 2013, by and among the Company, Plaza Massachusetts Acquisition, Inc., and Algonquin Power & Utilities Corp.; filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed February 12, 2013. |
10.47* | | Assignment and Assumption Agreement, dated as of January 11, 2013, by and between Plaza Missouri Acquisition, Inc. and Laclede Gas; filed as Exhibit 99.1 to Laclede Gas' Current Report on Form 8-K filed January 14, 2013. |
10.48* | | Consent to Assignment executed by Southern Union Company dated as of January 11, 2013; filed as Exhibit 99.2 to Laclede Gas' Current Report on Form 8-K filed January 14, 2013. |
10.49* | | Consent Agreement, dated as of February 11, 2013, by and among the Company, Plaza Massachusetts Acquisition, Inc. Southern Union Company and Algonquin Power & Utilities Corp.; filed as Exhibit 2.2 to the Company's Current Report on Form 8-K filed February 12, 2013. |
10.50* | | Loan agreement, dated September 3, 2013, among the Company and the several bank parties thereto, including Wells Fargo Bank, National Association, as Administrative Agent, U.S. Bank National Association and JPMorgan Chase Bank, N.A. as Co-Syndication Agents; Bank of America, N.A., Fifth Third Bank and Morgan Stanley Bank, N.A., as Co-Documentation Agents; and Wells Fargo Securities LLC, U.S. Bank National Association and J.P. Morgan Securities LLC as Joint Lead Arrangers and Joint Bookrunners; and Commerce Bank, UMB Bank, N.A., and Stifel Bank & Trust as the other participating banks; filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2013. |
10.51* | | First Amendment and Waiver to Loan Agreement, dated as of April 28, 2014, among the Company and the several banks parties thereto, including Wells Fargo Bank, National Association as Administrative Agent; filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014. |
10.52* | | First Extension Agreement, dated as of September 3, 2014, to Loan Agreement, dated September 3, 2013, as amended, by and among the Company and the several banks party thereto, including Wells Fargo Bank, National Association, as administrative agent; filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed September 4, 2014. |
10.53* | | Loan agreement, dated September 3, 2013, among Laclede Gas and the several bank parties thereto, including Wells Fargo Bank, National Association, as Administrative Agent, U.S. Bank National Association and JPMorgan Chase Bank, N.A. as Co-Syndication Agents; Bank of America, N.A., Fifth Third Bank and Morgan Stanley Bank, N.A., as Co-Documentation Agents; and Wells Fargo Securities LLC, U.S. Bank National Association and J.P. Morgan Securities LLC as Joint Lead Arrangers and Joint Bookrunners; and Commerce Bank, UMB Bank, N.A., and Stifel Bank & Trust as the other participating banks; filed as Exhibit 10.12 to Laclede Gas' Annual Report on Form 10-K for the fiscal year ended September 30, 2013. |
10.54* | | First Extension Agreement, dated as of September 3, 2014, to Loan Agreement, dated September 3, 2013, as amended, by and among Laclede Gas and the several banks party thereto, including Wells Fargo Bank, National Association, as administrative agent; filed as Exhibit 99.3 to Laclede Gas' Current Report on Form 8-K filed September 4, 2014. |
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Exhibit Number | | |
10.55* | | Lease Agreement, dated January 21, 2014, between the Company, as Tenant, and Market 700, LLC, as Landlord; filed as Exhibit 10.1 to Laclede Group, Inc.'s Current Report on Form 8-K filed January 27, 2014. |
10.56* | | Stock Purchase Agreement, dated as of April 5, 2014, between the Company and Energen Corporation; filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed April 7, 2014. |
10.57* | | Commitment Letter, dated April 5, 2014, among the Company and Credit Suisse AG and Wells Fargo Bank, National Association, and their respective affiliates; filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed April 7, 2014. |
10.58* | | First Amendment to the Commitment Letter, dated June 16, 2014, among the Company and Credit Suisse AG and Wells Fargo Bank, National Association, and their respective affiliates; filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed June 17, 2014. |
10.59* | | 2nd Amendment to Commitment Letter, dated August 19, 2014, among the Company and Credit Suisse AG and Wells Fargo Bank, National Association, and their respective affiliates; filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed August 21, 2014. |
10.60* | | The Company's Executive Severance Plan effective January 1, 2015; filed as Exhibit 10.59 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2014. |
10.61* | | Master Note Purchase Agreement, dated as of June 5, 2015, among Alagasco and certain institutional purchasers; filed as Exhibit 10.1 to to Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015. |
10.62* | | Credit Agreement dated September 2, 2014, by and among Alagasco, Wells Fargo Bank, National Association., as Administrative Agent, Credit Suisse AG, Cayman Islands Branch and U.S. Bank National Association, as CO-Syndication Agents, Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC and U.S. Bank National Association, as Joint Lead Arrangers and Joint Book Managers, and the lenders party thereto which was filed as Exhibit 991. to Alagasco’s Current Report on Form 8-K filed September 4, 2014. |
10.63* | | Credit Agreement dated October 30, 2012, by and among Alagasco, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer, Wells Fargo Bank, National Association and Regions Bank, and Co-Syndication Agents and L/C Issuers, Compass Bank and U.S. Bank National Association, as Co- Documentation Agents and L/C Issuers, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities LLC, Regions Capital Markets, a division of Regions Bank, Compass Bank and U.S. Bank National Association, as Joint Lead Arrangers and Joint Book Managers, and the lenders party thereto which was filed as Exhibit 10.2 to Alagasco’s Current Report on Form 8-K filed October 31, 2012. |
10.64* | | Note Purchase Agreement, dated December 22, 2011, among Alagasco and the Purchasers thereto (the AIG purchasers) with respect to $25 million 3.86 percent Senior Notes due December 22, 2021, which was filed as Exhibit 10.1 to Alagasco’s Current Report on Form 8-K filed December 22, 2011. |
10.65* | | Note Purchase Agreement, dated December 22, 2011, among Alagasco and the Purchasers thereto (the Prudential purchasers) with respect to $25 million 3.86 percent Senior Notes due December 22, 2021, which was filed as Exhibit 10.2 to Alagasco’s Current Report on Form 8-K filed December 22, 2011. |
10.66* | | Service Agreement Under Rate Schedule CSS (No. SSNG1), between Southern Natural Gas Company and Alagasco, dated as of September 1, 2005, which was filed as Exhibit 10(a) to Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2005. |
10.67* | | Amended Exhibit A, effective January 15, 2014, to Service Agreement Under Rate Schedule CSS (No. SSNG1) between Southern Natural Gas Company and Alagasco dated September 1, 2005 which was filed as Exhibit 10(g) to Alagasco's Annual Report on Form 10-K for the year ended December 31, 2013. |
10.68* | | Firm Transportation Service Agreement Under Rate Schedule FT and/or FT-NN (No. FSNG1), between Southern Natural Gas Company and Alagasco dated as of September 1, 2005, which was filed as Exhibit 10(b) to Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2005. |
10.69* | | Amended Exhibit A, effective October 1, 2013, to Firm Transportation Service Agreement (No. FSNG1) between Southern Natural Gas Company and Alagasco, which was filed as Exhibit 10(i) to Alagasco's Annual Report on Form 10-K for the year ended December 31, 2013. |
10.70* | | Amended Exhibit B, effective November 1, 2013, to Firm Transportation Service Agreement (No. FSNG1) between Southern Natural Gas Company and Alagasco, which was filed as Exhibit 10(j) to Alagasco's Annual Report on Form 10-K for the year ended December 31, 2013. |
10.71* | | Form of Service Agreement Under Rate Schedule IT (No. 790420), between Southern Natural Gas Company and Alagasco, which was filed as Exhibit 10(b) to Alagasco’s Annual Report on Form 10-K for the year ended September 30, 1993. |
10.72* | | Service Agreement between Transcontinental Gas Pipeline Corporation and Transco Energy Marketing Company as Agent for Alagasco, dated August 1, 1991 which was filed as Exhibit 3(e) to Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2003. |
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Exhibit Number | | |
10.73* | | Amendment to Service Agreement between Transcontinental Gas Pipeline Corporation and Alagasco, dated December 2, 2005, which was filed as Exhibit 10(e) to Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2005. |
12.1 | | Ratio of Earnings to Fixed Charges of the Company. |
12.2 | | Ratio of Earnings to Fixed Charges of Laclede Gas. |
21 | | Subsidiaries of the Company and Laclede Gas. |
23.1 | | Consent of Independent Registered Public Accounting Firm of the Company. |
23.2 | | Consent of Independent Registered Public Accounting Firm of Laclede Gas. |
31.1 | | Certifications under Rule 13a-14(a) of the CEO and CFO of the Company. |
31.2 | | Certifications under Rule 13a-14(a) of the CEO and CFO of Laclede Gas. |
31.3 | | Certifications under Rule 13a-14(a) of the CEO and CFO of Alagasco. |
32.1 | | Section 1350 Certifications under Rule 13a-14(b) of the CEO and CFO of the Company. |
32.2 | | Section 1350 Certifications under Rule 13a-14(b) of the CEO and CFO of Laclede Gas. |
32.3 | | Section 1350 Certifications under Rule 13a-14(b) of the CEO and CFO of Alagasco. |
101.INS | | XBRL Instance Document. (1) |
101.SCH | | XBRL Taxonomy Extension Schema. (1) |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase. (1) |
101.DEF | | XBRL Taxonomy Definition Linkbase. (1) |
101.LAB | | XBRL Taxonomy Extension Labels Linkbase. (1) |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase. (1) |
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(1) | Attached as Exhibit 101 to this Annual Report are the following documents formatted in extensible business reporting language (XBRL): (i) Document and Entity Information; (ii) Consolidated Statements of Income and Statements of Income for the years ended September 30, 2015, 2014, and 2013; (iii) Consolidated Statements of Comprehensive Income and Statements of Comprehensive Income for the years ended September 30, 2015, 2014, and 2013; (iv) Consolidated Statements of Common Shareholders' Equity and Statements of Common Shareholder's Equity for the years ended September 30, 2015, 2014, and 2013; (v) Consolidated Statements of Cash Flows and Statements of Cash Flows for the years ended September 30, 2015, 2014, and 2013; (vi) Consolidated Balance Sheets and Balance Sheets at September 30, 2015 and 2014; (vii) Consolidated Statements of Capitalization and Statements of Capitalization at September 30, 2015 and 2014; and (viii) Notes to Financial Statements. For Alagasco, the Statements of Income, Comprehensive Income, Common Shareholder's Equity, and Cash Flows are for the year ended September 30, 2015, the nine months ended September 30, 2014, and the year ended December 31, 2013. We also make available on our website the Interactive Data Files submitted as Exhibit 101 to this Annual Report.
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* Incorporated herein by reference and made a part hereof. The Company File No. 1-16681. Laclede Gas File No. 1-1822. Alagasco file No. 2-38960.
Bold items reflect management, contract or compensatory plan or arrangement.
