Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” “target,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results or outcomes to differ materially from those contemplated in any forward-looking statement are:
• | Weather conditions and catastrophic events, particularly severe weather in U.S. natural gas producing areas; |
• | Impacts related to the COVID-19 pandemic and uncertainties as to their continuing duration and severity; |
• | Volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments, and the impact on our competitive position in relation to suppliers of alternative heating sources, such as electricity; |
• | Changes in gas supply and pipeline availability, including 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; |
• | Acquisitions may not achieve their intended results; |
• | Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting: |
• | allowed rates of return, |
• | incentive regulation, |
• | industry structure, |
• | purchased gas adjustment provisions, |
• | rate design structure and implementation, |
• | capital structures established for rate-setting purposes, |
• | 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, funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital markets; |
• | Retention of, ability to attract, ability to collect from, and conservation efforts of, customers; |
• | Our ability to comply with all covenants in our indentures and credit facilities any violations of which, if not cured in a timely manner, could trigger a default of our obligation; |
• | Energy commodity market conditions; |
• | Discovery of material weakness in internal controls; |
• | The disruption, failure or malfunction of our operational and information technology systems, including due to cyberattacks; and |
• | Employee workforce issues, including but not limited to labor disputes, the inability to attract and retain key talent, and future wage and employee benefit costs, including costs resulting from changes in discount rates and returns on benefit plan assets. |
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.
Item 1. Business
OVERVIEW
Spire Inc. (Spire(“Spire” or the Company)“Company”) was formerly The Laclede Group, Inc., an entity formed in 2000 that, effective October 1, 2001, becameand is the public utility holding company for Spire Missouri Inc. (Spire Missouri or the Missouri Utilities).(“Spire Missouri”), Spire Alabama Inc. (“Spire Alabama”), other gas utilities, and gas-related businesses. Spire Missouri was foundedformed 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 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,was formed in 1948 by the Company purchased 100%merger 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.
The Gas Utility segment includes the regulated operations of Spire Missouri, Spire Alabama, Spire Gulf Inc. (“Spire Gulf”) and Spire Mississippi Inc. (“Spire Mississippi”) (collectively, the Utilities)“Utilities”). The business of the Utilities is subject to seasonal fluctuations with the peak period occurring in the winter heating season, typically November through April of each fiscal year. Spire Missouri is a public utility engaged in the purchase, retail distribution and sale of natural gas, with primary offices located in St. Louis, Missouri. Spire Missouri is the largest natural gas distribution utility system in Missouri, serving more than 1.1approximately 1.2 million residential, commercial and industrial customers. For utility regulatory purposes Spire Missouri has two regions, one servingcustomers in St. Louis, and eastern Missouri (Spire Missouri East) and the other serving Kansas City, and western Missouri (Spire Missouri West, formerly Missouri Gas Energy, or MGE).other areas in Missouri. Spire Alabama is a public utility engaged in the purchase, retail distribution and sale of natural gas principally in central and northern Alabama, serving more than 0.4 million residential, commercial and industrial customers with primary offices located in Birmingham, Alabama. Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas to 0.1 million customers in southernthe Mobile, Alabama area and south centralsouth-central Mississippi.
The Gas Marketing segment includes Spire Marketing Inc. (Spire Marketing, formerly known as Laclede Energy Resources, Inc.(“Spire Marketing”), a wholly owned subsidiary engaged in the marketing ofproviding natural gas and related activities on a non-regulated basis.
As of September 30, 2017,2020, Spire had 3,2793,583 employees, including 2,2712,424 for Spire Missouri and 819947 for Spire Alabama. We believe that:
1. | the safety and well-being of our employees is one of our most important responsibilities, |
2. | the development, education and advancement of employees is key to our sustainability, and |
3. | embracing an inclusive workforce full of diverse backgrounds and perspectives drives innovation. |
We have implemented processes, procedures and programs that have helped us reduce our employee injury rate for the last threesixth fiscal yearsyear in a row, marking a 17% year-over-year improvement and an overall improvement of 57% since fiscal year 2015. We remain very focused on reducing at-fault motor vehicle accidents, thereby improving safety for our employees and our communities, and this past year, the American Gas Association recognized us for our commitment to safety with the Accident Prevention Certificate. Due to our swift and strategic response to COVID-19, we did not furlough or lay off any employees in fiscal year 2020. We offer incentives for weight management and gym membership, as well as employee assistance programs to provide counseling services and emotional support, and in 2020, we created a formalized comprehensive well-being program that focuses on the physical, emotional, social and financial health of every employee.
All employees have access to developmental assessments, customized training, specialized degree programs, and partnerships with best-in-class organizations related to industry courses, leadership and management workshops and computer application development seminars. In addition, all employees are presented below. Foreligible for up to $6,000 per year in tuition assistance and have access to the Spire Learning Center, our robust internal learning management system. In their first year, each construction and maintenance employee receives 80 hours of safety training, while each service and installation employee receives 200 hours. Field operations employees average 24 hours of technical and procedural training annually.
We regularly review and adjust our affirmative action plans based on placement and utilization rates, and we strive to create an even more detailed financial information regardingdiverse and inclusive work environment by committing to and achieving the segments, see Note 14, Information by Operating Segment,goals of the NotesCEO Action for Diversity & Inclusion Pledge. In addition, during fiscal year 2020, we adopted a Human Rights Policy, which is our first step in demonstrating that Spire understands its universal responsibility to Financial Statements in Item 8.
| (In millions) | 2017 | 2016* | 2015 | ||||||||
| Gas Utility | $ | 1,660.0 | $ | 1,457.2 | $ | 1,891.8 | |||||
| Gas Marketing and other | 80.7 | 80.1 | 84.6 | ||||||||
| Total Operating Revenues | $ | 1,740.7 | $ | 1,537.3 | $ | 1,976.4 | |||||
Spire uses its website, SpireEnergy.com, as a routine channel for distribution of important information including news releases, analyst presentations and trades under the ticker symbol “SR.” The following table reflects Spire shares issued during the two most recent fiscal years:
| 2017 | 2016 | ||||
| Common Stock Issuance | 2,504,684 | 2,185,000 | |||
| Dividend Reinvestment and Stock Purchase Plan (DRIP) | 23,731 | 22,878 | |||
| Equity Incentive Plan | 84,186 | 107,752 | |||
| Total Shares Issued | 2,612,601 | 2,315,630 | |||
GAS UTILITY
Natural Gas Supply
The Utilities’ fundamental gas supply strategy is to meet the two-fold objective of 1) ensuring a dependable gas supply is available for delivery when needed and 2) insofar as is compatible with that dependability, purchasing gas that is economically priced. In structuring their natural gas supply portfolio, the Utilities focus on natural gas assets that are strategically positioned to meet the Utilities’ primary objectives.
Spire Missouri focuses its gas supply portfolio around a number of large natural gas suppliers with equity ownership or control of assets strategically situated to complement its regionally diverse firm transportation arrangements. Spire Missouri East utilizes both Mid-Continent andMidcontinent, Gulf Coast, Northeast, and Rocky Mountain gas sources to provide a level of supply diversity that facilitates the optimization of pricing differentials as well as protecting against the potential of regional supply disruptions. Further, Spire STL Pipeline, a wholly owned subsidiary of Spire, is capable of delivering up to 4 million therms per day of natural gas into eastern Missouri, of which Spire Missouri West utilizes both Mid-Continent and Rocky Mountain gas sources to provideis the foundation shipper with a levelcontractual commitment of supply diversity that accesses low cost supplies.
In fiscal year 2017,2020, Spire Missouri purchased natural gas from 4027 different suppliers to meet its total service area current gas sales and storage injection requirements. Spire Missouri entered into firm agreements with suppliers including major producers and marketers providing flexibility to meet the temperature sensitivetemperature-sensitive needs of its customers. Natural gas purchased by Spire Missouri for delivery to its service areaareas included 50.5 billion cubic feet (Bcf) on the Southern Star Central Gas Pipeline, Inc. (Southern Star), 31.3 Bcf through the Enable Mississippi River Transmission LLC (MRT) system, totaled 45.9 billion cubic feet (Bcf).and a combined 39.3 Bcf on the Tallgrass Interstate Gas Transmission, LLC (TIGT), Panhandle Eastern Pipe Line Company, LP (PEPL), Rockies Express Pipeline, LLC (REX), and Spire STL Pipeline systems. Spire Missouri also holds firm transportation arrangements on several other interstate pipeline systems that provide access to gas supplies upstream of MRT. In addition to natural gas deliveries from MRT, 49.7 Bcf was purchased on the Southern Star Central Gas Pipeline, Inc. (Southern Star), 3.9 Bcf was purchased on the Tallgrass Interstate Gas Transmission, LLC (TGIT) system, 8.4 Bcf was purchased on the Panhandle Eastern Pipe Line Company, LP (PEPL) system, and 1.4 Bcf was purchased on the Rockies Express Pipeline, LLC (REX) system.upstream. Some of Spire Missouri’s commercial and industrial customers purchased their own gas with Spire Missouri transporting 44.845.9 Bcf to them through its distribution system.
The fiscal year 20172020 peak day send out of natural gas to Spire Missouri customers, including transportation customers, occurred on December 18, 2016.February 13, 2020. The average temperature was 811 degrees Fahrenheit in St. Louis and -313 degrees Fahrenheit in Kansas City. On that day, the Missouri Utilities’Spire Missouri’s customers consumed 1.651.56 Bcf of natural gas. For eastern Missouri, this peak day demand was met with natural gas transported to St. Louis through the MRT, MoGas Pipeline LLC, Spire STL Pipeline, and Southern Star transportation systems, and from Spire Missouri’s on-system storage and peak shaving resources.storage. For western Missouri, this peak day demand was met with natural gas transported to Kansas City through the Southern Star, PEPL, TGIT,TIGT, and REX transportation systems.
Spire Alabama’s distribution system is connected to two major interstate natural gas pipeline systems, Southern Natural Gas Company, L.L.C. (Southern Natural Gas) and Transcontinental Gas Pipe Line Company, LLC (Transco). It is also connected to two intrastate natural gas pipeline systems.
Spire Alabama purchases natural gas from various natural gas producers and marketers. Certain volumes are purchased under firm contractual commitments with other volumes purchased on a spot market basis. The purchased volumes are delivered to Spire Alabama’s system using a variety of firm transportation, interruptible transportation and storage capacity arrangements designed to meet the system’s varying levels of demand.
In fiscal 2017,2020, Spire Alabama purchased natural gas from 1423 different suppliers to meet current gas sales, storage injection, and liquefied natural gas (LNG) liquefaction requirements, of which sevenfive are under long-term supply agreements. Approximately 58.064.0 Bcf was transportedpurchased for delivery by Southern Natural Gas, 4.45.2 Bcf by Transco, and 5.69.4 Bcf through intrastate pipelines to the Spire Alabama delivery points for its residential, commercial, and industrial customers.
The fiscal 20172020 peak day send out for Spire Alabama was 0.60.5 Bcf on January 7, 2017,November 12, 2019, when the average temperature was 3134 degrees Fahrenheit in Birmingham, of which 100% was met with supplies transported through Southern Natural Gas, Transco, intrastate facilities, and one of the four LNG peak shaving facilities.
Spire Gulf’s distribution system is directly connected to interstate pipelines, natural gas processing plants and gas storage facilities. Spire Gulf buys from a variety of producers and marketers, with BP Energy Company being the primary supplier.
Natural Gas Storage
Spire Missouri believes that it has ample storage capacity to meet the demands of its distribution system, particularly to augment its supply during peak demand periods. Spire Missouri has a contractual right to store 21.621.5 Bcf of gas in MRT’s storage facility located in Unionville, Louisiana, 16.3 Bcf of gas storage in Southern Star’s system storage facilities located in Kansas and Oklahoma, and 1.4 Bcf of firm storage on PEPL’s system storage. MRT’s tariffs allow injections into storage from May 161 through November 151 and require the withdrawal from storage of all but 2.14.3 Bcf from November 161 through May 15.1. Southern Star tariffs allow both injections and withdrawals into storage year roundyear-round with ratchets that restrict the associated flows dependent upon the underlying inventory level per the contracts.
In addition, Spire Missouri East supplements pipeline gas with natural gas withdrawn from its own underground storage field located in St. Louis and St. Charles Counties in Missouri. The field is designed to provide approximately 0.3 Bcf of natural gas withdrawals on a peak day and maximum annual net withdrawals of approximately 4.0 Bcf of natural gas based on the inventory level that Spire Missouri plans to maintain.
Spire Alabama has a contractual right to store 12.5 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, Spire 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 Gulf South Pipeline Company, LP, and Sempra’sEnstor Gas, LLC’s Bay Gas Storage.
Union Agreements
The Company believes labor relations with its employees are good. Should that condition change, the Company could experience labor disputes, work stoppages or other disruptions that could negatively impact the Company’s system operations, customer service, results of operations and cash flows.
The following table presents the Company’s various labor agreements as of September 30, 2020:
Union |
| Local |
| Employees Covered |
|
| Contract Start Date |
| Contract End Date | |
Spire Missouri |
|
|
|
|
|
|
|
|
|
|
United Steel, Paper and Forestry, Rubber Manufacturing, Allied-Industrial and Service Workers International Union (USW) |
| 884 |
|
| 67 |
|
| August 1, 2018 |
| July 31, 2021 |
USW |
| 11-6 |
|
| 928 |
|
| August 1, 2018 |
| July 31, 2021 |
USW |
| 11-194 |
|
| 82 |
|
| August 1, 2018 |
| July 31, 2021 |
USW |
| 12561 |
|
| 140 |
|
| October 9, 2019 |
| July 31, 2022 |
USW |
| 14228 |
|
| 44 |
|
| October 9, 2019 |
| July 31, 2022 |
USW |
| 11-267 |
|
| 29 |
|
| October 9, 2019 |
| July 31, 2022 |
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada |
| 781-Kansas City |
|
| 210 |
|
| September 21, 2019 |
| July 31, 2022 |
Gas Workers Metal Trades locals of the United Association of Journeyman and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada |
| 781-Monett |
|
| 57 |
|
| September 21, 2019 |
| July 31, 2022 |
Total Spire Missouri |
|
|
|
| 1,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Alabama |
|
|
|
|
|
|
|
|
|
|
USW |
| 12030 |
|
| 234 |
|
| May 1, 2020 |
| April 30, 2023 |
United Association of Gas Fitters |
| 548 |
|
| 125 |
|
| May 1, 2019 |
| April 30, 2022 |
Total Spire Alabama |
|
|
|
| 359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Gulf |
|
|
|
|
|
|
|
|
|
|
USW |
| 541 |
|
| 63 |
|
| August 1, 2020 |
| July 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
Total Spire |
|
|
|
| 1,979 |
|
|
|
|
|
Operating Revenues and Customer Information
The following tables present information on Spire’s revenues and therms sold and transported (before intersegment eliminations), and annual average numbers of customers for the three years ended September 30, 2020, 2019 and 2018.
Gas Utility Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
(% of Total) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Residential |
|
| 68 | % |
|
| 68 | % |
|
| 66 | % |
Commercial & Industrial |
|
| 22 | % |
|
| 23 | % |
|
| 24 | % |
Transportation |
|
| 6 | % |
|
| 6 | % |
|
| 6 | % |
Other |
|
| 4 | % |
|
| 3 | % |
|
| 4 | % |
Total |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Gas Utility Therms Sold and Transported |
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Residential |
|
| 1,054.2 |
|
|
| 1,132.9 |
|
|
| 1,095.8 |
|
Commercial & Industrial |
|
| 473.4 |
|
|
| 525.2 |
|
|
| 536.4 |
|
Transportation |
|
| 1,670.5 |
|
|
| 1,673.2 |
|
|
| 1,615.1 |
|
Interruptible |
|
| 14.8 |
|
|
| 16.2 |
|
|
| 14.5 |
|
Total System |
|
| 3,212.9 |
|
|
| 3,347.5 |
|
|
| 3,261.8 |
|
Off-System |
|
| 84.9 |
|
|
| 38.5 |
|
|
| 68.6 |
|
Total |
|
| 3,297.8 |
|
|
| 3,386.0 |
|
|
| 3,330.4 |
|
Gas Utility Customers |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Residential |
|
| 1,599,693 |
|
|
| 1,584,570 |
|
|
| 1,567,939 |
|
Commercial & Industrial |
|
| 112,566 |
|
|
| 112,561 |
|
|
| 123,982 |
|
Transportation |
|
| 847 |
|
|
| 842 |
|
|
| 835 |
|
Interruptible |
|
| 67 |
|
|
| 69 |
|
|
| 70 |
|
Total |
|
| 1,713,173 |
|
|
| 1,698,042 |
|
|
| 1,692,826 |
|
Total annual average number of customers for Spire Missouri and Spire Alabama for fiscal 2020 was 1,186,523 and 424,804, respectively.
Regulatory Matters
For details on regulatory matters, see
Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.Other Pertinent Matters
Spire Missouri is the only distributor of natural gas within its franchised service areas, while Spire Alabama is the main distributor of natural gas in its service areas. Spire Missouri and Spire Alabama have franchises in nearly all the communities where they provide service with terms varying from five years to an indefinite duration. A franchise is essentially a municipal permit to install pipes and construct other facilities in the community. All of the franchises are free from unduly burdensome restrictions and are adequate for the conduct of Spire Missouri’s and Spire Alabama’s current public utility businesses in their respective states. In recent years, although certain franchise agreements have expired, the Utilities have continued to provide service in those communities without formal franchises.
The principal competition for the Utilities comes from the local electric companies. Other competitors in the service areas include suppliers of fuel oil, coal, and propane, as well as natural gas pipelines that can directly connect to large volume customers. For the Missouri Utilities, competition also comes from district steam systems in the downtown areas of both St. Louis and Kansas City, and for Spire Alabama, from municipally or publicly owned gas distributors located adjacent to its service territory. Coal ishas been 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,Competition also comes from district steam has been competitive with gas forsystems in the downtown areas of both St. Louis and Kansas City area heating users.
Residential, commercial, and industrial markets representedcustomers represent approximately 91%92% and 82%83% of fiscal 20172020 operating revenues for Spire Missouri and Spire Alabama, respectively. Given the current level of natural gas supply and market conditions, the Utilities believe that the relative comparison of natural gas equipment and operating costs with those of competitive fuels will not change significantly in the foreseeable future, and that these markets will continue to be supplied by natural gas. In new multi-family and commercial rental markets, the Utilities’ competitive exposures are presently limited to space and water heating applications.
Spire Missouri offersand Spire Alabama offer gas transportation service to its large-userlarge commercial and industrial customers. Transportation customers represent approximately 3% and commercial customers.16% of fiscal 2020 operating revenues for Spire Missouri and Spire Alabama, respectively. The Spire Missouri tariff approved for that type of service produces a margin similar to that which theSpire Missouri Utilities would have received under their regular sales rates. Similarly, Spire Alabama’s transportation tariff allows it to transport gas for large commercial and industrial customers rather than buying and reselling it to them and is based on Spire Alabama’s sales profit margin so that operating margins are unaffected. During fiscal 2017, substantially all of Spire Alabama’s large commercial and industrial customer deliveries involved the transportation of customer-owned gas.
The Utilities are subject to various environmental laws and regulations that, to date, have not materially affected the Utilities’ or the Company’s financial position and results of operations. For a detailed discussion of environmental matters, see
Note 16, Commitment and Contingencies, of the Notes to Financial Statements in Item 8.| Union | Local | Employees Covered | Contract Start Date | Contract End Date |
| Spire Missouri | ||||
| United Steel, Paper and Forestry, Rubber Manufacturing, Allied-Industrial and Service Workers International Union (USW) | 884 | 64 | August 1, 2015 | July 31, 2018 |
| USW | 11-6 | 932 | August 1, 2015 | July 31, 2018 |
| USW | 11-194 | 85 | August 1, 2015 | July 31, 2018 |
| USW | 12561 | 130 | August 16, 2016 | July 31, 2019 |
| USW | 14228 | 41 | August 16, 2016 | July 31, 2019 |
| USW | 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 | 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 | 56 | August 16, 2016 | July 31, 2019 |
| Total Spire Missouri | 1,524 | |||
| Spire Alabama | ||||
| USW | 12030 | 200 | May 1, 2017 | April 30, 2020 |
| USW | 12030-A | 53 | May 1, 2017 | April 30, 2020 |
| United Association of Gas Fitters | 548 | 122 | July 1, 2016 | April 30, 2019 |
| Total Spire Alabama | 375 | |||
| Spire Gulf | ||||
| USW | 3-541 | 65 | December 1, 2013 | November 30, 2017 |
| Total Spire | 1,964 | |||
| Gas Utility Operating Revenues | ||||||||||||
| (In millions) | 2017 | 2016 | 2015 | |||||||||
| Residential | $ | 1,084.5 | $ | 979.0 | $ | 1,263.1 | ||||||
| Commercial & Industrial | 389.2 | 331.3 | 462.3 | |||||||||
| Interruptible | 5.1 | 2.0 | 2.3 | |||||||||
| Transportation | 99.8 | 93.1 | 92.2 | |||||||||
| Off-System and Other Incentive | 67.9 | 50.7 | 76.2 | |||||||||
| Provisions for Refunds and Other | 21.4 | 3.3 | (0.3 | ) | ||||||||
| Total Gas Utility Operating Revenues | $ | 1,667.9 | $ | 1,459.4 | $ | 1,895.8 | ||||||
| Gas Utility Therms Sold and Transported | ||||||||||||
| (In millions) | 2017 | 2016 | 2015 | |||||||||
| Residential | 866.2 | 867.5 | 1,065.1 | |||||||||
| Commercial & Industrial | 446.7 | 420.4 | 491.6 | |||||||||
| Interruptible | 12.6 | 4.6 | 3.6 | |||||||||
| Transportation | 1,467.5 | 1,089.8 | 989.0 | |||||||||
| System Therms Sold and Transported | 2,793.0 | 2,382.3 | 2,549.3 | |||||||||
| Off-System | 175.6 | 183.3 | 193.5 | |||||||||
| Total Gas Utility Therms Sold and Transported | 2,968.6 | 2,565.6 | 2,742.8 | |||||||||
| Gas Utility Customers | 2017 | 2016 | 2015 | |||||||||
| Residential | 1,550,777 | 1,540,366 | 1,434,584 | |||||||||
| Commercial & Industrial | 133,864 | 137,450 | 132,388 | |||||||||
| Interruptible | 64 | 42 | 18 | |||||||||
| Transportation | 827 | 824 | 796 | |||||||||
| Total Gas Utility Customers | 1,685,532 | 1,678,682 | 1,567,786 | |||||||||
GAS MARKETING
Spire Marketing is engaged in the marketing of natural gas and providing energy services to both on-system utility transportation customers and customers outside of the Utilities’ traditional service areas. During fiscal 2017, Gas Marketing utilized over 20 interstateThe majority of Spire Marketing’s business is derived from the procurement and intrastate pipelines and over 100 suppliers to marketphysical delivery of natural gas to more than 200 retail customers and 100 wholesale customers,a diverse customer base, primarily in the central United States (US).and southern U.S. Through its retail operations, Spire Marketing offers natural gas marketing services to large commercial and industrial customers, while its wholesale business consists of producers, pipelines, power generators, municipalities, storage operators, and utility companies. Wholesale activities currently represent a majority of the total Gas Marketing business.
In the course of its business, Spire Marketing enters into agreements to purchase natural gas at a future date in order to lock up supply to cover future sales commitments to its customers. To secure access to the markets it serves, Spire Marketing contracts for transportation capacity on various pipelines from both pipeline companies directly and from other parties through the secondary capacity market from third parties.market. Throughout fiscal 2017,2020, Spire Marketing held approximately 0.681.1 Bcf per day of firm transportation capacity. In addition, to ensure reliability of service and to provide operational flexibility, Spire Marketing enters into firm storage contracts and interruptible park and loan transactions with various companies, where it is able to buy and retain gas to be delivered at a future date, at which time it sells the natural gas to third parties. As of September 30, 2017, Gas2020, Spire Marketing has contracted for approximately 7.226 Bcf of such storage and park and loan capacity for the 2017-20182020-2021 winter season.
The Gas Marketing strategy is to leverage its market expertise and risk management skills to manage and optimize the value of its portfolio of commodity, transportation, park and loan, and storage contracts while controlling costs and acting on new marketplace opportunities. Overall, Gas Marketing saw significantvolume growth in volumes in fiscal 20172020 primarily as a result of increased business with producers and power generatorsintegrated utilities, retail and adding a sizable amount of day-to-day trading volumes by taking advantage of the flexibility thatwholesale customer growth, and increased optimization opportunities resulting from its overall portfolio of assets provided.
OTHER
Other components of the Other results in recent years has been interest expense on corporate debt and other expenses attributable to acquisition transactions and 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.Company’s consolidated information include:
• | unallocated corporate items, including certain debt and associated interest costs; |
• | Spire STL Pipeline LLC (“Spire STL Pipeline”) and Spire Storage West LLC (“Spire Storage”), described below; and |
• | Spire’s subsidiaries engaged in the operation of a propane pipeline, the compression of natural gas, and risk management, among other activities. |
Spire STL Pipeline is a wholly owned subsidiary of Spire that is planning constructionwhich owns and operation ofoperates a 65-mile pipeline to connect toconnecting the Rockies Express Pipeline in Scott County, Illinois, and endto delivery points in St. Louis County, Missouri.Missouri, including Spire Missouri’s storage facility. The proposed pipeline will operateis under the jurisdiction of the Federal Energy Regulatory Commission (FERC) jurisdiction and will beis capable of delivering up to 400,000 dekatherms4 million therms per day of natural gas into eastern Missouri. Spire Missouri will beis the foundationalfoundation shipper with a contractual commitment of 350,000 dekatherms3.5 million therms per day.
Spire NGL LLC (formerly Laclede Pipeline Company)Storage is a wholly owned subsidiaryengaged in the storage of natural gas in the western region of the United States. The facility consists of two storage fields operating under one FERC market-based rate tariff. On July 1, 2020, the Board of Directors of Spire, based upon the recommendation of senior management, revised the development plan for Spire Storage. As a result of the revised development plan, an asset impairment charge was recorded in the third quarter of fiscal 2020. The revision to the development plan for Spire Storage was driven by the realization that operates a propane pipeline underlonger time horizon will be required for optimization and positioning of the storage facility to serve energy markets in the western United States that continue to evolve. Spire remains committed to serving its customers through the ongoing development and operation of the facility. Such development is expected to include approximately $16 million in capital investment over the next year or so to enhance the capabilities of the facility. Consistent with the revised development plans, a FERC jurisdiction. This pipeline allowsapplication to expand the working capacity of the facility, pursuant to Section 7(c) of the Natural Gas Act, was filed on October 9, 2020. The application process and receipt of an authorizing certificate does not commit Spire Missouri to receive propane that may be used to supplement its natural gas supply and meet peak demands on its distribution system.incremental capital investment in Spire NGL LLC also provides propane transportation services to third parties.
Item 1A. Risk Factors
Spire’s and the Utilities’ business and financial results are subject to a number of risks and uncertainties, including those set forth below. The risks described below are those the Company and the Utilities consider to be material. When considering any investment in Spire or the Utilities’ securities, investors should carefully consider the following information, as well as information contained in the caption “Forward-Looking Statements,” Item 7A, and other documents Spire, Spire Missouri, and Spire Alabama file with the SEC. This list is not exhaustive, and Spire’s and the Utilities’ respective management places no priority or likelihood based on the risk descriptions, order of presentation or grouping by subsidiary. All references to dollar amounts are in millions.
RISKS AND UNCERTAINTIES THAT RELATE TO THE BUSINESS AND FINANCIAL RESULTS OF SPIRE AND ITS SUBSIDIARIES
We face risks related to widespread public health concerns, such as the recent coronavirus outbreak.
The actual or perceived effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as COVID-19, will likely negatively affect our operations, liquidity, financial condition, cash flows and results of operations. The outbreak of the novel coronavirus (COVID-19) has adversely impacted economic activity and conditions worldwide. In particular, efforts to control the spread of COVID-19 have led to shutdowns of customer operations, as well as disrupted financial markets and supply chains. The Company has implemented what we believe to be appropriate procedures and protocols to ensure the safety of our customers, suppliers and employees. These actions include activating incident management procedures, working-from-home for our office-based employees, limiting direct contact with our customers, and, from March through June, suspending disconnections and late payment charges for our utility customers. During fiscal 2020, we experienced impacts on our results of operations as a result of COVID-19 including, but not limited to:
• | reduced collection of late payment charges, lower revenue on commercial and industrial volumes; |
• | increased bad debt expenses; |
• | increases in certain operational expenses such as enhanced cleaning and personal protection equipment; |
• | decreases in expense for travel and medical claims; and |
• | higher residential customer charges due to the moratorium on disconnections. |
We are continuing to assess the developments involving our workforce, customers and suppliers, as well as the ongoing response of federal and state authorities, our regulators and other business and community leaders. An extended slowdown of the United States' economy or demand for commodities and/or material changes in government policy in response to COVID-19 could result in lower demand for natural gas, particularly among our commercial and industrial customers, as well as negatively impact the ability of our customers, contractors, suppliers and other business partners to remain in business or return to reasonable business activity in the near future. While the crisis has not had a material effect on the Company to date, the impacts continue to unfold and the full extent of future developments are not known at this time and may have a material impact on our results of operations, financial condition, liquidity and prospects. We have identified the following potential categories of risks for Spire, Spire Missouri and Spire Alabama outside of those already experienced through September 2020:
• | The health, safety and productivity of our workforce, including in a physically dispersed environment; |
• | Decreases in non-essential operational functions and/or capital investment; |
• | Supply chain impacts due to decreased production and imports of materials and supplies; |
• | The impact on operating results due to increased costs, lower demand in Spire’s service territories and/or lower fees associated with suspending service disconnections and other billing practices or other moratoriums; |
• | The impact of new regulatory actions that could increase costs or provide for future regulatory recovery of those costs; |
• | Spire’s continued ability to access normal functioning capital markets in prolonged economic downturn; |
• | Adverse investment performance for postretirement benefit plan assets or the failure to maintain sustained growth in these investments over time could lead to an increase in our plan costs and funding requirements related to the plans; and |
• | Cybersecurity risks associated with a portion of our workforce working remotely. |
To mitigate some of these risks, Spire has implemented additional health and safety precautions while continuing to service utility customers. Spire is an essential business and continues to operate, while adhering to precautionary safety measures, to ensure that critical infrastructure improvements continue and to maintain the safety of the gas distribution network. Further, we have modified certain business and workforce practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events, and conferences) to conform to government restrictions and best practices encouraged by government and regulatory authorities. We are monitoring impacts on our operations, costs and rate bases of our businesses, and continue to explore alternative approaches to ensure the viability of our businesses and continued service to our customers.
To the extent the COVID-19 health crisis adversely affects our business, it may also have the effect of heightening many of the other risks described in this item.
As a holding company, Spire depends on its operating subsidiaries to meet its financial obligations.
Spire is a holding company with no significant assets other than the stock of its operating subsidiaries and cash investments. Spire, and Spire Missouri prior to the holding company’s formation in 2000, havehas paid common stock dividends continuously since 1946. Spire’s ability to pay dividends to its shareholders is dependent on the ability of its subsidiaries to generate sufficient net income and cash flows to pay upstream dividends and make loans or loan repayments. In addition, because it is a holding company and the substantial portion of its assets are represented by its holdings in the Utilities, the risks faced by the Utilities as described below under RISKS THAT RELATE TO THE GAS UTILITY SEGMENT may also adversely affect Spire’s cash flows, liquidity, financial condition and results of operations.
A downgrade in Spire’s and/or its subsidiaries’ credit ratings may negatively affect its ability to access capital and its cost of capital.
Currently, Spire, Spire Missouri, and its utility subsidiariesSpire Alabama have investment grade credit ratings, which are subject to review and change by the rating agencies. Standard & Poor’s has rated Spire’s debt at BBB+, one notch lower than its issuer rating of A-, and Moody’s (which does not use issuer ratings) rated Spire’s debt at Baa2.ratings. There is no assurance that such credit ratings for any of the Spire companies will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Spire has a working capital line of credit to meet its short-term liquidity needs. Spire’s line of credit may be used to meet the liquidity needs of any of its subsidiaries, subject to sublimits. If the rating agencies lowered the credit rating at any of these entities, particularly below investment grade, it might significantly limit suchthat entity’s ability to secure new or additional credit facilities and would increase its costs of borrowing. Spire’s or the Utilities’ ability to borrow under current or new credit facilities and costs of that borrowing have a direct impact on their ability to execute their operating strategies.
Pipeline integrity programs and repairs may impose significant costs and liabilities on the Company.
The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) requires pipeline operators to develop integrity management programs to comprehensively evaluate certain areas along their pipelines and to take additional measures to protect pipeline segments located in “high consequence areas” where a leak or rupture could potentially do the most harm. As the operator of the STL Pipeline, the Company is required to:
• | perform ongoing assessments of pipeline integrity; |
• | identify and characterize applicable threats to pipeline segments that could impact a “high consequence area”; |
• | improve data collection, integration and analysis; |
• | repair and remediate the pipeline as necessary; and |
• | implement preventative and mitigating actions. |
The Company is required to maintain pipeline integrity testing programs that are intended to assess pipeline integrity. Any repair, remediation, preventative or mitigating actions may require significant capital and operating expenditures. Should the Company fail to comply with applicable statutes and the PHMSA Office of Pipeline Safety’s rules and related regulations and orders, it could be subject to significant penalties and fines.
Reductions in capacity of interconnecting, third-party pipelines could cause a reduction in volumes transported by Spire STL Pipeline, which could adversely affect Spire’sthe Company.
Spire STL Pipeline is dependent upon third-party pipelines and other facilities to provide delivery options to and from its pipeline. If any pipeline connection were to become unavailable for volumes of natural gas due to repairs, damage to the facility, lack of capacity or any other reason, Spire STL Pipeline’s ability to continue shipping natural gas to end markets could be restricted, and to the extent not mitigated by contractual indemnification, insurance or tariffs, would thereby reduce its subsidiaries’revenues. Any permanent interruption at any key pipeline interconnect that causes a material reduction in volumes transported on its pipeline could result in an impairment loss that could have a material adverse effect on the Company’s financial condition and operating results.
The Company’s natural gas storage business includes inherent geologic and operational risks, as well as risks from competition and changes in market fundamentals.
In 2017 and 2018, the Company acquired two neighboring storage facilities, one of which had been operating in bankruptcy for an extended period. The Company has restructured to integrate these facilities into one, now known as Spire Storage, to increase capacity, improve operating performance, and improve the integrity of its storage fields and associated above-ground facilities. Any damage to the storage facility or pipelines, or lack of integrity to its storage fields, to the extent not covered by insurance, could have a material adverse effect on the Company’s financial condition, operating results and cash flows.
The Company’s storage assets are connected to third-party-owned pipelines. The continuing operation of such third-party pipelines is not within its control. If any of these pipelines become unable to transport, treat or process natural gas or natural gas liquids, or if the volumes it gathers or transports do not meet the quality requirements of such pipelines, the Company’s revenues and cash flows could be adversely affected.
The Company does not own all the land on which its storage facilities were constructed, and it is, therefore, subject to the possibility of more onerous terms or increased costs to retain necessary land use, if and when applicable property rights expire or are renewed. Changes in the terms of such land use could have an adverse impact on the financial condition, results of operations.
Spire Storage is subject to competition from similar services provided by pipelines and from competing independent storage providers capable of serving its customers. Natural gas storage is a competitive business, risks inherentwith competitors having the ability to expand storage capacity. Increased competition in the activitiesnatural gas storage business could reduce the demand and drive rates down for the Company’s natural gas storage services.
Storage businesses are affected by various gas market fundamentals which impact the level of Spire’s subsidiaries. If,demand for storage services and the rates that can be charged for these services. These market fundamentals include: seasonal price spread; monthly, daily and hourly price volatility; locational basis for pricing points on pipelines connected to a storage facility; seasonal, daily and hourly weather; and operational impacts in supply and market areas served by a storage facility and its connected pipelines. These fundamentals have varying and potentially material adverse impacts on the various services offered by storage facilities and the rates that can be charged for these services in the normal coursemarket. These services include long-term firm storage, short-term park and loan, wheeling, and optimization. Rates below the variable costs to operate a storage facility could result in a decision to not operate all the capacity in the facility or to operate the facility at a loss if required to fulfill firm customer contract obligations. A sustained decline in these rates or a shut-in of all or a portion of one or more facilities’ capacity could have an adverse impact on the Company’s financial condition, results of operations and cash flows.
Transporting, distributing, and storing natural gas and propane involves numerous risks that may result in accidents and other operating risks and costs.
Natural gas transportation, distribution and storage activities inherently involve a variety of hazards and operations risks, such as leaks, accidental explosions, damage caused by third parties, and mechanical problems, which could cause substantial financial losses. In addition, these risks could result in serious injury to employees and non-employees, loss of human life, significant damage to property, environmental pollution, impairment of operations, and substantial losses to the Company and its subsidiaries. The location of pipelines and storage facilities near populated areas, including residential areas, commercial business centers, and industrial sites, could increase the level of damages resulting from these risks. Similar risks also exist for Spire or any of its subsidiaries becomes a partyMissouri’s propane storage, transmission and minor distribution operations. These activities may subject the Company to litigation suchor administrative proceedings. Such litigation or proceedings could result in substantial monetary judgments, fines, or penalties against the Company and its subsidiaries or be resolved on unfavorable terms. The Utilities and other Spire businesses are subject to federal and state laws and regulations requiring them to maintain certain safety and system integrity measures by identifying and managing storage and pipeline risks. Compliance with these laws and regulations, or future changes in these laws and regulations, may result in increased capital, operating and other costs which may not be recoverable in a timely manner from customers in rates. In accordance with customary practice,industry practices, the Utilities and other Spire and its subsidiariesbusinesses maintain insurance against a significant portion of, but not all, risks and losses. In addition, in the normal course of its operations, Spire and its subsidiaries may be exposed to loss from other sources, such as bad debt expense or the failure of a counterparty to meet its financial obligations. Spire and its operating companies employ many strategies to gain assurance that such risks are appropriately managed, mitigated, or insured, as appropriate. To the extent a loss is not fully covered by insurance or other risk mitigation strategies, that loss could adversely affect the Company’s and/or its subsidiaries’ financial condition and results of operations.
In connection with acquisitions, Spire Missouri and Spire Missouri recorded goodwill and long-lived assets that could become impaired and adversely affect its financial condition and results of operations.
Spire and Spire Missouri assess goodwill for impairment annually or more frequently if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company and Spire Missouri assess their long-lived assets for impairment whenever events or circumstances indicate that an asset’s carrying amount may not be recoverable. To the extent the value of goodwill or long-lived assets becomes impaired, the Company and Spire Missouri may be required to incur impairment charges that could have a material impact on their results of operations.
Since interest rates are a key component, among other assumptions, in the models used to estimate the fair values of the Company’s reporting units, asrises in interest rates rise,would generally decrease the calculated fair values decrease and future impairments may occur. Due to the subjectivity of the assumptions and estimates underlying the impairment analysis, Spire and Spire Missouri cannot provide assurance that future analyses will not result in impairment. These assumptions and estimates include projected cash flows, current and future rates for contracted capacity, growth rates, weighted average cost of capital and market multiples. For additional information, see
Climate change and regulatory and legislative developments in the energy industry related to climate change may in the future adversely affect operations and financial results.
Climate change, and the extent regulatory, public policy, or legislative changes occur to address the potential for climate change, could adversely affect operations and financial results of the Company. Management believes it is likely that any such resulting impacts would occur 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. Ifcustomers, or result in lost revenues 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.customers. To the extent the Utilities would be unable to recover those costs,such impacts are not covered by insurance or if higherrecovered in rates, resulting from recovery of such costs would result in reduced demand forthis could have a material adverse effect on the Company’s services, the Company’s and the Utilities’ future business, financial condition, or financialoperating results could be adversely impacted. and cash flows.
In addition, there have been a number of federal, state and statelocal legislative and regulatory initiatives proposed in recent years in an attempt to control or limit the effects of global warming and overall climate change, including greenhouse gas emissions, such as methane and carbon dioxide. The adoption in the future of this type of legislation by Congress or similar legislation by states or localities, or the adoption of related regulations by federal, state or statelocal governments mandating a substantial reduction in greenhouse gas emissions, inrestricting the futureuse of fossil fuels, such as natural gas, or restricting the construction of infrastructure necessary to deliver natural gas to customers could have far-reaching and significant impacts on the energy industry. Such new legislation or regulations could result in increased compliance costs or additional operating restrictions, affect the demand for natural gas or impact the prices charged to customers. At this time, we cannot predict the potential impact of such laws or regulations that may be adopted on the Company’s and the Utilities’ future business, financial condition or financial results.
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 current federal and state income tax obligations over the past few years through tax planning strategies and the extensionuse of bonus depreciation deductions for certain expenditures for property. As a result, the Company has generated large annual taxable losses that have resulted in significant federal and state net operating losses.losses in years prior to the Tax Cuts and Jobs Act. 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, thoseThose 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 benefitsbenefit 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 benefitsbenefit plans that provide benefits to many of their employees and retirees. Costs of providing benefits and related funding requirements of these plans are subject to changes in the market value of the assets that fund the plans. The funded status of the plans and the related costs reflected in ourthe Company’s financial statements are affected by various factors, which are subject to an inherent degree of uncertainty, including economic conditions, financial market performance, interest rates, life expectancies and demographics. Recessions and volatility in the domestic and international financial markets have negatively affected the asset values of Spire’s pension plans at various times in the past. Poor investment returns or lower interest rates may necessitate accelerated funding of the plans to meet minimum federal government requirements, which could have an adverse impact on the Company’s and its subsidiaries’ financial condition and results of operations.
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 authorities. At the state level, the Utilities are regulated in Missouri by the Missouri Public Service Commission (MoPSC), in Alabama by the Alabama Public Service Commission (APSC), and in Mississippi by the Mississippi Public Service Commission (MSPSC). These state public service commissions regulate many aspects of the Utilities’ distribution operations, including construction and maintenance of facilities, operations, safety, the rates the Utilities may charge customers, the terms of service to their customers, transactions with their affiliates, the rate of return they are allowed to realize, and the accounting treatment for certain aspects of their operations. For further discussion of these accounting matters, see
Regulatory Accounting underAccounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the state public service commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. A material disallowance of deferred costs could adversely affect the Utilities’ results of operations.
The MoPSC also approves Spire Missouri’s Infrastructure System Replacement Surcharge (ISRS). The ISRS allows Spire Missouri expedited recovery for its investment to upgrade its infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Such investments are subject to review, and there is risk that any material disallowance of costs under ISRS could adversely affect the timing of revenues.
The Utilities’ ability to obtain and timely implement rate increases and rate supplements to maintain the current rate of return is subject to regulatory review and approval. There can be no assurance that they will be able to obtain rate increases or rate supplements or continue earning the current authorized rates of return. Spire Alabama’s and Spire Gulf’s rate setting process, Rate Stabilization and Equalization (RSE), is subject to regulation by the APSC and is implemented pursuant to an APSC order that will continue beyondorders expiring September 30, 20182022 and September 30, 2021, respectively,respectively. RSE adjustments would continue after those dates unless the APSC enters an order to the contrary in a manner consistent with the law. Spire Mississippi is subject to regulation by the MSPSC and utilizes the Rate Stabilization Adjustment (RSA) Rider. For further details, see Note 15, Regulatory and Other Matters, of the Notes to Financial Statements 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.regulations. In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent noncompliance could also increase. If the Utilities fail to comply with applicable laws and regulations, whether existing or new, they could be subject to fines, penalties or other enforcement action by the authorities that regulate the Utilities’ operations.
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 1516 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 is a lag between when the Utilities incur increases in certain of their costs and the time in which those costs are considered for recovery in the ratemaking process. Cash requirements for increased operating costs, increased funding levels of defined benefit pension and postretirement costs, capital expenditures, and other increases in the costs of doing business can require outlays of cash prior to the authorization of increases in rates charged to customers, as approved by the MoPSC, APSC, and MSPSC. Accordingly, the Utilities’ liquidity can be adversely impacted to the extent higher costs are not timely recovered from their customers.
The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner.
In order to meet their customers’ annual and seasonal natural gas demands, the Utilities must obtain sufficient supplies, interstate pipeline capacity, and storage capacity. If they are unable to obtain these, either from their suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, to the extent not mitigated by tariffs, contractual indemnification or insurance, the Utilities’ financial condition and results of operations may be adversely impacted. If a substantial disruption in interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand, the Utilities’ financial results could be adversely impacted.
The Utilities’ liquidity and, in certain circumstances, the Utilities’ results of operations may be adversely affected by the cost of purchasing natural gas during periods in which natural gas prices are rising significantly.
The tariff rate schedules of theSpire Missouri, Utilities, Spire Gulf and Spire Mississippi contain Purchased Gas Adjustment (PGA) clauses and Spire Alabama’s tariff rate schedule contains a Gas Supply Adjustment (GSA) rider that permit the Utilities to file for rate adjustments to recover the cost of purchased gas. Changes in the cost of purchased gas are flowed through to customers and may affect uncollectible amounts and cash flows and can therefore impact the amount of capital resources.
Currently, theSpire Missouri Utilities areis allowed to adjust the gas cost component of rates up to four times each year while Spire Alabama and Spire Gulf (collectively, the Alabama Utilities)“Alabama Utilities”) and Spire Mississippi may adjust the gas cost component of their rates on a monthly basis. TheSpire Missouri Utilities must make a mandatory gas cost adjustment at the beginning of the winter, in November, and during the next twelve months may make up to three additional discretionary gas cost adjustments, so long as each of these adjustments is separated by at least two months.
The MoPSC typically approves the Spire Missouri Utilities’ PGA changes on an interim basis, subject to refund and the outcome of a subsequent audit and prudence review. Due to such review process, there is a risk of a disallowance of full recovery of these costs. Any material disallowance of purchased gas costs would adversely affect revenues.results of operations. The Alabama Utilities’ gas supply charges are submitted for APSC review on a monthly basis, regardless of whether there is a request for a change, so prudence review occurs on an ongoing basis. Spire Mississippi’s PGA is adjusted on a monthly basis for the most recent charges and is filed at the MSPSC on a monthly basis.
Increases in the prices the Utilities charge for gas may also adversely affect revenues because they could lead customers to reduce usage and cause some customers to have trouble paying the resulting higher bills. These higher prices may increase bad debt expenses and ultimately reduce earnings. Rapid increases in the price of purchased gas may result in an increase in short-term debt.
To lower financial exposure to commodity price fluctuations, Spire Missouri enters into contracts to hedge the forward commodity price of its natural gas supplies. As part of this strategy, Spire Missouri may use fixed-price forward physical purchase contracts, swaps, futures, and option contracts. However, Spire Missouri does not hedge the entire exposure of energy assets or positions to market price volatility, and the coverage will vary over time. Any costs, gains, or losses experienced through hedging procedures, including carrying costs, generally flow through the PGA clause, thereby limiting the Missouri Utilities’Spire Missouri’s exposure to earnings volatility. However, variations in the timing of collections of such gas costs under the PGA clause and the effect of cash payments for margin deposits associated with the Missouri Utilities’Spire Missouri’s use of natural gas derivative instruments may cause short-term cash requirements to vary. These procedures remain subject to prudence review by the MoPSC.
Other than fixed-price forward physical purchase contracts, Spire Alabama 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’ business activities are concentrated in three states.
The Utilities provide natural gas distribution services to customers in Alabama, Mississippi, and Missouri. Changes in the regional economies, politics, regulations and weather patterns of these states could negatively impact the Utilities’ growth opportunities and the usage patterns and financial condition of customers and could adversely affect the Utilities’ earnings, cash flow,flows, and financial position.
The Utilities may be adversely affected by economic conditions.
Periods of slowed economic activity generally result in decreased energy consumption, particularly by industrial and large commercial companies, a loss of existing customers, fewer new customers especially in newly constructed buildings. As a consequence, national or regional recessions or other downturns in economic activity could adversely affect the Utilities’ revenues and cash flows or restrict their future growth. Economic conditions in the Utilities’ service territories may also adversely impact the Utilities’ ability to collect accounts receivable, resulting in an increase in bad debt expense.
Environmental laws and regulations may require significant expenditures or increase operating costs.
The Utilities are subject to federal, state and local environmental laws and regulations affecting many aspects of their present and future operations. These laws and regulations require the Utilities to obtain and comply with a wide variety of environmental licenses, permits, inspections, and approvals. Failure to comply with these laws and regulations and failure to obtain any required permits and licenses may result in costs to the Utilities in the form of fines, penalties or business interruptions, which may be material. In addition, existing environmental laws and regulations could be revised or reinterpreted and/or new laws and regulations could be adopted or become applicable to the Utilities or their facilities, thereby impacting the Utilities’ cost of compliance. The discovery of presently unknown environmental conditions, including former manufactured gas plant sites, and claims against the Utilities under environmental laws and regulations may result in expenditures and liabilities, which could be material. To the extent environmental compliance costs are not fully covered by insurance or recovered in rates from customers, those costs may have an adverse effect on the Utilities’ financial condition and results of operations.
Because of the highly competitive nature of its business,competition, the Utilities may not be able to retain existing customers or acquire new customers, which could have an adverse impact on their business, operating results and financial condition.
The Utilities face the risk that larger commercial or industrial customers may bypass gas distribution services by gaining distribution directly from interstate pipelines or, in the case of Spire Alabama and Spire Gulf, also from municipally or publicly owned gas distributors located adjacent to its service territory. The Utilities cannot provide any assurance that increased competition or other changes in legislation, regulation or policies will not have a material adverse effect on their business, financial condition or results of operations.
The Utilities compete with distributors offering a broad range of services and prices, from full-service distributors to those offering delivery only. The Utilities also compete for retail customers with suppliers of alternative energy products, principally propane and electricity. If they are unable to compete effectively, the Utilities may lose existing customers and/or fail to acquire new customers, which in the aggregate could have a material adverse effect on their business, operating results 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. TheSpire Missouri Utilitiesand Spire Mississippi each have weather mitigation rate designs and thea Weather Normalization Adjustment rider, Spire Alabama Utilities havehas a Temperature Adjustment Riders (TARs), each of which isRider, and Spire Gulf has a Weather Impact Normalization Factor. These mechanisms, 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, while the annual rate designs of Alabama and Mississippi help adjust for other factors that affect customer usage. However, significantly warmer-than-normal weather conditions in the Utilities’ service areas and other factors, such as climate change, alternative energy sources and increased efficiency of gas furnaces and other appliances, may result in reduced profitability and decreased cash flows attributable to lower gas sales. Furthermore, continuation of the weather mitigation rate design at Spire Missouri East, the rate design whereby distribution costs are recovered predominantly through fixed monthly charges at Spire Missouri West, or the RSE at Spire Alabama and Spire Gulf, arethese adjustment factors is subject to regulatory discretion.
In addition, legislative and regulatory initiatives by the federal, state and local governments addressing greenhouse gas emissions or restricting the use of natural gas could adversely affect customer demand. The promulgation of regulations by the U. S. Environmental Protection Agency (EPA), particularly those regulatingof the emissions of greenhouse gases and by the U. S. Department of Energy 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’ ability to profit from off-system sales and capacity release.
Spire Missouri’s and Spire Alabama’s income from off-system sales and capacity release is subject to fluctuations in market conditions and changing supply and demand conditions in areas the Missouri Utilities hold pipeline capacity rights. Specific factors impacting the Missouri Utilities’ income from off-system sales and capacity release include the availability of attractively-pricedattractively priced natural gas supply, availability of pipeline capacity, and market demand. Income from off-system sales and capacity release is shared with customers. TheSpire Missouri Utilitiesand Spire Alabama are allowed to retain 15% to 25% of the first $6.0 in annual income earned (depending on the levelnet margins achieved as a result of income earned)such off-system sales and 30% of income exceeding $6.0 annually. In accordance with an agreement approved by the MoPSC, Spire Missouri East deferred, until fiscal 2017, its ability to retain 15% of the first $2.0. Spire 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.capacity releases. The Missouri Utilities’ ability to retain such income in the future is subject to regulatory discretion in a base rate proceeding.
RISKS THAT RELATE TO THE GAS MARKETING SEGMENT
Increased competition, fluctuations in natural gas commodity prices, expiration of supply and transportation arrangements, and infrastructure projects may adversely impact the future profitability of Gas Marketing.
Competition in the marketplace and fluctuations in natural gas commodity prices have a direct impact on the Gas Marketing business. Changing market conditions and prices, the narrowing of regional and seasonal price differentials and limited future price volatility may adversely impact its sales margins or affect its ability to procure gas supplies and/or to serve certain customers, which may reduce sales profitability and/or increase certain credit requirements caused by reductions in netting capability. Also, Gas Marketing profitability may be impacted by the effects of the expiration, in the normal course of business, of certain of its natural gas supply contracts if those contracts cannot be replaced and/or renewed with arrangements with similar terms and pricing. Although the FERC regulates the interstate transportation of natural gas and establishes the general terms and conditions under which Spire Marketing may use interstate gas pipeline capacity to purchase and transport natural gas, itSpire Marketing must occasionally renegotiate its transportation agreements with a concentrated group of pipeline companies. Renegotiated terms of new agreements, or increases in FERC-authorized rates of existing agreements, may impact Gas Marketing’s future profitability. Profitability may also be adversely impacted if pipeline capacity or future storage capacity secured is not fully utilized and/or its costs are not fully recovered.
Reduced access to credit and/or capital markets may prevent the Gas Marketing business from executing operating strategies.
The Gas Marketing segment relies on its cash flows, ability to effect net settlements with counterparties, parental guarantees,guaranties, and access to Spire’s liquidity resources to satisfy its credit and working capital requirements. Spire Marketing’s ability to rely on parental guaranteesguaranties is dependent upon Spire’s financial condition and credit ratings. If Spire’s credit ratings were lowered, particularly below investment grade, counterparty acceptance of parental guaranteesguaranties may diminish, resulting in decreased availability of credit. Additionally, under such circumstances, certain counterparties may require Spire Marketing to provide prepayments or cash deposits, amounts of which would be dependent upon natural gas market conditions. Reduced access to credit or increased credit requirements, which may also be caused by factors such as higher overall natural gas prices, may limit Spire Marketing’s ability to enter into certain transactions. In addition, Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are with (or are associated with) energy producers, utility companies, and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry, or other conditions. Spire Marketing also has concentrations of credit risk in certain individually significant counterparties. Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations.
Risk management policies, including the use of derivative instruments, may not fully protect GasSpire Marketing’s sales and results of operations from volatility and may result in financial losses.
In the course of its business, Spire Marketing enters into contracts to purchase and sell natural gas at fixed prices and index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments.
Spire Marketing currently manages the commodity price risk associated with fixed-price commitments for the purchase or sale of natural gas by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of natural gas futures, options, and swap contracts traded on or cleared through the New York Mercantile Exchange, Inc. (NYMEX) andand/or the 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 Spire Marketing’s natural gas contracts are classified as trading activities or do not otherwise qualify for the normal purchases or normal sales designation (or the designation is not elected), the contracts are recorded as derivatives at fair value each period. Accordingly, the associated gains and losses are reported directly in earnings and may cause volatility in results of operations. Gains or losses (realized and unrealized) on certain wholesale purchase and sale contracts, consisting of those classified as trading activities, are required to be presented on a net basis (instead of a gross basis) in the statements of consolidated income. Such presentation could result in volatility in the Company’s operating revenues.
As a natural gas market participant, Spire Marketing is subject to applicable FERC- and Commodity Futures Trading Commission- (CFTC) administered statutes, rules, regulations and orders, including those directed generally to prevent manipulation of or fraud involving natural gas physical transactions and financial instruments, such as futures, options and swaps. Spire Marketing could be subject to substantial penalties and fines by FERC or CFTC, or both, for failure to comply with such rules.
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.
Spire Marketing’s ability to deliver natural gas to its customers is contingent upon the ability of natural gas producers, other gas marketers, and interstate pipelines to fulfill delivery obligations to Spire Marketing under firm contracts. If these counterparties fail to perform, they have a contractual obligation to reimburse Spire Marketing for adverse consequences. Spire Marketing will attempt to use such reimbursements to obtain the necessary supplies so that it may fulfill its customer obligations. To the extent that it is unable to obtain the necessary supplies, Spire Marketing’s financial position and results of operations may be adversely impacted.
Regulatory and legislative developments pertaining to the energy industry may adversely impact SpireGas Marketing’s results of operations, financial condition and cash flows.
The SpireGas Marketing business is non-regulated, in that the rates it charges its customers are not currently established by or subject to approval by any regulatory body with jurisdiction over utilities.its business. However, it is subject to various laws and regulations affecting the energy industry. New regulatory and legislative actions may adversely impact SpireGas Marketing’s results of operations, financial condition, and cash flows by potentially reducing customer growth opportunities and/or increasing the costs of doing business.
Gas Marketing incurs additional costs to comply with new lawsuses bilateral contracts and regulations,derivative instruments such as the Dodd-Frank Act amendments to the Commodity Exchange Act, which authorizes the Commodity Futures Trading Commission (the CFTC) to regulate futures contracts, options and swaps. These derivative transactions include instruments and bilateral contracts that Spire Marketing usesswaps to hedge or mitigate ongoing commercial risks. TheMost standardized swaps, under the Dodd-Frank Act, contemplates that most standardized swaps will beare required to be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility, subject to certain exceptions. In addition, the CFTC’s rules require companies, includeincluding 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 newthese CFTC rules, its derivatives counterparties will beare subject to new capital, margin, documentation and business conduct requirements imposed as a result of the Dodd-Frank Act. Such new rules willThese obligations may increase transaction costs and may make it more difficult for Spire Marketing to enter into hedging transactions on favorable terms or affect the number and/or creditworthiness of available swap counterparties. 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.
The CFTC has also recently finalized its position limits rules that modify and expand the applicability of position limits on the amounts of certain speculative futures contracts, as well as economically equivalent options, futures and swaps for or linked to certain physical commodities that market participants may hold. While Spire Marketing anticipates qualifying for a bona fide hedging exemption to certain requirements of the final rule, the CFTC’s final rule and earlier adopted aggregation rules may cause Spire Marketing’s hedging strategies described above to be limited if Spire Marketing is unable to qualify for an exemption.
GENERAL RISK FACTORS
Unexpected losses may adversely affect Spire’s or its subsidiaries’ financial condition and results of operations.
As with most businesses, there are operations and business risks inherent in the activities of Spire’s subsidiaries. If, in the normal course of business, Spire or any of its subsidiaries becomes a party to litigation, such litigation could result in substantial monetary judgments, fines, or penalties or be resolved on unfavorable terms. In accordance with customary practice, Spire and its subsidiaries maintain insurance against a significant portion of, but not all, risks and losses. In addition, in the normal course of its operations, Spire and its subsidiaries may be exposed to loss from other sources, such as bad debt expense or the regulatory environment forfailure of a counterparty to meet its financial obligations. Spire and its operating companies employ many strategies to gain assurance that such risks are appropriately managed, mitigated, or insured, as appropriate. To the extent a loss is not fully covered by insurance or other risk mitigation strategies, that loss could adversely affect the Company’s and/or its subsidiaries’ financial condition and results of operations.
Increased dependence on technology may hinder Spire’s and its subsidiaries’ business operations and adversely affect their financial condition and results of operations if such technologies fail.
Spire and its subsidiaries have implemented or acquired a variety of technological tools including both Company-owned information technology and technological services provided by outside parties. These tools and systems support critical functions including Spire and its subsidiaries’ integrated planning, scheduling and dispatching of field resources, its automated meter reading system, customer care and billing, procurement and accounts payable, operational plant logistics, management reporting, and external financial reporting. The failure of these or other similarly important technologies, or the Company’s or its subsidiaries’ inability to have these technologies supported, updated, expanded, or integrated into other technologies, could hinder their business operations and, to the extent not covered by insurance, could adversely impact their financial condition and results of operations.
Although the Company and its subsidiaries have, when possible, developed alternative sources of technology and built redundancy into their computer networks and tools, there can be no assurance that these efforts to date would protect against all potential issues related to the loss of any such technologies or the Utilities’ use of such technologies.
A cyberattack may disrupt Spire’s operations or lead to a loss or misuse of confidential and proprietary information or potential liability.
The Company and its subsidiaries are subject to cybersecurity risks primarily related to breaches of security pertaining to sensitive customer, employee, and vendor information maintained by the Company, its subsidiaries, or its third-party vendors in the normal course of business, as well as breaches in the technology that manages natural gas industrydistribution operations and other business processes. A loss of confidential or proprietary data or security breaches of technology for operations or business processes could adversely affect the Company’s and its subsidiaries’ reputation, diminish customer confidence, disrupt operations, and subject the Company and its subsidiaries to possible financial liability, any of which could have a material effect on the Company’s and its subsidiaries’ financial condition and results of operations.
The Company acknowledges that increased dependence on technology increases the Company’s exposure to cyberattack. The Company and its subsidiaries closely monitor both preventive and detective measures to manage these risks and maintain cyber risk insurance to mitigate a significant portion, but not all, of these risks and losses. To the extent that the occurrence of any of these cyber events is not fully covered by insurance, it could adversely affect the Company’s and its subsidiaries’ financial condition and results of operations.
Resources expended to pursue or integrate business acquisitions, investments or other business arrangements may adversely affect Spire’s financial position and results of operations and return on investments made may not meet the Company’s expectations.
From time to time, Spire may seek to grow through strategic acquisitions, investments or other business arrangements. Attractive acquisition and investment opportunities may be difficult to complete on economically acceptable terms. It is possible for Spire to expend considerable resources pursuing acquisitions and investments but, for a variety of reasons, decide not to move forward. Similarly, investment opportunities may be hindered or halted by regulatory or legal actions. To the extent that acquisitions or investments are made, such transactions involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of management’s attention from daily operations, difficulties in complexity,assimilation and retention of employees, securing adequate capital to support the transaction, and regulatory approval. Uncertainties exist in assessing the value, risks, profitability, and liabilities associated with certain businesses or assets and there is a possibility that anticipated operating and financial efficiencies expected to result from an acquisition or investment do not develop. Additionally, there are no assurances that resources expended will achieve their intended result.
The failure to complete an acquisition successfully or to integrate acquisitions or investments it may undertake could have an adverse effect on the Spire’s financial condition and results of operations and the market’s perception of the Company’s execution of its strategy. To the extent Spire engages in 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.
Workforce risks may affect the Company’s financial results.
The Company and its subsidiaries are subject to various workforce risks, including, but not limited to, the risk that it will be unable to attract and retain qualified personnel; that it will be unable to effectively transfer to new personnel the knowledge and expertise of inadvertent noncompliancean aging workforce as those workers retire; and that it will be unable to reach collective bargaining arrangements with the unions that represent certain of its workers, which could also increase. Ifresult in work stoppages.
Changes in accounting standards may adversely impact the business fails to comply with applicable lawsCompany’s financial condition and regulations, whether existing or new ones, it could beresults of operations.
Spire and its subsidiaries are subject to fines, penaltieschanges in U.S. generally accepted accounting principles (GAAP), SEC regulations and other interpretations of financial reporting requirements for public utilities. Neither the Company nor any of its subsidiaries have any control over the impact these changes may have on their financial condition or results of operations nor the timing of such changes. The potential issues associated with rate-regulated accounting, along with other potential changes to GAAP that the U.S. Financial Accounting Standards Board (FASB) continues to consider may be significant.
22
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Catastrophic events may adversely affect the Company’s 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 enforcement action bysimilar occurrences could adversely affect the authoritiesUtilities’ facilities and operations, as well as those of Spire STL Pipeline and Spire Storage. The Utilities have emergency planning and training programs in place to respond to events that regulatecould cause business interruptions. However, unanticipated events or a combination of events, failure in resources needed to respond to events, or slow or inadequate response to events may have an adverse impact on the operations, financial condition, and results of operations of the Company and its operations.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Spire
Refer to the information below about the principal properties of Spire Missouri and Spire Alabama. The Spire EnergySouth utilities own approximately 5,500 miles of pipelines. Other properties of Spire and its subsidiaries including Spire Marketing and Spire EnergySouth, do not constitute a significant portion of its properties. The current leases for office space in downtown St. Louis commenced in early 2015, with terms ranging from 10 to 20 years, with multiple renewal options. For further information on leases see
Spire Missouri
The principal properties of Spire Missouri consist of its gas distribution system, which includes more than 30,00031,100 miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which we haveSpire Missouri has obtained the necessary legal rights to place and operate ourits facilities on such property. Spire Missouri has an underground natural gas storage facility, several operating centers, and other related properties. Substantially all of Spire Missouri’s utility plant is subject to the liens of its mortgage. All the properties of Spire Missouri are held in fee, or by easement, or under lease agreements. The principal lease agreements include underground storage rights that are of indefinite duration.
Spire Alabama
The properties of Spire Alabama consist primarily of its gas distribution system, which includes approximately 23,00024,300 miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which we haveSpire Alabama has obtained the necessary legal rights to place and operate ourits facilities on such property. Spire Alabama also has four LNG facilities, several operating centers, and other related properties. All of the properties of Spire Alabama are held in fee, or by easement, or under lease agreements.
Item 3. Legal Proceedings
For a description of pending regulatory matters of Spire, see
Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8. For a description of environmental and other legal matters, see Contingencies in Note 16Item 4. Mine Safety Disclosures
Not applicable.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE REGISTRANT
Name | Age | |||
Position with Company (1) | Appointed (2) | |||
S. Sitherwood | 60 | |||
President and Chief Executive Officer | February 2012 | |||
Chairman of the Board, | January 2015 | |||
Chairman of the Board, | September 2014 | |||
S. L. Lindsey | 54 | |||
Executive Vice President, Chief Operating Officer | January 2020 | |||
Executive Vice President, Chief Executive Officer of Gas Utilities and | October 2012 | |||
Chief Executive Officer, Spire Missouri | December 2018 | |||
President and Chief Executive Officer, Spire Missouri | January 2015 | |||
Chief Executive Officer, Spire Alabama | September 2014 | |||
S. P. Rasche | 60 | |||
Executive Vice President and Chief Financial Officer | November 2013 | |||
Chief Financial Officer, Spire Missouri (until January 2020) | May 2012 | |||
Chief Financial Officer, Spire Alabama (until January 2020) | September 2014 | |||
M. C. Darrell | 62 | Senior Vice President, Chief | May 2012 | |
M. C. Geiselhart | 61 | Senior Vice President, | January 2015 | |
S. B. Carter (3) | 48 | |||
Senior Vice President, | January 2019 | |||
Senior Vice President, | January | |||
President, | ||||
December 2018 |
(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. |
(2) | Officers of Spire are normally reappointed by |
(3) | Mr. |
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Spire
Spire’s common stock trades on The New York Stock Exchange (NYSE) under the symbol “SR.” The high and the low sales price for the common stock for each quarter in the two most recent fiscal years were:
| 2017 | 2016 | ||||||||||||||
| High | Low | High | Low | ||||||||||||
| 1st Quarter | $ | 66.65 | $ | 59.54 | $ | 61.04 | $ | 53.86 | |||||||
| 2nd Quarter | 68.30 | 62.33 | 68.79 | 57.10 | |||||||||||
| 3rd Quarter | 72.83 | 63.84 | 70.87 | 61.00 | |||||||||||
| 4th Quarter | 78.00 | 68.30 | 71.21 | 61.96 | |||||||||||
Dividends declaredare payable on the Company’s common stock at the discretion of its Board of Directors (the “Board”). Spire, and Spire Missouri prior to the holding company’s formation in 2000, has paid common stock dividends continuously since 1946, with 2020 marking the 17th consecutive year of increasing dividends on an annualized basis. Although the Board expects to continue paying dividends on the common stock for the two most recent fiscal years were:
| 2017 | 2016 | ||||||
| 1st Quarter | $ | 0.525 | $ | 0.49 | |||
| 2nd Quarter | 0.525 | 0.49 | |||||
| 3rd Quarter | 0.525 | 0.49 | |||||
| 4th Quarter | 0.525 | 0.49 | |||||
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
September 30 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| ||||||
Spire Inc. |
| $ | 100.00 |
| $ | 120.55 |
| $ | 145.53 |
| $ | 147.91 |
| $ | 180.60 |
| $ | 114.13 |
|
S&P 500 Utilities Index |
|
| 100.00 |
|
| 117.37 |
|
| 131.49 |
|
| 135.34 |
|
| 172.02 |
|
| 163.47 |
|
S&P 500 Index |
|
| 100.00 |
|
| 115.43 |
|
| 136.91 |
|
| 161.43 |
|
| 168.30 |
|
| 193.80 |
|
* | Cumulative total return is based on a $100 investment on September 30, 2015, assuming reinvestment of dividends. |
The S&P 500 Utilities Index is comprised of 28 utilities heavily weighted to large capitalization (median market cap of $22.5 billion) electric utilities. Stocks of small and mid cap utilities and gas utility companies 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
Note 3, Stock-Based Compensation, of the Notes to Financial Statements in ItemDuring the three months ended September 30, 2017,2020, the only repurchases of ourthe Company’s common stock waswere pursuant to elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the vesting of performance-based and time-vested restricted stock and stock units. The following table provides information on those repurchases:
Period |
| (a) Total Number of Shares Purchased |
|
| (b) Average Price Paid Per Share |
|
| (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| (d) Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs |
| ||||
July 1, 2020 - July 31, 2020 |
|
| 493 |
|
| $ | 62.80 |
|
|
| — |
|
|
| — |
|
August 1, 2020 - August 31, 2020 |
|
| 40 |
|
|
| 60.65 |
|
|
| — |
|
|
| — |
|
September 1, 2020 - September 30, 2020 |
|
| 532 |
|
|
| 53.20 |
|
|
| — |
|
|
| — |
|
Total |
|
| 1,065 |
|
| $ | 57.92 |
|
|
| — |
|
|
| — |
|
| 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 | — | — |
| 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 | |||||||||||||||||
Spire Missouri
Spire Missouri 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:
| 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,Spire Alabama
Spire Alabama common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange.
| 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 | |||||
Item 6. Selected Financial Data
Spire |
| Fiscal Years Ended September 30 |
| |||||||||||||||||
(In millions, except per share amounts) |
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| 2016(1) |
| |||||
Balance Sheet data at year end (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 8,241.2 |
|
| $ | 7,619.2 |
|
| $ | 6,843.6 |
|
| $ | 6,546.7 |
|
| $ | 6,064.4 |
|
Preferred Stock |
|
| 242.0 |
|
|
| 242.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Long-Term Debt (less current portion) |
|
| 2,423.7 |
|
|
| 2,082.6 |
|
|
| 1,900.1 |
|
|
| 1,995.0 |
|
|
| 1,820.7 |
|
Income data (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 1,855.4 |
|
| $ | 1,952.4 |
|
| $ | 1,965.0 |
|
| $ | 1,740.7 |
|
| $ | 1,537.3 |
|
Net Income [GAAP] |
| $ | 88.6 |
|
| $ | 184.6 |
|
| $ | 214.2 |
|
| $ | 161.6 |
|
| $ | 144.2 |
|
Impairments |
|
| 148.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Missouri regulatory adjustments |
|
| — |
|
|
| 12.2 |
|
|
| 30.6 |
|
|
| — |
|
|
| — |
|
Fair value and timing adjustments |
|
| 2.5 |
|
|
| 1.2 |
|
|
| (4.3 | ) |
|
| 5.7 |
|
|
| (1.5 | ) |
Acquisition, divestiture and restructuring activities |
|
| — |
|
|
| 0.4 |
|
|
| 13.6 |
|
|
| 4.0 |
|
|
| 9.2 |
|
Income tax effect of adjustments |
|
| (31.9 | ) |
|
| (3.3 | ) |
|
| (10.3 | ) |
|
| (3.7 | ) |
|
| (2.8 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| — |
|
|
| — |
|
|
| (60.1 | ) |
|
| — |
|
|
| — |
|
Net Economic Earnings [Non-GAAP] |
| $ | 207.8 |
|
| $ | 195.1 |
|
| $ | 183.7 |
|
| $ | 167.6 |
|
| $ | 149.1 |
|
Net Income Available to Common Shareholders |
| $ | 73.7 |
|
| $ | 178.9 |
|
| $ | 213.7 |
|
| $ | 161.2 |
|
| $ | 143.7 |
|
Diluted Earnings per Share of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income [GAAP] |
| $ | 1.44 |
|
| $ | 3.52 |
|
| $ | 4.33 |
|
| $ | 3.43 |
|
| $ | 3.24 |
|
Impairments |
|
| 2.89 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Missouri regulatory adjustments |
|
| — |
|
|
| 0.23 |
|
|
| 0.62 |
|
|
| — |
|
|
| — |
|
Fair value and timing adjustments |
|
| 0.05 |
|
|
| 0.03 |
|
|
| (0.09 | ) |
|
| 0.12 |
|
|
| (0.03 | ) |
Acquisition, divestiture and restructuring activities |
|
| — |
|
|
| 0.01 |
|
|
| 0.28 |
|
|
| 0.09 |
|
|
| 0.21 |
|
Income tax effect of adjustments |
|
| (0.62 | ) |
|
| (0.06 | ) |
|
| (0.21 | ) |
|
| (0.08 | ) |
|
| (0.06 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| — |
|
|
| — |
|
|
| (1.21 | ) |
|
| — |
|
|
| — |
|
Weighted average shares adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.06 |
|
Net Economic Earnings [Non-GAAP] |
| $ | 3.76 |
|
| $ | 3.73 |
|
| $ | 3.72 |
|
| $ | 3.56 |
|
| $ | 3.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Outstanding at Year End |
|
| 51.6 |
|
|
| 51.0 |
|
|
| 50.7 |
|
|
| 48.3 |
|
|
| 45.6 |
|
Common Stock Dividends Declared Per Share |
| $ | 2.49 |
|
| $ | 2.37 |
|
| $ | 2.25 |
|
| $ | 2.10 |
|
| $ | 1.96 |
|
Preferred Stock Dividends Declared Per Depositary Share |
| $ | 1.84375 |
|
| $ | 0.344 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Capital Expenditures |
| $ | 638.4 |
|
| $ | 823.3 |
|
| $ | 499.4 |
|
| $ | 438.1 |
|
| $ | 293.3 |
|
| 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 |
(2) | |
Balance Sheet data for the fiscal |
(3) | |
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 |
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 Spire Inc. (Spire or the Company)(the “Company”), Spire Missouri Inc. (Spire Missouri or the Missouri Utilities), and Spire Alabama Inc. (Spire Alabama). Spire Missouri, Spire Alabama and Spire EnergySouth Inc. (Spire EnergySouth) are wholly owned subsidiaries of the Company. Spire Missouri changed its name from Laclede Gas Company on August 30, 2017, and Spire 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.“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).Mississippi. This section includes management’s view of factors that affect the respective businesses of the Company, Spire Missouri and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods, and the effects of such factors on the Company’s, Spire Missouri’s and Spire Alabama’s overall financial condition and liquidity.
Reference is made to “Item 1A. Risk Factors” and “Forward-Looking Statements,” which describe important factors that could cause actual results to differ from expectations and non-historical information contained herein. In addition, the following discussion should be read in conjunction with the audited financial statements and accompanying notes thereto of Spire, Spire Missouri and Spire Alabama included in “Item 8. Financial Statements and Supplementary Data.”
OVERVIEW
The Company has two key businessreportable segments: Gas Utility and Gas Marketing. Nearly all of Spire’s earnings are primarily derived from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the Utilities’ business and the Spire Missouri rate design, earnings of Spire Spire Missouri and Spire Alabamaeach of the Utilities are typically concentrated during the heating season of November through April each fiscal year.
Gas Utility - Spire Missouri
Spire Missouri is Missouri’s largest natural gas distribution utility and is regulated by the Missouri Public Service Commission (MoPSC).MoPSC. Spire Missouri serves St. Louis, and eastern Missouri through Spire Missouri East (formerly Laclede Gas Company) and serves Kansas City, and western Missouri throughother areas throughout the state. Spire Missouri West (formerlypurchases natural gas in the wholesale market from producers and marketers and ships the gas through interstate pipelines into its own distribution facilities for sale to residential, commercial and industrial customers. Spire Missouri Gas Energy, or MGE).also transports gas through its distribution system for certain larger customers who buy their own gas on the wholesale market. Spire Missouri delivers natural gas to retail customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Spire Missouri are primarily generated by the sale of heating energy. The rate design for each service territory serves to lessen the impact of weather volatility on its customers during cold winters and stabilize Spire Missouri’s earnings.
Gas Utility - Spire Alabama
Spire Alabama is the largest natural gas distribution utility in the state of Alabama.Alabama and is regulated by the APSC. Spire Alabama’s service territory is located in central and northern Alabama. Among the cities served by Spire Alabama are Birmingham, the center of the largest metropolitan area in the state, and Montgomery, the state capital. Spire Alabama is regulated by the Alabama Public Service Commission (APSC). Spire Alabama purchases natural gas through interstate and intrastate suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial, and industrial customers and other end-users of natural gas. Spire Alabama also provides transportation services to large industrial and commercial customers located ontransports gas through its distribution system. Thesesystem for certain large commercial and industrial customers for a transportation fee. Effective December 1, 2020, for most of these transportation service customers, using Spire Alabama as their agent or acting on their own,will also purchase gas directly from marketers or suppliers and arrangeon the wholesale market for sale to the customer upon delivery of the gas intoto the Spire Alabama distribution system. All Spire Alabama charges a feeservices are provided to transport such customer-ownedcustomers at rates and in accordance with tariffs authorized by the APSC.
Gas Utility - Spire EnergySouth
Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas through its distribution system to approximately 100,000 customers in southern Alabama and south-central Mississippi. Spire Gulf is regulated by the customers’ facilities.
Gas Marketing
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. Spire Marketing markets natural gas across the country with the core of its footprint located incentral and around the central United States (US).southern U.S. It holds firm transportation and storage contracts in order to effectively manage its customer base,transactions with counterparties, which consists ofprimarily include producers, pipelines, power generators, storage operators, municipalities, electric and gas utility companies, and large commercial and industrial customers.
Other
Other components of the Company’s consolidated information include:
• | unallocated corporate items, including certain debt and associated interest costs; |
• | Spire STL Pipeline, a subsidiary of Spire which has constructed and, as of November 2019, operates a 65-mile FERC-regulated pipeline to deliver natural gas into eastern Missouri; |
• | Spire Storage, a subsidiary of Spire providing physical natural gas storage services; and |
• | Spire’s subsidiaries engaged in the operation of a propane pipeline, the compression of natural gas, and risk management, among other activities. |
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 followingseveral key variables in evaluating the financial condition and results of operations and managing the business.
For the Gas Utility segment:segment, these include:
• | the Utilities’ ability to recover from their customers the costs of purchasing and distributing natural gas; |
• | 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’ ability to earn the authorized rate of return in each of the service territories they serve; |
• | the 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 manage costs, integrate and standardize operations, and upgrade infrastructure. |
In the Utilities’ ability to recover the costs of purchasing and distributing natural gas from their customers;
• | the risks of competition; |
• | fluctuations in natural gas prices; |
• | the changing flow and availability of natural gas; |
• | new national infrastructure projects; |
• | the ability to procure firm transportation and storage services at reasonable rates; |
• | credit and/or capital market access; |
• | 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’ distribution costs are the essential, primarily fixed, expenditures itthey must incur to operate and maintain more than 58,00060,900 miles of mains and services comprising thetheir natural gas distribution systems and related storage facilities for Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth.
The Utilities’ distribution costs include wages and employee benefit costs, depreciation and maintenance expenses, and other regulated utility operating expenses, excluding natural and propane gas expense. Distribution costs are considered in the rate-making process, and recovery of these types of costs is included in revenues generated through the Utilities’ tariff rates. Spire Missouri’s tariff rates are approved by the MoPSC, whereas Spire Alabama’s tariff rates are approved by the APSC. The subsidiaries of Spire EnergySouth, Spire Gulf and Spire Mississippi have tariff rates that are approved by the APSC and Mississippi Public Service Commission (MSPSC),MSPSC, respectively.
Spire Missouri and Spire Alabama also has anhave off-system sales and capacity release income streamstreams that isare regulated by tariff.
| 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% |
The Utilities work actively to reduce the impact of wholesale natural gas price volatility on their costs by strategically structuring their natural gas supply portfolios to increase their gas supply availability and pricing alternatives. They may also use derivative instruments to hedge against significant changes in the commodity price of natural gas. Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Purchased Gas Adjustment (PGA) clause of Spire Missouri, Spire Gulf and Spire Mississippi and Spire Alabama’sthe Gas Supply Adjustment (GSA) rider of Spire Alabama allow the Utilities to flow through to customers, subject to prudence review by the public service commissions, the cost of purchased gas supplies, including costs, cost reductions and related carrying costs associated with the use of derivative instruments to mitigate volatility in the cost of natural gas, as well as gas inventory carrying costs.gas. As of September 30, 2017,2020, Spire Missouri had active derivative positions, but Spire 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.
The Utilities rely on short-term credit and long-term capital markets, as well as cash flows from operations, to satisfy their seasonal cash requirements and fund their capital expenditures. The Utilities’ ability to issueUtilities access the commercial paper market through a program administered by the holding company, which then loans borrowed funds to the Utilities. The Utilities directly access their lines of credit, issuethe long-term bonds, or obtain new lines of creditbond market. Access to debt markets is dependent on current conditions in the credit and capital markets. Management focuses on maintaining a strong balance sheet and believes itthe Utilities currently hashave adequate access to credit and capital markets and will have sufficient capital resources to meet their foreseeable obligations. See the
Gas Marketing
Spire Marketing is engaged in the marketing of natural gas and providing energy services to both on-system utility transportation customers and customers outside of the Utilities’ traditional service areas. Spire Marketing utilizes its natural gas supply agreements, transportation agreements, park and loan agreements, storage agreements and other executory contracts to support a variety of services to its customers at competitive prices. It closely monitors and manages the natural gas commodity price and volatility risks associated with providing such services to its customers through the use of a variety of risk management activities, including the use of exchange-traded/cleared derivative instruments and other contractual arrangements. Spire Marketing is committed to managing commodity price risk while it seeks to expand the services that it now provides. Nevertheless, income from the Gas Marketing operations is subject to more fluctuations in market conditions than the Utilities’ operations.
The Gas Marketing business is directly impacted by the effects of competition in the marketplace, the impacts of new infrastructure, surplus natural gas supplies, and the addition of new demand from exports, power generation and industrial load. Spire Marketing’s management expects a growing need for marketing services across the country as customers manage seasonal variability and marketplace volatility.
In addition to its operating cash flows, Spire Marketing relies on Spire’s parental guaranteesguaranties to secure its purchase and sales obligations of natural gas, and it also has access to Spire’s liquidity resources. A large portion of Spire Marketing’s receivables are from customers in the energy industry. It also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure. On a net dollar exposure basis, the majority of Spire Marketing’s customers are utilities or utility affiliates. Although Spire Marketing’s uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from customers are possible and could adversely affect GasSpire Marketing’s liquidity and results of operations.
Spire Marketing carefully monitors the creditworthiness of counterparties to its transactions. It performs in-house credit reviews of potential customers and may require credit assurances such as prepayments, letters of credit or parental guaranteesguaranties when appropriate. Credit limits for customers are established and monitored.
As a result of infrastructure optimization activities and an abundance of natural gas supply, Spire Marketing cannot be certain that all of its wholesale purchase and sale transactions will settle physically. As such, certain transactions are designated as trading activities for financial reporting purposes, due to their settlement characteristics. Results of operations from trading activities are reported on a net basis in GasSpire Marketing operating revenues (or expenses, if negative), which may cause volatility in the Company’s operating revenues, but have no effect on operating income or net income.
In the course of its business, Spire Marketing enters into commitments associated with the purchase or sale of natural gas. In accordance with US generally accepted accounting principles (GAAP),U.S. GAAP, some of its purchase and sale transactions are not recognized in earnings until the natural gas is physically delivered, while other energy-related transactions, including those designated as trading activities, are required to be accounted for as derivatives with the changes in their fair value (representing unrealized gains or losses) recorded in earnings in periods prior to settlement. Because related transactions of a purchase and sale strategy may be accounted for differently, there may be timing differences in the recognition of earnings under GAAP and economic earnings realized upon settlement. The Company reports both GAAP and net economic earnings (non-GAAP), as discussed below.in the section “Non-GAAP Measures”.
COVID-19
The outbreak of the novel coronavirus (COVID-19) has adversely impacted economic activity and conditions worldwide. We are continuing to assess the developments involving our workforce, customers and suppliers, as well as the response of federal and state authorities, our regulators and other business and community leaders. The Company has implemented what we believe to be appropriate procedures and protocols to ensure the safety of our customers, suppliers and employees. These actions include activating incident management procedures, work-from-home for our office-based employees, limiting direct contact with our customers, and, through June, suspending disconnections and late payment fees for our utility customers.
We have experienced impacts on our results of operations from COVID-19. Based upon our analysis, the effects through September 30, 2020, included:
• | lost late payment fees of $2.3 due to a Missouri moratorium from late March through mid-June; |
• | minor net margin impact from lower commercial and industrial volumes offset by additional residential fixed charges; |
• | bad debt expense increases of $4.8 due to the aging of our accounts receivable balances; and |
• | net other direct cost reductions totaling less than $1.0 due to lower travel, meals and entertainment and training offset by increased costs for enhanced cleaning and personal protective equipment for our facilities and field personnel compared to normal and expected levels. |
Spire Missouri received an Accounting Authority Order from the MoPSC to defer certain costs and has recorded a related regulatory asset of $3.8 as of September 30, 2020. Even with the cost increases and lost revenues, Spire Alabama exceeded the allowed return and recorded a Rate Stabilization and Equalization giveback in September 2020, so there was no bottom-line impact of these COVID-19 effects.
An extended slowdown of the United States' economy, changes in commodity costs and/or significant changes in policy and regulation could result in lower demand for natural gas as well as negatively impact the ability of our customers, contractors, suppliers and other business partners to remain in business or return to operating health. These could have a material adverse effect on our results of operations, financial condition, liquidity and prospects.
The Company is participating in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provisions allowing for a payroll tax deferral which will not have an impact on our results of operations but will defer the payment of the Company’s portion of certain payroll taxes until fiscal 2021 and 2022. Although the Company does not currently expect to seek relief under any other CARES Act provisions, we will continue to monitor all pending and future federal, state and local efforts related to the Gas UtilityCOVID-19 health crisis and Gas Marketing segments, other non-utility activities of the Company include:
NON-GAAP MEASURES
Net income, earnings per share and operation of a proposed 65-mile Federal Energy Regulatory Commission (FERC) regulated pipeline to deliver natural gas into eastern Missouri; and
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 asthe impacts of acquisition, divestiture and restructuring activities. Theseactivities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In fiscal 2018, these other items included the revaluation of deferred tax assets and liabilities due to the federal Tax Cuts and Jobs Act and the write-off of certain long-standing assets as a result of disallowances in Spire Missouri’s rate proceedings. In fiscal 2019, other items included a provision for refunds to customers of amounts previously collected under MoPSC approved orders as a result of the November 2019 ISRS rulings against Spire Missouri. In fiscal 2020, adjustments for ISRS revenues reflect the regulatory settlement reached in the third quarter, such that the related GAAP provision for customer credit for fiscal 2020 is reflected in net economic earnings. In addition, net economic earnings per share excludes the impact, in the fiscal year of issuance, of shares issued to finance acquisitions that have yet to be included in net economic earnings.
The fair value and timing adjustments are made in instances where the accounting treatment differs from what management considers the economic substance of the underlying transaction, including the following:
• | Net unrealized gains and losses on energy-related derivatives that are required by GAAP fair value accounting associated with current changes in the fair value of financial and physical transactions prior to their completion and settlement. These unrealized gains and losses 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 net realizable value |
• | 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 transactions occur. While management uses these non-GAAP measures to evaluate both the Utilities and non-utility businesses, the net effect of adjustments on the Utilities’ earnings is minimal because gains or losses on their natural gas derivative instruments are deferred pursuant to state regulation.
Contribution Margin
In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of contribution margin when evaluating results of operations. Contribution margin is defined as operating revenues less natural and propane gas costs and gross receipts tax expense. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC, APSC or MSPSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses or GSA rider.riders. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes and gross receipts tax expense (which are calculated as a percentage of revenues), with the same amount (excluding immaterial timing differences) included in revenues, hashave 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 items are reflected in both operating revenue and operating expenses and management has little control over these amounts for the Utilities,Therefore, management believes that contribution margin is a useful supplemental measure. In addition, it is management’s belief that contribution margin andmeasure, along with the remaining operating expenses, that calculate operating income are useful infor assessing the Company’s and the Utilities’ performance as management has more abilityperformance.
EARNINGS
This section contains discussion and analysis of the results for the year ended September 30, 2020 compared to influence control over these revenuesthe results for the year ended September 30, 2019 and expenses.
Spire
Net Income (Loss) and Net Economic Earnings (Loss)
The following tables reconcile the Company’s net economic earnings to the most comparable GAAP number, net income.
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Consol- idated |
|
| Per Diluted Share** |
| |||||
Year Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) [GAAP] |
| $ | 213.6 |
|
| $ | 7.0 |
|
| $ | (132.0 | ) |
| $ | 88.6 |
|
| $ | 1.44 |
|
Adjustments, pre-tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments |
|
| — |
|
|
| — |
|
|
| 148.6 |
|
|
| 148.6 |
|
|
| 2.89 |
|
Fair value and timing adjustments |
|
| (0.3 | ) |
|
| 2.8 |
|
|
| — |
|
|
| 2.5 |
|
|
| 0.05 |
|
Income tax effect of adjustments* |
|
| 0.1 |
|
|
| (0.7 | ) |
|
| (31.3 | ) |
|
| (31.9 | ) |
|
| (0.62 | ) |
Net Economic Earnings (Loss) [Non-GAAP] |
| $ | 213.4 |
|
| $ | 9.1 |
|
| $ | (14.7 | ) |
| $ | 207.8 |
|
| $ | 3.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) [GAAP] |
| $ | 190.5 |
|
| $ | 18.5 |
|
| $ | (24.4 | ) |
| $ | 184.6 |
|
| $ | 3.52 |
|
Adjustments, pre-tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for ISRS rulings |
|
| 12.2 |
|
|
| — |
|
|
| — |
|
|
| 12.2 |
|
|
| 0.23 |
|
Fair value and timing adjustments |
|
| — |
|
|
| 1.2 |
|
|
| — |
|
|
| 1.2 |
|
|
| 0.03 |
|
Acquisition, divestiture and restructuring activities |
|
| — |
|
|
| — |
|
|
| 0.4 |
|
|
| 0.4 |
|
|
| 0.01 |
|
Income tax effect of adjustments* |
|
| (2.9 | ) |
|
| (0.3 | ) |
|
| (0.1 | ) |
|
| (3.3 | ) |
|
| (0.06 | ) |
Net Economic Earnings (Loss) [Non-GAAP] |
| $ | 199.8 |
|
| $ | 19.4 |
|
| $ | (24.1 | ) |
| $ | 195.1 |
|
| $ | 3.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income [GAAP] |
| $ | 144.4 |
|
| $ | 24.9 |
|
| $ | 44.9 |
|
| $ | 214.2 |
|
| $ | 4.33 |
|
Adjustments, pre-tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Missouri regulatory adjustments |
| 30.6 |
|
|
| — |
|
|
| — |
|
| 30.6 |
|
| $ | 0.62 |
| ||
Fair value and timing adjustments |
|
| — |
|
|
| (4.3 | ) |
|
| — |
|
|
| (4.3 | ) |
|
| (0.09 | ) |
Acquisition, divestiture and restructuring activities |
|
| 0.2 |
|
|
| — |
|
|
| 13.4 |
|
|
| 13.6 |
|
|
| 0.28 |
|
Income tax effect of adjustments* |
|
| (9.1 | ) |
|
| 1.2 |
|
|
| (2.4 | ) |
|
| (10.3 | ) |
|
| (0.21 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| 17.0 |
|
|
| 1.1 |
|
|
| (78.2 | ) |
|
| (60.1 | ) |
|
| (1.21 | ) |
Net Economic Earnings (Loss) [Non-GAAP] |
| $ | 183.1 |
|
| $ | 22.9 |
|
| $ | (22.3 | ) |
| $ | 183.7 |
|
| $ | 3.72 |
|
| 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 | |||||||||
* | |
Income tax effect is calculated by applying federal, state and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling |
** | |
Net economic earnings per share is calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted |
2020 vs. 2016
Consolidated
Spire’s net income was $161.6$88.6 in fiscal 2017,2020, compared with $144.2$184.6 in fiscal 2016.2019. Basic and diluted earnings per share were $3.44 and $3.43, respectively,$1.44 for fiscal 20172020 compared with basic and diluted earnings per share of $3.26$3.53 and $3.24,$3.52, respectively, for fiscal 2016. 2019. The decrease in net income of $96.0 reflects a $148.6 pre-tax ($117.3 after-tax) reduction in the current year due to impairment charges recorded in the third quarter of this year. The impairment charges are further described under “Impairment of Long-lived Assets” in Note 1, Summary of Significant Accounting Policies. These impairment charges were only partly offset by the $12.2 pre-tax ($9.3 after-tax) reduction in the prior year results due to ISRS rulings against Spire Missouri.
Excluding these amounts, net income growth was $12.0, driven by higher operating results of the Gas Utility segment primarily attributable to Spire Missouri’s higher ISRS charges, and RSE adjustment impacts at Spire Alabama.
The Gas Marketing segment’s net income for fiscal 2020 was $7.0, an $11.5 reduction versus the comparable prior-year period, reflecting primarily the cost of storage positions as noted below.
Net economic earnings were $167.6 (or $3.56$207.8 ($3.76 per diluted share) in fiscal 2017, compared with $149.1 (or $3.42for the twelve months ended September 30, 2020, up from $195.1 ($3.73 per diluted share) in fiscal 2016, anfor the same period last year. Earnings reflect a $13.6 increase of $18.5. Net income increased in fiscal 2017 compared to fiscal 2016 primarily due to $21.5 income growth in thefor Gas Utility, segment,and by a $9.4 lower net economic loss in Other, partly offset by a $3.7 income decline$10.3 net economic earnings decrease experienced by Gas Marketing. These fluctuations are described in more detail below. Earnings per share and net economic earnings per share reflect the Gas Marketing segmentimpact of preferred and a $0.4 larger loss from other activities.
Gas Utility
Gas Utility net income andincreased by $23.1, while net economic earnings increased by $21.5 and $21.2, respectively,$13.6 in fiscal 2017,2020 compared to fiscal 2016. The increases to net income and net economic earnings were driven by2019. Both measures benefited from a $20.2 increase in run rate ISRS revenues in the $9.6current year, combined with a $1.1 pre-tax increase in all other factors, including modest customer growth. These positive drivers of 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 Infrastructure System Replacement Surcharge (ISRS) charges at the Missouri Utilities and net favorable regulatory adjustments at Spire Alabama,were only partly offset by weather impacts resulting from warmer winter temperatures. These impacts were partly offseta $5.4 contribution margin reduction in the current year relating to lower volumes, and a COVID-19-related $2.3 reduction in late payment charges. Net income was also impacted by increases in depreciation and amortization expenses. Additionally, interest expense was higher duethe $10.0 year-over-year favorable impact relating to the Spire EnergySouth acquisitionprovision for and higher interest charges experienced by Spire Missouri. Income taxessettlement of the ISRS Rulings that occurred in late fiscal 2019 and were also higher due to the Spire EnergySouth acquisition and higher pre-tax income for both Spire Missouri and Spire Alabama. Further details are discussedresolved in the Gas Utility, Spire Missouri, and Spire Alabama sections below.
Gas Marketing
The Gas Marketing segment reported net income totaling $3.4, a decrease$7.0 for the twelve months ended September 30, 2020, versus net income of $3.7 compared with$18.5 during the same period last year. Net economic earnings for fiscal 2017 increased $0.4the twelve months ended September 30, 2020, was $9.1, a decrease of $10.3 from fiscal 2016. The decrease in net income was primarily attributable to unfavorable mark-to-market (MTM) activity in the current year. Net economic earnings benefited 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 increasedCompany’s other non-utility activities generated a net loss of $132.0 for fiscal 2020, compared to a net loss of $24.4 for the same period last year. Fiscal 2020 reflects the $117.3 after-tax impairment charge previously mentioned. Net economic loss was primarily the result$14.7 for fiscal 2020, a decrease of higher current year interest charges associated with the September 2016 acquisition of$9.4 compared to fiscal 2019. The improvement was driven by a smaller loss from Spire EnergySouth.Storage and an increase in earnings from Spire STL Pipeline.
Operating Revenues and Operating Expenses
Reconciliations of contribution margin to the most directly comparable GAAP measure are shown below.
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Year Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
| $ | 334.3 |
|
| $ | 9.3 |
|
| $ | (137.2 | ) |
| $ | — |
|
| $ | 206.4 |
|
Operation and maintenance expenses |
|
| 421.3 |
|
|
| 11.8 |
|
|
| 38.2 |
|
|
| (12.7 | ) |
|
| 458.6 |
|
Depreciation and amortization |
|
| 189.7 |
|
|
| 0.6 |
|
|
| 7.0 |
|
|
| — |
|
|
| 197.3 |
|
Taxes, other than income taxes |
|
| 146.5 |
|
|
| 1.1 |
|
|
| 0.8 |
|
|
| — |
|
|
| 148.4 |
|
Impairment loss |
|
| — |
|
|
| — |
|
|
| 148.6 |
|
|
| — |
|
|
| 148.6 |
|
Less: Gross receipts tax expense |
|
| (91.1 | ) |
|
| (0.4 | ) |
|
| — |
|
|
| — |
|
|
| (91.5 | ) |
Contribution Margin [Non-GAAP] |
|
| 1,000.7 |
|
|
| 22.4 |
|
|
| 57.4 |
|
|
| (12.7 | ) |
|
| 1,067.8 |
|
Natural gas costs |
|
| 660.2 |
|
|
| 65.1 |
|
|
| 0.4 |
|
|
| (29.6 | ) |
|
| 696.1 |
|
Gross receipts tax expense |
|
| 91.1 |
|
|
| 0.4 |
|
|
| — |
|
|
| — |
|
|
| 91.5 |
|
Operating Revenues |
| $ | 1,752.0 |
|
| $ | 87.9 |
|
| $ | 57.8 |
|
| $ | (42.3 | ) |
| $ | 1,855.4 |
|
|
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Year Ended September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
| $ | 293.4 |
|
| $ | 23.2 |
|
| $ | (14.3 | ) |
| $ | — |
|
| $ | 302.3 |
|
Operation and maintenance expenses |
|
| 441.7 |
|
|
| 11.7 |
|
|
| 31.6 |
|
|
| (10.9 | ) |
|
| 474.1 |
|
Depreciation and amortization |
|
| 179.4 |
|
|
| 0.1 |
|
|
| 2.2 |
|
|
| — |
|
|
| 181.7 |
|
Taxes, other than income taxes |
|
| 151.7 |
|
|
| 0.8 |
|
|
| 1.5 |
|
|
| — |
|
|
| 154.0 |
|
Less: Gross receipts tax expense |
|
| (99.1 | ) |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| (99.3 | ) |
Contribution Margin [Non-GAAP] |
|
| 967.1 |
|
|
| 35.6 |
|
|
| 21.0 |
|
|
| (10.9 | ) |
|
| 1,012.8 |
|
Natural gas costs |
|
| 794.6 |
|
|
| 47.9 |
|
|
| 0.5 |
|
|
| (2.7 | ) |
|
| 840.3 |
|
Gross receipts tax expense |
|
| 99.1 |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| 99.3 |
|
Operating Revenues |
| $ | 1,860.8 |
|
| $ | 83.7 |
|
| $ | 21.5 |
|
| $ | (13.6 | ) |
| $ | 1,952.4 |
|
Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
| Year Ended September 30, 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, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss) |
| $ | 276.6 |
|
| $ | 33.8 |
|
| $ | (16.3 | ) |
| $ | — |
|
| $ | 294.1 |
|
Operation and maintenance expenses |
|
| 449.7 |
|
|
| 7.4 |
|
|
| 30.3 |
|
|
| (10.1 | ) |
|
| 477.3 |
|
Depreciation and amortization |
|
| 167.0 |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
| 168.4 |
|
Taxes, other than income taxes |
|
| 152.5 |
|
|
| 0.2 |
|
|
| 0.8 |
|
|
| — |
|
|
| 153.5 |
|
Less: Gross receipts tax expense |
|
| (98.3 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| (98.4 | ) |
Contribution Margin [Non-GAAP] |
|
| 947.5 |
|
|
| 41.3 |
|
|
| 16.2 |
|
|
| (10.1 | ) |
|
| 994.9 |
|
Natural gas costs |
|
| 842.6 |
|
|
| 30.2 |
|
|
| 0.3 |
|
|
| (1.4 | ) |
|
| 871.7 |
|
Gross receipts tax expense |
|
| 98.3 |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 98.4 |
|
Operating Revenues |
| $ | 1,888.4 |
|
| $ | 71.6 |
|
| $ | 16.5 |
|
| $ | (11.5 | ) |
| $ | 1,965.0 |
|
| Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
| Year Ended September 30, 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
Spire’s operating revenues of $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 to2020 were $97.0 lower than the same period lastin the prior year. Operating revenues decreased by $108.8 at the Gas Utility segment and were $4.2 and $36.3 higher in the Gas Marketing segment and Other, respectively. Intercompany eliminations increased $28.7 year-over-year, principally related to STL Pipeline. The Gas Utility decrease was due principally to lower gas cost recoveries, weather/volumetric impacts (net of weather mitigation), lower gross-receipts tax, and lower off-system sales that were only partly offset by higher ISRS, and Spire Alabama RSE adjustment impacts. The Gas Marketing increase was primarily due to higher volumes that offset the impact of slightly lower pricing. The increase in intercompany eliminations was driven by the STL Pipeline transportation services to Spire Missouri.
Spire’s contribution margin of $94.6 forincreased $55.0 compared with the same twelve-month period last year. The growth in contribution margin was primarily attributable to the Gas Utility segment, slightly offset byup $33.6, with Spire Missouri up $23.4 and Spire Alabama up $6.5, with remaining growth from the lowerutilities of Spire EnergySouth. Gas Marketing’s contribution margin reported in Gas Marketing. Operationwas down $13.2, reflecting the costs of incremental storage and maintenance (O&M) expenses increased $26.7 fortransportation capacity that will benefit the twelve months ended September 30, 2017 as compared to the same period last year, as discussed below.upcoming winter heating season. Depreciation and amortization expenses increased $16.6,were higher in the Gas Utility segment, driven principally by the Spire EnergySouth acquisition and continued infrastructure investment atin both Spire Missouri and Spire AlabamaAlabama. Gas Utility operation and maintenance (“O&M”) expenses were lower in fiscal 2017.
Gas Utility
Operating Revenues
– Gas Utility operating revenues for fiscalSpire Missouri and Spire Alabama – Lower PGA/GSA gas cost recoveries |
| $ | (96.8 | ) |
Spire Missouri and Spire Alabama – Volumetric usage |
|
| (35.8 | ) |
Spire Missouri and Spire Alabama – Gross Receipt Taxes |
|
| (7.8 | ) |
Spire Missouri – Off-system sales and capacity release |
|
| (7.1 | ) |
Spire Missouri – Higher ISRS |
|
| 20.2 |
|
Spire Missouri – Smaller ISRS Rulings Provision versus prior year |
|
| 10.0 |
|
Spire Alabama – RSE: net adjustments |
|
| 4.9 |
|
All other factors |
|
| 3.6 |
|
Total Variation |
| $ | (108.8 | ) |
| 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 | |
As shown in the table above, the decrease in revenues was driven primarily by a $96.8 reduction in gas cost recoveries, $35.8 attributable to volumetric usage, lower gross receipt taxes of $7.8, and a $7.1 impact due to lower Spire Missouri off-system sales. These impacts were only partly offset by an increase of $30.2 in ISRS ($20.2 of the increase relating to run rate, with the remaining $10.0 increase attributable to the favorable year-over-year impact of the ISRS Rulings provision and subsequent settlement), a $4.9 increase relating to Spire Alabama’s RSE adjustments, and $3.6 attributable to all other factors.
Contribution Margin
– Gas Utility contribution margin wasSpire Missouri – Higher ISRS |
| $ | 20.2 |
|
Spire Missouri – Smaller ISRS Rulings Provision versus prior year |
|
| 10.0 |
|
Spire Alabama – RSE: net adjustments |
|
| 3.8 |
|
Spire Missouri and Spire Alabama – Volumetric usage |
|
| (5.4 | ) |
Spire Missouri – Late Payments |
|
| (2.3 | ) |
All other factors |
|
| 7.3 |
|
Total Variation |
| $ | 33.6 |
|
| 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$30.2 increase in Spire Missouri ISRS ($20.2 of operatingthe increase relating to run rate, with the remaining $10.0 increase attributable to the favorable year-over-year impact of the ISRS Rulings provision and subsequent settlement). Contribution margin resultingalso benefited from thea $3.8 increase relating to Spire EnergySouth acquisition, lowerAlabama’s RSE revenuenet 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.$7.3 attributable to multiple smaller factors, including modest customer growth. These positive impacts were only partly offset the negative impactby a $5.4 volumetric/weather reduction (net of weather mitigation) and temperature adjustments. Temperaturesa $2.3 COVID-19-related reduction in thelate payment fee revenue in 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 areasMissouri.
Operating Expenses– O&M expenses 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, contributing2020 decreased by $20.4 million compared to the constrained margins experienced in the current year.
Gas Marketing
Operating Revenues
–Gas Marketing operating revenue for theContribution Margin – Gas Marketing contribution margin was $22.4 for fiscal 2020, a $13.2 decrease compared to the same period last year. Excluding the net impact of fair value adjustments in both periods totaling $1.6, the net year-over-year decline was $11.6. This reflects the costs associated with storage positions entered into in the second half of 2020 whose value will not be realized until the upcoming winter heating season in fiscal 2021, as well as less favorable market conditions.
Other
Other operating revenue increased $36.3 for the year ended September 30, 2020 compared to 2019, driven principally by STL Pipeline that was placed in service in November of 2019. Other operating expenses were $6.6 higher than the prior year reflecting STL Pipeline, combined with higher activity levels at Spire Storage.
Interest Charges
Consolidated interest charges during the year ended September 30, 2020 increased $1.1 versus the prior year. The increase was primarily driven by net long-term debt issuances in the current year and the prior year benefiting from Allowance for Funds Used in Construction (AFUDC) non-cash income at STL Pipeline. The current year also benefited from lower interest rates and stable levels of average short-term borrowings. Short-term rates averaged 1.7% in the current year versus 2.7% for the prior year and, for the years ended September 30, 2020 and 2019, average short-term borrowings were $576.2 and $574.5, respectively.
Income Taxes
Consolidated income tax expense during the year ended September 30, 2020 was $12.4, compared to $34.5 for fiscal 2019. This decrease of $22.1 is primarily the result of the $31.3 tax benefit relating to the impairment loss recorded in the third quarter of fiscal 2020. This benefit was only partly offset by the effects of higher pre-tax book income (excluding the restructuring charge) in the current year.
Spire Missouri
Summary Operating Results
|
| Year ended September 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Operating Income |
| $ | 205.6 |
|
| $ | 174.8 |
|
Operation and maintenance expenses |
|
| 251.0 |
|
|
| 268.1 |
|
Depreciation and amortization |
|
| 118.0 |
|
|
| 111.5 |
|
Taxes, other than income taxes |
|
| 103.2 |
|
|
| 107.6 |
|
Less: Gross receipts tax expense |
|
| (63.5 | ) |
|
| (71.1 | ) |
Contribution Margin [Non-GAAP] |
|
| 614.3 |
|
|
| 590.9 |
|
Natural gas costs |
|
| 515.8 |
|
|
| 629.8 |
|
Gross receipts tax expense |
|
| 63.5 |
|
|
| 71.1 |
|
Operating Revenues |
| $ | 1,193.6 |
|
| $ | 1,291.8 |
|
Net Income |
| $ | 130.2 |
|
| $ | 115.0 |
|
Operating revenues during the year ended September 30, 2020 decreased $98.2 from the same period last year. The variancedecrease in revenues reflectswas driven primarily by a $92.6 reduction in gas cost recoveries, $22.0 attributable to lower volumetric usage, lower gross receipt taxes of $7.4, and a $7.1 impact due to lower off-system sales. These impacts were only partly offset by an increase of $30.2 in ISRS ($20.2 of the increase relating to run rate, with the remaining $10.0 increase attributable to the favorable year-over-year impact of higher total volumesthe ISRS Rulings provision and higher commodity pricing levels offset by the effectsubsequent settlement), and $2.9 attributable to customer growth primarily due to a lower level of increased trading activities, and unfavorable mark-to-market adjustments on derivatives. Under GAAP, revenues associated with trading activities are presented net ofdisconnections related costs. Average pricingto COVID-19.
Contribution margin for the twelve monthsyear ended September 30, 2017 was approximately $2.897/MMBtu versus approximately $2.286/MMBtu for fiscal 2016, an increase of $0.611/MMBtu.
| 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 | |||
O&M expenses for the twelve monthsyear ended September 30, 20172020 were $0.6$17.1 lower than the prior year. Lower employment-relatedRemoving the $8.6 net year-over-year impact due to the transfer of mix of service and non-service postretirement benefits costs were almost completely offset by higher professional services.to other income and expense, O&M decreased $8.5 due to lower operations and employee-related costs. Depreciation and amortization increased $4.5,$6.5, reflecting continued infrastructure investments throughout Missouri. Interest expense inIncome taxes were $4.0 higher for the current year was $1.7 greater thanended September 30, 2020 versus the prior year,year. This increase is primarily 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, mitigatedpartly offset by a slightly lower effective tax rate.
Temperatures experienced in the Missouri Utilities’Spire Missouri’s service area during fiscal 20172020 were 1%9% warmer than the same period lastprior year and 20%2% 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 1,482.11,684.0 million for fiscal 20172020 compared with 1,479.31,805.7 million for fiscal 2016.2019, a decrease of 7%. Total off-system therms sold and transported outside of Spire Missouri’s service area were 175.6decreased 21% to 30.6 million for fiscal 20172020 compared with 183.338.5 million for fiscal 2016.
Spire Alabama
Summary Operating Results
|
| Year ended September 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Operating Income |
| $ | 102.9 |
|
| $ | 95.5 |
|
Operation and maintenance expenses |
|
| 139.1 |
|
|
| 142.6 |
|
Depreciation and amortization |
|
| 59.3 |
|
|
| 56.2 |
|
Taxes, other than income taxes |
|
| 34.8 |
|
|
| 35.7 |
|
Less: Gross receipts tax expense |
|
| (23.3 | ) |
|
| (23.7 | ) |
Contribution Margin [Non-GAAP] |
|
| 312.8 |
|
|
| 306.3 |
|
Natural gas costs |
|
| 118.9 |
|
|
| 135.5 |
|
Gross receipts tax expense |
|
| 23.3 |
|
|
| 23.7 |
|
Operating Revenues |
| $ | 455.0 |
|
| $ | 465.5 |
|
Net Income |
| $ | 65.7 |
|
| $ | 60.3 |
|
| 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 monthsyear ended September 30, 2017 increased $32.02020 decreased $10.5 versus the comparable period ended September 30, 2016.2019. Of the increase, $19.2decrease, $13.8 was the result 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 $6.5 versus the prior year, primarily the result of RSE adjustments of approximately $3.8, a legal settlement$2.0 increase due to weather/volumetric impacts (net of $6.0. There was no impactweather mitigation), and $0.8 relating to net income, as this revenue adjustment offset a corresponding $6.0 gain recorded in other income.
O&M expenses for the twelve monthsyear ended September 30, 20172020 decreased $3.1$3.5 versus the year ended September 30, 2016.2019. Removing the $0.8 net year-over-year impact due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M was down $2.7 from the prior year. The O&M decrease in other operating expenses was driven primarily bydue to due to lower operations and employee-related costs, which were favorably impacted by the warmer weatherand a benefit associated with a bad debt charge in the current year.fiscal 2019 that did not repeat and was partially recovered. Depreciation and amortization was $2.1$3.1 higher versus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory.
Interest expense decreased $1.1. The decrease was primarily driven by net long-term debt issuances with lower rates, and lower rates and levels of short-term borrowings. Income tax expense increased $3.4,is $1.5 higher than the prior year, primarily due to the result of higher pre-tax book income earned in the current year.
Temperatures in Spire Alabama’s service area during the twelve monthsyear ended September 30, 20172020 were 35%13% warmer than normallast year, and 15%approximately 17% warmer than the same period a year earlier.historical norms. Spire Alabama’s total therms sold and transported were 900.61,034.8 million for the twelve monthsyear ended September 30, 2017,2020, compared with 878.11,083.1 million for the same period last year.
2019 vs. 2015
Consolidated
Spire’s net income was $144.2$184.6 in fiscal 2016,2019, compared with $136.9$214.2 in fiscal 2015.2018. Basic and diluted earnings per share were $3.26$3.53 and $3.24,$3.52, respectively, for fiscal 20162019 compared with basic and diluted earnings per share of $3.16$4.35 and $4.33, respectively, for fiscal 2015. 2018. The decrease in net income of $29.6 reflects a $12.2 pre-tax ($9.3 after-tax) reduction in the current year due to ISRS rulings against Spire Missouri, and a $60.1 prior year income benefit relating to the implementation of the Tax Cuts and Jobs Act (TCJA), partly offset by $38.4 in pre-tax ($23.6 after-tax) expense for Missouri rate case write-offs recorded in the prior year.
Excluding these amounts, net income growth was $16.2, driven by higher operating results of the Gas Utility segment primarily attributable to Spire Missouri’s new rate design, higher ISRS charges, higher volumes, and customer growth.
The Gas Marketing segment also experienced strong operating results, as the benefits of geographic expansion have mostly offset the return of more normal market conditions and higher operating expenses.
Net economic earnings were $149.1 (or $3.42$195.1 ($3.73 per diluted 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 increased by $46.1, while net economic earnings increased $16.7 in fiscal 2019 compared to fiscal 2015,2018. Both measures benefited from the 2018 rate case redesign at Spire Missouri, and from weather patterns that were favorable compared to the prior year. Fiscal 2019 net income was negatively impacted by $9.3 in after-tax impacts relating to ISRS rulings against Spire Missouri. Fiscal 2018 net income was negatively impacted by the $23.6 after-tax expense related to Missouri rate case write-offs and by a $17.0 one-time tax expense related to the implementation of the TCJA.
Gas Marketing
The Gas Marketing segment reported net income totaling $18.5 for fiscal 2019, versus net income of $24.9 during fiscal 2018, with 2018 benefitting from favorable fair value mark-to-market valuations and unusually favorable market conditions. Net economic earnings for the twelve months ended September 30, 2019, was $19.4, a decrease of $3.5 from the twelve months ended September 30, 2018 as discussed below. the benefits of geographic expansion were more than offset by a return of more normal market conditions and higher operating expenses.
Other
The decrease in O&M expensesCompany’s other non-utility activities generated a net loss of $24.4 for fiscal 2019, compared to net income of $44.9 for fiscal 2018. Fiscal 2018 reflects a $78.2 tax benefit resulting from the implementation of the TCJA, partly offset by higher acquisition and restructuring activities. Net economic loss was $24.1 for fiscal 2019, an increase of $1.8 compared to fiscal 2018. The increased loss reflects higher corporate interest costs and a $15.4 loss from Spire Storage, partially offset by $6.7increased allowance for funds used during construction (AFUDC) income for Spire STL Pipeline.
Operating Revenues and Operating Expenses
Consolidated
Spire’s operating revenues for the twelve months ended September 30, 2019 were $12.6 lower than for the twelve months ending September 30, 2018. Operating revenues decreased by $27.6 at the Gas Utility segment and were $12.1 higher depreciationin the Gas Marketing segment. The Gas Utility decrease was due principally to lower gas cost recoveries, rate case TCJA customer givebacks, impacts at Spire Missouri relating to ISRS rulings, and weather/volumetric impacts (net of volume mitigation) that were only partly offset by Missouri rate design changes, higher ISRS, and favorable Spire Alabama Rate Stabilization and Equalization (RSE) renewal and giveback. The Gas Marketing increase was primarily due to higher volumes that offset the impact of slightly lower pricing.
Spire’s contribution margin increased $17.9 compared with the same twelve-month period last year. The growth in contribution margin was primarily attributable to the Gas Utility segment, up $19.6, with Spire Missouri up $11.0 and Spire Alabama up $7.0, with remaining growth from the utilities of Spire EnergySouth. Gas Marketing’s contribution margin was down $5.7, reflecting a decline in basis differentials that was only partly offset by higher volumes combined with geographic expansion. Depreciation and amortization expense,expenses were higher in the Gas Utility segment, driven principally by continued infrastructure investment at the Utilities in fiscal 2016.
Gas Utility
Operating Revenues – Gas Utility operating revenues for fiscal 20162019 decreased $436.4$27.6 compared to fiscal 2015,2018, and was primarily attributable to the following factors:
Spire Missouri and Spire Alabama – Lower PGA/GSA gas cost recoveries |
| $ | (30.2 | ) |
Spire Missouri and Spire Alabama – Rate case TCJA customer giveback |
|
| (24.3 | ) |
Spire Missouri and Spire Alabama – Volumetric usage |
|
| (12.4 | ) |
Spire Missouri – Provision for ISRS rulings |
|
| (12.2 | ) |
Spire Missouri – 2018 rate case resets |
|
| 32.2 |
|
Spire Missouri – Higher ISRS |
|
| 8.7 |
|
Spire Alabama – RSE: net renewal and giveback |
|
| 4.6 |
|
Customer growth |
|
| 2.7 |
|
All other factors |
|
| 3.3 |
|
Total Variation |
| $ | (27.6 | ) |
| 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 | ) |
As shown in the table above, the decrease in revenues was driven primarily by a $30.2 reduction in gas cost recoveries, rate case TCJA customer givebacks totaling $24.3, $12.4 attributable to volumetric usage, and a $12.2 impact due to ISRS rulings. These impacts were only partly offset by an increase of $32.2 relating to the rate design changes at Spire Missouri, an increase in ISRS of $8.7, a $4.6 increase relating to Spire Alabama’s RSE renewal and giveback, and $2.7 attributable to customer growth.
Contribution Margin
Spire Missouri – 2018 rate case resets |
| $ | 32.2 |
|
Spire Missouri – Higher ISRS |
|
| 8.7 |
|
Spire Missouri and Spire Alabama – Volumetric usage |
|
| 5.1 |
|
Spire Alabama – RSE: net renewal and giveback |
|
| 4.6 |
|
Customer growth |
|
| 2.7 |
|
Spire Missouri and Spire Alabama – Rate case TCJA customer giveback |
|
| (24.3 | ) |
Spire Missouri – Provision for ISRS rulings |
|
| (12.2 | ) |
All other factors |
|
| 2.8 |
|
Total Variation |
| $ | 19.6 |
|
| 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 was primarily attributable to benefits ofthe $32.2 increase resulting from the 2018 Missouri rate cases resets. Contribution margin also benefited from $8.7 higher ISRS charges, for$5.1 due to volumes and colder weather in the current year (net of weather mitigation), a $4.6 increase relating to Spire Missouri in 2016 of $13.8, lowerAlabama’s RSE revenue adjustments, beneficial CCMrenewal and return on capitalgiveback, and $2.7 attributable to customer growth. These positive impacts totaling $4.5 for Spire Alabama, and $2.2 of contribution margin resulting from the Spire EnergySouth acquisition, which were mostlyonly partly offset by the negative 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 therate case TCJA customer givebacks totaling $24.3 from both Spire Missouri and Spire Alabama, service areas in fiscal 2016 were 19.7% and 30% warmer than in$12.2 relating to ISRS rulings against Spire Missouri.
Operating Expenses – Gas Utility O&M expenses for the same period intwelve months ended September 30, 2019 decreased $8.0 from last year. Removing last year’s $38.4 of Missouri rate case write-offs, and the prior year, respectively, significantly contributing$19.6 net year-over-year increase due to the $18.0 negative volume impact on contribution margin in fiscal 2016.
Gas Marketing
Operating Revenues –
Gas Marketing operating revenue for theContribution Margin
– Gas Marketing contribution margin wasOther
Other operating revenue increased $5.0 for the year ended September 30, 2019 compared to 2018, driven principally by gas storage revenues and slightly higher insurance revenues.reinsurance premiums. Other O&Moperating expenses were essentially flat with$1.3 higher than the prior year.
Interest Charges
Consolidated interest charges during the twelve monthsyear ended September 30, 20162019 increased $2.6 from fiscal 2015. Interest expense reductions from$6.0 versus the refinancing of $115.0 in Spire Alabamaprior year. The increase was primarily driven by net long-term debt in Septemberissuances and December of 2015, along with lower average short-term borrowings, have been offset by higher rates onand levels of short-term borrowings, interest on debt issued to financeborrowings. Short-term rates averaged 2.7% in the Spire EnergySouth acquisition, interest on acquired debt,current year versus 2.0% for the prior year and, charges related to a temporary bridge facility commitment obtained and terminated duringfor the third quarter of fiscal 2016 related to the Spire EnergySouth acquisition. For the twelve monthsyears ended September 30, 20162019 and 2015,2018, average short-term borrowings were $273.9$574.5 and $300.6, respectively, and$408.6, respectively. Partly offsetting these factors was an increase in the average interest rates on those borrowings were 0.9% and 0.7%, respectively.
Income Taxes
Consolidated income tax expense during the year ended September 30, 2019 was $34.5, compared to a $26.5 tax benefit for fiscal 2018. This increase of $61.0 is primarily the result of the $60.1 fiscal 2018 revaluation benefit of deferred tax assets and liabilities on the balance sheet that were not reflected in net economic earnings. The remaining increase in income tax is primarily the result of the effects of higher pre-tax book income in the current year, partly offset by an increase in amortization of excess deferred income taxes.
Spire Missouri
Summary Operating Results
|
| Year ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Operating Income |
| $ | 174.8 |
|
| $ | 158.5 |
|
Operation and maintenance expenses |
|
| 268.1 |
|
|
| 279.1 |
|
Depreciation and amortization |
|
| 111.5 |
|
|
| 102.8 |
|
Taxes, other than income taxes |
|
| 107.6 |
|
|
| 108.4 |
|
Less: Gross receipts tax expense |
|
| (71.1 | ) |
|
| (68.9 | ) |
Contribution Margin [Non-GAAP] |
|
| 590.9 |
|
|
| 579.9 |
|
Natural gas costs |
|
| 629.8 |
|
|
| 636.8 |
|
Gross receipts tax expense |
|
| 71.1 |
|
|
| 68.9 |
|
Operating Revenues |
| $ | 1,291.8 |
|
| $ | 1,285.6 |
|
Net Income |
| $ | 115.0 |
|
| $ | 129.3 |
|
Operating revenues during the year ended September 30, 2019 increased $7.3$6.2 from the same period last year. Revenues were impacted primarily by the $9.4 increase attributable to the new rate design (net of TCJA giveback), combined with higher ISRS charges of $8.7, and customer growth of $2.7. These positive impacts on the revenue growth were partly offset by $12.2 in fiscal 2016impacts relating to ISRS rulings and volume impacts (net of weather mitigation) of $3.6.
Contribution margin for the year ended September 30, 2019 increased $11.0 from fiscal 2015 primarilythe prior year. Contribution margin benefited from the $9.4 increase attributable to the new rate design (net of TCJA giveback), combined with higher ISRS charges of $8.7, customer growth of $2.7, and the $2.8 increase due to the combined impacts of volumetric usage and higher pre-taxoff-system sales. These positive impacts were only partly offset by the $12.2 in adjustments relating to the ISRS rulings.
O&M expenses for the year ended September 30, 2019 were $11.0 lower than the prior year. Removing last year’s $38.4 of Missouri rate case write-offs, and the $16.9 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and aexpense, O&M increased $10.5. Of this increase, $9.0 relates to higher employee benefits and energy efficiency costs that resulted from the 2018 Missouri rate cases. Depreciation and amortization increased $8.7, reflecting continued infrastructure investments throughout Missouri. Interest expense in the current year was $2.8 greater than prior year, the result of higher short-term borrowings and higher average effective interest rates. Income taxes were $45.9 higher for the year ended September 30, 2019 versus the prior year. This increase is primarily the result of the $45.2 fiscal 2018 revaluation benefit of deferred tax rate. Theassets and liabilities on the balance sheet.
Temperatures experienced in Spire Missouri’s service area during fiscal 2016 effective tax rate of 32.5% is approximately 1.3 percentage points higher2019 were 5% colder than the rateprior year and 8% colder than normal. Total system therms sold and transported were 1,805.7 million for fiscal 2015.2019 compared with 1,759.8 million for fiscal 2018, an increase of 3%. Total off-system therms sold and transported outside of Spire Missouri’s service area decreased 44% to 38.5 million for fiscal 2019 compared with 68.6 million for fiscal 2018. The decrease in off-system therms was the direct result of the increase in demand experienced for system therms.
Spire Alabama
Summary Operating Results
|
| Year ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Operating Income |
| $ | 95.5 |
|
| $ | 96.6 |
|
Operation and maintenance expenses |
|
| 142.6 |
|
|
| 138.8 |
|
Depreciation and amortization |
|
| 56.2 |
|
|
| 53.2 |
|
Taxes, other than income taxes |
|
| 35.7 |
|
|
| 36.1 |
|
Less: Gross receipts tax expense |
|
| (23.7 | ) |
|
| (25.4 | ) |
Contribution Margin [Non-GAAP] |
|
| 306.3 |
|
|
| 299.3 |
|
Natural gas costs |
|
| 135.5 |
|
|
| 176.0 |
|
Gross receipts tax expense |
|
| 23.7 |
|
|
| 25.4 |
|
Operating Revenues |
| $ | 465.5 |
|
| $ | 500.7 |
|
Net Income |
| $ | 60.3 |
|
| $ | 1.3 |
|
Operating revenues for the year ended September 30, 2019 decreased $35.2 versus the comparable period ended September 30, 2018. Of the decrease, $27.8 related to lower gas cost recoveries, $8.8 was the result of weather and usage impacts, $1.7 was attributable to lower gross receipt taxes, along with approximately $1.5 associated with rate reductions to customers due to tax savings from the TCJA. Partly offsetting these negative impacts was a $4.6 increase relating to favorable RSE renewal and giveback.
Contribution margin increased $7.0 versus the prior year, as a favorable RSE adjustment of approximately $4.6 and a $3.9 increase due to weather/volumetric impacts (net of weather mitigation) were only slightly offset by the $1.5 impact of the customer rate reduction resulting from the TCJA.
O&M expenses for the year ended September 30, 2019 increased $3.8 versus the year ended September 30, 2018. Removing the $2.4 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $1.4. Depreciation and amortization was $3.0 higher fiscal 2016 rate includesversus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory.
Interest expense increased $4.4. The increase was primarily driven by net long-term debt issuances and higher rates and levels of short-term borrowings. Income tax expense associatedis $61.1 lower than the prior year, primarily the result of 2018 being burdened with a valuation allowance onthe $60.7 deferred tax assets.
Temperatures in Spire Alabama’s service area during the year ended September 30, 2019 were 6% warmer than last year, and approximately 6% warmer than historical norms. Spire Alabama’s total therms sold and transported were 1,083.1 million for the year ended September 30, 2019, compared with 1,020.8 million last year, a 6% increase.
REGULATORY MATTERS
For discussions of regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.
ACCOUNTING PRONOUNCEMENTS
The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the impact that recently issued accounting standards 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 Pronouncements section of Note 1 of the Notes to Financial Statements in Item 8.
INFLATION
The accompanying financial statements reflect the historical costs of events and transactions, regardless of the purchasing power of the dollar at the time. Due to the capital-intensive nature of the businesses of the Company, Spire Missouri and Spire Alabama, the most significant impact of inflation is on the depreciation of utility plant. Rate regulation, to which the Utilities are subject, allows recovery through its rates of only the historical cost of utility plant as depreciation. The Utilities expect to incur significant capital expenditures in future years, primarily related to the planned increased replacements of distribution plant. The Utilities believe any higher costs experienced upon replacement of existing facilities will be recovered through the normal regulatory process.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment and estimates in preparing our financial statements:
Regulatory Accounting
– The Utilities account for their regulated operations in accordance withPGA Clause
– Spire Missouri’s PGA clauses allowsGSA Rider
–Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider, established in 1993, which permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA, that is designed to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily to residential, small commercial and small industrial customers. Other non-temperature weather related conditions that may affect customer usage are not included in the temperature adjustment. In prior years, Spire Alabama entered into cash flow derivative commodity instruments to hedge its exposure to price fluctuations on its gas supply. Spire Alabama recognizes all derivatives at fair value as either assets or liabilities on the balance sheet. Any realized gains or losses are passed through to customers using the mechanisms of the GSA rider in accordance with Spire Alabama’s APSC approved tariff and are recognized as aregulatory asset or regulatory liability. All derivative commodity instruments in a gain position are valued on a discounted basis incorporating an estimate of performance risk specific to each related counterparty. Derivative commodity instruments in a loss position are valued on a discounted basis incorporating an estimate of performance risk specific to Spire Alabama. Spire Alabama currently has no active gas supply derivative positions.
ISRS –The ISRS allows Spire Missouri expedited recovery for its investment to upgrade its infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Spire Missouri records ISRS revenues as authorized by the excess ofMoPSC and estimates the acquisition-date fair value of the consideration transferred over theprobability and amount of acquisition-date identifiable assets acquired netany refunds based on commission precedent, current legal rulings, the opinion of assumed liabilities,legal counsel, and adjustments are recorded during the measurement period to finalize the allocation of purchase price. Spire Missouri has recorded goodwill related to the 2013 acquisition of Spire Missouri West, and Spire also has recorded goodwill related to the 2016 and 2014 acquisitions of Spire EnergySouth and Spire Alabama, respectively. Neither Spire EnergySouth nor Spire Alabama have goodwill on their balance sheets as push down accounting was not applied. 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. The goodwill impairment test compares the fair value of each reporting unit to its carrying amount, including goodwill. 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 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 costs recognized in the financial statements related to the Utilities’ qualified pension plans and other postretirement benefit plans is based upon allowances, as approved by the MoPSC (for Spire Missouri) and as approved by the APSC (for Spire Alabama). The allowances have been established in the rate-making process for the recovery of these costs from customers. The differences between these amounts and actual pension and other postretirement benefit costs incurred for financial reporting purposes are deferred as regulatory assets or regulatory liabilities. GAAP also requires that changes that affect the funded status of pension and other postretirement benefit plans, but that are not yet required to be recognized as components of pension and other postretirement benefit costs, be reflected in other comprehensive income. For the Utilities’ qualified pension plans and other postretirement benefit plans, amounts that would otherwise be reflected in other comprehensive income are deferred with entries to regulatory assets or regulatory liabilities.
The tables below reflect the sensitivity of Spire’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* | ||||||||||||
Discount Rate |
|
|
| 0.25 | % |
|
|
| $ | (21.7 | ) |
|
|
| $ | 0.4 |
|
|
|
|
|
| (0.25 | )% |
|
|
|
| 23.0 |
|
|
|
|
| (0.4 | ) |
|
Expected Return on Plan Assets |
|
|
| 0.25 | % |
|
|
|
| — |
|
|
|
|
| (1.2 | ) |
|
|
|
|
| (0.25 | )% |
|
|
|
| — |
|
|
|
|
| 1.2 |
|
|
Rate of Future Compensation Increase |
|
|
| 0.25 | % |
|
|
|
| 3.4 |
|
|
|
|
| 0.3 |
|
|
|
|
|
| (0.25 | )% |
|
|
|
| (3.3 | ) |
|
|
|
| (0.3 | ) |
|
Postretirement Benefits:
Actuarial Assumptions |
| Increase/ (Decrease) |
| Estimated Increase/ (Decrease) to Projected Postretirement Benefit Obligation |
| Estimated Increase/ (Decrease) to Annual Net Postretirement Benefit Cost* | ||||||||||||
Discount Rate |
|
|
| 0.25 | % |
|
|
| $ | (4.9 | ) |
|
|
| $ | 0.2 |
|
|
|
|
|
| (0.25 | )% |
|
|
|
| 5.2 |
|
|
|
|
| (0.1 | ) |
|
Expected Return on Plan Assets |
|
|
| 0.25 | % |
|
|
|
| — |
|
|
|
|
| (0.7 | ) |
|
|
|
|
| (0.25 | )% |
|
|
|
| — |
|
|
|
|
| 0.7 |
|
|
Annual Medical Cost Trend |
|
|
| 1.00 | % |
|
|
|
| 9.7 |
|
|
|
|
| 0.8 |
|
|
|
|
|
| (1.00 | )% |
|
|
|
| (8.7 | ) |
|
|
|
| (0.7 | ) |
|
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 | % | $ | (17.9 | ) | $ | 0.6 | ||||||||||
| (0.25 | )% | 18.7 | (0.6 | ) | |||||||||||||
| Expected Return on Plan Assets | 0.25 | % | — | (1.1 | ) | ||||||||||||
| (0.25 | )% | — | 1.3 | ||||||||||||||
| Rate of Future Compensation Increase | 0.25 | % | 4.9 | 0.6 | |||||||||||||
| (0.25 | )% | (4.7 | ) | (0.5 | ) | ||||||||||||
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 | % | $ | (5.0 | ) | $ | 0.1 | ||||||||||
| (0.25 | )% | 5.2 | (0.1 | ) | |||||||||||||
| Expected Return on Plan Assets | 0.25 | % | — | (0.6 | ) | ||||||||||||
| (0.25 | )% | — | 0.6 | ||||||||||||||
| Annual Medical Cost Trend | 1.00 | % | 10.0 | 1.7 | |||||||||||||
| (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 in Item 8 for information regarding the regulatory treatment of these costs. |
Impairment of Long-lived Assets – Long-lived assets classified as held and used are evaluated for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Whether impairment has occurred is determined by comparing the estimated undiscounted cash flows attributable to the assets with the carrying value of the assets. If the carrying value exceeds the undiscounted cash flows, the Company recognizes an impairment charge equal to the amount of the carrying value that exceeds the estimated fair value of the assets. In the period in which the Company determines an asset meets held-for-sale criteria, an impairment charge is recorded to the extent the book value exceeds its fair value less cost to sell.
On July 1, 2020, Spire’s Board of Directors, based upon the recommendation of senior management, revised the development plan for Spire Storage, resulting in an impairment charge of $140.8 related to Spire Storage assets in the quarter ended June 30, 2020. The revision was driven by the realization that a longer time horizon will be required for optimization and positioning of the storage facility to serve energy markets in the western United States. Among other factors, evaluations of the continuing evolution of market dynamics in the region led management to update models of various development alternatives. Separately in the quarter ended June 30, 2020, Spire recorded impairment charges totaling $7.8 related to two commercial compressed natural gas fueling stations as a result of revised projections reflecting lower diesel prices and slower conversions of Class 8 vehicles. The fair values used in measuring the impairment charges were determined with an expected present value technique using a discounted cash flow method under an income approach. Our impairment loss calculations required management to make assumptions and to apply judgment in order to estimate fair values of the assets. This involved estimating cash flows, useful lives, and current market value for similar assets and selecting a discount rate that reflects the risk inherent in future cash flows. Cash flow projections were based on assumptions about future market demand and achievement of certain operational capabilities. Assumptions were selected from a range of reasonably possible amounts and were supported by relevant and reliable data. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to additional impairments that could be material. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate asset impairment losses.
Income Taxes – Income tax calculations require estimates due to book-tax differences, estimates with respect to regulatory treatment of certain items, and uncertainty in the interpretation of tax laws and regulations. Critical assumptions and judgments also include projections of future taxable income to determine the ability to utilize net operating losses and credit carryforwards prior to their expiration. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in regulatory treatment or tax related estimates and assumptions that could have a material impact on cash flows, financial position and/or results of operations.
For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements.
LIQUIDITY
The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when they purchase natural gas and when their customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with Spire Missouri’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utilities’ PGA clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and may cause significant variations in the Company’s cash provided by or used in operating activities.
Cash Flow Summary |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net cash provided by operating activities |
| $ | 469.9 |
|
| $ | 450.9 |
|
| $ | 456.6 |
|
Net cash used in investing activities |
|
| (631.6 | ) |
|
| (838.3 | ) |
|
| (531.7 | ) |
Net cash provided by financing activities |
|
| 160.0 |
|
|
| 371.8 |
|
|
| 89.1 |
|
| Cash Flow Summary | 2017 | 2016 | 2015 | ||||||||
| Net cash provided by operating activities | $ | 288.3 | $ | 328.3 | $ | 322.4 | |||||
| Net cash used in investing activities | (433.5 | ) | (612.7 | ) | (298.7 | ) | |||||
| Net cash provided by (used in) financing activities | 147.4 | 275.8 | (26.0 | ) | |||||||
Net cash provided by operating activities increased $19.0 from 2019 to 2020 and decreased $39.9$5.7 from fiscal 20162018 to fiscal 2017. The change is2019, primarily due toas a result of fluctuations in working capital as mentioned above, largely driven byitems.
In fiscal 2020, the relative weather conditions and gas prices during the periods. Cash was provided by increases in accounts payable, net income, depreciation, and deferred 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.
In fiscal 2019, the Company used $306.6 more cash used for the acquisition of Spire EnergySouth, while fiscal 2017 and fiscal 2015 included only smaller acquisition settlements.in investing activities than in 2018. Capital expenditures increased $144.8$323.9 from fiscal 20162018 to fiscal 2017,2019, primarily as a result of the$110.5 higher level of infrastructure upgrades across both Missouri and Alabama, as well as $16.0 from the addition of EnergySouth and $25.5expenditures for the Spire STL Pipeline project. Spire estimates its capital expenditures for fiscal 2018 will be approximately $485.0, including approximately $415.0 for the Utilities. Theproject and a $118.9 increase in investment reflects the continued commitment to infrastructure upgrades, atnew business development and investment to support customer growth across Missouri and Alabama. A further $89.9 in expenditures related to the Utilities and the beginningdevelopment of the construction phase of the Spire STL Pipeline.
Net cash provided by financing activities was $128.5 lowerdeclined $211.8 in fiscal 20172020 versus fiscal 2019, the major driver being the prior year issuance of preferred stock that generated $242.0 in proceeds. Year-over-year net debt issuance increased by $32.3, and the issuance of common stock generated $21.6 more cash in fiscal 2020 than in fiscal 2016. This change2019. These increases in cash were only partly offset by a $20.4 increase in common and preferred stock dividends in fiscal 2020 versus fiscal 2019.
Net cash provided by financing activities increased $282.7 from 2018 to 2019. The increase in 2019 versus 2018 was primarily reflectsdue to the effect 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 borrowings continued to increase, reflecting the Company’s growing operations. Stock issuances in 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 continued increases in dividend paymentspreferred shares for $242.0 and other financing activities this year. In fiscal 2015, the net issuances of long-term debt and common stock were not significant. In the first half of fiscal 2018, Spire Alabama plans to issue long-term notes totaling $75.0. Spire Missouri expects to refinance $100.0 of bonds due in August 2018.
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% |
| 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 | ||||||||
CAPITAL RESOURCES
The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. The creditTheir debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of September 30, 2020, the debt ratings of the Company, Spire Missouri and Spire Alabama, shown in the following table, remain at investment grade but are subject to review and change by the rating agencies.with a stable outlook.
S&P | Moody’s | |||
Spire Inc. senior unsecured long-term debt | BBB+ | Baa2 | ||
Spire Inc. preferred stock | BBB | Ba1 | ||
Spire Inc. short-term debt | A-2 | P-2 | ||
Spire Missouri senior secured long-term debt | A | A1 | ||
Spire Alabama senior unsecured long-term debt | A- | A2 |
It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements, which primarily include capital expenditures, interest payments on long-term debt, scheduled maturities of long-term debt, short-term seasonal needs and dividends.
The effects of COVID-19 on the U.S. capital markets may significantly impact Spire. We rely on access to the capital markets to fund our capital requirements. These uncertain economic conditions may also result in the inability of our customers to pay for services and could have an impact on our liquidity. Still, considering our financing as described in Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8, we believe we have sufficient access to cash to meet our needs.
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire redeemed in full at par its $250.0 floating rate notes due August 15, 2017, plus accruedhad no temporary cash investments as of September 30, 2020 or 2019. Due to lower yields available to Spire on short-term investments, the Company elected to provide all of Spire Missouri’s and unpaid interest.
Short-term Debt
The Utilities’ short-term borrowing requirements typically peak during the colder months, while most of the Company’s other needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper or through the use of a revolving credit facility. For information about these resources, see Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.
Long-term Debt and Equity
At September 30, 2020, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $2,500.0, of which $1,098.0 was issued by Spire Missouri, $475.0 was issued by Spire Alabama, and $237.0 was issued by other subsidiaries. For more information about long-term debt, see Note 6 of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.
On November 12, 2019, Spire Missouri issued and sold to certain institutional purchasers in a private placement $275.0 of 2.84% first mortgage bonds due November 15, 2029. Interest is payable semi-annually. The bonds are secured by a mortgage and deed of trust and rank equal in right to payment with all Spire Missouri’s other first mortgage bonds. Spire Missouri used the proceeds to repay its $100.0 floating-rate note and for other general corporate purposes.
On December 2, 2019, Spire Alabama issued and sold to certain institutional investors in aggregate principal amounta private placement $100.0 of 2.88% Series 2019B Senior Notes due March 15, 2027. The notes bear interest at the rate of 3.93% per annum,December 1, 2029. Interest is payable semi-annually. The notes are senior unsecured obligations of the Company. The CompanySpire Alabama and rank equal in right to payment with all its other senior unsecured indebtedness. Spire Alabama used the proceeds from the sale of the notesto repay short-term debt and for the repayment of other debt.
On December 23, 2019, 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).
On September 15, 2017,June 16, 2020, Spire Missouri issuedpurchased and sold incancelled a private placement $50.0 in aggregate principal amountportion of its outstanding first mortgage bonds, due September 15, 2032, $70.0 in aggregate principal amountincluding $5.7 of its first mortgage7% bonds due September 15, 2047 and $50.0 in aggregate principal amount2029, $0.8 of its first mortgage6% bonds due September 15, 2057. 2034, $0.5 of its 6.15% bonds due 2036, and $0.1 of its 4.625% bonds due 2043.
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 has a shelf registration statement on Form S-3 on file with the USU.S. Securities and Exchange Commission (SEC) for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 244,130207,254 and 239,945201,148 shares at September 30, 20172020 and November 10, 2017,16, 2020, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also hashave a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various 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,securities, which expires on May 14, 2022.
On February 6, 2019, Spire entered into an “at-the-market” equity distribution agreement, supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $150.0. Those shares are issued pursuant to Spire’s universal shelf registration statement referenced above and a prospectus supplement dated May 14, 2019. Under this program, in the year ended September 22, 2019.
On May 21, 2019, Spire issued 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, resulting in $242.0 of proceeds net of issuance costs.
Including the current portion of long-term debt, the Company’s long-term consolidated capitalization at September 30, 20172020, consisted of 48.7% of common stock50% equity, and 51.3% long-term debt, compared to 46.1% of common stock55% equity and 53.9% of long-term debt at September 30, 2016.
CONTRACTUAL OBLIGATIONS
As of September 30, 2017,2020, Spire had contractual obligations with payments due as summarized below:
|
|
|
|
|
| Payments due by period |
| |||||||||||||
Contractual Obligations |
| Total |
|
| Less than 1 Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than 5 Years |
| |||||
Principal Payments on Long-term Debt |
| $ | 2,500.0 |
|
| $ | 60.4 |
|
| $ | 391.9 |
|
| $ | 198.6 |
|
| $ | 1,849.1 |
|
Interest Payments on Long-term Debt (a) |
|
| 1,390.2 |
|
|
| 99.3 |
|
|
| 180.5 |
|
|
| 150.0 |
|
|
| 960.4 |
|
Operating Leases (b) |
|
| 90.3 |
|
|
| 6.6 |
|
|
| 14.4 |
|
|
| 10.9 |
|
|
| 58.4 |
|
Purchase Obligations – Natural Gas (c) |
|
| 1,745.4 |
|
|
| 484.9 |
|
|
| 512.6 |
|
|
| 215.9 |
|
|
| 532.0 |
|
Purchase Obligations – Other (d) |
|
| 53.2 |
|
|
| 40.6 |
|
|
| 7.9 |
|
|
| 3.3 |
|
|
| 1.4 |
|
Asset Retirement Obligations |
|
| 540.1 |
|
|
| 29.8 |
|
|
| 30.7 |
|
|
| 31.3 |
|
|
| 448.3 |
|
Total (e) |
| $ | 6,319.2 |
|
| $ | 721.6 |
|
| $ | 1,138.0 |
|
| $ | 610.0 |
|
| $ | 3,849.6 |
|
| Payments due by period | |||||||||||||||||||
| Contractual Obligations | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | ||||||||||||||
| Principal Payments on Long-term Debt | $ | 2,112.0 | $ | 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) | 83.7 | 10.1 | 17.1 | 12.1 | 44.4 | ||||||||||||||
| Purchase Obligations – Natural Gas (c) | 1,281.8 | 703.3 | 373.9 | 66.8 | 137.8 | ||||||||||||||
| Purchase Obligations – Other (d) | 74.9 | 63.6 | 9.2 | 1.8 | 0.3 | ||||||||||||||
| Asset Retirement Obligations | 296.6 | 10.1 | 23.3 | 16.8 | 246.4 | ||||||||||||||
| Total (e) | $ | 5,091.5 | $ | 972.9 | $ | 803.9 | $ | 347.1 | $ | 2,967.6 | |||||||||
(a) | |
Includes interest payments over the terms of the debt. Interest is calculated using the applicable interest rate 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 |
(b) | |
Lease obligations are primarily for office space |
(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, |
(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 |
ENVIRONMENTAL MATTERS
The Utilities and other Spire subsidiaries own and operate natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s, Spire Missouri’s or Spire Alabama’s financial position and results of operations. As environmental laws, regulations and their interpretations change, however, the Company and the Utilities may be required to incur additional costs. For information relative to environmental matters, see Contingencies in Note 16
OFF-BALANCE SHEET ARRANGEMENTS
At September 30, 2020, the Company had no off-balance sheet financing arrangements, other than surety bonds, and letters of credit entered into in the ordinary course of business. The Company does not expect to engage in any significant off-balance sheet financing arrangements in the near future.
MARKET RISK
Commodity Price Risk
Gas Utility
The Utilities’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of the Missouri Utilities’Spire Missouri’s PGA clauses and Spire Alabama’s GSA rider. The PGA clauses and GSA rider allows the Utilities to flow through to customers, subject to prudence review by the MoPSC and APSC, the cost of purchased gas supplies, as well as gas inventory carrying costs.supplies. Spire Missouri is allowed the flexibility to make up to three discretionary PGA changes during each year, in addition to its mandatory November PGA change, so long as such changes are separated by at least two months. Spire Missouri is able to mitigate, to some extent, changes in commodity prices through the use of physical storage supplies and regional supply diversity. 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, 2017,2020, Spire Missouri had active natural gas derivative positions, but Spire Alabama did not. Costs and cost reduction, including carrying costs, associated with the use of natural gas derivative instruments are allowed to be passed on to customers through the operation of the PGA clauses or GSA rider. Accordingly, the Utilities do not expect any adverse earnings impact as a result of the use of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements may cause short-term cash requirements to vary. For more information about the Utilities’ natural gas derivative instruments, see
Gas Marketing
In the course of its business, Spire’s non-regulated gas marketing subsidiary, Spire Marketing, enters into contracts to purchase and sell natural gas at fixed prices and natural gas index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily monitoring of a number of business measures, including fixed price commitments. In accordance with the risk management policy, Spire Marketing manages the price risk associated with its fixed price commitments. This risk is currently managed either by closely matching the offsetting physical purchase or sale of natural gas at fixed-prices or through the use of natural gas futures, options and swap contracts traded on or cleared through the New York Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) to lock in margins. At September 30, 20172020 and 2016,2019, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations.
As mentioned above, Spire Marketing uses natural gas futures, options and swap contracts traded on or cleared through the NYMEX and ICE to manage the commodity price risk associated with its fixed-price natural gas purchase and sale commitments. These derivative instruments may be designated as cash flow hedges of forecasted purchases or sales. Such accounting treatment, if elected, generally permits a substantial portion of the gain or loss to be deferred from recognition in earnings until the period that the associated forecasted purchase or sale is recognized in earnings. To the extent a hedge is effective, gains or losses on the derivatives will be offset by changes in the value of the hedged forecasted transactions. Information about the fair values of Spire Marketing’s exchange-traded/cleared natural gas derivative instruments is presented below:
|
| Derivative Fair Values |
|
| Cash Margin |
|
| Derivatives and Cash Margin |
| |||
Net balance of derivative assets at September 30, 2019 |
| $ | (1.4 | ) |
| $ | 4.8 |
|
| $ | 3.4 |
|
Changes in fair value |
|
| 11.8 |
|
|
| — |
|
|
| 11.8 |
|
Settlements/purchases - net |
|
| (4.7 | ) |
|
| — |
|
|
| (4.7 | ) |
Changes in cash margin |
|
| — |
|
|
| (5.2 | ) |
|
| (5.2 | ) |
Net balance of derivative assets at September 30, 2020 |
| $ | 5.7 |
|
| $ | (0.4 | ) |
| $ | 5.3 |
|
|
| As of September 30, 2020 |
| |||||||||||||||||
Maturity by Fiscal Year |
| Total |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
| |||||
Fair values of exchange-traded/cleared natural gas derivatives - net |
| $ | 7.4 |
|
| $ | 1.0 |
|
| $ | 6.0 |
|
| $ | 0.4 |
|
| $ | — |
|
Fair values of basis swaps - net |
|
| 49.3 |
|
|
| (9.2 | ) |
|
| 50.1 |
|
|
| 8.3 |
|
|
| 0.1 |
|
Fair values of puts and calls - net |
|
| (0.7 | ) |
|
| (0.8 | ) |
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Position volumes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMBtu - net (short) long futures/swap/option positions |
|
| (12.4 | ) |
|
| (11.2 | ) |
|
| (1.1 | ) |
|
| (0.1 | ) |
|
| — |
|
MMBtu - net (short) long basis swap positions |
|
| (1.0 | ) |
|
| (1.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
MMBtu - net (short) puts and calls positions |
|
| (0.8 | ) |
|
| (0.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Derivative Fair Values | Cash Margin | Derivatives and Cash Margin | |||||||||
| Net balance of derivative assets at September 30, 2016 | $ | (1.3 | ) | $ | 4.1 | $ | 2.8 | ||||
| Changes in fair value | 4.4 | — | 4.4 | ||||||||
| Settlements/purchases - net | (2.7 | ) | — | (2.7 | ) | ||||||
| Changes in cash margin | — | (2.2 | ) | (2.2 | ) | ||||||
| Net balance of derivative assets at September 30, 2017 | $ | 0.4 | $ | 1.9 | $ | 2.3 | |||||
| As of September 30, 2017 | |||||||||||||||||||||||
| Maturity by Fiscal Year | Total | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||
| Fair values of exchange-traded/cleared natural gas derivatives - net | $ | 0.6 | $ | 0.6 | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Fair values of basis swaps - net | (0.1 | ) | (0.3 | ) | 0.2 | — | — | — | |||||||||||||||
| Position volumes: | |||||||||||||||||||||||
| 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 | (4.2 | ) | (2.9 | ) | (1.1 | ) | (0.2 | ) | — | — | |||||||||||||
Certain of Spire Marketing’s physical natural gas derivative contracts are designated as normal purchases or normal sales, as permitted by GAAP. This election permits the Company to account for the contract in the period the natural gas is delivered. Contracts not designated as normal purchases or normal sales, including those designated as trading activities, are accounted for as derivatives with changes in fair value recognized in earnings in the periods prior to settlement.
Below is a reconciliation of the beginning and ending balances for physical natural gas contracts accounted for as derivatives, none of which will settle beyond fiscal 2020:2022:
Net balance of derivative liabilities at September 30, 2019 |
| $ | 3.0 |
|
Changes in fair value |
|
| (7.6 | ) |
Settlements |
|
| (2.8 | ) |
Net balance of derivative liabilities at September 30, 2020 |
| $ | (7.4 | ) |
| Net balance of derivative assets at September 30, 2016 | $ | 6.3 | |
| Changes in fair value | (0.7 | ) | |
| Settlements | (7.1 | ) | |
| Net balance of derivative liabilities at September 30, 2017 | $ | (1.5 | ) |
For further details related to Spire Marketing’s derivatives and hedging activities, see
Note 10, Derivative Instruments and Hedging Activities, of the Notes to FinancialCounterparty Credit Risk
Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are with energy producers, utility companies and pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in economic, industry or other conditions. Spire Marketing also has concentrations of credit risk with certain individually significant counterparties. To the extent possible, Spire Marketing enters into netting arrangements with its counterparties to mitigate exposure to credit risk. It is also exposed to credit risk associated with its derivative contracts designated as normal purchases and normal sales. Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in financial losses and/or capital limitations. For more information on these and other concentrations of credit risk, including how Spire Marketing manages these risks, see
Note 11,Concentrations of Credit Risk, of the Notes to FinancialInterest 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 2017,2020, an increase of 100 basis points in the underlying average interest rate for short-term debt would have caused an increase in interest expense (and a decrease in pre-tax earnings and cash flows) of approximately $4.9$5.8 on an annual basis. Portions of such increasesan increase may be offset through the Utilities’ application of PGA and GSA carrying costs. At September 30, 2017,2020, Spire had no variable rate long-term debt outstanding but had fixed-rate long-term debt totaling $2,112.0, which includes $67.0 of fixed-rate long-term debt assumed through the acquisition of Spire EnergySouth.$2,500.0. Spire Missouri had fixed-rate long-term debt totaling $980.0$1,098 and Spire Alabama had fixed ratefixed-rate long-term debt of $250.0, both$475.0, all included in Spire’s total long-term debt. While thesethe long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemptions of long-term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future period.
During the secondfirst quarter of fiscal 2016, Spire entered into five-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 interest rates in anticipation of the issuance of long-term debt in fiscal 2017. During the third quarter of fiscal 2016,2019, 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-yearthree-year interest rate swap with a fixed interest rate of 2.658%3.250% and a notional amount of $60.0$100.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $0.9$53.7 mark-to-market loss to comprehensive income on this swap for the yeartwelve months ended September 30, 2017. 2020. In the second quarter of 2020, the Company entered into multiple interest rate swaps with fixed interest rates ranging from 0.921% to 1.3105% for a total notional amount of $150.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $0.5 mark-to-market loss to comprehensive income for these swaps for the twelve months ended September 30, 2020.
Refer to
Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8 for additional details onItem 7A. Quantitative and Qualitative Disclosures About Market Risk
For this discussion, see “Market Risk” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Item 8. Financial Statements and Supplementary Data
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Management Reports on Internal Control over Financial Reporting
Spire Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Inc.’s management, including ourits Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Inc.’s internal control over financial reporting as of September 30, 2017.2020. In making this assessment, management used the criteria in
Spire Missouri Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Missouri Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Missouri Inc.’s management, including ourits Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Missouri Inc.’s internal control over financial reporting as of September 30, 2017.2020. In making this assessment, management used the criteria in
Spire Alabama Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Spire Alabama Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Alabama Inc.’s management, including ourits Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of Spire Alabama Inc.’s internal control over financial reporting as of September 30, 2017.2020. In making this assessment, management used the criteria in
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors and Shareholders of
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2017,2020, based on criteria established in
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2020, of the Company and our report dated November 18, 2020, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for itstheir assessment of the effectiveness of internal control over financial reporting, included in the accompanying Spire section of Management ReportsReport 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).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’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’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of theits 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 preventedprevent or detected on a timely basis.detect misstatements. 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.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 18, 2020
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Spire Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the Company maintained,financial statements present fairly, in all material respects, effective internal control overthe financial reportingposition of the Company as of September 30, 2017, based on2020 and 2019, and the criteria established in
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedCompany’s internal control over financial statementsreporting as of and for the year ended September 30, 2017
Basis for each of the three years in the period ended September 30, 2017. Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidatedCompany’s financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements
Critical Audit Matter Description
The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities).
The Company is subject to rate regulation by the Missouri, Alabama, and Mississippi Public Service Commissions (the “Commissions”), which have jurisdiction with respect to the rates of natural gas companies within their respective geographies. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.
Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2020, and the judgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:
• | We tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. |
• | We evaluated the Company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. |
• | We read relevant regulatory orders issued by the Commissions for the Company in Missouri, Alabama, and Mississippi; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. |
• | We obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. |
Evaluation of Spire Storage Asset Impairment – Refer to Note 1 to the financial statements
Critical Audit Matter Description
The Company evaluates for impairment long-lived assets classified as held and used when events or changes in circumstance indicate that the carrying value of the respective asset (asset group) may not be recoverable. The carrying value of the asset is not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value of the asset is not recoverable, the Company recognizes an impairment charge equal to the amount of the carrying value of the asset that exceeds the fair value of the asset.
During the year ended September 30, 2020, the Company recorded an impairment loss of $140.8 million related to their Spire Storage West LLC (“Storage”) long-lived assets (the “asset group”) after it was determined that their carrying value was not recoverable due to a revision in future business development plans. The Company measured the impairment loss by estimating the fair value of the asset group using a discounted cash flow model (the “model”). The estimation of fair value required management to make assumptions and apply judgment regarding future cash flows expected to result from the use and eventual disposition of the asset group under various business development plans, future market demand, operational capabilities, and the selection of a discount rate. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period.
We identified the estimation of the fair value of the Storage asset group as a critical audit matter due to the high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions in determining the fair value, including those related to revenue forecasts and the “terminal value” used to determine estimated future cash flows under various business development plans, and the selection of a discount rate.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the estimation of the fair value of the Storage asset group included the following, among others:
• | We tested the effectiveness of management’s controls over the Storage asset impairment evaluation, including those over the key assumptions used in the estimation of the fair value of the asset group, including revenue forecasts, terminal value, and selection of a discount rate. |
• | We evaluated the reasonableness of key assumptions used by management in the fair value determination by: |
o | Comparing revenue and cash flow projections to current executed contracts, capital improvement plans, and third-party reports about future market demand, |
o | Comparing assumed operational capabilities to internal development plans and third-party reports about asset viability, |
o | Comparing the various development plans considered to internal communications to management and the Board of Directors, |
o | Comparing estimated terminal value to comparable precedent transactions involving external parties, and |
o | Performing sensitivity analyses of the key assumptions to evaluate the change in the fair value estimate that would result from changes in the assumptions. |
• | We evaluated the reasonableness of management’s assumptions involving revenue forecasts by determining if the revenue forecasts were consistent with: |
o | Executed storage contracts, |
o | Third-party reports regarding future market demand, value of contracts, and operational capabilities of the Storage sites, and |
o | Various business development plans communicated to management and the Board of Directors of Spire Inc. |
• | We evaluated the reasonableness of management’s assumptions involving terminal value by determining whether the terminal value was consistent with comparable precedent transactions involving external parties. |
• | With the assistance of our fair value specialists, we evaluated the reasonableness of the discounted cash flow model by: |
o | Testing the mathematical accuracy of the model, and |
o | Evaluating the reasonableness of the discount rate used in the model by developing a range of independent estimates and comparing those to the discount rate selected by management. |
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 18, 2020
We have served as the Company’s auditor since 1953.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Spire Missouri Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Spire Missouri Inc. (a wholly owned subsidiary of Spire Inc.) (the "Company") as of September 30, 2020 and 2019, the related statements of comprehensive income, shareholder’s equity, and cash flows, for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, such consolidatedthe financial statements present fairly, in all material respects, the financial position of Spire Inc. and subsidiariesthe Company as of September 30, 20172020 and 2016,2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2017,2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for each of the three years in the period ended September 30, 2017. Opinion
These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of itstheir internal control over financial reporting. OurAs part of our audits, included considerationwe are required to obtain an understanding 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
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements present fairly,
Critical Audit Matter Description
The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities).
The Company is subject to rate regulation by the Missouri Public Service Commission (the “Commission”), which has jurisdiction with respect to the rates of natural gas companies within their geography. The Company has stated that all material respects,regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.
Accounting for the economics of rate regulation affects multiple financial positionstatement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commission will not approve full recovery of Spire Missouri Inc.the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2017 and 2016,2020, and the resultsjudgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of its operations(1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these rate-impacted account balances and its cash flowsdisclosures, and the related judgments, requires specialized knowledge of accounting for eachrate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.
How the three yearsCritical Audit Matter Was Addressed in the period ended September 30, 2017, in conformity with accounting principles generally accepted inAudit
Our audit procedures related to the United Statesuncertainty of America.future decisions by the Commission included the following, among others:
• | We tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. |
• | We evaluated the Company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. |
• | We read relevant regulatory orders issued by the Commission for the Company in Missouri; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. |
• | We obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. |
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 15, 2017
We have served as the Company’s auditor since 1953.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors and Shareholder of
Opinion on the Financial Statements
We have audited the accompanying balance sheets and statements of capitalization of Spire Alabama Inc. (formerly Alabama Gas Corporation) (a wholly owned subsidiary of Spire Inc.) (the “Company”"Company") as of September 30, 20172020 and 2016, and2019, the related statements of income, common shareholder’s equity, and cash flows, for each of the three years in the period ended September 30, 2017. 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of itstheir internal control over financial reporting. OurAs part of our audits, included considerationwe are required to obtain an understanding 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
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements present fairly,
Critical Audit Matter Description
The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities).
The Company is subject to rate regulation by the Alabama Public Service Commission (the “Commission”), which has jurisdiction with respect to the rates of natural gas companies within their geography. The Company has stated that all material respects,regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.
Accounting for the economics of rate regulation affects multiple financial positionstatement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commission will not approve full recovery of Spire Alabama Inc.the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2017 and 2016,2020, and the resultsjudgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of its operations(1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these rate-impacted account balances and its cash flowsdisclosures, and the related judgments, requires specialized knowledge of accounting for eachrate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.
How the three yearsCritical Audit Matter Was Addressed in the period ended September 30, 2017, in conformity with accounting principles generally accepted inAudit
Our audit procedures related to the United Statesuncertainty of America.future decisions by the Commission included the following, among others:
• | We tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. |
• | We evaluated the Company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. |
• | We read relevant regulatory orders issued by the Commission for the Company in Alabama; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. |
• | We obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. |
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 18, 2020
We have served as the Company’s auditor since 2014.
SPIRE INC.
CONSOLIDATED STATEMENTS OF INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions, except per share amounts) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Operating Revenues |
| $ | 1,855.4 |
|
| $ | 1,952.4 |
|
| $ | 1,965.0 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 696.1 |
|
|
| 840.3 |
|
|
| 871.7 |
|
Operation and maintenance |
|
| 458.6 |
|
|
| 474.1 |
|
|
| 477.3 |
|
Depreciation and amortization |
|
| 197.3 |
|
|
| 181.7 |
|
|
| 168.4 |
|
Taxes, other than income taxes |
|
| 148.4 |
|
|
| 154.0 |
|
|
| 153.5 |
|
Impairments |
|
| 148.6 |
|
|
| — |
|
|
| — |
|
Total Operating Expenses |
|
| 1,649.0 |
|
|
| 1,650.1 |
|
|
| 1,670.9 |
|
Operating Income |
|
| 206.4 |
|
|
| 302.3 |
|
|
| 294.1 |
|
Interest Expense, Net |
|
| 105.5 |
|
|
| 104.4 |
|
|
| 98.4 |
|
Other Income (Expense), Net |
|
| 0.1 |
|
|
| 21.2 |
|
|
| (8.0 | ) |
Income Before Income Taxes |
|
| 101.0 |
|
|
| 219.1 |
|
|
| 187.7 |
|
Income Tax Expense (Benefit) |
|
| 12.4 |
|
|
| 34.5 |
|
|
| (26.5 | ) |
Net Income |
|
| 88.6 |
|
|
| 184.6 |
|
|
| 214.2 |
|
Provision for preferred dividends |
|
| 14.8 |
|
|
| 5.3 |
|
|
| - |
|
Income allocated to participating securities |
|
| 0.1 |
|
|
| 0.4 |
|
|
| 0.5 |
|
Net Income Available to Common Shareholders |
| $ | 73.7 |
|
| $ | 178.9 |
|
| $ | 213.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 51.2 |
|
|
| 50.7 |
|
|
| 49.1 |
|
Diluted |
|
| 51.3 |
|
|
| 50.8 |
|
|
| 49.3 |
|
Basic Earnings Per Share of Common Stock |
| $ | 1.44 |
|
| $ | 3.53 |
|
| $ | 4.35 |
|
Diluted Earnings Per Share of Common Stock |
| $ | 1.44 |
|
| $ | 3.52 |
|
| $ | 4.33 |
|
| SPIRE INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (In millions, except per share amounts) | |||||||||||
| Years Ended September 30 | 2017 | 2016 | 2015 | ||||||||
| Operating Revenues: | |||||||||||
| Gas Utility | $ | 1,660.0 | $ | 1,457.2 | $ | 1,891.8 | |||||
| Gas Marketing and other | 80.7 | 80.1 | 84.6 | ||||||||
| Total Operating Revenues | 1,740.7 | 1,537.3 | 1,976.4 | ||||||||
| Operating Expenses: | |||||||||||
| Gas Utility | |||||||||||
| Natural and propane gas | 570.5 | 492.2 | 882.4 | ||||||||
| Other operation and maintenance expenses | 405.0 | 377.5 | 390.6 | ||||||||
| Depreciation and amortization | 153.5 | 136.9 | 129.9 | ||||||||
| Taxes, other than income taxes | 137.8 | 125.2 | 142.1 | ||||||||
| Total Gas Utility Operating Expenses | 1,266.8 | 1,131.8 | 1,545.0 | ||||||||
| Gas Marketing and other | 152.2 | 123.2 | 158.9 | ||||||||
| Total Operating Expenses | 1,419.0 | 1,255.0 | 1,703.9 | ||||||||
| Operating Income | 321.7 | 282.3 | 272.5 | ||||||||
| Other Income – Net | 6.6 | 8.6 | 1.2 | ||||||||
| Interest Charges: | |||||||||||
| Interest on long-term debt | 76.8 | 67.6 | 66.6 | ||||||||
| Other interest charges | 12.3 | 9.6 | 8.0 | ||||||||
| Total Interest Charges | 89.1 | 77.2 | 74.6 | ||||||||
| Income Before Income Taxes | 239.2 | 213.7 | 199.1 | ||||||||
| Income Tax Expense | 77.6 | 69.5 | 62.2 | ||||||||
| Net Income | $ | 161.6 | $ | 144.2 | $ | 136.9 | |||||
| Weighted Average Number of Common Shares Outstanding: | |||||||||||
| Basic | 46.9 | 44.1 | 43.2 | ||||||||
| Diluted | 47.0 | 44.3 | 43.3 | ||||||||
| Basic Earnings Per Share of Common Stock | $ | 3.44 | $ | 3.26 | $ | 3.16 | |||||
| Diluted Earnings Per Share of Common Stock | $ | 3.43 | $ | 3.24 | $ | 3.16 | |||||
See the accompanying
Notes to Financial Statements.SPIRE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net Income |
| $ | 88.6 |
|
| $ | 184.6 |
|
| $ | 214.2 |
|
Other Comprehensive (Loss) Income, Before Tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedging derivative instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Net hedging (loss) gain arising during the period |
|
| (8.9 | ) |
|
| (46.4 | ) |
|
| 3.9 |
|
Amounts reclassified into net income |
|
| (3.2 | ) |
|
| (1.3 | ) |
|
| (1.5 | ) |
Net (loss) gain on cash flow hedging derivative instruments |
|
| (12.1 | ) |
|
| (47.7 | ) |
|
| 2.4 |
|
Defined benefit pension and other postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial (gain) loss included in net periodic pension and postretirement benefit cost |
|
| (0.5 | ) |
|
| (0.9 | ) |
|
| 0.4 |
|
Net defined benefit pension and other postretirement benefit plans |
|
| (0.5 | ) |
|
| (0.9 | ) |
|
| 0.4 |
|
Net unrealized gain on available-for-sale debt securities |
|
| — |
|
|
| 0.1 |
|
|
| 0.3 |
|
Other Comprehensive (Loss) Income, Before Tax |
|
| (12.6 | ) |
|
| (48.5 | ) |
|
| 3.1 |
|
Income Tax (Benefit) Expense Related to Items of Other Comprehensive (Loss) Income |
|
| (2.7 | ) |
|
| (10.8 | ) |
|
| 0.6 |
|
Other Comprehensive (Loss) Income, Net of Tax |
|
| (9.9 | ) |
|
| (37.7 | ) |
|
| 2.5 |
|
Comprehensive Income |
| $ | 78.7 |
|
| $ | 146.9 |
|
| $ | 216.7 |
|
| SPIRE INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||
| (In millions) | |||||||||||
| Years Ended September 30 | 2017 | 2016 | 2015 | ||||||||
| Net Income | $ | 161.6 | $ | 144.2 | $ | 136.9 | |||||
| Other Comprehensive Income (Loss), Before Tax: | |||||||||||
| Cash flow hedging derivative instruments: | |||||||||||
| 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 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 | 0.4 | (0.3 | ) | 0.5 | |||||||
| Loss on available for sale securities | (0.1 | ) | — | — | |||||||
| Other Comprehensive Income (Loss), Before Tax | 11.8 | (3.2 | ) | (0.6 | ) | ||||||
| Income Tax Expense (Benefit) Related to Items of Other Comprehensive Income (Loss) | 4.4 | (1.0 | ) | (0.3 | ) | ||||||
| Other Comprehensive Income (Loss), Net of Tax | 7.4 | (2.2 | ) | (0.3 | ) | ||||||
| Comprehensive Income | $ | 169.0 | $ | 142.0 | $ | 136.6 | |||||
See the accompanying
Notes to Financial Statements.SPIRE INC.
CONSOLIDATED BALANCE SHEETS
|
| September 30 |
| ||||||
(In millions) |
| 2020 |
|
| 2019 |
| |||
ASSETS |
|
|
|
|
|
|
|
| |
Utility Plant |
| $ | 6,766.3 |
|
| $ | 6,146.5 |
| |
Less: Accumulated depreciation and amortization |
|
| 2,086.2 |
|
|
| 1,794.5 |
| |
Net Utility Plant |
|
| 4,680.1 |
|
|
| 4,352.0 |
| |
Non-utility Property (net of accumulated depreciation and amortization of $19.0 and $12.7 at September 30, 2020 and 2019, respectively) |
|
| 432.3 |
|
|
| 477.8 |
| |
Other Investments |
|
| 71.7 |
|
|
| 72.3 |
| |
Total Other Property and Investments |
|
| 504.0 |
|
|
| 550.1 |
| |
Current Assets: |
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
| 4.1 |
|
|
| 5.8 |
| |
Accounts receivable: |
|
|
|
|
|
|
|
| |
Utility |
|
| 131.8 |
|
|
| 139.8 |
| |
Other |
|
| 146.4 |
|
|
| 172.8 |
| |
Allowance for doubtful accounts |
|
| (24.9 | ) |
|
| (23.0 | ) | |
Delayed customer billings |
|
| 10.0 |
|
|
| 4.3 |
| |
Inventories: |
|
|
|
|
|
|
|
| |
Natural gas |
|
| 154.3 |
|
|
| 162.6 |
| |
Propane gas |
|
| 10.7 |
|
|
| 10.7 |
| |
Materials and supplies |
|
| 26.5 |
|
|
| 23.3 |
| |
Regulatory assets |
|
| 69.5 |
|
|
| 78.6 |
| |
Prepayments |
|
| 29.2 |
|
|
| 29.1 |
| |
Other |
|
| 33.0 |
|
|
| 10.5 |
| |
Total Current Assets |
|
| 590.6 |
|
|
| 614.5 |
| |
Deferred Charges and Other Assets: |
|
|
|
|
|
|
|
| |
Goodwill |
|
| 1,171.6 |
|
|
| 1,171.6 |
| |
Regulatory assets |
|
| 1,069.4 |
|
|
| 767.6 |
| |
Other |
|
| 225.5 |
|
|
| 163.4 |
| |
Total Deferred Charges and Other Assets |
|
| 2,466.5 |
|
|
| 2,102.6 |
| |
Total Assets |
| $ | 8,241.2 |
|
| $ | 7,619.2 |
| |
SPIRE INC.
CONSOLIDATED BALANCE SHEETS (Continued)
|
| September 30 |
| |||||
|
| 2020 |
|
| 2019 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Preferred stock ($25.00 par value per share; 10.0 million depositary shares authorized, issued and outstanding at September 30, 2020 and 2019) |
| $ | 242.0 |
|
| $ | 242.0 |
|
Common stock (par value $1.00 per share; 70.0 million shares authorized; 51.6 million issued and outstanding at September 30, 2020, and 51.0 million shares issued and outstanding September 30, 2019) |
|
| 51.6 |
|
|
| 51.0 |
|
Paid-in capital |
|
| 1,549.2 |
|
|
| 1,505.8 |
|
Retained earnings |
|
| 720.7 |
|
|
| 775.5 |
|
Accumulated other comprehensive loss |
|
| (41.2 | ) |
|
| (31.3 | ) |
Total Shareholders' Equity |
|
| 2,522.3 |
|
|
| 2,543.0 |
|
Temporary equity |
|
| 3.4 |
|
|
| 3.4 |
|
Long-term debt (less current portion) |
|
| 2,423.7 |
|
|
| 2,082.6 |
|
Total Capitalization |
|
| 4,949.4 |
|
|
| 4,629.0 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
| 60.4 |
|
|
| 40.0 |
|
Notes payable |
|
| 648.0 |
|
|
| 743.2 |
|
Accounts payable |
|
| 243.3 |
|
|
| 301.5 |
|
Advance customer billings |
|
| 45.3 |
|
|
| 32.6 |
|
Wages and compensation accrued |
|
| 46.3 |
|
|
| 45.7 |
|
Customer deposits |
|
| 30.6 |
|
|
| 35.6 |
|
Taxes accrued |
|
| 71.4 |
|
|
| 68.5 |
|
Regulatory liabilities |
|
| 113.0 |
|
|
| 60.8 |
|
Other |
|
| 190.9 |
|
|
| 140.9 |
|
Total Current Liabilities |
|
| 1,449.2 |
|
|
| 1,468.8 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
| 511.4 |
|
|
| 451.4 |
|
Pension and postretirement benefit costs |
|
| 309.0 |
|
|
| 264.8 |
|
Asset retirement obligations |
|
| 540.1 |
|
|
| 337.6 |
|
Regulatory liabilities |
|
| 343.7 |
|
|
| 399.0 |
|
Other |
|
| 138.4 |
|
|
| 68.6 |
|
Total Deferred Credits and Other Liabilities |
|
| 1,842.6 |
|
|
| 1,521.4 |
|
Commitments and Contingencies (Note 16) |
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities |
| $ | 8,241.2 |
|
| $ | 7,619.2 |
|
| SPIRE INC. | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (In millions) | |||||||
| September 30 | 2017 | 2016 | |||||
| ASSETS | |||||||
| Utility Plant | $ | 5,278.4 | $ | 4,793.6 | |||
| Less: Accumulated depreciation and amortization | 1,613.2 | 1,506.4 | |||||
| Net Utility Plant | 3,665.2 | 3,287.2 | |||||
| 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 | 1,171.6 | 1,164.9 | |||||
| Other investments | 64.2 | 62.1 | |||||
| Other Property and Investments | 1,287.8 | 1,240.7 | |||||
| Current Assets: | |||||||
| Cash and cash equivalents | 7.4 | 5.2 | |||||
| Accounts receivable: | |||||||
| Utility | 140.5 | 127.8 | |||||
| Other | 149.2 | 113.4 | |||||
| Allowance for doubtful accounts | (18.3 | ) | (20.5 | ) | |||
| Delayed customer billings | 3.4 | 1.6 | |||||
| Inventories: | |||||||
| Natural gas | 194.9 | 174.0 | |||||
| Propane gas | 12.0 | 12.0 | |||||
| Materials and supplies | 18.9 | 16.3 | |||||
| Natural gas receivable | 1.9 | 9.7 | |||||
| Derivative instrument assets | 5.9 | 11.4 | |||||
| Unamortized purchased gas adjustments | 102.6 | 49.7 | |||||
| Other regulatory assets | 72.9 | 44.2 | |||||
| Prepayments and other | 34.2 | 24.8 | |||||
| Total Current Assets | 725.5 | 569.6 | |||||
| Deferred Charges: | |||||||
| Regulatory assets | 791.1 | 838.0 | |||||
| Other | 77.1 | 128.9 | |||||
| Total Deferred Charges | 868.2 | 966.9 | |||||
| Total Assets | $ | 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 | |||||
Commitments and Contingencies (Note 16) | |||||||
| Total Capitalization and Liabilities | $ | 6,546.7 | $ | 6,064.4 | |||
See the accompanying
Notes to Financial Statements.SPIRE INC.
(Dollars in millions, |
| Common Stock |
|
| Preferred |
|
| Paid-in |
|
| Retained |
|
|
|
|
|
|
|
|
| ||||||||
except per share amounts) |
| Shares |
|
| Par |
|
| Stock |
|
| Capital |
|
| Earnings |
|
| AOCI* |
|
| Total |
| |||||||
Balance at September 30, 2017 |
|
| 48,263,243 |
|
| $ | 48.3 |
|
| $ | — |
|
| $ | 1,325.6 |
|
| $ | 614.2 |
|
| $ | 3.2 |
|
| $ | 1,991.3 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 214.2 |
|
|
| — |
|
|
| 214.2 |
|
Common stock issued |
|
| 2,300,000 |
|
|
| 2.3 |
|
|
| — |
|
|
| 150.7 |
|
|
| — |
|
|
| — |
|
|
| 153.0 |
|
Dividend reinvestment plan |
|
| 23,023 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.7 |
|
|
| — |
|
|
| — |
|
|
| 7.7 |
|
Stock issued under stock-based compensation plans |
|
| 119,592 |
|
|
| 0.1 |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Employees’ tax withholding for stock-based compensation |
|
| (33,955 | ) |
|
| — |
|
|
| — |
|
|
| (2.8 | ) |
|
| — |
|
|
| — |
|
|
| (2.8 | ) |
Dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($2.25 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (112.1 | ) |
|
| — |
|
|
| (112.1 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2.5 |
|
|
| 2.5 |
|
Reclassification of certain income tax effects |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.7 | ) |
|
| 0.7 |
|
|
| — |
|
Balance at September 30, 2018 |
|
| 50,671,903 |
|
| $ | 50.7 |
|
| $ | — |
|
| $ | 1,482.7 |
|
| $ | 715.6 |
|
| $ | 6.4 |
|
| $ | 2,255.4 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 184.6 |
|
|
| — |
|
|
| 184.6 |
|
Common stock issued |
|
| 179,630 |
|
|
| 0.2 |
|
|
| — |
|
|
| 14.2 |
|
|
| — |
|
|
| — |
|
|
| 14.4 |
|
Dividend reinvestment plan |
|
| 62,735 |
|
|
| — |
|
|
| — |
|
|
| 5.1 |
|
|
| — |
|
|
| — |
|
|
| 5.1 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6.2 |
|
|
| — |
|
|
| — |
|
|
| 6.2 |
|
Stock issued under stock-based compensation plans |
|
| 87,978 |
|
|
| 0.1 |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Employees’ tax withholding for stock-based compensation |
|
| (28,731 | ) |
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
Temporary equity adjustment to redemption value |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
|
| — |
|
|
| (0.8 | ) |
Preferred stock issued |
|
| — |
|
|
| — |
|
|
| 242.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 242.0 |
|
Dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($2.37 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (120.5 | ) |
|
| — |
|
|
| (120.5 | ) |
Preferred stock ($0.344 per depositary share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3.4 | ) |
|
| — |
|
|
| (3.4 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37.7 | ) |
|
| (37.7 | ) |
Balance at September 30, 2019 |
|
| 50,973,515 |
|
| $ | 51.0 |
|
| $ | 242.0 |
|
| $ | 1,505.8 |
|
| $ | 775.5 |
|
| $ | (31.3 | ) |
| $ | 2,543.0 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 88.6 |
|
|
| — |
|
|
| 88.6 |
|
Common stock issued |
|
| 446,619 |
|
|
| 0.4 |
|
|
| — |
|
|
| 31.6 |
|
|
| — |
|
|
| — |
|
|
| 32.0 |
|
Dividend reinvestment plan |
|
| 122,545 |
|
|
| 0.1 |
|
|
| — |
|
|
| 9.1 |
|
|
| — |
|
|
| — |
|
|
| 9.2 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6.0 |
|
|
| — |
|
|
| — |
|
|
| 6.0 |
|
Stock issued under stock-based compensation plans |
|
| 110,463 |
|
|
| 0.1 |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Employees’ tax withholding for stock-based compensation |
|
| (41,353 | ) |
|
| — |
|
|
| — |
|
|
| (3.2 | ) |
|
| — |
|
|
| — |
|
|
| (3.2 | ) |
Temporary equity adjustment to redemption value |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.4 |
|
|
| — |
|
|
| 3.4 |
|
Dividends declared: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock ($2.49 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (128.4 | ) |
|
| — |
|
|
| (128.4 | ) |
Preferred stock ($1.84375 per depositary share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18.4 | ) |
|
| — |
|
|
| (18.4 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9.9 | ) |
|
| (9.9 | ) |
Balance at September 30, 2020 |
|
| 51,611,789 |
|
| $ | 51.6 |
|
| $ | 242.0 |
|
| $ | 1,549.2 |
|
| $ | 720.7 |
|
| $ | (41.2 | ) |
| $ | 2,522.3 |
|
| 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 | |||
SPIRE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 88.6 |
|
| $ | 184.6 |
|
| $ | 214.2 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 197.3 |
|
|
| 181.7 |
|
|
| 168.4 |
|
Impairments |
|
| 148.6 |
|
|
| — |
|
|
| — |
|
Deferred income taxes and investment tax credits |
|
| 9.0 |
|
|
| 31.8 |
|
|
| (28.7 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 36.2 |
|
|
| 2.7 |
|
|
| (32.7 | ) |
Inventories |
|
| 2.6 |
|
|
| 13.6 |
|
|
| 15.5 |
|
Regulatory assets and liabilities |
|
| 0.6 |
|
|
| — |
|
|
| 191.0 |
|
Accounts payable |
|
| (43.1 | ) |
|
| (6.4 | ) |
|
| 12.6 |
|
Delayed/advance customer billings, net |
|
| 7.0 |
|
|
| 12.4 |
|
|
| (12.8 | ) |
Taxes accrued |
|
| 2.9 |
|
|
| 3.5 |
|
|
| 6.4 |
|
Other assets and liabilities |
|
| 12.0 |
|
|
| 31.0 |
|
|
| (121.2 | ) |
Other |
|
| 8.2 |
|
|
| (4.0 | ) |
|
| 43.9 |
|
Net cash provided by operating activities |
|
| 469.9 |
|
|
| 450.9 |
|
|
| 456.6 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (638.4 | ) |
|
| (823.3 | ) |
|
| (499.4 | ) |
Other business acquisitions |
|
| — |
|
|
| (7.9 | ) |
|
| (28.1 | ) |
Other |
|
| 6.8 |
|
|
| (7.1 | ) |
|
| (4.2 | ) |
Net cash used in investing activities |
|
| (631.6 | ) |
|
| (838.3 | ) |
|
| (531.7 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock |
|
| — |
|
|
| 242.0 |
|
|
| — |
|
Issuance of long-term debt |
|
| 510.0 |
|
|
| 230.0 |
|
|
| 75.0 |
|
Repayment of long-term debt |
|
| (147.0 | ) |
|
| (184.1 | ) |
|
| (105.0 | ) |
(Repayment) issuance of short-term debt, net |
|
| (95.2 | ) |
|
| 189.6 |
|
|
| 76.3 |
|
Issuance of common stock |
|
| 41.1 |
|
|
| 19.5 |
|
|
| 154.7 |
|
Dividends paid on common stock |
|
| (128.0 | ) |
|
| (119.0 | ) |
|
| (108.7 | ) |
Dividends paid on preferred stock |
|
| (14.8 | ) |
|
| (3.4 | ) |
|
| — |
|
Other |
|
| (6.1 | ) |
|
| (2.8 | ) |
|
| (3.2 | ) |
Net cash provided by financing activities |
|
| 160.0 |
|
|
| 371.8 |
|
|
| 89.1 |
|
Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash |
|
| (1.7 | ) |
|
| (15.6 | ) |
|
| 14.0 |
|
Cash, Cash Equivalents, and Restricted Cash at Beginning of Year |
|
| 5.8 |
|
|
| 21.4 |
|
|
| 7.4 |
|
Cash, Cash Equivalents, and Restricted Cash at End of Year |
| $ | 4.1 |
|
| $ | 5.8 |
|
| $ | 21.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
| $ | (100.0 | ) |
| $ | (102.4 | ) |
| $ | (95.1 | ) |
Income taxes |
|
| (2.9 | ) |
|
| (2.7 | ) |
|
| (1.5 | ) |
| 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 | |||||||||||
See the accompanying Notes to Financial Statements.
SPIRE MISSOURI INC.
STATEMENTS OF COMPREHENSIVE INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Operating Revenues |
| $ | 1,193.6 |
|
| $ | 1,291.8 |
|
| $ | 1,285.6 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 515.8 |
|
|
| 629.8 |
|
|
| 636.8 |
|
Operation and maintenance |
|
| 251.0 |
|
|
| 268.1 |
|
|
| 279.1 |
|
Depreciation and amortization |
|
| 118.0 |
|
|
| 111.5 |
|
|
| 102.8 |
|
Taxes, other than income taxes |
|
| 103.2 |
|
|
| 107.6 |
|
|
| 108.4 |
|
Total Operating Expenses |
|
| 988.0 |
|
|
| 1,117.0 |
|
|
| 1,127.1 |
|
Operating Income |
|
| 205.6 |
|
|
| 174.8 |
|
|
| 158.5 |
|
Interest Expense, Net |
|
| 49.4 |
|
|
| 49.2 |
|
|
| 46.4 |
|
Other (Expense) Income, Net |
|
| (8.7 | ) |
|
| 2.7 |
|
|
| (15.4 | ) |
Income Before Income Taxes |
|
| 147.5 |
|
|
| 128.3 |
|
|
| 96.7 |
|
Income Tax Expense (Benefit) |
|
| 17.3 |
|
|
| 13.3 |
|
|
| (32.6 | ) |
Net Income |
|
| 130.2 |
|
|
| 115.0 |
|
|
| 129.3 |
|
Other Comprehensive (Loss) Income, Net of Tax |
|
| (0.5 | ) |
|
| (0.8 | ) |
|
| 0.4 |
|
Comprehensive Income |
| $ | 129.7 |
|
| $ | 114.2 |
|
| $ | 129.7 |
|
See the accompanying Notes to Financial Statements.
SPIRE MISSOURI INC.
BALANCE SHEETS
|
| September 30 |
| |||||
(In millions) |
| 2020 |
|
| 2019 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility Plant |
| $ | 3,931.2 |
|
| $ | 3,643.2 |
|
Less: Accumulated depreciation and amortization |
|
| 825.7 |
|
|
| 764.1 |
|
Net Utility Plant |
|
| 3,105.5 |
|
|
| 2,879.1 |
|
Other Property and Investments |
|
| 56.7 |
|
|
| 53.3 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 0 |
|
|
| 2.6 |
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Utility |
|
| 92.5 |
|
|
| 94.6 |
|
Associated companies |
|
| 2.7 |
|
|
| 1.4 |
|
Other |
|
| 34.1 |
|
|
| 26.5 |
|
Allowance for doubtful accounts |
|
| (18.1 | ) |
|
| (14.9 | ) |
Delayed customer billings |
|
| 2.4 |
|
|
| 4.3 |
|
Inventories: |
|
|
|
|
|
|
|
|
Natural gas |
|
| 95.1 |
|
|
| 100.1 |
|
Propane gas |
|
| 10.7 |
|
|
| 10.7 |
|
Materials and supplies |
|
| 15.6 |
|
|
| 13.3 |
|
Regulatory assets |
|
| 32.1 |
|
|
| 29.4 |
|
Prepayments |
|
| 20.7 |
|
|
| 18.2 |
|
Total Current Assets |
|
| 287.8 |
|
|
| 286.2 |
|
Deferred Charges and Other Assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
| 210.2 |
|
|
| 210.2 |
|
Regulatory assets |
|
| 548.7 |
|
|
| 507.5 |
|
Other |
|
| 96.0 |
|
|
| 85.6 |
|
Total Deferred Charges and Other Assets |
|
| 854.9 |
|
|
| 803.3 |
|
Total Assets |
| $ | 4,304.9 |
|
| $ | 4,021.9 |
|
SPIRE MISSOURI INC.
BALANCE SHEETS (continued)
|
| September 30 |
| |||||
|
| 2020 |
|
| 2019 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Common stock (par value $1.00 per share; 50.0 million shares authorized; 24,577 issued and outstanding at September 30, 2020 and 2019) |
| $ | 0.1 |
|
| $ | 0.1 |
|
Paid-in capital |
|
| 765.0 |
|
|
| 765.0 |
|
Retained earnings |
|
| 672.9 |
|
|
| 576.6 |
|
Accumulated other comprehensive loss |
|
| (2.9 | ) |
|
| (2.4 | ) |
Total Shareholders' Equity |
|
| 1,435.1 |
|
|
| 1,339.3 |
|
Long-term debt |
|
| 1,092.0 |
|
|
| 925.0 |
|
Total Capitalization |
|
| 2,527.1 |
|
|
| 2,264.3 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Notes payable – associated companies |
|
| 301.2 |
|
|
| 386.4 |
|
Accounts payable |
|
| 66.7 |
|
|
| 75.7 |
|
Accounts payable – associated companies |
|
| 9.3 |
|
|
| 5.5 |
|
Advance customer billings |
|
| 32.7 |
|
|
| 20.8 |
|
Wages and compensation accrued |
|
| 33.3 |
|
|
| 34.5 |
|
Customer deposits |
|
| 9.3 |
|
|
| 13.4 |
|
Taxes accrued |
|
| 39.1 |
|
|
| 36.4 |
|
Regulatory liabilities |
|
| 103.2 |
|
|
| 52.3 |
|
Other |
|
| 39.9 |
|
|
| 26.4 |
|
Total Current Liabilities |
|
| 634.7 |
|
|
| 651.4 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Deferred income taxes |
|
| 434.7 |
|
|
| 364.6 |
|
Pension and postretirement benefit costs |
|
| 217.2 |
|
|
| 192.4 |
|
Asset retirement obligations |
|
| 153.4 |
|
|
| 173.5 |
|
Regulatory liabilities |
|
| 274.8 |
|
|
| 326.5 |
|
Other |
|
| 63.0 |
|
|
| 49.2 |
|
Total Deferred Credits and Other Liabilities |
|
| 1,143.1 |
|
|
| 1,106.2 |
|
Commitments and Contingencies (Note 16) |
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities |
| $ | 4,304.9 |
|
| $ | 4,021.9 |
|
See the accompanying Notes to Financial Statements.
SPIRE MISSOURI INC.
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
|
|
|
|
|
|
|
| |||||||
(Dollars in millions) |
| Shares |
|
| Par |
|
| Capital |
|
| Earnings |
|
| AOCI* |
|
| Total |
| ||||||
Balance at September 30, 2017 |
|
| 24,577 |
|
| $ | 0.1 |
|
| $ | 756.1 |
|
| $ | 416.5 |
|
| $ | (1.7 | ) |
| $ | 1,171.0 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129.3 |
|
|
| — |
|
|
| 129.3 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| 4.2 |
|
|
| — |
|
|
| — |
|
|
| 4.2 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (45.0 | ) |
|
| — |
|
|
| (45.0 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.4 |
|
|
| 0.4 |
|
Reclassification of certain income tax effects |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
|
| (0.3 | ) |
|
| — |
|
Balance at September 30, 2018 |
|
| 24,577 |
|
|
| 0.1 |
|
|
| 760.3 |
|
|
| 501.1 |
|
|
| (1.6 | ) |
|
| 1,259.9 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 115.0 |
|
|
| — |
|
|
| 115.0 |
|
Stock-based compensation costs |
|
| — |
|
|
| — |
|
|
| 4.7 |
|
|
| — |
|
|
| — |
|
|
| 4.7 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (39.5 | ) |
|
| — |
|
|
| (39.5 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
|
| (0.8 | ) |
Balance at September 30, 2019 |
|
| 24,577 |
|
|
| 0.1 |
|
|
| 765.0 |
|
|
| 576.6 |
|
|
| (2.4 | ) |
|
| 1,339.3 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 130.2 |
|
|
| — |
|
|
| 130.2 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33.9 | ) |
|
| — |
|
|
| (33.9 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.5 | ) |
|
| (0.5 | ) |
Balance at September 30, 2020 |
|
| 24,577 |
|
| $ | 0.1 |
|
| $ | 765.0 |
|
| $ | 672.9 |
|
| $ | (2.9 | ) |
| $ | 1,435.1 |
|
*Accumulated other comprehensive income (loss)
See the accompanying
| 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 | |||||||
SPIRE MISSOURI INC.
STATEMENTS OF CASH FLOWS
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 130.2 |
|
| $ | 115.0 |
|
| $ | 129.3 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 118.0 |
|
|
| 111.5 |
|
|
| 102.8 |
|
Deferred income taxes and investment tax credits |
|
| 17.1 |
|
|
| 13.2 |
|
|
| (32.6 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (3.7 | ) |
|
| (0.3 | ) |
|
| (2.0 | ) |
Inventories |
|
| 2.7 |
|
|
| 29.0 |
|
|
| 8.4 |
|
Regulatory assets and liabilities |
|
| 27.3 |
|
|
| 32.7 |
|
|
| 141.5 |
|
Accounts payable |
|
| 2.3 |
|
|
| (8.4 | ) |
|
| (14.8 | ) |
Delayed/advance customer billings, net |
|
| 13.7 |
|
|
| 13.9 |
|
|
| (7.4 | ) |
Taxes accrued |
|
| 2.7 |
|
|
| 4.4 |
|
|
| (2.1 | ) |
Other assets and liabilities |
|
| (6.1 | ) |
|
| (2.6 | ) |
|
| (83.9 | ) |
Other |
|
| 0.6 |
|
|
| 5.2 |
|
|
| 45.0 |
|
Net cash provided by operating activities |
|
| 304.8 |
|
|
| 313.6 |
|
|
| 284.2 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (356.0 | ) |
|
| (356.9 | ) |
|
| (295.8 | ) |
Other |
|
| 1.3 |
|
|
| 1.3 |
|
|
| 4.8 |
|
Net cash used in investing activities |
|
| (354.7 | ) |
|
| (355.6 | ) |
|
| (291.0 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of first mortgage bonds / long-term debt |
|
| 275.0 |
|
|
| 100.0 |
|
|
| — |
|
Redemption / maturity of first mortgage bonds / long-term debt |
|
| (107.0 | ) |
|
| (50.0 | ) |
|
| (100.0 | ) |
(Repayments of) borrowings from Spire, net |
|
| (85.2 | ) |
|
| 41.1 |
|
|
| 142.3 |
|
Dividends paid on common stock |
|
| (33.9 | ) |
|
| (48.5 | ) |
|
| (36.0 | ) |
Other |
|
| (1.6 | ) |
|
| — |
|
|
| — |
|
Net cash provided by financing activities |
|
| 47.3 |
|
|
| 42.6 |
|
|
| 6.3 |
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
| (2.6 | ) |
|
| 0.6 |
|
|
| (0.5 | ) |
Cash and Cash Equivalents at Beginning of Year |
|
| 2.6 |
|
|
| 2.0 |
|
|
| 2.5 |
|
Cash and Cash Equivalents at End of Year |
| $ | — |
|
| $ | 2.6 |
|
| $ | 2.0 |
|
Supplemental disclosure of cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
| $ | (46.0 | ) |
| $ | (48.7 | ) |
| $ | (45.6 | ) |
Income taxes |
|
| 0 |
|
|
| 0 |
|
|
| 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 | |||||
SPIRE ALABAMA INC.
STATEMENTS OF INCOME
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Operating Revenues |
| $ | 455.0 |
|
| $ | 465.5 |
|
| $ | 500.7 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 118.9 |
|
|
| 135.5 |
|
|
| 176.0 |
|
Operation and maintenance |
|
| 139.1 |
|
|
| 142.6 |
|
|
| 138.8 |
|
Depreciation and amortization |
|
| 59.3 |
|
|
| 56.2 |
|
|
| 53.2 |
|
Taxes, other than income taxes |
|
| 34.8 |
|
|
| 35.7 |
|
|
| 36.1 |
|
Total Operating Expenses |
|
| 352.1 |
|
|
| 370.0 |
|
|
| 404.1 |
|
Operating Income |
|
| 102.9 |
|
|
| 95.5 |
|
|
| 96.6 |
|
Interest Expense, Net |
|
| 20.6 |
|
|
| 21.7 |
|
|
| 17.3 |
|
Other Income, Net |
|
| 5.4 |
|
|
| 7.0 |
|
|
| 3.6 |
|
Income Before Income Taxes |
|
| 87.7 |
|
|
| 80.8 |
|
|
| 82.9 |
|
Income Tax Expense |
|
| 22.0 |
|
|
| 20.5 |
|
|
| 81.6 |
|
Net Income |
| $ | 65.7 |
|
| $ | 60.3 |
|
| $ | 1.3 |
|
| 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 | |||||
See the accompanying
Notes to Financial Statements.SPIRE ALABAMA INC.
BALANCE SHEETS
|
| September 30 |
| |||||
(In millions) |
| 2020 |
|
| 2019 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Utility Plant |
| $ | 2,469.9 |
|
| $ | 2,138.0 |
|
Less: Accumulated depreciation and amortization |
|
| 1,117.0 |
|
|
| 882.1 |
|
Net Utility Plant |
|
| 1,352.9 |
|
|
| 1,255.9 |
|
Current Assets: |
|
|
|
|
|
|
|
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Utility |
|
| 31.4 |
|
|
| 37.5 |
|
Associated companies |
|
| 0.6 |
|
|
| 0 |
|
Other |
|
| 5.8 |
|
|
| 8.5 |
|
Allowance for doubtful accounts |
|
| (5.5 | ) |
|
| (6.3 | ) |
Delayed customer billings |
|
| 7.5 |
|
|
| 0 |
|
Inventories: |
|
|
|
|
|
|
|
|
Natural gas |
|
| 22.5 |
|
|
| 35.1 |
|
Materials and supplies |
|
| 8.4 |
|
|
| 7.8 |
|
Regulatory assets |
|
| 20.4 |
|
|
| 33.9 |
|
Prepayments |
|
| 4.3 |
|
|
| 5.3 |
|
Other |
|
| 0.2 |
|
|
| 0.4 |
|
Total Current Assets |
|
| 95.6 |
|
|
| 122.2 |
|
Deferred Charges and Other Assets: |
|
|
|
|
|
|
|
|
Regulatory assets |
|
| 489.9 |
|
|
| 231.2 |
|
Deferred income tax |
|
| 59.3 |
|
|
| 81.3 |
|
Other |
|
| 53.7 |
|
|
| 53.0 |
|
Total Deferred Charges and Other Assets |
|
| 602.9 |
|
|
| 365.5 |
|
Total Assets |
| $ | 2,051.4 |
|
| $ | 1,743.6 |
|
SPIRE ALABAMA INC.
BALANCE SHEETS (continued)
|
| September 30 |
| |||||
|
| 2020 |
|
| 2019 |
| ||
CAPITALIZATION AND LIABILITIES |
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Common stock and paid-in capital (par value $0.01 per share; 3,000,000 shares authorized; 1,972,052 issued and outstanding at September 30, 2020 and 2019) |
| $ | 350.9 |
|
| $ | 370.9 |
|
Retained earnings |
|
| 500.8 |
|
|
| 459.1 |
|
Total Shareholders' Equity |
|
| 851.7 |
|
|
| 830.0 |
|
Long-term debt (less current portion) |
|
| 471.8 |
|
|
| 372.2 |
|
Total Capitalization |
|
| 1,323.5 |
|
|
| 1,202.2 |
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
| 0 |
|
|
| 40.0 |
|
Notes payable – associated companies |
|
| 121.3 |
|
|
| 128.7 |
|
Accounts payable |
|
| 43.7 |
|
|
| 56.2 |
|
Accounts payable – associated companies |
|
| 4.2 |
|
|
| 1.6 |
|
Advance customer billings |
|
| 11.5 |
|
|
| 10.6 |
|
Wages and compensation accrued |
|
| 8.0 |
|
|
| 8.0 |
|
Customer deposits |
|
| 18.7 |
|
|
| 19.5 |
|
Taxes accrued |
|
| 28.0 |
|
|
| 27.4 |
|
Regulatory liabilities |
|
| 3.9 |
|
|
| 3.4 |
|
Other |
|
| 11.8 |
|
|
| 9.2 |
|
Total Current Liabilities |
|
| 251.1 |
|
|
| 304.6 |
|
Deferred Credits and Other Liabilities: |
|
|
|
|
|
|
|
|
Pension and postretirement benefit costs |
|
| 74.9 |
|
|
| 59.2 |
|
Asset retirement obligations |
|
| 374.3 |
|
|
| 148.7 |
|
Regulatory liabilities |
|
| 18.5 |
|
|
| 23.0 |
|
Other |
|
| 9.1 |
|
|
| 5.9 |
|
Total Deferred Credits and Other Liabilities |
|
| 476.8 |
|
|
| 236.8 |
|
Commitments and Contingencies (Note 16) |
|
|
|
|
|
|
|
|
Total Capitalization and Liabilities |
| $ | 2,051.4 |
|
| $ | 1,743.6 |
|
| 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 | |||||
Commitments and Contingencies (Note 16) | |||||||
| Total Capitalization and Liabilities | $ | 3,631.5 | $ | 3,296.4 | |||
See the accompanying
Notes to Financial Statements.SPIRE ALABAMA INC.
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
|
|
|
| |||||||
(Dollars in millions) |
| Shares |
|
| Par |
|
| Capital |
|
| Earnings |
|
| Total |
| |||||
Balance at September 30, 2017 |
|
| 1,972,052 |
|
| $ | — |
|
| $ | 420.9 |
|
| $ | 446.5 |
|
| $ | 867.4 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.3 |
|
|
| 1.3 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30.0 | ) |
|
| (30.0 | ) |
Return of capital to Spire |
|
| — |
|
|
| — |
|
|
| (30.0 | ) |
|
| — |
|
|
| (30.0 | ) |
Balance at September 30, 2018 |
|
| 1,972,052 |
|
|
| — |
|
|
| 390.9 |
|
|
| 417.8 |
|
|
| 808.7 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60.3 |
|
|
| 60.3 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19.0 | ) |
|
| (19.0 | ) |
Return of capital to Spire |
|
| — |
|
|
| — |
|
|
| (20.0 | ) |
|
| — |
|
|
| (20.0 | ) |
Balance at September 30, 2019 |
|
| 1,972,052 |
|
|
| — |
|
|
| 370.9 |
|
|
| 459.1 |
|
|
| 830.0 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 65.7 |
|
|
| 65.7 |
|
Dividends declared |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24.0 | ) |
|
| (24.0 | ) |
Return of capital to Spire |
|
| — |
|
|
| — |
|
|
| (20.0 | ) |
|
| — |
|
|
| (20.0 | ) |
Balance at September 30, 2020 |
|
| 1,972,052 |
|
| $ | — |
|
| $ | 350.9 |
|
| $ | 500.8 |
|
| $ | 851.7 |
|
| 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 | |||
See the accompanying
Notes to Financial Statements.SPIRE ALABAMA INC.
STATEMENTS OF CASH FLOWS
|
| Years Ended September 30 |
| |||||||||
(In millions) |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 65.7 |
|
| $ | 60.3 |
|
| $ | 1.3 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 59.3 |
|
|
| 56.2 |
|
|
| 53.2 |
|
Deferred income taxes |
|
| 22.0 |
|
|
| 20.5 |
|
|
| 81.6 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 7.3 |
|
|
| 0.8 |
|
|
| (16.2 | ) |
Inventories |
|
| 11.9 |
|
|
| (1.2 | ) |
|
| (1.2 | ) |
Regulatory assets and liabilities |
|
| (23.5 | ) |
|
| (28.2 | ) |
|
| 40.7 |
|
Accounts payable |
|
| (15.1 | ) |
|
| 4.5 |
|
|
| 4.7 |
|
Delayed/advance customer billings |
|
| (6.6 | ) |
|
| (2.5 | ) |
|
| (5.5 | ) |
Taxes accrued |
|
| 0.6 |
|
|
| (0.9 | ) |
|
| 4.9 |
|
Other assets and liabilities |
|
| 18.9 |
|
|
| 34.8 |
|
|
| (16.7 | ) |
Other |
|
| 0.2 |
|
|
| (3.2 | ) |
|
| (0.7 | ) |
Net cash provided by operating activities |
|
| 140.7 |
|
|
| 141.1 |
|
|
| 146.1 |
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (150.4 | ) |
|
| (174.5 | ) |
|
| (131.7 | ) |
Other |
|
| 1.6 |
|
|
| (3.3 | ) |
|
| (1.6 | ) |
Net cash used in investing activities |
|
| (148.8 | ) |
|
| (177.8 | ) |
|
| (133.3 | ) |
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of long-term debt |
|
| 100.0 |
|
|
| 90.0 |
|
|
| 75.0 |
|
Repayment of long-term debt, net |
|
| (40.0 | ) |
|
| 0 |
|
|
| 0 |
|
(Repayments of) borrowings from Spire, net |
|
| (7.4 | ) |
|
| (13.8 | ) |
|
| (27.4 | ) |
Return of capital to Spire |
|
| (20.0 | ) |
|
| (20.0 | ) |
|
| (30.0 | ) |
Dividends paid |
|
| (24.0 | ) |
|
| (19.0 | ) |
|
| (30.0 | ) |
Other |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| (0.5 | ) |
Net cash provided by (used in) financing activities |
|
| 8.1 |
|
|
| 36.7 |
|
|
| (12.9 | ) |
Net Decrease in Cash and Cash Equivalents |
|
| 0 |
|
|
| 0 |
|
|
| (0.1 | ) |
Cash and Cash Equivalents at Beginning of Year |
|
| 0 |
|
|
| 0 |
|
|
| 0.1 |
|
Cash and Cash Equivalents at End of Year |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
| $ | (19.0 | ) |
| $ | (19.2 | ) |
| $ | (15.1 | ) |
Income taxes |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
| 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 | ||||||||||
See the accompanying
| SPIRE MISSOURI INC. | |||||||||||
| STATEMENTS OF CASH FLOWS | |||||||||||
| (In millions) | |||||||||||
| Years Ended September 30 | 2017 | 2016 | 2015 | ||||||||
| Operating Activities: | |||||||||||
| Net Income | $ | 113.0 | $ | 105.9 | $ | 105.3 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 93.1 | 88.6 | 82.6 | ||||||||
| Deferred income taxes and investment tax credits | 47.5 | 45.3 | 45.4 | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable – net | (20.5 | ) | 35.7 | 9.9 | |||||||
| Unamortized purchased gas adjustments | (11.6 | ) | (18.7 | ) | 21.3 | ||||||
| Accounts payable | 16.8 | 0.9 | (11.4 | ) | |||||||
| Delayed/advance customer billings – net | (37.6 | ) | 24.9 | 17.9 | |||||||
| Taxes accrued | 5.0 | 4.9 | (14.6 | ) | |||||||
| Inventories | (13.0 | ) | 11.0 | 51.2 | |||||||
| Other assets and liabilities | (11.6 | ) | (29.6 | ) | (32.8 | ) | |||||
| Other | 1.6 | 2.3 | 2.8 | ||||||||
| Net cash provided by operating activities | 182.7 | 271.2 | 277.6 | ||||||||
| Investing Activities: | |||||||||||
| Capital expenditures | (282.2 | ) | (197.8 | ) | (198.6 | ) | |||||
| Other | 1.1 | 1.1 | 2.9 | ||||||||
| Net cash used in investing activities | (281.1 | ) | (196.7 | ) | (195.7 | ) | |||||
| Financing Activities: | |||||||||||
| 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 | (28.7 | ) | (84.8 | ) | (78.7 | ) | |||||
| Other | (1.8 | ) | — | 0.5 | |||||||
| 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 | 2.1 | 1.7 | 3.7 | ||||||||
| Cash and Cash Equivalents at End of Year | $ | 2.5 | $ | 2.1 | $ | 1.7 | |||||
| Supplemental disclosure of cash (paid) refunded for: | |||||||||||
| Interest | $ | (38.6 | ) | $ | (35.7 | ) | $ | (31.0 | ) | ||
| Income taxes | — | 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 | |||||
| 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 | |||||
Commitments and Contingencies (Note 16) | |||||||
| 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 | |||
| 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 | |||||||||
| 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 | — | ||||||||
SPIRE INC., SPIRE MISSOURI INC., AND SPIRE ALABAMA INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share, per unit and per gallon amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
–These notes are an integral part of the accompanying audited financial statements of Spire Inc. (“Spire” or the “Company”) presented on a consolidated basis,The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
NATURE OF OPERATIONS
– SpireUSE OF ESTIMATES
– The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.SYSTEM OF ACCOUNTS –
The accounts of the Utilities are maintained in accordance with the Uniform System of Accounts prescribed by the applicable state public service commissions, which systems substantially conform to that prescribed by the Federal Energy Regulatory Commission (FERC).PROPERTY, PLANT, AND EQUIPMENT
–Utility Plant
– Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct labor and materials, allocable overheads and an allowance for funds used during construction. The costs of units of property retired, replaced or renewed are removed from utility plant and are charged to accumulated depreciation. Maintenance and repairs of property and replacement and renewal of items determined to be less than units of property are charged to maintenance expenses.For Spire Missouri, utility plant is depreciated on a straight-line basis at rates based on estimated service lives of the various classes of property. In fiscal year 2020, the average depreciation and amortization expense averaged 2.9%, while in fiscal years 2017, 20162019 and 2015,2018, annual depreciation and amortization expense averaged 3.0% of the original cost of depreciable and amortizable property.
For Spire Alabama, depreciation is provided using the composite method of depreciation on a straight-line basis over the estimated useful lives of utility property at rates approved by the Alabama Public Service Commission (APSC). The composite depreciation rate isin fiscal years 2020, 2019 and 2018 was approximately 3.1%.
Non-utility Property
– Non-utility property is recorded at the original cost of acquisition or construction, which includes material, labor, contractor services and, for FERC-regulated projects, an allowance for funds used during construction. Repairs, replacements and renewals of items of property determined to be less than a unit of property or that do not increase the property’s life or functionality are charged to maintenance expense. Upon retirement or sale of non-utility property, the original cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in the income statements. Costs related to software developed or obtained for internal use are capitalized and amortized on a straight-line basis over the estimated useful life of the related software. If software is retired prior to being fully amortized, the difference is recorded as a loss in the income statements.Accrued Capital Expenditures
– Accrued capital expenditures, shown in the following table, are excluded from capital expenditures in the statements of cashSeptember 30 |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Spire |
| $ | 67.6 |
|
| $ | 80.6 |
|
| $ | 62.1 |
|
Spire Missouri |
|
| 34.3 |
|
|
| 40.1 |
|
|
| 36.7 |
|
Spire Alabama |
|
| 17.0 |
|
|
| 11.9 |
|
|
| 8.9 |
|
| 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
– Spire, Spire Missouri and Spire Alabama record legal obligations associated with the retirement of long-lived assets in the period in which the obligations are incurred, if sufficient information exists to reasonably estimate the fair value of the obligations. Obligations are recorded as both a cost of the related long-lived asset and as a corresponding liability. Subsequently, the asset retirement costs are depreciated over the life of the asset and the asset retirement obligations are accreted to the expected settlement amounts. The Company, Spire Missouri and Spire Alabama record asset retirement obligations associated with certain safety requirements to purge and seal gas distribution mains upon retirement, the plugging and abandonment of storage wells and other storage facilities, specific service line obligations, and certain removal and disposal obligations related to components of Spire Missouri’s, Spire Alabama’s and Spire Gulf’s distribution systems and general plant. Asset retirement obligations recorded by Spire’s other subsidiaries are not material. As authorized by the Missouri Public Service Commission (MoPSC) and APSC, Spire Missouri, Spire Alabama and Spire Gulf accrue future asset removal costs associated with their property, plant and equipment even if a legal obligation does not exist. Such accruals are provided for through depreciation expense and are recorded with corresponding credits to regulatory liabilities or regulatory assets. When those utilities retire depreciable utility plant and equipment, they charge the associated original costs to accumulated depreciation and amortization, and any related removal costs incurred are charged to regulatory liabilities or regulatory assets. The difference between removal costs recognized in depreciation rates and the accretion expense and depreciation expense recognized for financial reporting purposes is a timing difference between recovery of these costs in rates and their recognition for financial reporting purposes. Accordingly, these differences are deferred as regulatory liabilities or regulatory assets. In the rate setting process, the regulatory liabilities or regulatory assets are excluded from the rate base upon which those utilities have the opportunity to earn their allowed rates of return.In fiscal 2020, Spire Alabama refined certain assumptions and estimates used in calculating its asset retirement obligations, resulting in both an increase in cost to retire gas distribution assets and a change in the timing of Spire Missouri,the related cash outflows. As a result of this change in estimate, which the Company believes is more precise, Spire Alabama recorded a $221.1 increase to its asset retirement obligations. Related adjustments were made to regulatory assets and Spire Gulf are either currently being recovered in rates or are probable of recovery in future rates.
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Asset retirement obligations, beginning of year |
| $ | 337.6 |
|
| $ | 321.1 |
|
| $ | 173.5 |
|
| $ | 174.1 |
|
| $ | 148.7 |
|
| $ | 135.7 |
|
Liabilities incurred during the period |
|
| 3.0 |
|
|
| 10.8 |
|
|
| 2.6 |
|
|
| 1.6 |
|
|
| 0 |
|
|
| 8.8 |
|
Liabilities settled during the period |
|
| (6.9 | ) |
|
| (8.3 | ) |
|
| (4.0 | ) |
|
| (6.8 | ) |
|
| (1.6 | ) |
|
| (0.8 | ) |
Accretion |
|
| 14.0 |
|
|
| 13.0 |
|
|
| 7.2 |
|
|
| 7.4 |
|
|
| 6.1 |
|
|
| 5.0 |
|
Revisions in estimated cash flows |
|
| 192.4 |
|
|
| 1.0 |
|
|
| (25.9 | ) |
|
| (2.8 | ) |
|
| 221.1 |
|
|
| 0 |
|
Asset retirement obligations, end of year |
| $ | 540.1 |
|
| $ | 337.6 |
|
| $ | 153.4 |
|
| $ | 173.5 |
|
| $ | 374.3 |
|
| $ | 148.7 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Asset retirement obligations, beginning of year | $ | 206.4 | $ | 159.2 | $ | 75.2 | $ | 72.4 | $ | 120.1 | $ | 86.6 | |||||||||||
| Liabilities incurred during the period | 5.5 | 4.1 | 0.3 | 1.2 | 5.2 | 2.9 | |||||||||||||||||
| Liabilities settled during the period | (4.6 | ) | (9.5 | ) | (1.1 | ) | (1.9 | ) | (1.9 | ) | (6.8 | ) | |||||||||||
| Accretion | 9.1 | 13.2 | 3.6 | 3.5 | 5.0 | 9.7 | |||||||||||||||||
| Revisions in estimated cash flows | 80.2 | 27.5 | 80.6 | — | — | 27.7 | |||||||||||||||||
| Addition of Spire EnergySouth asset retirement obligations | — | 11.9 | — | — | — | — | |||||||||||||||||
| Asset retirement obligations, end of year | $ | 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,| 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% |
NATURAL GAS AND PROPANE GAS
– For SpireBUSINESS COMBINATIONS
–In December 2017, the acquisitionCompany acquired an 80% voting interest in a natural gas storage facility in Wyoming. The transaction was valued at $24.8, consisting of Spire EnergySouth, refer$16.0 in cash and a $10.0 non-interest-bearing note valued at $8.8. In October 2018, the Company completed the exercise of its right to
GOODWILL
– Goodwill is measured as the excess of the acquisition-date fair value of the consideration transferred over the amount of acquisition-date identifiable assets acquired net of assumed liabilities. At September 30, 2020, goodwill included in Spire’s Gas Utility and Gas Marketing segments was $210.2 and 0, respectively, with the remainder held at the corporate level. Goodwill amounts have not changed since fiscal 2017, and there are 0 accumulated impairment losses. 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,| 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.On July 1, 2020, Spire’s Board of Directors, based upon the recommendation of senior management, revised the development plan for Spire Storage, resulting in an impairment charge of $140.8 related to Spire Storage assets (non-utility property on 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 reversedthe balance sheet) in the subsequent accounting period when meters are actually readquarter ended June 30, 2020. The revision was driven by the realization that a longer time horizon will be required for optimization and customers are billed. The amountspositioning of accrued unbilled revenues forthe storage facility to serve energy markets in the western United States. Among other factors, evaluations of the continuing evolution of market dynamics in the region led management to update models of various development alternatives. Separately in the quarter ended June 30, 2020, Spire Missouri at September 30, 2017 and 2016 were $30.1 and $26.1, respectively. Spire Alabama recordsrecorded impairment charges totaling $7.8 related to 2 commercial compressed natural gas distribution revenuesfueling stations (also non-utility property) as a result of revised projections reflecting lower diesel prices and slower conversions of Class 8 vehicles. The fair values used in accordancemeasuring the impairment charges were determined 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.
DERIVATIVES – In the course of itstheir business, certain subsidiaries of Spire Marketing entersenter into commitments associated with the purchase or sale of natural gas. Certain of itstheir derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of FASB ASC Topic 815, “DerivativesDerivatives and Hedging.”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.gross. Contracts not designated as normal purchases or normal sales are recorded as derivatives with changes in fair value recognized in earnings in the periods prior to physical delivery. For additional information on derivative instruments, refer to
INCOME TAXES
– Spire and its subsidiaries account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and the respective tax basis and for tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to beThe Company accounts for uncertain tax positions in accordance with authoritative guidance. The authoritative guidance addresses the determination of whether tax benefits claimed, or expected to be claimed, on a tax return should be recorded in the financial statements. Spire may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained upon examination by the taxing authority, based on the technical merits of the position. Tax-related interest and penalties, if any, are classified as a liability on the balance sheets.
CASH, AND CASH EQUIVALENTS,
NATURAL GAS RECEIVABLE
– Spire Marketing enters into natural gas transactions with natural gas pipeline and storage companies known as park and loan arrangements. Under the terms of the arrangements, Spire Marketing purchases natural gas from a third party and delivers that natural gas to the pipeline or storage company for the right to receive the same quantity of natural gas fromEARNINGS 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.| 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 | ||||||||
TRANSACTIONS WITH AFFILIATES
–Transactions between affiliates of the Company have been eliminated from the consolidated financial statements of Spire. Spire Missouri and Spire Alabama borrowed funds from the Company and incurred related interest, as reflected in their separate financial statements, and they participated in normal intercompany shared services transactions. In addition, Spire Missouri’s other transactions with affiliates included:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Purchases of natural gas from Spire Marketing |
| $ | 56.9 |
|
| $ | 95.3 |
|
| $ | 71.5 |
|
Sales of natural gas to Spire Marketing |
|
| 0.1 |
|
|
| 1.7 |
|
|
| 0.3 |
|
Transportation services received from STL Pipeline LLC |
|
| 27.9 |
|
|
| — |
|
|
| — |
|
Transportation services received from Spire NGL Inc. |
|
| 1.0 |
|
|
| 1.0 |
|
|
| 1.0 |
|
| 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 | ||||||||
In the twelve months ended September 30, 2020, Spire Alabama had natural gas purchases from and sales to Spire Marketing totaling $6.3 and $0.3, respectively.
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.
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Allowance at beginning of year |
| $ | 23.0 |
|
| $ | 22.4 |
|
| $ | 18.3 |
|
| $ | 14.9 |
|
| $ | 16.0 |
|
| $ | 14.1 |
|
| $ | 6.3 |
|
| $ | 3.9 |
|
| $ | 2.6 |
|
Additions charged to expense |
|
| 14.0 |
|
|
| 16.9 |
|
|
| 14.6 |
|
|
| 12.7 |
|
|
| 12.3 |
|
|
| 11.9 |
|
|
| 0.9 |
|
|
| 4.7 |
|
|
| 2.1 |
|
Net deductions |
|
| (12.1 | ) |
|
| (16.3 | ) |
|
| (10.5 | ) |
|
| (9.5 | ) |
|
| (13.4 | ) |
|
| (10.0 | ) |
|
| (1.7 | ) |
|
| (2.3 | ) |
|
| (0.8 | ) |
Allowance at end of year |
| $ | 24.9 |
|
| $ | 23.0 |
|
| $ | 22.4 |
|
| $ | 18.1 |
|
| $ | 14.9 |
|
| $ | 16.0 |
|
| $ | 5.5 |
|
| $ | 6.3 |
|
| $ | 3.9 |
|
FINANCE RECEIVABLES
– Spire Alabama finances third party contractor sales of merchandise including gas furnaces and appliances. At September 30,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 accounts for share-based compensation arrangements in accordance with ASC Topic 718, Compensation - Stock Compensation. The Company measures stock-based compensation awards at fair value at the date of grant and recognizes the compensation cost of the awards over the requisite service period.NEW ACCOUNTING PRONOUNCEMENTS
–Also effective October 1, 2018, Spire, Spire Missouri and Spire Alabama adopted ASU No. 2017-07, Compensation – Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, with no material impact on interim or annual financial statements. The amended guidance though excluded by requires that 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 service cost component of such revenues (subject tonet periodic pension and postretirement benefit costs be presented within the above-noted deliberations)same line item in the income statement as other compensation costs (except for the amount being capitalized), while other components are to be presented outside the subtotal of income. Entitiesoperating income and are no longer eligible for capitalization (e.g., as part of utility plant). The amended guidance is applied retrospectively for income statement presentation and prospectively for capitalization. The Company, Spire Missouri and Spire Alabama elected the practical expedient permitting the use of the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Accordingly, for the year ended September 30, 2018, the Company, Spire Missouri and Spire Alabama reclassified net benefit costs (income) of $14.4, $17.2 and $(2.0), respectively, from “operation and maintenance” to “other income (expense), net.” For Spire Missouri, Spire Alabama, and the Company’s other rate-regulated entities, all components of net benefit cost have historically been recovered from customers as a component of utility plant and will continue to be recovered in the optionsame manner over the depreciable lives of using eitherthe related plant assets; therefore, for those entities, the components that are no longer eligible to be capitalized as a full retrospective or modified retrospective approach to adopting this guidance. component of plant under GAAP are reported as regulatory assets.
In August 2015,February 2018, the FASB issued ASU No. 2015-14, which made2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This guidance permits companies to make an election to reclassify stranded income tax effects from the guidanceenactment of the Tax Cuts and Jobs Act of 2017, included in ASU No. 2014-09 effective for fiscal years beginning after December 15, 2017 and interim periods within those years. 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.accumulated other comprehensive income or loss (AOCI), to retained earnings. The Company, Spire Missouri and Spire Alabama have nearly completed their evaluation of their sources of revenue and related contracts and plan to adopt the newadopted this guidance in the first quarter ended September 30, 2018, and the related reclassifications are shown on the statements of fiscal 2019 using the modified retrospective approach, and they expect no material effect on their financial position, results of operations, or cash flows.
The Company, Spire Missouri and Spire Alabama expect to adopt this standard in the first quarter of fiscal 2019 with no significant impact.
Spire, Spire Missouri and Spire Alabama are currently assessingadopted the timing and impacts of adopting this standard, which must be adopted by the first quarter of fiscal 2020.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which was later supplemented by ASU Nos. 2018-19, 2019-04, 2019-05 and 2019-11. The standard replaces the current “incurred loss” model with an “expected loss” model for certain instruments, including trade receivables, requiring measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. It also requires entities to record credit loss allowances for available-for-sale securities rather than impair the carrying amount of the securities. Spire, Spire Missouri and Spire Alabama will initially apply the new standard for the quarter ending December 31, 2020, using a modified retrospective method of adoption. Based on the credit quality of the existing available-for sale securities portfolio, 0 allowance for credit losses will be recognized at adoption for those investments. The ASU did not result in any significant modifications to the Company’s policies related to recognizing an allowance on trade receivables, and the adoption of the new standard is not expected to have a material impact on Spire’s, Spire Missouri’s and Spire Alabama’s financial statements.
RECLASSIFICATIONS – Spire’s consolidated statements of income historically showed Gas Utility operating revenues and expense line items separately from Gas Marketing and other operations. The current presentation shows operating revenues and expense line items on a consolidated basis. Disaggregated data is presented in Note 14, Information by Operating Segment. Prior period amounts have been reclassified to conform with the current period presentation.
2. REVENUE
The following tables show revenue disaggregated by source and customer type.
|
| 2020 |
|
| 2019 |
| ||
Spire |
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
Residential |
| $ | 1,184.3 |
|
| $ | 1,267.3 |
|
Commercial & industrial |
|
| 383.0 |
|
|
| 433.9 |
|
Transportation |
|
| 115.8 |
|
|
| 112.1 |
|
Off-system & other incentive |
|
| 38.4 |
|
|
| 41.9 |
|
Other customer revenue |
|
| 26.2 |
|
|
| 22.5 |
|
Total revenue from contracts with customers |
|
| 1,747.7 |
|
|
| 1,877.7 |
|
Changes in accrued revenue under alternative revenue programs |
|
| 4.3 |
|
|
| (16.9 | ) |
Total Gas Utility operating revenues |
|
| 1,752.0 |
|
|
| 1,860.8 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
Revenue from contracts with retail customers |
|
| 87.9 |
|
|
| 83.7 |
|
Revenue from wholesale derivative contracts |
|
| — |
|
|
| — |
|
Total Gas Marketing operating revenues |
|
| 87.9 |
|
|
| 83.7 |
|
Other |
|
| 57.8 |
|
|
| 21.5 |
|
Total before eliminations |
|
| 1,897.7 |
|
|
| 1,966.0 |
|
Intersegment eliminations (see Note 14, Information by Operating Segment) |
|
| (42.3 | ) |
|
| (13.6 | ) |
Total Operating Revenues |
| $ | 1,855.4 |
|
| $ | 1,952.4 |
|
Spire Missouri |
|
|
|
|
|
|
|
|
Residential |
| $ | 859.6 |
|
| $ | 945.9 |
|
Commercial & industrial |
|
| 241.4 |
|
|
| 283.8 |
|
Transportation |
|
| 32.9 |
|
|
| 33.1 |
|
Off-system & other incentive |
|
| 35.1 |
|
|
| 41.9 |
|
Other customer revenue |
|
| 22.3 |
|
|
| — |
|
Total revenue from contracts with customers |
|
| 1,191.3 |
|
|
| 1,304.7 |
|
Changes in accrued revenue under alternative revenue programs |
|
| 2.3 |
|
|
| (12.9 | ) |
Total Operating Revenues |
| $ | 1,193.6 |
|
| $ | 1,291.8 |
|
Spire Alabama |
|
|
|
|
|
|
|
|
Residential |
| $ | 267.8 |
|
| $ | 265.3 |
|
Commercial & industrial |
|
| 109.4 |
|
|
| 113.5 |
|
Transportation |
|
| 72.9 |
|
|
| 69.5 |
|
Off-system & other incentive |
|
| 3.2 |
|
|
| — |
|
Other customer revenue |
|
| 1.9 |
|
|
| 20.7 |
|
Total revenue from contracts with customers |
|
| 455.2 |
|
|
| 469.0 |
|
Changes in accrued revenue under alternative revenue programs |
|
| (0.2 | ) |
|
| (3.5 | ) |
Total Operating Revenues |
| $ | 455.0 |
|
| $ | 465.5 |
|
The Utilities sell natural gas to residential and other customers. The sale of natural gas is governed by the various state utility commissions, which set rates, charges, and terms and conditions of service, collectively included in a “tariff.” The performance obligation, which relates to the promise to provide natural gas, is satisfied over time as the customer simultaneously receives and consumes the natural gas, and revenue is recognized accordingly.
The Utilities’ transportation revenue relates to the promise to transport the specified quantities of natural gas at tariff rates. This performance obligation is satisfied over time as the gas is transported, and revenue is recognized as invoiced monthly.
The Utilities have alternative revenue programs (ARPs), which represent an agreement between the utility and its regulator, currently consisting of decoupling mechanisms (also known as weather normalization adjustments) and incentive programs (primarily Alabama’s Cost Control Measure). When the criteria to recognize additional (or reduced) revenue from ARPs have been met, the Utilities establish a regulatory asset (or liability). When amounts previously recognized for ARPs are effectivebilled, the Utilities reduce the regulatory asset (or liability) and increase (or decrease) accounts receivable. Billed amounts, which are part of the overall tariff paid by customers, are included in revenue from contracts with customers, while the change in the related regulatory asset or liability is presented as revenue from ARPs. Depending on whether the beginning accrued ARP balance was a regulatory asset or liability and depending on the size and direction of the current period accrual, the amount presented as revenue from ARPs could be negative.
The Utilities read meters and bill customers on monthly cycles. Spire Missouri, 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 fiscal years beginning after December 15, 2018,gas delivered but not yet billed. The accruals for unbilled revenues are reversed in the subsequent accounting period when meters are actually read and interim periodscustomers are billed. Spire Alabama records natural gas distribution revenues in accordance with the tariff established by the APSC. Unbilled revenue is accrued in an amount equal to the related gas cost, as profit margin is not considered earned until billed. Spire’s other subsidiaries, including Spire Marketing, record revenues when earned, as the product is delivered or as services are performed.
Gas Marketing’s contracts are derivatives. The wholesale contracts (with producers, municipalities, and utility companies) are subject to derivative accounting. The retail contracts (with large commercial and industrial customers) are designated as “normal purchase, normal sale” arrangements and are therefore accounted for as revenue from contracts with customers. The performance obligation is satisfied over time by the transfer of control of natural gas to the customer, and revenue is recognized as invoiced monthly.
Payments are generally required within those fiscal years,30 days of billing, and early applicationcontracts generally do not have a significant financing component. Spire’s revenues are not subject to significant returns, refunds, or warranty obligations.
Spire, Spire Missouri, and Spire Alabama have elected to apply a “right to invoice” practical expedient, recognizing revenue for volumes delivered for which they have a right to invoice, as long as that amount corresponds with the value to the customer. Disclosures about remaining performance obligations are not required because either contracts have an original expected duration of one year or less, or revenue is permitted. Therecognized under the right to invoice practical expedient, or both.
Sales taxes imposed on applicable Spire Alabama and Spire Missouri sales are billed to customers. These amounts are not recorded in the statements of income but are recorded as tax collections payable and included in the “Other” line of the Current Liabilities section of the balance sheets.
Gross receipts taxes associated with the Company’s natural gas utility services are imposed on the Company, Spire Missouri, and Spire Alabama are currently assessing the effects of this new guidance, as well as the timing of adoption.
| 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 | ||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Spire |
| $ | 91.5 |
|
| $ | 99.3 |
|
| $ | 98.4 |
|
Spire Missouri |
|
| 63.5 |
|
|
| 71.1 |
|
|
| 68.9 |
|
Spire Alabama |
|
| 23.3 |
|
|
| 23.7 |
|
|
| 25.4 |
|
| 2017 | 2016 | ||||||
| Total Operating Revenues | $ | 95.5 | $ | 3.3 | |||
| Net Income (Loss) | 9.4 | (0.2 | ) | ||||
| Earnings Per Share | $ | 0.20 | $ | — | |||
| 2017 | 2016 | 2015 | |||||||||
| Total Operating Revenues | $ | 1,740.7 | $ | 1,632.4 | $ | 2,081.6 | |||||
| Net Income | 161.6 | 153.9 | 143.6 | ||||||||
| Basic Earnings Per Share | $ | 3.44 | $ | 3.48 | $ | 3.32 | |||||
| Diluted Earnings Per Share | 3.43 | 3.46 | 3.31 | ||||||||
3. STOCK-BASED COMPENSATION
The Laclede GroupSpire 2015 Equity Incentive Plan (the 2015 Plan),(EIP) was approved at the annual meeting ofby shareholders of Spire on January 29, 2015.2015 and amended on November 9, 2018. The purpose of the 2015 PlanEIP is to encourage directors, officers, and key employees of the Company and its subsidiaries to contribute to the Company’s success and align their interests with that of shareholders. To accomplish this purpose, the Compensation Committee (Committee)(“Committee”) of theSpire’s Board of Directors (the “Board”) may grant awards under the 2015 PlanEIP that may be earned by achieving performance objectives and/or other criteria as determined by the Committee. Under the terms of the 2015 Plan,EIP, officers and employees of the Company and its subsidiaries, as determined by the Committee, are eligible to be selected for awards. The 2015 PlanEIP 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 PlanEIP 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 PlanEIP is 1,000,000. The 2015 Plan replaced The Laclede Group 2006 Equity Incentive Plan (the 2006 Plan), which in turn replaced The Laclede Group, Inc. 2002 Equity Incentive Plan (the 2002 Plan). Shares reserved under the 2006 Plan and the 2002 Plan, other than those needed for 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 2017,2020, the Company granted 196,40091,662 performance-contingent restricted share units to executive officers and key employees at a weighted average grant date fair value of $45.01$76.19 per share. This number represents the maximumtarget shares that can be earned pursuant to the terms of the awards. The share units have a performance period ending September 30, 2019.2023. While the participants have no interim voting rights on these share units, dividends accrue during the performance period and are paid to the participants upon vesting but are subject to forfeiture if the underlying share units do not vest.
The number of share units that will ultimately vest is dependent upon the attainment of certain levels of earnings and other strategic goals, as well as the Company’s level of total shareholder return (TSR) during the performance period relative to a comparator group of peer companies. This TSR provision is considered a market condition under GAAP and is discussed further below.
The weighted average grant date fair value of performance-contingent restricted shares and share units granted during fiscal years 20162019 and 20152018 was $45.95$80.72 and $36.69$79.88 per share, respectively.
Fiscal 20172020 activity of restricted stock and restricted stock units subject to performance and/or market conditions is presented below:
|
| Units |
|
| Weighted Average Grant Date Fair Value Per Unit |
| ||
Nonvested at September 30, 2019 |
|
| 263,910 |
|
| $ | 73.20 |
|
Granted |
|
| 91,662 |
|
| $ | 76.19 |
|
Vested |
|
| (86,287 | ) |
| $ | 58.68 |
|
Forfeited |
|
| (9,341 | ) |
| $ | 79.34 |
|
Nonvested at September 30, 2020 |
|
| 259,944 |
|
| $ | 78.92 |
|
For the year ended September 30, 2020, the total number of shares that could be issued if all outstanding award grants attain maximum performance payout is 519,888.
Shares/ Units | Weighted Average Grant Date Fair Value Per Share | |||||
| Nonvested at September 30, 2016 | 510,583 | $ | 40.37 | |||
| Granted (maximum shares that can be earned) | 196,400 | $ | 45.01 | |||
| Vested | (78,825 | ) | $ | 42.37 | ||
| Forfeited | (64,128 | ) | $ | 33.03 | ||
| Nonvested at September 30, 2017 (at maximum) | 564,030 | $ | 42.51 | |||
| Nonvested at September 30, 2017 (at target) | 282,015 | $ | 56.32 | |||
During fiscal 2017,2020, the Company granted 33,24033,350 shares of time-vested restricted stock to executive officers and key employees at a weighted average grant date fair value of $63.05$76.13 per share. Unless forfeited based on terms of the agreements, these shares will vest in fiscal 2020.2021. In the interim, participants receive full voting rights and dividends, which are not subject to forfeiture. The weighted average grant date fair value of time-vested restricted stock and restricted stock units awarded to employees during fiscal years 20162019 and 20152018 was $59.40$76.66 and $50.90$76.60 per share, respectively.
During fiscal 2017,2020, the Company granted 10,85010,560 shares of time-vested restricted stock to non-employee directors at a weighted average grant date fair value of $63.45$84.58 per share. These shares vested in fiscal 2017,2020, six months after the grant date. The weighted average grant date fair value of restricted stock awarded to non-employee directors during fiscal years 20162019 and 20152018 was $63.93$78.69 and $54.66$63.20 per share, respectively.
Time-vested restricted stock and stock unit activity for fiscal 20172020 is presented below:
|
| Shares/ Units |
|
| Weighted Average Grant Date Fair Value Per Share |
| ||
Nonvested at September 30, 2019 |
|
| 96,277 |
|
| $ | 72.83 |
|
Granted |
|
| 33,350 |
|
| $ | 76.13 |
|
Vested |
|
| (32,326 | ) |
| $ | 65.28 |
|
Forfeited |
|
| (3,628 | ) |
| $ | 76.94 |
|
Nonvested at September 30, 2020 |
|
| 93,673 |
|
| $ | 76.45 |
|
Shares/ Units | Weighted Average Grant Date Fair Value Per Share | |||||
| Nonvested at September 30, 2016 | 132,779 | $ | 49.83 | |||
| Granted | 44,090 | $ | 63.15 | |||
| Vested | (58,200 | ) | $ | 47.67 | ||
| Forfeited | (7,729 | ) | $ | 55.58 | ||
| Nonvested at September 30, 2017 | 110,940 | $ | 55.85 | |||
For restricted stock and stock units (performance-contingent and time-vested) that vested during fiscal years 2017, 2016,2020, 2019, and 2015,2018, the Company withheld 35,51441,353 shares, 30,71228,731 shares and 31,688,34,922 shares, respectively, at weighted average prices of $63.83, $57.29,$77.07, $79.23 and $50.65$81.65 per share, respectively, pursuant to elections by employees to satisfy tax withholding obligations. The total fair value of restricted stock (performance-contingent and time-vested) that vested during fiscal years 2017, 2016,2020, 2019, and 20152018 was $8.9, $6.3,$9.8, $7.6, and $6.4,$10.5, respectively, and the related tax benefit was $3.3, $2.4,$3.7, $2.9, and $2.4,$4.0, respectively. None of the tax benefits have been realized.
In fiscal 2019, the Company gave participants in the EIP the ability to defer a portion or all of their award. Participants have elected to defer 59,408 shares and 80,760 shares (at target payout) in fiscal years 2017, 2016,2020 and 2015. There was no stock option activity2019, respectively. Based on actual performance, these awards will be issued in fiscal 2017,cash, not shares, once the performance requirements have been achieved, so related amounts are reflected as all outstanding stock options either vested or forfeited in fiscal 2016. During fiscal 2016, cash received fromtemporary equity on 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 and the related intrinsic value was $0.9. Related tax benefits were not material in any of those years.consolidated balance sheet.
Equity Compensation Costs
Compensation cost for performance-contingent restricted stock and stock unit awards is based upon the probable outcome of the performance conditions. For shares or units that do not vest or that are not expected to vest due to the outcome of the performance conditions (excluding market conditions), no compensation cost is recognized and any previously recognized compensation cost is reversed.
The fair value of awards of performance-contingent and time-vested restricted stock and restricted stock units, not subject to the TSR provision, are estimated using the closing price of the Company’s stock on the grant date. For those awards that do not pay dividends during the vesting period, the estimate of fair value is reduced by the present value of the dividends expected to be paid on the Company’s common stock during the performance period, discounted using an appropriate United States (US)U.S. Treasury yield. For shares subject to the TSR provision, the estimated impact of this market condition is reflected in the grant date fair value per share of the awards. Accordingly, compensation cost is not reversed to reflect any actual reductions in the awards that may result from the TSR provision. However, if the Company’s TSR during the performance period ranks below the level specified in the award agreements, relative to a comparator group of companies, and the Committee elects not to reduce the award (or reduce by a lesser amount), this election would be accounted for as a modification of the original award and additional compensation cost would be recognized at that time. The grant date fair value of the awards subject to the TSR provision awarded during fiscal years 2017, 2016,2020, 2019 and 20152018 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:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Risk-free interest rate |
| 1.57% |
|
| 2.88% |
|
| 1.76% |
| |||
Expected dividend yield of stock |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Expected volatility of stock |
| 16.8% |
|
| 17.0% |
|
| 16.0% |
| |||
Vesting period |
| 3.0 years |
|
| 3.0 years |
|
| 2.9 years |
| |||
| 2017 | 2016 | 2015 | |||
| Risk-free interest rate | 1.39% | 1.14% | 0.83% | ||
| Expected dividend yield of stock | — | — | — | ||
| Expected volatility of stock | 16.3% | 15.0% | 14.0% | ||
| Vesting period | 2.8 years | 2.8 years | 2.8 years | ||
The risk-free interest rate was based on the yield on USU.S. Treasury securities matching the vesting period. A zero0 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:
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Total compensation cost |
| $ | 9.4 |
|
| $ | 8.6 |
|
| $ | 6.9 |
|
Compensation cost capitalized |
|
| (0.6 | ) |
|
| (1.4 | ) |
|
| (1.3 | ) |
Prior period disallowed stock compensation capitalization |
|
| 0 |
|
|
| 0 |
|
|
| 6.9 |
|
Compensation cost recognized in net income |
|
| 8.8 |
|
|
| 7.2 |
|
|
| 12.5 |
|
Income tax benefit recognized in net income |
|
| (2.1 | ) |
|
| (1.7 | ) |
|
| (4.0 | ) |
Compensation cost recognized in net income, net of income tax |
| $ | 6.7 |
|
| $ | 5.5 |
|
| $ | 8.5 |
|
| 2017 | 2016 | 2015 | |||||||||
| Total compensation cost | $ | 7.4 | $ | 6.7 | $ | 6.7 | |||||
| Compensation cost capitalized | (3.3 | ) | (2.2 | ) | (1.8 | ) | |||||
| Compensation cost recognized in net income | $ | 4.1 | $ | 4.5 | $ | 4.9 | |||||
| Income tax benefit recognized in net income | (1.5 | ) | (1.7 | ) | (1.9 | ) | |||||
| Compensation cost recognized in net income, net of income tax | $ | 2.6 | $ | 2.8 | $ | 3.0 | |||||
As of September 30, 2017,2020, there was $8.9$10.8 of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That costarrangements, which is expected to be recognized over a weighted average period of 1.81.75 years.
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Basic Earnings Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 88.6 |
|
| $ | 184.6 |
|
| $ | 214.2 |
|
Less: Provision for preferred dividends |
|
| 14.8 |
|
|
| 5.3 |
|
|
| — |
|
Income allocated to participating securities |
|
| 0.1 |
|
|
| 0.4 |
|
|
| 0.5 |
|
Net Income Available to Common Shareholders |
| $ | 73.7 |
|
| $ | 178.9 |
|
| $ | 213.7 |
|
Weighted Average Common Shares Outstanding (in millions) |
|
| 51.2 |
|
|
| 50.7 |
|
|
| 49.1 |
|
Basic Earnings Per Share of Common Stock |
| $ | 1.44 |
|
| $ | 3.53 |
|
| $ | 4.35 |
|
Diluted Earnings per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
| $ | 88.6 |
|
| $ | 184.6 |
|
| $ | 214.2 |
|
Less: Provision for preferred dividends |
|
| 14.8 |
|
|
| 5.3 |
|
|
| — |
|
Income allocated to participating securities |
|
| 0.1 |
|
|
| 0.4 |
|
|
| 0.5 |
|
Net Income Available to Common Shareholders |
| $ | 73.7 |
|
| $ | 178.9 |
|
| $ | 213.7 |
|
Weighted Average Common Shares Outstanding (in millions) |
|
| 51.2 |
|
|
| 50.7 |
|
|
| 49.1 |
|
Dilutive Effect of Restricted Stock and Restricted Stock Units (in millions)* |
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.2 |
|
Weighted Average Diluted Common Shares (in millions) |
|
| 51.3 |
|
|
| 50.8 |
|
|
| 49.3 |
|
Diluted Earnings Per Share of Common Stock |
| $ | 1.44 |
|
| $ | 3.52 |
|
| $ | 4.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Calculation excludes certain outstanding common shares (shown in millions by period at the right) attributable to stock units subject to performance or market conditions and restricted stock, which could have a dilutive effect in the future |
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.4 |
|
| 2017 | 2016 | 2015 | |||||||||
| Basic EPS: | |||||||||||
| Net Income | $ | 161.6 | $ | 144.2 | $ | 136.9 | |||||
| Less: Income allocated to participating securities | 0.4 | 0.5 | 0.5 | ||||||||
| Net Income Available to Common Shareholders | $ | 161.2 | $ | 143.7 | $ | 136.4 | |||||
| Weighted Average Shares Outstanding (millions) | 46.9 | 44.1 | 43.2 | ||||||||
| Earnings Per Share of Common Stock | $ | 3.44 | $ | 3.26 | $ | 3.16 | |||||
| Diluted EPS: | |||||||||||
| Net Income | $ | 161.6 | $ | 144.2 | $ | 136.9 | |||||
| Less: Income allocated to participating securities | 0.4 | 0.5 | 0.5 | ||||||||
| Net Income Available to Common Shareholders | $ | 161.2 | $ | 143.7 | $ | 136.4 | |||||
| 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 | $ | 3.43 | $ | 3.24 | $ | 3.16 | |||||
| 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 | 0.5 | 0.3 | 0.3 | ||||||||
Spire
Preferred Stock
At September 30, 2020 and 2019, Spire had authorized 5,000,000 shares of preferred stock.
On May 21, 2019, Spire completed the public offering of 10,000,000 depositary shares (the “Depositary Shares”), each representing a 1/1,000th interest in a share of the Company’s 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $25.00 per share, with a liquidation preference of $25,000 per share (the “Preferred Stock”). The transaction resulted in $242.0 of net proceeds, after deducting commissions and sale expenses, which proceeds were used to (i) refinance long-term and short-term Spire debt and (ii) fund capital expenditures at both the Utilities and Spire’s 2.875 million equity units issuedgas-related businesses.
Dividends on the Preferred Stock, when declared by the Board, will be payable on the liquidation preference amount, on a cumulative basis, quarterly in June 2014 were anti-dilutivearrears on the 15th day of February, May, August and November of each year, beginning on August 15, 2019. Dividends will be payable out of amounts legally available for the periods they were outstanding. Accordingly, they were also excludedpayment of dividends at an annual rate equal to 5.90% of the liquidation preference per share of Preferred Stock (equivalent to $25.00 per Depositary Share). Dividends will accumulate daily and be cumulative from May 21, 2019.
Under the calculationterms of weighted average diluted shares for those periods. On April 3, 2017, Spire settled the Preferred Stock, the Company’s ability to declare or pay dividends on, or purchase contracts underlying those equity units by issuing approximately 2.5 millionor redeem, shares of its common stock. See
Spire Alabama acquisition financing.may, at its option, redeem the Preferred Stock (i) in whole, but not in part, at any time prior to August 15, 2024, within 120 days after a ratings event where a rating agency amends, clarifies or changes the criteria it uses to assign equity credit for securities such as the Preferred Stock, at a redemption price in cash equal to $25,500 per share, or (ii) in whole or in part, from time to time, on or after August 15, 2024, at a redemption price in cash equal to $25,000 per share, plus, in each case, all accumulated and unpaid dividends (whether declared or not) up to such redemption date.
Shareholders of the Preferred Stock generally have no voting rights with respect to matters that generally require the approval of voting stockholders. The limited voting rights of holders of the Preferred Stock include the right to vote on certain matters that may affect the preference or special rights of the Preferred Stock. In addition, if and whenever dividends on any shares of Preferred Stock have not been declared and paid for at least six dividend periods, whether or not consecutive, the number of directors then constituting the Board shall automatically be increased by two (to be elected by the holders of the Preferred Stock) until all accumulated and unpaid dividends on the Preferred Stock have been paid in full.
ATM Program
On February 6, 2019, Spire entered into an at-the-market (ATM) equity units were originally issued at $50 per unitdistribution agreement, supplemented as of May 14, 2019, pursuant to which the Purchase ContractCompany may offer and Pledge Agreement (Purchase Contract) datedsell, from time to time, shares of its common stock having an aggregate offering price of up to $150.0. Proceeds from this program are intended to be used (i) to fund, in part, investments related to the construction of infrastructure and infrastructure improvements in the Utilities, as well as pipelines and storage, and (ii) for general corporate purposes, including repayment 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 2022short-term debt and the Purchase Contract obligating the holderadjustment from time to purchase common shares at a future settlement date. The equity unit investments were effectively replaced as planned in a series of transactions outlined in
Other Equity Information
Spire has a purchase price of $57.3921 per share. Under the contract terms, the equity units were converted to common stock at the rate of 0.8712 shares per unit, with a corresponding adjustment to purchase price.
Spire Missouri
Substantially all of Spire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains several restrictions on Spire Missouri’s ability to pay cash dividends on its common stock or to make loans to its parent company. These mortgage restrictions are applicable regardless of whether the stock is publicly held or held solely by Spire Missouri’s parent company. Under the most restrictive of these provisions, no cash dividend may be declared or paid if, after the dividend, the aggregate net amount spent for all dividends after September 30, 1953 would exceed a maximum amount determined by a formula set out in the mortgage. Under that formula, the maximum amount is the sum of $8.0 plus earnings applicable to common stock (adjusted for stock repurchases and issuances) for the period from September 30, 1953 to the last day of the quarter before the declaration or payment date for the dividends. As of September 30, 20172020 and 2016,2019, the amount under the mortgage’s formula that was available to pay dividends was $1,010.8$1,269.4 and $916.8,$1,182.4, respectively. Thus, all of Spire Missouri’s retained earnings were free from such dividend restrictions as of those dates.
Spire Missouri filed with the SEChas a jointuniversal shelf registration statement on Form S-3 on file with the SEC for the issuance of various types ofequity and debt and equity securities, which registration statement will expire September 22, 2019. The amount, timing, and type of additional financing to be issued under this shelf registration statement will dependexpires on cash requirements and market conditions, as well as future MoPSC authorizations.
At September 30, 20172020 and 2016,2019, Spire Missouri had authorized 1,480,000 shares of preferred stock, but noneNaN were issued and outstanding.
Spire Alabama
At September 30, 20172020 and 2016,2019, Spire Alabama had authorized 120,000 shares of preferred stock, but noneNaN were issued and outstanding.
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income (loss)(AOCI), net of income taxes, recognized in the balance sheets at September 30 were as follows:
|
| Net Unrealized Gains (Losses) on Cash Flow Hedges |
|
| Defined Benefit Pension and Other Postretirement Benefit Plans |
|
| Net Unrealized Losses on Available-for- Sale Debt Securities |
|
| Total |
| ||||
Spire |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018 |
| $ | 7.9 |
|
| $ | (1.5 | ) |
| $ | 0 |
|
| $ | 6.4 |
|
Other comprehensive (loss) income |
|
| (36.9 | ) |
|
| (0.9 | ) |
|
| 0.1 |
|
|
| (37.7 | ) |
Balance at September 30, 2019 |
|
| (29.0 | ) |
|
| (2.4 | ) |
|
| 0.1 |
|
|
| (31.3 | ) |
Other comprehensive loss |
|
| (9.4 | ) |
|
| (0.5 | ) |
|
| 0 |
|
|
| (9.9 | ) |
Balance at September 30, 2020 |
| $ | (38.4 | ) |
| $ | (2.9 | ) |
| $ | 0.1 |
|
| $ | (41.2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spire Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2018 |
| $ | 0 |
|
| $ | (1.6 | ) |
| $ | 0 |
|
| $ | (1.6 | ) |
Other comprehensive loss |
|
| 0 |
|
|
| (0.8 | ) |
|
| 0 |
|
|
| (0.8 | ) |
Balance at September 30, 2019 |
|
| 0 |
|
|
| (2.4 | ) |
|
| 0 |
|
|
| (2.4 | ) |
Other comprehensive loss |
|
| 0 |
|
|
| (0.5 | ) |
|
| 0 |
|
|
| (0.5 | ) |
Balance at September 30, 2020 |
| $ | 0 |
|
| $ | (2.9 | ) |
| $ | 0 |
|
| $ | (2.9 | ) |
| 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, Spire Alabama had no accumulated other comprehensive income (loss)AOCI balances.
6. LONG-TERM DEBT
The composition of long-term debt for Spire, Spire Missouri and Spire Alabama areas of September 30 is shown in each registrant’s statements of capitalization as part of the financial statements. following tables.
|
| 2020 |
|
| 2019 |
| ||
Spire |
|
|
|
|
|
|
|
|
2.52% Senior Notes, due September 1, 2021 |
| $ | 35.0 |
|
| $ | 35.0 |
|
3.31% Notes Payable, due December 15, 2022 |
|
| 25.0 |
|
|
| 25.0 |
|
3.54% Senior Notes, due February 27, 2024 |
|
| 150.0 |
|
|
| 150.0 |
|
3.13% Senior Notes, due September 1, 2026 |
|
| 130.0 |
|
|
| 130.0 |
|
3.93% Senior Notes, due March 15, 2027 |
|
| 100.0 |
|
|
| 100.0 |
|
4.70% Senior Notes, due August 15, 2044 |
|
| 250.0 |
|
|
| 250.0 |
|
Total principal of Spire Missouri long-term debt (see below) |
|
| 1,098.0 |
|
|
| 930.0 |
|
Total principal of Spire Alabama long-term debt (see below) |
|
| 475.0 |
|
|
| 415.0 |
|
Other subsidiaries' long-term debt: |
|
|
|
|
|
|
|
|
4.14% First Mortgage Bonds, due September 30, 2021 |
|
| 20.0 |
|
|
| 20.0 |
|
5.00% First Mortgage Bonds, due September 30, 2031 |
|
| 42.0 |
|
|
| 42.0 |
|
2.95% Notes, with annual principal payments through December 2034 |
|
| 135.0 |
|
|
| — |
|
3.52% First Mortgage Bonds, due September 30, 2049 |
|
| 40.0 |
|
|
| 40.0 |
|
Total principal of long-term debt |
|
| 2,500.0 |
|
|
| 2,137.0 |
|
Less: Unamortized discounts and debt issuance costs |
|
| (15.9 | ) |
|
| (14.4 | ) |
Less: Current portion |
|
| (60.4 | ) |
|
| (40.0 | ) |
Long-term debt, excluding current portion |
| $ | 2,423.7 |
|
| $ | 2,082.6 |
|
Spire Missouri |
|
|
|
|
|
|
|
|
Floating-rate note due December 1, 2021 |
| $ | — |
|
| $ | 100.0 |
|
First Mortgage Bonds: |
|
|
|
|
|
|
|
|
3.00% Series, due March 15, 2023 |
|
| 55.0 |
|
|
| 55.0 |
|
3.40% Series, due August 15, 2023 |
|
| 250.0 |
|
|
| 250.0 |
|
3.40% Series, due March 15, 2028 |
|
| 45.0 |
|
|
| 45.0 |
|
7.00% Series, due June 1, 2029 |
|
| 19.3 |
|
|
| 25.0 |
|
2.84% Series, due November 15, 2029 |
|
| 275.0 |
|
|
| — |
|
7.90% Series, due September 15, 2030 |
|
| 30.0 |
|
|
| 30.0 |
|
3.68% Series, due September 15, 2032 |
|
| 50.0 |
|
|
| 50.0 |
|
6.00% Series, due May 1, 2034 |
|
| 99.3 |
|
|
| 100.0 |
|
6.15% Series, due June 1, 2036 |
|
| 54.5 |
|
|
| 55.0 |
|
4.63% Series, due August 15, 2043 |
|
| 99.9 |
|
|
| 100.0 |
|
4.23% Series, due September 15, 2047 |
|
| 70.0 |
|
|
| 70.0 |
|
4.38% Series, due September 15, 2057 |
|
| 50.0 |
|
|
| 50.0 |
|
Total principal of Spire Missouri long-term debt |
|
| 1,098.0 |
|
|
| 930.0 |
|
Less: Unamortized discounts and debt issuance costs |
|
| (6.0 | ) |
|
| (5.0 | ) |
Less: Current portion |
|
| — |
|
|
| — |
|
Spire Missouri long-term debt, excluding current portion |
| $ | 1,092.0 |
|
| $ | 925.0 |
|
Spire Alabama |
|
|
|
|
|
|
|
|
5.20% Notes, due January 15, 2020 |
| $ | — |
|
| $ | 40.0 |
|
3.86% Notes, due December 22, 2021 |
|
| 50.0 |
|
|
| 50.0 |
|
3.21% Notes, due September 15, 2025 |
|
| 35.0 |
|
|
| 35.0 |
|
2.88% Notes, due December 1, 2029 |
|
| 100.0 |
|
|
| — |
|
5.90% Notes, due January 15, 2037 |
|
| 45.0 |
|
|
| 45.0 |
|
4.31% Notes, due December 1, 2045 |
|
| 80.0 |
|
|
| 80.0 |
|
3.92% Notes, due January 15, 2048 |
|
| 45.0 |
|
|
| 45.0 |
|
4.64% Notes, due January 15, 2049 |
|
| 90.0 |
|
|
| 90.0 |
|
4.02% Notes, due January 15, 2058 |
|
| 30.0 |
|
|
| 30.0 |
|
Total principal of Spire Alabama long-term debt |
|
| 475.0 |
|
|
| 415.0 |
|
Less: Unamortized discounts and debt issuance costs |
|
| (3.2 | ) |
|
| (2.8 | ) |
Less: Current portion |
|
| — |
|
|
| (40.0 | ) |
Spire Alabama long-term debt, excluding current portion |
| $ | 471.8 |
|
| $ | 372.2 |
|
Maturities of long-term debt for Spire on a consolidated basis, Spire Missouri and Spire Alabama for the five fiscal years subsequent toafter September 30, 20172020 are as follows:
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
| |||||
Spire |
| $ | 60.4 |
|
| $ | 55.8 |
|
| $ | 336.2 |
|
| $ | 156.6 |
|
| $ | 42.0 |
|
Spire Missouri |
|
| 0 |
|
|
| 0 |
|
|
| 305.0 |
|
|
| 0 |
|
|
| 0 |
|
Spire Alabama |
|
| 0 |
|
|
| 50.0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 35.0 |
|
| 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 | ||||||||
The long-term debt agreements of Spire, Spire Missouri and Spire Alabama contain customary financial covenants and default provisions. As of September 30, 2017,2020, there were no events of default under these financial covenants.
Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. The credit ratings of the Company, Spire Missouri and Spire Alabama remain at investment grade, but are subject to review and change by the rating agencies.
At September 30, 2017,2020, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $2,112.0,$2,500.0, of which $980.0$1,098.0 was issued by Spire Missouri, $250.0$475.0 was issued by Spire Alabama and $67.0$237.0 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.
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.Spire Missouri
At September 30, 2020, 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.
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 May 14, 2022. Spire Missouri was authorized by the MoPSC to issue registered securities (first mortgage bonds, unsecured debt and preferred stock), common stock, and private placement debt in an aggregate amount of up to $500.0 for financings placed any time before SeptemberSubstantially all of Spire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains several restrictions on Spire Missouri’s ability to pay cash dividends on its common stock, which are described in
Note 5, Shareholders’ Equity.Spire Alabama
At September 30, 2020, 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.
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 fromMarch 24, 2020, the APSC to borrowapproved an application for up to $75.0 for general corporate purposes and to retire short-term debt.
7. NOTES PAYABLE AND CREDIT AGREEMENTS
Spire, Spire Missouri and Spire Alabama entered intohave a new syndicated revolving credit 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 12.3%. 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.
Spire Missouri, and 33% for Spire Alabama. There were no borrowings against this credit facility as of September 30, 2017.
On March 26, 2020, Spire entered into a new loan agreement with 2 banks providing for a term loan of $150.0, which was immediately fully funded and matures on March 25, 2021, subject to optional prepayment by Spire. The net proceeds ofterm loan bears interest at the issuances ofLIBOR Rate (as defined in the Notes are expected to beloan agreement) plus 0.85% per annum. Proceeds were used for working capital and 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. Based on average short-term borrowings for the year ended September 30, 2017, an increase in the average interest rate of 100 basis points would decrease Spire’s pre-tax earnings and cash flows by approximately $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% |
|
| Spire (Parent Only) |
|
| Spire Missouri |
|
| Spire Alabama |
|
| Spire |
| ||||||||||||||||||||
|
| Credit |
|
| Term |
|
| CP |
|
| Credit |
|
| Spire |
|
| Credit |
|
| Spire |
|
| Consol- |
| ||||||||
|
| Facility |
|
| Loan |
|
| Program |
|
| Facility |
|
| Note |
|
| Facility |
|
| Note |
|
| idated |
| ||||||||
Year Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average borrowings |
| $ | 0.1 |
|
| $ | 77.5 |
|
| $ | 476.1 |
|
| $ | 17.9 |
|
| $ | 242.0 |
|
| $ | 4.6 |
|
| $ | 89.0 |
|
| $ | 576.2 |
|
Lowest borrowings outstanding |
|
| — |
|
|
| — |
|
|
| 73.5 |
|
|
| — |
|
|
| 16.0 |
|
|
| — |
|
|
| 18.5 |
|
|
| 432.6 |
|
Highest borrowings outstanding |
|
| 23.1 |
|
|
| 150.0 |
|
|
| 856.6 |
|
|
| 185.1 |
|
|
| 429.5 |
|
|
| 50.0 |
|
|
| 161.3 |
|
|
| 856.6 |
|
Weighted average interest rate |
|
| 1.9 | % |
|
| 1.6 | % |
|
| 1.7 | % |
|
| 1.9 | % |
|
| 1.5 | % |
|
| 1.9 | % |
|
| 1.4 | % |
|
| 1.7 | % |
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding |
| $ | — |
|
| $ | 150.0 |
|
| $ | 498.0 |
|
| $ | — |
|
| $ | 301.2 |
|
| $ | — |
|
| $ | 121.3 |
|
| $ | 648.0 |
|
Weighted average interest rate |
| n/a |
|
|
| 1.1 | % |
|
| 0.2 | % |
| n/a |
|
|
| 0.2 | % |
| n/a |
|
|
| 0.2 | % |
|
| 0.6 | % | |||
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings outstanding |
| $ | — |
|
| $ | — |
|
| $ | 743.2 |
|
| $ | — |
|
| $ | 386.4 |
|
| $ | — |
|
| $ | 128.7 |
|
| $ | 743.2 |
|
Weighted average interest rate |
| n/a |
|
| n/a |
|
|
| 2.3 | % |
| n/a |
|
|
| 2.3 | % |
| n/a |
|
|
| 2.3 | % |
|
| 2.3 | % | ||||
| 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% |
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
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis for the Company arewere as follows:
|
|
|
|
|
|
|
|
|
| Classification of Estimated Fair Value |
| |||||
|
| Carrying Amount |
|
| Fair Value |
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
| ||||
Spire |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 4.1 |
|
| $ | 4.1 |
|
| $ | 4.1 |
|
| $ | — |
|
Notes payable |
|
| 648.0 |
|
|
| 648.0 |
|
|
| — |
|
|
| 648.0 |
|
Long-term debt, including current portion |
|
| 2,484.1 |
|
|
| 2,908.6 |
|
|
| — |
|
|
| 2,908.6 |
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 5.8 |
|
| $ | 5.8 |
|
| $ | 5.8 |
|
| $ | — |
|
Notes payable |
|
| 743.2 |
|
|
| 743.2 |
|
|
| — |
|
|
| 743.2 |
|
Long-term debt, including current portion |
|
| 2,122.6 |
|
|
| 2,373.4 |
|
|
| — |
|
|
| 2,373.4 |
|
Spire Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable - associated companies |
| $ | 301.2 |
|
| $ | 301.2 |
|
| $ | — |
|
| $ | 301.2 |
|
Long-term debt |
|
| 1,092.0 |
|
|
| 1,313.5 |
|
|
| — |
|
|
| 1,313.5 |
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 2.6 |
|
| $ | 2.6 |
|
| $ | 2.6 |
|
| $ | — |
|
Notes payable - associated companies |
|
| 386.4 |
|
|
| 386.4 |
|
|
| — |
|
|
| 386.4 |
|
Long-term debt |
|
| 925.0 |
|
|
| 1,065.2 |
|
|
| — |
|
|
| 1,065.2 |
|
Spire Alabama |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable - associated companies |
| $ | 121.3 |
|
| $ | 121.3 |
|
| $ | — |
|
| $ | 121.3 |
|
Long-term debt, including current portion |
|
| 471.8 |
|
|
| 576.9 |
|
|
| — |
|
|
| 576.9 |
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable - associated companies |
| $ | 128.7 |
|
| $ | 128.7 |
|
| $ | — |
|
| $ | 128.7 |
|
Long-term debt, including current portion |
|
| 412.2 |
|
|
| 474.8 |
|
|
| — |
|
|
| 474.8 |
|
| Classification of Estimated Fair Value | |||||||||||||||
Carrying Amount | Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Observable Inputs (Level 2) | ||||||||||||
| As of September 30, 2017 | |||||||||||||||
| Cash and cash equivalents | $ | 7.4 | $ | 7.4 | $ | 7.4 | $ | — | |||||||
| Short-term debt | 477.3 | 477.3 | — | 477.3 | |||||||||||
| Long-term debt, including current portion | 2,095.0 | 2,210.3 | — | 2,210.3 | |||||||||||
| As of September 30, 2016 | |||||||||||||||
| Cash and cash equivalents | $ | 5.2 | $ | 5.2 | $ | 5.2 | $ | — | |||||||
| Short-term debt | 398.7 | 398.7 | — | 398.7 | |||||||||||
| Long-term debt, including current portion | 2,070.7 | 2,257.1 | — | 2,257.1 | |||||||||||
| Classification of Estimated Fair Value | |||||||||||||||
Carrying Amount | Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Observable Inputs (Level 2) | ||||||||||||
| 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 | $ | 2.1 | $ | 2.1 | $ | 2.1 | $ | — | |||||||
| Short-term debt | 243.7 | 243.7 | — | 243.7 | |||||||||||
| Long-term debt | 804.1 | 900.4 | — | 900.4 | |||||||||||
| Classification of Estimated Fair Value | |||||||||||||||
Carrying Amount | Fair Value | Quoted Prices in Active Markets (Level 1) | Significant Observable Inputs (Level 2) | ||||||||||||
| As of September 30, 2017 | |||||||||||||||
| Cash and cash equivalents | $ | 0.1 | $ | 0.1 | $ | 0.1 | $ | — | |||||||
| Short-term debt | 169.9 | 169.9 | — | 169.9 | |||||||||||
| Long-term debt | 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 | |||||||||||
9. FAIR VALUE MEASUREMENTS
The information presented below categorizes the assets and liabilities in the balance sheets that are accounted for at fair value on a recurring basis in periods subsequent to initial recognition.
The mutual funds included in Level 1 are valued based on exchange-quoted market prices of individual securities. The mutual funds included in Level 2 are valued based on the closing net asset value per unit.
Derivative instruments included in Level 1 are valued using quoted market prices on the NYMEX.NYMEX or the Intercontinental Exchange (ICE). Derivative instruments classified asin 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’s assumptions about how market participants would price the asset or liability. There were no material Level 3 balances as of September 30, 20172020 or 2016.2019. The Company’s and the Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of the interim reporting period in which circumstances change or events occur to cause the transfer.
The mutual funds are included in “Other investments” on the Company’s balance sheets and in “Property“Other Property and other investments”Investments” on Spire Missouri’s balance sheets. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net on the balance sheets when a legally enforceable netting agreement exist between the Company, Spire Missouri or Spire MissouriAlabama and the counterparty to the derivative contract. For additional information on derivative instruments, see
Spire
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Effects of Netting and Cash Margin Receivables /Payables |
|
| Total |
| |||||
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 21.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 21.9 |
|
Gasoline and heating oil contracts |
|
| 0.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| (0.3 | ) |
|
| 0 |
|
NYMEX/ICE natural gas contracts |
|
| 6.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| (6.3 | ) |
|
| 0 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
|
| 0 |
|
|
| 27.7 |
|
|
| 0 |
|
|
| (25.4 | ) |
|
| 2.3 |
|
Natural gas commodity contracts |
|
| 0 |
|
|
| 14.5 |
|
|
| 0.4 |
|
|
| 0 |
|
|
| 14.9 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
|
| 18.6 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 18.6 |
|
Total |
| $ | 47.1 |
|
| $ | 42.2 |
|
| $ | 0.4 |
|
| $ | (32.0 | ) |
| $ | 57.7 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
| $ | 0.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | (0.9 | ) |
| $ | 0 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
|
| 0.7 |
|
|
| 21.4 |
|
|
| 0 |
|
|
| (22.1 | ) |
|
| 0 |
|
Natural gas commodity contracts |
|
| 0 |
|
|
| 22.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| 22.3 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
| 0 |
|
|
| 54.2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 54.2 |
|
Total |
| $ | 1.6 |
|
| $ | 97.9 |
|
| $ | 0 |
|
| $ | (23.0 | ) |
| $ | 76.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 20.5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 20.5 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
|
| 0.9 |
|
|
| 6.5 |
|
|
| 0 |
|
|
| (6.9 | ) |
|
| 0.5 |
|
Natural gas commodity contracts |
|
| 0 |
|
|
| 16.8 |
|
|
| 0 |
|
|
| (2.5 | ) |
|
| 14.3 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
|
| 15.5 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 15.5 |
|
Total |
| $ | 36.9 |
|
| $ | 23.3 |
|
| $ | 0 |
|
| $ | (9.4 | ) |
| $ | 50.8 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
| $ | 12.3 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | (12.3 | ) |
| $ | 0 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
|
| 0.4 |
|
|
| 8.5 |
|
|
| 0 |
|
|
| (8.9 | ) |
|
| 0 |
|
Natural gas commodity contracts |
|
| 0 |
|
|
| 13.8 |
|
|
| 0.1 |
|
|
| (2.5 | ) |
|
| 11.4 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
| 0 |
|
|
| 43.4 |
|
|
| 0 |
|
|
| 0 |
|
|
| 43.4 |
|
Total |
| $ | 12.7 |
|
| $ | 65.7 |
|
| $ | 0.1 |
|
| $ | (23.7 | ) |
| $ | 54.8 |
|
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 | |||||||||||||||||||
| Gas Utility: | |||||||||||||||||||
| 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 | ||||||||||||||
| 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 | $ | 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 | $ | 1.6 | $ | — | $ | — | $ | (1.6 | ) | $ | — | ||||||||
| OTCBB natural gas contracts | — | 0.2 | — | — | 0.2 | ||||||||||||||
| 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 | $ | 5.1 | $ | 7.4 | $ | — | $ | (7.6 | ) | $ | 4.9 | ||||||||
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, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 21.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 21.9 |
|
Gasoline and heating oil contracts |
|
| 0.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| (0.3 | ) |
|
| 0 |
|
NYMEX/ICE natural gas contracts |
|
| 6.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| (6.3 | ) |
|
| 0 |
|
Total |
| $ | 28.5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | (6.6 | ) |
| $ | 21.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
| $ | 0.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | (0.9 | ) |
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 20.5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 20.5 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX/ICE natural gas contracts |
| $ | 12.3 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | (12.3 | ) |
| $ | 0 |
|
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
Spire Alabama commencedoccasionally utilizes a gasoline derivative program to stabilize the cost of fuel used in operations. As of September 30, 2017, the fair value of related2020, and September 30, 2019, there were 0 gasoline contracts was not significant.
10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Spire
Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options and swaps for the explicit purpose of managing price risk associated with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. Further discussion of this policy can be found in the Spire Missouri section.
From time to time Spire Missouri and Spire Alabama purchase NYMEX futures and options contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of their business.equipment. Further information on these derivatives can be found in the Spire Missouri and Spire Alabama sections, respectively.
In the course of its business, Spire’s gas marketing subsidiary, Spire Marketing which includes its(including a wholly owned subsidiary Spire Storage Inc.subsidiary), enters into commitments associated with the purchase or sale of natural gas. Certain of Spire Marketing’s derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of ASC Topic 815 and are accounted for as executory contracts on an accrual basis. Any of Spire Marketing’s derivative natural gas contracts that are not designated as normal purchases or normal sales are accounted for at fair value. At September 30, 2017,2020, the fair values of 202.1278.3 million MMBtu of non-exchange tradednon-exchange-traded natural gas commodity contracts were reflected in the Consolidated Balance Sheet. Of these contracts, 156.8233.1 million MMBtu will settle during fiscal 2018,2021, and 34.335.7 million MMBtu, 5.95.8 million MMBtu, 4.11.3 million MMBtu, 0.91.6 million MMBtu, and 0.10.8 million MMBtu will settle during fiscal years 2019, 2020, 2021, 2022, 2023, 2024, 2025, and 2023,2026, respectively. These contracts have not been designated as hedges; therefore, changes in the fair value of these contracts are reported in earnings each period.
Furthermore, Spire Marketing manages the price risk associated with its fixed-priced commitments by either closely matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of NYMEX or ICE futures, swap, and option contracts to lock in margins.
At September 30, 2017,2020, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations. Spire Marketing’s NYMEX and ICE natural gas futures, swap and option contracts used to lock in margins may be designated as cash flow hedges of forecasted transactions for financial reporting purposes.
In August 2018, Spire entered into a ten-yearthree- year interest rate swap with a fixed interest rate of 2.658%2.7675% and a notional amount of $60.0$100.0 to protect itself against adverse movements in interest rates. In the first quarter of 2020, the Company settled this position, resulting in a loss of $2.5 which will be amortized to interest expense over the hedged periods. During the first quarter of fiscal 2019, the Company entered into a three-year interest rate swap with a fixed interest rate of 3.250% and a notional amount of $100.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $0.9cumulative $53.7 mark-to-market loss in accumulated other comprehensive loss on thesethis swap at September 30, 2020. In the second quarter of 2020, the Company entered into multiple interest rate swaps as partwith fixed interest rates ranging from 0.921% to 1.3105% for a total notional amount of other$150.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $0.5 mark-to-market loss to comprehensive income for these swaps for the yeartwelve months ended September 30, 2017.
The Company’s and Spire Missouri’s exchange-traded/cleared derivative instruments consist primarily of NYMEX and ICE positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX/NYMEX and ICE natural gas futures and swap positions at September 30, 20172020 and 2019 were as follows:
|
| September 30, 2020 |
|
| September 30, 2019 |
| ||||||||||
Gas Marketing |
| Notional (MMBtu millions) |
|
| Maximum Term (Months) |
|
| Notional (MMBtu millions) |
|
| Maximum Term (Months) |
| ||||
Natural gas futures purchased |
|
| 22.9 |
|
|
| 41 |
|
|
| 29.1 |
|
|
| 36 |
|
Natural gas options purchased, net |
|
| 4.8 |
|
|
| 6 |
|
|
| 6.9 |
|
|
| 12 |
|
Natural gas basis swaps purchased |
|
| 6.2 |
|
|
| 24 |
|
|
| 90.1 |
|
|
| 36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas Utility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas futures purchased |
|
| 25.9 |
|
|
| 12 |
|
|
| 69.0 |
|
|
| 12 |
|
| 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, 2017,2020, neither Spire Missouri alsonor Spire Marketing had 33.9 million MMBtu of otherany further price mitigation in place through the use of NYMEX natural gas option-based strategies while Spire Marketing had none.place.
Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance sheets of the Company at fair value, and the change in fair value of the effective portion of these hedge instruments is recorded, net of income tax, in other comprehensive income or loss (OCI). Accumulated other comprehensive income or loss (AOCI) is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged item impacts. Based on market prices at September 30, 2017,2020, it is expected that an immaterial amount of unrealized gains will be reclassified into the Consolidated Statements of Income of the Company during the next twelve months. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the Consolidated Statements of Cash Flows.
Effect of Derivative Instruments on the Consolidated Statements of Income and Comprehensive Income |
| |||||||||||||
|
| Location of Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded in Income |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
| ||
Effective portion of gain (loss) recognized in OCI on derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest rate swaps |
|
|
|
| (8.9 | ) |
|
| (46.4 | ) |
|
| 3.9 |
|
Total |
|
|
| $ | (8.9 | ) |
| $ | (46.4 | ) |
| $ | 3.9 |
|
Effective portion of gain (loss) reclassified from AOCI to income: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Gasoline and heating oil contracts |
| Gas Utility Other Operating Expenses |
|
| 0 |
|
|
| 0 |
|
|
| 0.1 |
|
Interest rate swaps |
| Interest Expense |
|
| (3.2 | ) |
|
| 1.3 |
|
|
| 1.4 |
|
Total |
|
|
| $ | (3.2 | ) |
| $ | 1.3 |
|
| $ | 1.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments* |
|
|
|
|
|
|
|
|
|
|
|
| ||
Gain (loss) recognized in income on derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Natural gas commodity contracts |
| Gas Marketing Operating Revenues |
| $ | 9.2 |
|
| $ | 2.5 |
|
| $ | 10.2 |
|
|
| Gas Marketing Operating Expenses |
|
| 0 |
|
|
| (8.4 | ) |
|
| (8.1 | ) |
NYMEX / ICE natural gas contracts |
| Gas Marketing Operating Revenues |
|
| (11.8 | ) |
|
| 0 |
|
|
| 0 |
|
Total |
|
|
| $ | (2.6 | ) |
| $ | (5.9 | ) |
| $ | 2.1 |
|
| Effect of Derivative Instruments on the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income | ||||||||||||
| Location of Gain (Loss) | ||||||||||||
| Recorded in Income | 2017 | 2016 | 2015 | |||||||||
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||
| Effective portion of gain (loss) recognized in OCI on derivatives: | ||||||||||||
| Gas Marketing natural gas contracts | $ | — | $ | (0.6 | ) | $ | (4.3 | ) | ||||
| Gas Utility gasoline and heating oil contracts | 0.1 | — | (1.2 | ) | ||||||||
| Interest rate swaps | 11.4 | (3.4 | ) | — | ||||||||
| Total | $ | 11.5 | $ | (4.0 | ) | $ | (5.5 | ) | ||||
| Effective portion of gain (loss) reclassified from AOCI to income: | ||||||||||||
| Natural gas contracts | Gas Marketing Operating Revenues | $ | (0.4 | ) | $ | 4.3 | $ | 1.7 | ||||
| Gas Marketing Operating Expenses | 0.1 | (4.9 | ) | (5.2 | ) | |||||||
| Subtotal | (0.3 | ) | (0.6 | ) | (3.5 | ) | ||||||
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | 0.2 | (0.5 | ) | (0.9 | ) | ||||||
| Interest rate swaps | Interest Expense | 0.1 | — | — | ||||||||
| Total | $ | — | $ | (1.1 | ) | $ | (4.4 | ) | ||||
| Ineffective portion of gain (loss) on derivatives recognized in income: | ||||||||||||
| Natural gas contracts | Gas Marketing Operating Revenues | $ | — | $ | 0.1 | $ | — | |||||
| Gas Marketing Operating Expenses | — | 0.1 | (0.5 | ) | ||||||||
| Subtotal | — | 0.2 | (0.5 | ) | ||||||||
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | — | 0.1 | 0.1 | ||||||||
| Interest rate swaps | Interest Expense | 0.5 | — | — | ||||||||
| Total | $ | 0.5 | $ | 0.3 | $ | (0.4 | ) | |||||
| Derivatives Not Designated as Hedging Instruments* | ||||||||||||
| Gain (loss) recognized in income on derivatives: | ||||||||||||
| Natural gas commodity contracts | Gas Marketing Operating Revenues | $ | 0.7 | $ | 12.3 | $ | (1.3 | ) | ||||
| NYMEX / ICE natural gas contracts | Gas Marketing Operating Revenues | (4.4 | ) | (1.7 | ) | (9.6 | ) | |||||
| Gasoline and heating oil contracts | Other Income and (Income Deductions) - Net | — | — | (0.2 | ) | |||||||
| Total | $ | (3.7 | ) | $ | 10.6 | $ | (11.1 | ) | ||||
* | |
Gains and losses on Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments for financial reporting purposes, are deferred pursuant to the Missouri Utilities’ PGA clauses and initially recorded as regulatory assets or regulatory liabilities. These gains and losses are excluded from the table above because they have no direct impact on the statements of income. Such amounts are recognized in the statements of income as a component of 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 Sheets |
| |||||||||||
|
| Derivative Assets* |
|
| Derivative Liabilities* |
| ||||||
September 30, 2020 |
| Balance Sheet Location |
| Fair Value |
|
| Balance Sheet Location |
| Fair Value |
| ||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Other: Interest rate swaps |
| Derivative Instrument Liability |
| $ | 0 |
|
| Derivative Instrument Liability |
| $ | 54.2 |
|
Subtotal |
|
|
|
| 0 |
|
|
|
|
| 54.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
| Accounts Receivable – Other |
|
| 6.3 |
|
| Accounts Receivable – Other |
|
| 0.9 |
|
Gasoline and heating oil contracts |
| Derivative Instrument Assets |
|
| 0.3 |
|
|
|
|
| 0 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX / ICE natural gas contracts |
| Derivative Instrument Assets |
|
| 20.5 |
|
| Derivative Instrument Assets |
|
| 21.3 |
|
|
| Deferred Charges – Other |
|
| 7.2 |
|
| Deferred Charges – Other |
|
| 0.8 |
|
Natural gas commodity |
| Derivative Instrument Assets |
|
| 13.5 |
|
| Derivative Instrument Assets |
|
| 0 |
|
|
| Deferred Charges – Other |
|
| 1.4 |
|
| Deferred Charges – Other |
|
| 0 |
|
|
| Current Liabilities – Other |
|
| 0 |
|
| Current Liabilities – Other |
|
| 16.8 |
|
|
| Deferred Credits – Other |
|
| 0 |
|
| Deferred Credits – Other |
|
| 5.5 |
|
Subtotal |
|
|
|
| 49.2 |
|
|
|
|
| 45.3 |
|
Total derivatives |
|
|
| $ | 49.2 |
|
|
|
| $ | 99.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Other: Interest rate swaps |
| Derivative Instrument Liability |
| $ | 0 |
|
| Derivative Instrument Liability |
| $ | 43.4 |
|
Subtotal |
|
|
|
| 0 |
|
|
|
|
| 43.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Gas Utility: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
| Accounts Receivable – Other |
|
| 0 |
|
| Accounts Receivable – Other |
|
| 12.3 |
|
Gas Marketing: |
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX / ICE natural gas contracts |
| Derivative Instrument Assets |
|
| 7.0 |
|
| Derivative Instrument Assets |
|
| 7.3 |
|
|
| Deferred Charges – Other |
|
| 0.5 |
|
| Deferred Charges – Other |
|
| 1.6 |
|
Natural gas commodity |
| Derivative Instrument Assets |
|
| 10.4 |
|
| Derivative Instrument Assets |
|
| 0.9 |
|
|
| Deferred Charges – Other |
|
| 4.8 |
|
| Deferred Charges – Other |
|
| 0 |
|
|
| Current Liabilities – Other |
|
| 1.4 |
|
| Current Liabilities – Other |
|
| 11.5 |
|
|
| Deferred Credits – Other |
|
| 0.1 |
|
| Deferred Credits – Other |
|
| 1.5 |
|
Subtotal |
|
|
|
| 24.2 |
|
|
|
|
| 35.1 |
|
Total derivatives |
|
|
| $ | 24.2 |
|
|
|
| $ | 78.5 |
|
| Fair Value of Derivative Instruments in the Consolidated Balance Sheets | |||||||||
| Asset Derivatives* | Liability Derivatives* | ||||||||
| September 30, 2017 | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||
| Derivatives designated as hedging instruments | |||||||||
| Gas Utility: | |||||||||
| Gasoline and heating oil contracts | Derivative Instrument Assets | $ | 0.1 | Derivative Instrument Assets | $ | — | |||
| Gas Marketing: | |||||||||
| Natural gas contracts | Derivative Instrument Assets | 0.3 | Derivative Instrument Assets | 0.2 | |||||
| Deferred Charges – Other | 0.3 | Deferred Charges – Other | — | ||||||
| Other: | |||||||||
| Interest rate swaps | Current Liabilities - Other | — | Current Liabilities - Other | 0.9 | |||||
| Subtotal | 0.7 | 1.1 | |||||||
| Derivatives not designated as hedging instruments | |||||||||
| Gas Utility: | |||||||||
| Natural gas contracts | Accounts Receivable – Other | 3.4 | Accounts Receivable – Other | 1.9 | |||||
| Gas Marketing: | |||||||||
| NYMEX / ICE natural gas contracts | Derivative Instrument Assets | 1.7 | Derivative Instrument Assets | 1.4 | |||||
| Deferred Charges – Other | 0.3 | Deferred Charges – Other | 0.5 | ||||||
| Natural gas commodity | Derivative Instrument Assets | 5.3 | Derivative Instrument Assets | 0.1 | |||||
| Other Deferred Charges | 0.4 | Other Deferred Charges | — | ||||||
| Current Liabilities – Other | 0.8 | Current Liabilities – Other | 5.0 | ||||||
| Deferred Credits – Other | 0.4 | Deferred Credits – Other | 3.3 | ||||||
| Subtotal | 12.3 | 12.2 | |||||||
| Total derivatives | $ | 13.0 | $ | 13.3 | |||||
| September 30, 2016 | |||||||||
| Derivatives designated as hedging instruments | |||||||||
| Gas Utility: | |||||||||
| Gasoline and heating oil contracts | Derivative Instrument Assets | $ | 0.3 | Derivative Instrument Assets | $ | — | |||
| Gas Marketing: | |||||||||
| Natural gas contracts | Derivative Instrument Assets | 2.5 | Derivative Instrument Assets | 0.8 | |||||
| Deferred Charges - Other | 0.4 | Deferred Charges - Other | 0.1 | ||||||
Other: Interest rate swaps | Derivative Instrument Assets | — | Derivative Instrument Assets | 3.0 | |||||
| Subtotal | 3.2 | 3.9 | |||||||
| Derivatives not designated as hedging instruments | |||||||||
| Gas Utility: | |||||||||
| Natural gas contracts | Accounts Receivable – Other | 5.4 | Accounts Receivable – Other | 1.6 | |||||
| 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 | 0.1 | ||||||
| Natural gas commodity | Derivative Instrument Assets | 6.5 | Derivative Instrument Assets | 0.2 | |||||
| Other Deferred Charges | 2.1 | Other Deferred Charges | 0.3 | ||||||
| Current Liabilities – Other | 0.2 | Current Liabilities – Other | 2.0 | ||||||
| Deferred Credits – Other | 0.2 | Deferred Credits – Other | 0.1 | ||||||
| Subtotal | 15.2 | 8.6 | |||||||
| Total derivatives | $ | 18.4 | $ | 12.5 | |||||
* | |
The fair values of |
Following is a reconciliation of the amounts in the tables above to the amounts presented in the Consolidated Balance Sheets:
|
| 2020 |
|
| 2019 |
| ||
Fair value of derivative assets presented above |
| $ | 49.2 |
|
| $ | 24.2 |
|
Fair value of cash margin receivable offset with derivatives |
|
| (9.0 | ) |
|
| 14.3 |
|
Netting of assets and liabilities with the same counterparty |
|
| (23.0 | ) |
|
| (23.7 | ) |
Total |
| $ | 17.2 |
|
| $ | 14.8 |
|
Derivative Instrument Assets, per Consolidated Balance Sheets: |
|
|
|
|
|
|
|
|
Current Assets – Other |
| $ | 15.8 |
|
| $ | 4.2 |
|
Deferred Charges and Other Assets – Other |
|
| 1.4 |
|
|
| 10.6 |
|
Total |
| $ | 17.2 |
|
| $ | 14.8 |
|
|
|
|
|
|
|
|
|
|
Fair value of derivative liabilities presented above |
| $ | 99.5 |
|
| $ | 78.5 |
|
Netting of assets and liabilities with the same counterparty |
|
| (23.0 | ) |
|
| (23.7 | ) |
Total |
| $ | 76.5 |
|
| $ | 54.8 |
|
Derivative Instrument Liabilities, per Consolidated Balance Sheets: |
|
|
|
|
|
|
|
|
Current Liabilities – Other |
| $ | 71.0 |
|
| $ | 50.0 |
|
Deferred Credits and Other Liabilities – Other |
|
| 5.5 |
|
|
| 4.8 |
|
Total |
| $ | 76.5 |
|
| $ | 54.8 |
|
| 2017 | 2016 | ||||||
| Fair value of asset derivatives presented above | $ | 13.0 | $ | 18.4 | |||
| Fair value of cash margin (payable) receivable offset with derivatives | (1.5 | ) | 2.5 | ||||
| Netting of assets and liabilities with the same counterparty | (5.3 | ) | (7.6 | ) | |||
| Total | $ | 6.2 | $ | 13.3 | |||
| Derivative Instrument Assets, per Consolidated Balance Sheets: | |||||||
| Derivative instrument assets | $ | 5.9 | $ | 11.4 | |||
| Deferred Charges – Other | 0.3 | 1.9 | |||||
| Total | $ | 6.2 | $ | 13.3 | |||
| Fair value of liability derivatives presented above | $ | 13.3 | $ | 12.5 | |||
| Netting of assets and liabilities with the same counterparty | (5.3 | ) | (7.6 | ) | |||
| Total | $ | 8.0 | $ | 4.9 | |||
| Derivative Instrument Liabilities, per Consolidated Balance Sheets: | |||||||
| Current Liabilities – Other | $ | 4.9 | $ | 4.8 | |||
| Deferred Credits – Other | 3.1 | 0.1 | |||||
| Total | $ | 8.0 | $ | 4.9 | |||
Additionally, at September 30, 20172020 and 2016,2019, the Company had $4.0$7.6 and $2.9,$8.1, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Spire Missouri
Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-traded options, swaps and over-the-counter instruments for the explicit purpose of managing price risk associated with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. This policy strictly prohibits speculation and permits Spire Missouri to hedge current physical natural gas purchase commitments or forecasted or anticipated future peak (maximum) physical need for natural gas delivered. Costs and cost reductions, including carrying costs, associated with Spire Missouri’s use of natural gas derivative instruments are allowed to be passed on to Spire Missouri customers through the operation of its PGA clause, through which the MoPSC allows Spire Missouri to recover gas supply costs, subject to prudence review by the MoPSC. Accordingly, Spire Missouri does not expect any adverse earnings impact as a result of the use of these derivative instruments.
Spire Missouri does not designate these instruments as hedging instruments for financial reporting purposes because gains or losses associated with the use of these derivative instruments are deferred and recorded as regulatory assets or regulatory liabilities pursuant to ASC Topic 980, “RegulatedRegulated Operations”, and, as a result, have no direct impact on the statements of income.
The timing of the operation of the PGA clause may cause interim variations in short-term cash flows, because Spire Missouri is subject to cash margin requirements associated with changes in the values of these instruments. Nevertheless, carrying costs associated with such requirements are recovered through the PGA clause.
From time to time, Spire Missouri purchases NYMEX futures and options contracts to help stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the course of its business. At September 30, 2017, Spire Missouri held 0.3 million gallons of gasoline futuresThese contracts at an average price of $1.27 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, “DerivativesDerivatives and Hedging.”Hedging. The gains or losses on these derivative instruments are not subject to 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 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, 2017,2020, it is expected that an immaterial amount of pre-tax gains will be reclassified into the statements of income during fiscal 2018.2021. Cash flows from hedging transactions are classified in the same category as the cash flows from the items that are being hedged in the statements of cash flows.
Spire Missouri’s derivative instruments consist primarily of NYMEX positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are traded. Open NYMEX natural gas futures positions at September 30, 20172020 were as follows:
|
| September 30, 2020 |
| |||||
|
| Notional (MMBtu millions) |
|
| Maximum Term (Months) |
| ||
Natural gas futures purchased |
|
| 25.9 |
|
|
| 12 |
|
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, 2017,2020, Spire Missouri also had 33.9 million MMBtu ofno other price mitigation derivatives in place through the use of NYMEX natural gas option-based strategies.place.
Effect of Derivative Instruments on the Statements of Comprehensive Income |
| |||||||||||||
|
| Location of Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded in Income |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
| ||
Effective portion of gain (loss) recognized in OCI on derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Gasoline and heating oil contracts |
|
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Effective portion of gain (loss) reclassified from AOCI to income: |
|
|
|
|
|
|
|
|
|
|
|
| ||
Gasoline and heating oil contracts |
| Gas Utility Other Operating Expenses |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0.1 |
|
| Effect of Derivative Instruments on the Statements of Income and Statements of Comprehensive Income | ||||||||||||
| Location of Gain (Loss) | ||||||||||||
| Recorded in Income | 2017 | 2016 | 2015 | |||||||||
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||
| Effective portion of gain (loss) recognized in OCI on derivatives: | ||||||||||||
| Gasoline and heating oil contracts | $ | 0.1 | $ | — | $ | (1.2 | ) | |||||
| Effective portion of gain (loss) reclassified from AOCI to income: | ||||||||||||
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | $ | 0.2 | $ | (0.5 | ) | $ | (0.9 | ) | |||
| Ineffective portion of gain (loss) on derivatives recognized in income: | ||||||||||||
| Gasoline and heating oil contracts | Gas Utility Other Operating Expenses | $ | — | $ | 0.1 | $ | 0.1 | |||||
| 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 | ) | ||||
* | |
Gains and losses on Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments for financial reporting purposes, are deferred pursuant to the Spire Missouri’s PGA clauses and initially recorded as regulatory assets or regulatory liabilities. 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 Sheets |
| |||||||||||
|
| Derivative Assets* |
|
| Derivative Liabilities* |
| ||||||
September 30, 2020 |
| Balance Sheet Location |
| Fair Value |
|
| Balance Sheet Location |
| Fair Value |
| ||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Natural gas contracts |
| Accounts Receivable – Other |
| $ | 6.3 |
|
| Accounts Receivable – Other |
| $ | 0.9 |
|
Gasoline and heating oil contracts |
| Derivative Instrument Assets |
|
| 0.3 |
|
|
|
|
| 0 |
|
Total derivatives |
|
|
| $ | 6.6 |
|
|
|
| $ | 0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
| ||
Natural gas contracts |
| Accounts Receivable – Other |
| $ | 0 |
|
| Accounts Receivable – Other |
| $ | 12.3 |
|
| Fair Value of Derivative Instruments in the Balance Sheets | |||||||||
| Asset Derivatives* | Liability Derivatives* | ||||||||
| September 30, 2017 | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||
| Derivatives designated as hedging instruments | |||||||||
| Gasoline and heating oil contracts | Derivative Instrument Assets | $ | 0.1 | Derivative Instrument Assets | $ | — | |||
| 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 | |||||
| September 30, 2016 | |||||||||
| Derivatives designated as hedging instruments | |||||||||
| Gasoline and heating oil contracts | Derivative Instrument Assets | $ | 0.3 | Derivative Instrument Assets | $ | — | |||
| Subtotal | 0.3 | — | |||||||
| Derivatives not designated as hedging instruments | |||||||||
| Natural gas contracts | Accounts Receivable – Other | 5.4 | Accounts Receivable – Other | 1.6 | |||||
| OTCBB natural gas contracts | Derivative Instrument Assets | — | Derivative Instrument Assets | 0.2 | |||||
| Subtotal | 5.4 | 1.8 | |||||||
| Total derivatives | $ | 5.7 | $ | 1.8 | |||||
* | |
The fair values of |
Following is a reconciliation of the amounts in the tables above to the amounts presented in Spire Missouri’s Balance Sheets:
|
| 2020 |
|
| 2019 |
| ||
Fair value of derivative assets presented above |
| $ | 6.6 |
|
| $ | 0 |
|
Fair value of cash margin (payable) receivable offset with derivatives |
|
| (5.7 | ) |
|
| 12.3 |
|
Netting of assets and liabilities with the same counterparty |
|
| (0.9 | ) |
|
| (12.3 | ) |
Total |
| $ | 0 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
Fair value of derivative liabilities presented above |
| $ | 0.9 |
|
| $ | 12.3 |
|
Netting of assets and liabilities with the same counterparty |
|
| (0.9 | ) |
|
| (12.3 | ) |
Total |
| $ | 0 |
|
| $ | 0 |
|
| 2017 | 2016 | ||||||
| Fair value of asset derivatives presented above | $ | 3.5 | $ | 5.7 | |||
| Fair value of cash margin (payable) receivable offset with derivatives | (1.5 | ) | 0.8 | ||||
| Netting of assets and liabilities with the same counterparty | (1.9 | ) | (1.6 | ) | |||
| Total | $ | 0.1 | $ | 4.9 | |||
| Derivative Instrument Assets, per Balance Sheets: | |||||||
| Derivative instrument assets | $ | 0.1 | $ | 4.9 | |||
| Total | $ | 0.1 | $ | 4.9 | |||
| Fair value of liability derivatives presented above | $ | 1.9 | $ | 1.8 | |||
| Netting of assets and liabilities with the same counterparty | (1.9 | ) | (1.6 | ) | |||
| Total | $ | — | $ | 0.2 | |||
| Derivative Instrument Liabilities, per Balance Sheets: | |||||||
| Current Liabilities – Other | $ | — | $ | 0.2 | |||
| Total | $ | — | $ | 0.2 | |||
Additionally, at September 30, 20172019 and 2016,2018, Spire Missouri had $4.0$7.2 and $0.5,$7.8, respectively, in cash margin receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Spire Alabama
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.
11. CONCENTRATIONS OF CREDIT RISK
Spire’s Gas Utility segment serves 1.7 million customers in Spire Marketing, Spire has no3 states across multiple rate classes resulting in a significant concentrationamount of credit risk.
Spire Marketing’s transactions are with (or are associated with) energy producers,accounts receivable attributable to utility companies and pipelines.their marketing affiliates totaled $73.0 at September 30, 2020. The concentration of transactions with these counterparties has the potential to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groupscustomers in this group may be affected similarly by changes in economic, industry, or other conditions. Spire Marketing also has concentrations of credit risk with certain individually significant counterparties. At September 30, 2020, the amounts included in accounts receivable from its 5 largest counterparties (in terms of net accounts receivable exposure) totaled $35.7. NaN of these five counterparties are investment-grade rated integrated utilities, while the fifth is not rated but is a subsidiary of an investment-grade rated company.
To manage this risk, as well as credit risk from significant counterparties in these and other industries,risks, Spire Marketing has established procedures to determine the creditworthiness of its counterparties. These procedures include obtaining credit ratings and credit reports, analyzing counterparty financial statements to assess financial condition, and considering the industry environment in which the counterparty operates. This information is monitored on an ongoing basis. In some instances, Spire Marketing may require credit assurances such as prepayments, letters of credit, or parental guarantees.guaranties. In addition, Spire Marketing may enter into netting arrangements to mitigate credit risk with counterparties in the energy industry with whom it conducts both sales and purchases of natural gas. Where there is no netting arrangement, Spire Marketing records accounts receivable, accounts payable, and prepayments for physical sales and purchases of natural gas on a gross basis. Sales are typically made on an unsecured credit basis with payment due the month following delivery. Accounts receivable amounts are closely monitored and provisions for uncollectible amounts are accrued when losses are probable.
12. INCOME TAXES
The Company, Spire Marketing records accounts receivable, accounts payable,Missouri, and prepayments for physical salesSpire Alabama are subject to federal income tax as well as income tax in various state and purchases of natural gas onlocal jurisdictions. Spire files a gross basis. consolidated federal income tax return and various state income tax returns and allocates income taxes to Spire Missouri, Spire Alabama and its other subsidiaries as if each entity were a separate taxpayer.
The amount included in accounts receivable attributable to energy producers and their marketing affiliates amounted to $17.9 at September 30, 2017 ($8.9 reflecting netting arrangements). Spire Marketing’s accounts receivable attributable to utility companies and their marketing affiliates comprised $58.2 of total accounts receivable at September 30, 2017 ($55.8 reflecting netting arrangements).
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Federal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
| $ | 0.4 |
|
| $ | 0.6 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Deferred |
|
| 5.8 |
|
|
| 27.4 |
|
|
| (22.7 | ) |
|
| 14.9 |
|
|
| 11.5 |
|
|
| (26.1 | ) |
|
| 17.4 |
|
|
| 16.3 |
|
|
| 81.5 |
|
Investment tax credits |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
State and local: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
| 3.0 |
|
|
| 2.1 |
|
|
| 2.2 |
|
|
| 0.1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Deferred |
|
| 3.4 |
|
|
| 4.6 |
|
|
| (5.8 | ) |
|
| 2.5 |
|
|
| 2.0 |
|
|
| (6.3 | ) |
|
| 4.6 |
|
|
| 4.2 |
|
|
| 0.1 |
|
Total income tax expense (benefit) |
| $ | 12.4 |
|
| $ | 34.5 |
|
| $ | (26.5 | ) |
| $ | 17.3 |
|
| $ | 13.3 |
|
| $ | (32.6 | ) |
| $ | 22.0 |
|
| $ | 20.5 |
|
| $ | 81.6 |
|
| 2017 | 2016 | 2015 | |||||||||
| Federal | |||||||||||
| Current | $ | 0.1 | $ | 0.1 | $ | (3.3 | ) | ||||
| Deferred | 67.7 | 62.0 | 58.8 | ||||||||
| Investment tax credits | (0.2 | ) | (0.2 | ) | (0.2 | ) | |||||
| State and local | |||||||||||
| Current | 0.5 | 0.6 | — | ||||||||
| Deferred | 9.5 | 7.0 | 6.9 | ||||||||
| Total income tax expense | $ | 77.6 | $ | 69.5 | $ | 62.2 | |||||
The Company’s effective income tax rate varied from the federal statutory income tax rate for each year due to the following:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Federal income tax statutory rate |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 24.5 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 24.5 | % |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 24.5 | % |
State and local income taxes, net of federal income tax benefits |
|
| 9.0 |
|
|
| 3.6 |
|
|
| 3.4 |
|
|
| 2.6 |
|
|
| 2.6 |
|
|
| 3.4 |
|
|
| 4.1 |
|
|
| 4.1 |
|
|
| 3.8 |
|
Certain expenses capitalized on books and deducted on tax return |
|
| (6.6 | ) |
|
| (3.8 | ) |
|
| (2.3 | ) |
|
| (4.6 | ) |
|
| (6.5 | ) |
|
| (4.6 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Taxes related to prior years |
|
| (1.8 | ) |
|
| 0.2 |
|
|
| (0.4 | ) |
|
| (1.4 | ) |
|
| 0.1 |
|
|
| (0.7 | ) |
|
| 0.1 |
|
|
| 0 |
|
|
| 0 |
|
Tax law changes |
|
| 0 |
|
|
| 0 |
|
|
| (35.9 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (50.3 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 70.0 |
|
Amortization of excess deferred taxes |
|
| (8.3 | ) |
|
| (3.8 | ) |
|
| (1.8 | ) |
|
| (5.7 | ) |
|
| (6.6 | ) |
|
| (3.6 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Other items – net * |
|
| (1.0 | ) |
|
| (1.4 | ) |
|
| (1.6 | ) |
|
| (0.2 | ) |
|
| (0.3 | ) |
|
| (2.5 | ) |
|
| (0.1 | ) |
|
| 0.2 |
|
|
| 0.1 |
|
Effective income tax rate |
|
| 12.3 | % |
|
| 15.8 | % |
|
| (14.1 | )% |
|
| 11.7 | % |
|
| 10.3 | % |
|
| (33.8 | )% |
|
| 25.1 | % |
|
| 25.3 | % |
|
| 98.4 | % |
* | Other consists primarily of property adjustments. |
| 2017 | 2016 | 2015 | ||||||
| Federal income tax statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
| State and local income taxes, net of federal income tax benefits | 2.8 | 2.8 | 3.0 | |||||
| Certain expenses capitalized on books and deducted on tax return | (2.3 | ) | (3.4 | ) | (3.7 | ) | ||
| Taxes related to prior years | (0.9 | ) | (0.2 | ) | (0.6 | ) | ||
| Other items – net * | (2.2 | ) | (1.7 | ) | (2.5 | ) | ||
| Effective income tax rate | 32.4 | % | 32.5 | % | 31.2 | % | ||
The Company’s significant items comprising the net deferred tax liability recorded in the Consolidated Balance Sheetsor asset as of September 30 arewere as follows:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves not currently deductible |
| $ | 24.8 |
|
| $ | 31.4 |
|
| $ | 16.7 |
|
| $ | 21.2 |
|
| $ | 5.9 |
|
| $ | 6.2 |
|
Pension and other postretirement benefits |
|
| 108.3 |
|
|
| 102.7 |
|
|
| 78.5 |
|
|
| 78.7 |
|
|
| 0 |
|
|
| 0 |
|
Goodwill |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 101.3 |
|
|
| 116.8 |
|
Operating losses |
|
| 170.4 |
|
|
| 162.2 |
|
|
| 36.0 |
|
|
| 51.1 |
|
|
| 111.3 |
|
|
| 94.2 |
|
Regulatory amount due to customers, net |
|
| 36.1 |
|
|
| 46.5 |
|
|
| 32.3 |
|
|
| 42.7 |
|
|
| 0 |
|
|
| 0 |
|
Other |
|
| 44.7 |
|
|
| 20.0 |
|
|
| 0 |
|
|
| 1.2 |
|
|
| 0 |
|
|
| 0 |
|
Deferred tax assets |
|
| 384.3 |
|
|
| 362.8 |
|
|
| 163.5 |
|
|
| 194.9 |
|
|
| 218.5 |
|
|
| 217.2 |
|
Less: Valuation allowance |
|
| (0.9 | ) |
|
| (1.8 | ) |
|
| (0.9 | ) |
|
| (1.8 | ) |
|
| 0 |
|
|
| 0 |
|
Total deferred tax assets |
|
| 383.4 |
|
|
| 361.0 |
|
|
| 162.6 |
|
|
| 193.1 |
|
|
| 218.5 |
|
|
| 217.2 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relating to property |
|
| (614.0 | ) |
|
| (562.9 | ) |
|
| (427.1 | ) |
|
| (395.1 | ) |
|
| (151.4 | ) |
|
| (129.3 | ) |
Regulatory pension and other postretirement benefits |
|
| (138.4 | ) |
|
| (135.9 | ) |
|
| (107.4 | ) |
|
| (111.7 | ) |
|
| (3.4 | ) |
|
| (2.0 | ) |
Other** |
|
| (142.4 | ) |
|
| (113.6 | ) |
|
| (62.8 | ) |
|
| (50.9 | ) |
|
| (4.4 | ) |
|
| (4.6 | ) |
Total deferred tax liabilities |
|
| (894.8 | ) |
|
| (812.4 | ) |
|
| (597.3 | ) |
|
| (557.7 | ) |
|
| (159.2 | ) |
|
| (135.9 | ) |
Net deferred tax (liability) asset |
| $ | (511.4 | ) |
| $ | (451.4 | ) |
| $ | (434.7 | ) |
| $ | (364.6 | ) |
| $ | 59.3 |
|
| $ | 81.3 |
|
| 2017 | 2016 | ||||||
| Deferred tax assets: | |||||||
| Reserves not currently deductible | $ | 31.5 | $ | 21.3 | |||
| Pension and other postretirement benefits | 58.6 | 68.3 | |||||
| Operating losses | 169.6 | 102.3 | |||||
| Other | 26.0 | — | |||||
| Deferred tax assets | 285.7 | 191.9 | |||||
| Less: valuation allowance | 0.5 | 0.9 | |||||
| Total deferred tax assets | 285.2 | 191.0 | |||||
| Deferred tax liabilities: | |||||||
| Relating to property | 728.3 | 623.1 | |||||
| Regulatory pension and other postretirement benefits | 108.0 | 106.8 | |||||
| Deferred gas costs | 30.6 | 20.0 | |||||
| Other** | 125.8 | 48.4 | |||||
| Total deferred tax liabilities | 992.7 | 798.3 | |||||
| Net deferred tax liability | $ | 707.5 | $ | 607.3 | |||
** | For Spire, Other consists primarily of goodwill-related liabilities. |
The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017, with an effective date of GoodwillJanuary 1, 2018, for substantially all of the provisions. This comprehensive act includes significant reform of the current income tax code including changes in the calculation for business entities and a reduction in the corporate federal income tax rate from 35% to 21%. The specific provisions related liabilities.
ASC Topic 740, Income Taxes, requires that the effects of changes in tax laws be recognized in the period in which the new law is enacted. It also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. For the Company’s regulated entities, the changes in deferred taxes related to the regulated operations are recorded as either an offset to or creation of a regulatory asset or liability and may be subject to refund to customers in future periods. The changes in deferred taxes that are not associated with rate making (including all changes for the Company’s non-regulated operations) are recorded as adjustments to deferred tax expense or benefit.
As indicated in Note 1, Summary of Significant Accounting Policies, the Company’s regulated operations accounting for income taxes is impacted by ASC Topic 980, Regulated Operations. Reductions in deferred income tax balances due to the reduction in the corporate income tax rate resulted in amounts previously collected from utility customers for these deferred taxes becoming refundable to such customers, generally through reductions in future rates. The TCJA includes provisions that stipulate how these excess deferred taxes are to be passed back to customers for certain accelerated tax depreciation benefits. In fiscal 2018, the MoPSC Amended Report and Order took effect and the estimated excess accumulated deferred income tax began to be returned to Spire Missouri customers in rates. The amount being returned is estimated with a tracker established to defer the difference from the estimated amounts to the actual amounts once the actual amounts have been calculated. Excess accumulated deferred taxes of $8.4 were returned by Spire Missouri during both fiscal 2020 and 2019. The treatment for accumulated deferred income tax balances for Spire Alabama, Spire Gulf and Spire Mississippi is yet to be determined by state regulators.
The Company recorded the TCJA impacts in fiscal 2018, including the impact of the federal income tax rate reduction and the revaluation of the deferred tax assets and liabilities. The total adjustments recorded, before reduction for amounts returned to customers, for the year ended September 30, 2018, were as follows:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Adjustment to deferred tax liabilities |
| $ | (318.3 | ) |
| $ | (285.3 | ) |
| $ | (61.0 | ) |
Adjustment to deferred income tax expense |
|
| (75.0 | ) |
|
| (57.0 | ) |
|
| 58.8 |
|
Adjustment to regulatory assets |
|
| (75.9 | ) |
|
| (78.1 | ) |
|
| 2.2 |
|
Adjustment to regulatory liabilities |
|
| 167.4 |
|
|
| 150.2 |
|
|
| — |
|
In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers all significant available positive and negative evidence, including the existence of losses in recent years, the timing of deferred tax liability reversals, projected future taxable income, taxable income in carryback years, and tax planning strategies to assess the need for a valuation allowance. Based upon this evidence, management believes it is more likely than not the Company, Spire Missouri and Spire Alabama will realize the benefits of these deferred tax assets, except for the contribution carryforward valuation allowanceallowances noted below.
The Company hashad federal and state loss carryforwards of approximately $478.6 $726.8at September 30, 2017. The Company also has contribution carryforwards of approximately $12.1 at September 30, 2017.2020. The loss carryforwards begin to expire in fiscal 2030 for certain state purposes and fiscal 2035 for federal and other states purposes. The Company also had contribution carryforwards beginof approximately $9.3 at September 30, 2020, which began to expire in fiscal 2018.this year. The Company has a valuation allowance of $0.5$3.6, 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 $2.5 that$2.9 along with a valuation allowance of $0.1 as a portion of these tax credits began to expire in 2020.
Spire Missouri had federal and state loss carryforwards of approximately $207.8 at September 30, 2020 on a separate company basis, which begin to expire in fiscal 2035. For federal tax purposes, these loss carryforwards may be utilized against income from another member of the consolidated group. Spire Missouri also has contribution carryforwards of approximately $5.4 at September 30, 2020 that began to expire this year. Spire Missouri has a valuation allowance of $3.0, as a portion of the contribution carryforward will not be realized prior to its expiration. Spire Missouri also has approximately $2.0of various tax credit carryforwards, and a valuation allowance of $0.1 as a portion of these tax credits began to expire in 2020.
On a separate company basis, Spire Alabama had federal and state loss carryforwards of approximately $443.5 at September 30, 2020. The loss carryforwards begin to expire in fiscal 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.
The Company, recognizesSpire Missouri and Spire Alabama recognize the tax benefit from a tax position only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company records potential interest and penalties related to its uncertain tax positions as interest expense and other income deductions, respectively. Unrecognized tax benefits are reported as a reduction of a deferred tax asset for an operating loss carryforward.
|
| Spire |
|
| Spire Missouri |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| ||||||
Unrecognized tax benefits, beginning of year |
| $ | 10.7 |
|
| $ | 8.1 |
|
| $ | 11.0 |
|
| $ | 10.4 |
|
| $ | 7.8 |
|
| $ | 10.7 |
|
Decrease related to tax law changes |
|
| 0 |
|
|
| 0 |
|
|
| (4.0 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (4.0 | ) |
Increases related to tax positions taken in current year |
|
| 2.6 |
|
|
| 4.5 |
|
|
| 1.2 |
|
|
| 2.6 |
|
|
| 4.5 |
|
|
| 1.1 |
|
Reductions related to tax positions taken in prior year |
|
| 0 |
|
|
| (1.9 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (1.9 | ) |
|
| 0 |
|
Reductions due to lapse of applicable statute of limitations |
|
| (0.1 | ) |
|
| 0 |
|
|
| (0.1 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Unrecognized tax benefits, end of year |
| $ | 13.2 |
|
| $ | 10.7 |
|
| $ | 8.1 |
|
| $ | 13.0 |
|
| $ | 10.4 |
|
| $ | 7.8 |
|
| 2017 | 2016 | 2015 | |||||||||
| Unrecognized tax benefits, beginning of year | $ | 10.0 | $ | 7.1 | $ | 4.6 | |||||
| Increases related to tax positions taken in current year | 2.4 | 3.4 | 2.9 | ||||||||
| Reductions due to lapse of applicable statute of limitations | (1.4 | ) | (0.5 | ) | (0.4 | ) | |||||
| Unrecognized tax benefits, end of year | $ | 11.0 | $ | 10.0 | $ | 7.1 | |||||
As of September 30, 2020 and 2019, the amounts of unrecognized tax benefits which, if recognized, would affect the Company’s effective tax rate were $5.1$2.9 and $3.3 as of September 30, 2017$2.5, respectively, for the Company and 2016, respectively.$2.7 and $2.2, respectively, for Spire Missouri. It is reasonably possible that events will occur in the next 12 months that could increase or decrease the amount of the Company’s unrecognized tax benefits. The Company doesand Spire Missouri do not expect that any such change will be significant to the Consolidated Balance Sheets.
The impact of any adjustments made to these returns by the relevant taxing authorities would be addressed by the indemnification provisions of the stock purchase agreement with Sempra Global.
| 2017 | 2016 | 2015 | |||||||||
| Federal | |||||||||||
| Current | $ | — | $ | — | $ | (2.1 | ) | ||||
| Deferred | 42.0 | 37.5 | 40.9 | ||||||||
| Investment tax credits | (0.2 | ) | (0.2 | ) | (0.2 | ) | |||||
| State and local | |||||||||||
| Current | — | 0.1 | (0.1 | ) | |||||||
| Deferred | 5.7 | 8.0 | 4.7 | ||||||||
| Total income tax expense | $ | 47.5 | $ | 45.4 | $ | 43.2 | |||||
| 2017 | 2016 | 2015 | ||||||
| Federal income tax statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
| State and local income taxes, net of federal income tax benefits | 2.8 | 2.8 | 2.8 | |||||
| Certain expenses capitalized on books and deducted on tax return | (3.5 | ) | (4.8 | ) | (4.9 | ) | ||
| Taxes related to prior years | (1.4 | ) | (0.2 | ) | (0.8 | ) | ||
| Other items – net * | (3.3 | ) | (2.8 | ) | (3.0 | ) | ||
| Effective income tax rate | 29.6 | % | 30.0 | % | 29.1 | % | ||
| 2017 | 2016 | ||||||
| Deferred tax assets: | |||||||
| Reserves not currently deductible | $ | 25.3 | $ | 14.9 | |||
| Pension and other postretirement benefits | 52.7 | 56.9 | |||||
| Operating losses | 52.0 | 29.9 | |||||
| Deferred tax assets | 130.0 | 101.7 | |||||
| Less: valuation allowance | 0.5 | 0.9 | |||||
| Total deferred tax assets | 129.5 | 100.8 | |||||
| Deferred tax liabilities: | |||||||
| Relating to utility property | 563.2 | 497.0 | |||||
| Regulatory pension and other postretirement benefits | 108.0 | 106.8 | |||||
| Deferred gas costs | 25.0 | 20.0 | |||||
| Other | 57.1 | 33.9 | |||||
| Total deferred tax liabilities | 753.3 | 657.7 | |||||
| Net deferred tax liability | $ | 623.8 | $ | 556.9 | |||
| 2017 | 2016 | 2015 | |||||||||
| Unrecognized tax benefits, beginning of year | $ | 9.7 | $ | 6.9 | $ | 4.2 | |||||
| Increases related to tax positions taken in current year | 2.4 | 3.3 | 2.9 | ||||||||
| Reductions due to lapse of applicable statute of limitations | (1.4 | ) | (0.5 | ) | (0.2 | ) | |||||
| Unrecognized tax benefits, end of year | $ | 10.7 | $ | 9.7 | $ | 6.9 | |||||
The Company, Spire Missouri, is subject to US federal income tax as well as income tax in various state and local jurisdictions, and isSpire Alabama are no longer subject to examination for fiscal years prior to 2014.
| 2017 | 2016 | 2015 | |||||||||
| Federal | |||||||||||
| Current | $ | — | $ | (0.8 | ) | $ | — | ||||
| Deferred | 31.6 | 29.4 | 25.9 | ||||||||
| State and local | |||||||||||
| Current | — | — | 0.1 | ||||||||
| Deferred | 4.2 | 3.8 | 3.3 | ||||||||
| Total income tax expense | $ | 35.8 | $ | 32.4 | $ | 29.3 | |||||
| 2017 | 2016 | 2015 | ||||||
| Federal income tax statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
| State and local income taxes, net of federal income tax benefits | 2.8 | 2.8 | 2.8 | |||||
| Other items – net | 0.3 | 0.1 | 0.1 | |||||
| Effective income tax rate | 38.1 | % | 37.9 | % | 37.9 | % | ||
| 2017 | 2016 | ||||||
| Deferred tax assets: | |||||||
| Reserves not currently deductible | $ | 6.0 | $ | 6.3 | |||
| Pension and other postretirement benefits | 4.4 | 11.4 | |||||
| Goodwill | 214.4 | 233.4 | |||||
| Operating losses | 88.3 | 60.2 | |||||
| Total deferred tax assets | 313.1 | 311.3 | |||||
| Deferred tax liabilities: | |||||||
| Relating to utility property | 119.3 | 87.6 | |||||
| Other | 8.2 | 2.3 | |||||
| Total deferred tax liabilities | 127.5 | 89.9 | |||||
| Net deferred tax asset | $ | 185.6 | $ | 221.4 | |||
13. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
The pension plans of Spire consist of plans for employees at theSpire Missouri, Utilities, plans covering the employees of Spire Alabama and plans covering employees of the subsidiaries of Spire EnergySouth.
Spire Missouri Utilities havehas non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Plan assets consist primarily of corporate and USU.S. government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments.
Spire Alabama has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its employees. Qualified plan assets are comprised of mutual and commingled funds consisting of USU.S. equities with varying strategies, global equities, alternative investments, and fixed income investments.
The net periodic pension costs include the following components:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Service cost – benefits earned during the period |
| $ | 22.5 |
|
| $ | 19.3 |
|
| $ | 20.2 |
|
| $ | 15.7 |
|
| $ | 12.4 |
|
| $ | 12.7 |
|
| $ | 6.1 |
|
| $ | 6.2 |
|
| $ | 6.4 |
|
Interest cost on projected benefit obligation |
|
| 22.6 |
|
|
| 28.2 |
|
|
| 27.4 |
|
|
| 15.8 |
|
|
| 19.8 |
|
|
| 19.5 |
|
|
| 4.9 |
|
|
| 6.0 |
|
|
| 5.5 |
|
Expected return on plan assets |
|
| (35.0 | ) |
|
| (36.3 | ) |
|
| (37.0 | ) |
|
| (24.6 | ) |
|
| (25.5 | ) |
|
| (27.2 | ) |
|
| (6.9 | ) |
|
| (7.3 | ) |
|
| (6.5 | ) |
Amortization of prior service (credit) cost |
|
| (2.5 | ) |
|
| (1.1 | ) |
|
| (0.9 | ) |
|
| 0.1 |
|
|
| 0.9 |
|
|
| 0.9 |
|
|
| (2.4 | ) |
|
| (1.8 | ) |
|
| (1.8 | ) |
Amortization of actuarial loss |
|
| 14.4 |
|
|
| 9.3 |
|
|
| 10.9 |
|
|
| 11.3 |
|
|
| 8.7 |
|
|
| 9.4 |
|
|
| 3.1 |
|
|
| 0.8 |
|
|
| 1.5 |
|
Loss on lump-sum settlements and curtailments |
|
| 31.6 |
|
|
| 0 |
|
|
| 18.6 |
|
|
| 26.6 |
|
|
| 0 |
|
|
| 16.1 |
|
|
| 5.0 |
|
|
| 0 |
|
|
| 2.4 |
|
Subtotal |
|
| 53.6 |
|
|
| 19.4 |
|
|
| 39.2 |
|
|
| 44.9 |
|
|
| 16.3 |
|
|
| 31.4 |
|
|
| 9.8 |
|
|
| 3.9 |
|
|
| 7.5 |
|
Regulatory adjustment |
|
| 6.6 |
|
|
| 39.6 |
|
|
| 37.4 |
|
|
| 3.9 |
|
|
| 31.8 |
|
|
| 32.1 |
|
|
| 1.8 |
|
|
| 6.9 |
|
|
| 4.5 |
|
Net pension cost |
| $ | 60.2 |
|
| $ | 59.0 |
|
| $ | 76.6 |
|
| $ | 48.8 |
|
| $ | 48.1 |
|
| $ | 63.5 |
|
| $ | 11.6 |
|
| $ | 10.8 |
|
| $ | 12.0 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
| Service cost – benefits earned during the period | $ | 20.5 | $ | 15.3 | $ | 17.3 | $ | 12.7 | $ | 10.0 | $ | 11.5 | $ | 6.2 | $ | 5.3 | $ | 5.8 | |||||||||||||||||
| Interest cost on projected benefit obligation | 27.9 | 28.0 | 29.5 | 19.5 | 21.7 | 23.3 | 6.1 | 6.3 | 6.2 | ||||||||||||||||||||||||||
| Expected return on plan assets | (38.5 | ) | (34.9 | ) | (37.4 | ) | (28.1 | ) | (26.7 | ) | (29.2 | ) | (7.2 | ) | (8.2 | ) | (8.2 | ) | |||||||||||||||||
| Amortization of prior service cost | 1.0 | 0.4 | 0.5 | 1.0 | 0.4 | 0.5 | — | — | — | ||||||||||||||||||||||||||
| Amortization of actuarial loss | 12.5 | 8.0 | 7.5 | 10.7 | 7.9 | 7.5 | 1.8 | 0.1 | — | ||||||||||||||||||||||||||
| 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 | 42.2 | 21.7 | 37.0 | 29.3 | 14.9 | 31.6 | 11.5 | 6.8 | 5.4 | ||||||||||||||||||||||||||
| Regulatory adjustment | (2.4 | ) | 17.8 | (2.1 | ) | (4.1 | ) | 11.7 | (5.2 | ) | 1.8 | 6.1 | 3.1 | ||||||||||||||||||||||
| Net pension cost | $ | 39.8 | $ | 39.5 | $ | 34.9 | $ | 25.2 | $ | 26.6 | $ | 26.4 | $ | 13.3 | $ | 12.9 | $ | 8.5 | |||||||||||||||||
Other changes in plan assets and pension benefit obligations recognized in other comprehensive income or loss include the following:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Current year actuarial loss (gain) |
| $ | 68.0 |
|
| $ | 90.9 |
|
| $ | (1.4 | ) |
| $ | 37.8 |
|
| $ | 59.0 |
|
| $ | 2.2 |
|
| $ | 24.4 |
|
| $ | 26.3 |
|
| $ | (0.6 | ) |
Amortization of actuarial loss |
|
| (14.4 | ) |
|
| (9.3 | ) |
|
| (10.9 | ) |
|
| (11.3 | ) |
|
| (8.7 | ) |
|
| (9.4 | ) |
|
| (3.1 | ) |
|
| (0.8 | ) |
|
| (1.5 | ) |
Acceleration of loss recognized due to settlement |
|
| (31.7 | ) |
|
| 0 |
|
|
| (18.5 | ) |
|
| (26.6 | ) |
|
| 0 |
|
|
| (16.1 | ) |
|
| (5.1 | ) |
|
| 0 |
|
|
| (2.4 | ) |
Current year service credit |
|
| (4.4 | ) |
|
| (10.2 | ) |
|
| (0.1 | ) |
|
| (4.4 | ) |
|
| (3.7 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (6.5 | ) |
|
| 0 |
|
Transfer due to merger |
|
| 0 |
|
|
| 0 |
|
|
| 0.1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0.1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Amortization of prior service credit (cost) |
|
| 2.5 |
|
|
| 1.1 |
|
|
| (2.9 | ) |
|
| (0.1 | ) |
|
| (0.9 | ) |
|
| (0.9 | ) |
|
| 2.4 |
|
|
| 1.8 |
|
|
| 0 |
|
Amortization of transition asset |
|
| 0 |
|
|
| 0 |
|
|
| 1.8 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1.8 |
|
Subtotal |
|
| 20.0 |
|
|
| 72.5 |
|
|
| (31.9 | ) |
|
| (4.6 | ) |
|
| 45.7 |
|
|
| (24.1 | ) |
|
| 18.6 |
|
|
| 20.8 |
|
|
| (2.7 | ) |
Regulatory adjustment |
|
| (19.5 | ) |
|
| (71.7 | ) |
|
| 31.6 |
|
|
| 5.1 |
|
|
| (44.9 | ) |
|
| 23.8 |
|
|
| (18.6 | ) |
|
| (20.8 | ) |
|
| 2.7 |
|
Total recognized in OCI |
| $ | 0.5 |
|
| $ | 0.8 |
|
| $ | (0.3 | ) |
| $ | 0.5 |
|
| $ | 0.8 |
|
| $ | (0.3 | ) |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
| Current year actuarial loss | $ | 14.1 | $ | 46.8 | $ | 48.3 | $ | 14.8 | $ | 21.6 | $ | 26.0 | $ | 3.3 | $ | 25.2 | $ | 22.3 | |||||||||||||||||
| Amortization of actuarial loss | (12.5 | ) | (8.0 | ) | (7.5 | ) | (10.7 | ) | (7.9 | ) | (7.5 | ) | (1.8 | ) | (0.1 | ) | — | ||||||||||||||||||
| Acceleration of loss recognized due to settlement | (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 | (1.0 | ) | (0.4 | ) | (0.5 | ) | (1.0 | ) | (0.4 | ) | (0.5 | ) | — | — | — | ||||||||||||||||||||
| Subtotal | (38.3 | ) | 40.1 | 20.7 | (10.4 | ) | 18.3 | — | (23.7 | ) | 21.8 | 20.7 | |||||||||||||||||||||||
| Regulatory adjustment | 38.0 | (39.8 | ) | (21.2 | ) | 10.1 | (18.0 | ) | (0.5 | ) | 23.7 | (21.8 | ) | (20.7 | ) | ||||||||||||||||||||
| Total recognized in OCI | $ | (0.3 | ) | $ | 0.3 | $ | (0.5 | ) | $ | (0.3 | ) | $ | 0.3 | $ | (0.5 | ) | $ | — | $ | — | $ | — | |||||||||||||
Spire pension obligations are driven by separate plan and regulatory provisions governing Spire Missouri, Spire Alabama and Spire EnergySouth pension plans.
Pursuant to the provisions of the Missouri Utilities’Spire Missouri’s and Spire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 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. TwoIn the fiscal year ended September 30, 2020, 2 Spire AlabamaMissouri plans and one1 Spire MissouriAlabama plan met the criteria for settlement recognition, in the fiscal year ended September 30, 2017, requiring re-measurement of the obligation under those plans using updated census data and assumptions for discount rate and mortality. For the remeasurements, the discount rates for the Missouri plans were updated to 2.85% at September 30, 2020 (from 3.2% at September 30, 2019), and the discount rate for the Alabama plan was updated to 2.95% (from 3.20%).Lump-sum payments recognized as settlements during fiscal years 2017, 2016, and 2015 were $62.2year 2020 was $89.3 ($43.574.5 attributable to Spire Missouri and $18.7$14.8 to Spire Alabama), $16.6 (attributable to.
NaN Spire Alabama), and $71.1 ($58.2 attributable to Spire Missouri and $12.9 to Spire Alabama), respectively.plans met the criteria for settlement recognition for the fiscal year ended September 30, 2019.
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
Effective April 19, 2018, the pension cost for Spire Missouri’s western territory (Missouri West) included in customer rates was reduced from $9.9 to $5.5 per year, the pension cost included in Spire Missouri’s eastern territory (Missouri East) customer rates was increased from $15.5 to $29.0 per year. Over an amortization period of eight years, Missouri East’s qualifiedEast rates also include the amortization of $173.0 of assets for pension plan is based on an annual allowanceand other postretirement benefits, and Missouri West rates will be reduced by the amortization of $15.5 effective January 1, 2011. The recovery in ratesa $26.2 net liability for Spire Missouri West’s qualified pension plan is based on an annual allowance of approximately $10 effective February 20, 2010. and other postretirement benefits.
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:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Benefit obligation, beginning of year |
| $ | 751.4 |
|
| $ | 664.6 |
|
| $ | 538.4 |
|
| $ | 473.3 |
|
| $ | 152.5 |
|
| $ | 136.3 |
|
Service cost |
|
| 22.5 |
|
|
| 19.3 |
|
|
| 15.7 |
|
|
| 12.4 |
|
|
| 6.1 |
|
|
| 6.2 |
|
Interest cost |
|
| 22.6 |
|
|
| 28.2 |
|
|
| 15.8 |
|
|
| 19.8 |
|
|
| 4.9 |
|
|
| 6.0 |
|
Actuarial loss (gain) |
|
| 37.5 |
|
|
| 104.8 |
|
|
| 15.6 |
|
|
| 76.0 |
|
|
| 18.4 |
|
|
| 23.7 |
|
Plan amendments |
|
| (4.4 | ) |
|
| (10.2 | ) |
|
| (4.4 | ) |
|
| (3.7 | ) |
|
| — |
|
|
| (6.5 | ) |
Settlement loss |
|
| 16.5 |
|
|
| — |
|
|
| 16.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Settlement benefits paid |
|
| (89.3 | ) |
|
| — |
|
|
| (74.5 | ) |
|
| — |
|
|
| (14.8 | ) |
|
| — |
|
Regular benefits paid |
|
| (24.2 | ) |
|
| (55.3 | ) |
|
| (17.9 | ) |
|
| (39.4 | ) |
|
| (3.6 | ) |
|
| (13.2 | ) |
Benefit obligation, end of year |
| $ | 732.6 |
|
| $ | 751.4 |
|
| $ | 505.2 |
|
| $ | 538.4 |
|
| $ | 163.5 |
|
| $ | 152.5 |
|
Accumulated benefit obligation, end of year |
| $ | 699.3 |
|
| $ | 712.9 |
|
| $ | 473.7 |
|
| $ | 500.2 |
|
| $ | 161.8 |
|
| $ | 152.3 |
|
| 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:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Fair value of plan assets, beginning of year |
| $ | 521.8 |
|
| $ | 499.2 |
|
| $ | 379.2 |
|
| $ | 349.1 |
|
| $ | 93.3 |
|
| $ | 101.3 |
|
Actual return on plan assets |
|
| 21.1 |
|
|
| 50.1 |
|
|
| 19.1 |
|
|
| 42.4 |
|
|
| 1.0 |
|
|
| 4.7 |
|
Employer contributions |
|
| 43.7 |
|
|
| 27.8 |
|
|
| 30.3 |
|
|
| 27.1 |
|
|
| 12.7 |
|
|
| 0.5 |
|
Settlement benefits paid |
|
| (89.3 | ) |
|
| — |
|
|
| (74.5 | ) |
|
| — |
|
|
| (14.8 | ) |
|
| — |
|
Regular benefits paid |
|
| (24.2 | ) |
|
| (55.3 | ) |
|
| (17.9 | ) |
|
| (39.4 | ) |
|
| (3.6 | ) |
|
| (13.2 | ) |
Fair value of plan assets, end of year |
| $ | 473.1 |
|
| $ | 521.8 |
|
| $ | 336.2 |
|
| $ | 379.2 |
|
| $ | 88.6 |
|
| $ | 93.3 |
|
Funded status of plans, end of year |
| $ | (259.5 | ) |
| $ | (229.6 | ) |
| $ | (169.0 | ) |
| $ | (159.2 | ) |
| $ | (74.9 | ) |
| $ | (59.2 | ) |
| 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:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Current liabilities |
| $ | (0.6 | ) |
| $ | (0.5 | ) |
| $ | (0.6 | ) |
| $ | (0.5 | ) |
| $ | 0 |
|
| $ | 0 |
|
Noncurrent liabilities |
|
| (258.9 | ) |
|
| (229.1 | ) |
|
| (168.4 | ) |
|
| (158.7 | ) |
|
| (74.9 | ) |
|
| (59.2 | ) |
Total |
| $ | (259.5 | ) |
| $ | (229.6 | ) |
| $ | (169.0 | ) |
| $ | (159.2 | ) |
| $ | (74.9 | ) |
| $ | (59.2 | ) |
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Current liabilities | $ | (0.5 | ) | $ | (0.6 | ) | $ | (0.5 | ) | $ | (0.6 | ) | $ | — | $ | — | |||||||
| Noncurrent liabilities | (216.7 | ) | (253.6 | ) | (153.2 | ) | (163.7 | ) | (50.3 | ) | (74.3 | ) | |||||||||||
| Total | $ | (217.2 | ) | $ | (254.2 | ) | $ | (153.7 | ) | $ | (164.3 | ) | $ | (50.3 | ) | $ | (74.3 | ) | |||||
Pre-tax amounts recognized in accumulated other comprehensive loss not yet recognized as components of net periodic pension cost consist of:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Net actuarial loss |
| $ | 235.6 |
|
| $ | 213.7 |
|
| $ | 152.9 |
|
| $ | 153.1 |
|
| $ | 78.1 |
|
| $ | 61.9 |
|
Prior service (credit) cost |
|
| (25.6 | ) |
|
| (23.7 | ) |
|
| (2.8 | ) |
|
| 1.7 |
|
|
| (21.1 | ) |
|
| (23.5 | ) |
Subtotal |
|
| 210.0 |
|
|
| 190.0 |
|
|
| 150.1 |
|
|
| 154.8 |
|
|
| 57.0 |
|
|
| 38.4 |
|
Adjustments for amounts included in regulatory assets |
|
| (206.7 | ) |
|
| (187.1 | ) |
|
| (146.8 | ) |
|
| (151.9 | ) |
|
| (57.0 | ) |
|
| (38.4 | ) |
Total |
| $ | 3.3 |
|
| $ | 2.9 |
|
| $ | 3.3 |
|
| $ | 2.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Net actuarial loss | $ | 163.0 | $ | 179.4 | $ | 126.2 | $ | 135.5 | $ | 40.9 | $ | 43.9 | |||||||||||
| Prior service (credit) cost | (13.4 | ) | 8.2 | 7.3 | 8.2 | (20.7 | ) | — | |||||||||||||||
| Subtotal | 149.6 | 187.6 | 133.5 | 143.7 | 20.2 | 43.9 | |||||||||||||||||
| Adjustments for amounts included in regulatory assets | (147.1 | ) | (184.8 | ) | (131.0 | ) | (140.9 | ) | (20.2 | ) | (43.9 | ) | |||||||||||
| Total | $ | 2.5 | $ | 2.8 | $ | 2.5 | $ | 2.8 | $ | — | $ | — | |||||||||||
At September 30, 2017,2020, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive loss into net periodic pension cost during fiscal 2018:2020:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Amortization of net actuarial loss |
| $ | 16.0 |
|
| $ | 11.4 |
|
| $ | 4.6 |
|
Amortization of prior service (credit) cost |
|
| (3.2 | ) |
|
| (0.6 | ) |
|
| (2.4 | ) |
Subtotal |
|
| 12.8 |
|
|
| 10.8 |
|
|
| 2.2 |
|
Regulatory adjustment |
|
| (12.5 | ) |
|
| (10.5 | ) |
|
| (2.2 | ) |
Total |
| $ | 0.3 |
|
| $ | 0.3 |
|
| $ | 0 |
|
| 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 Spire Missouri are as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
Weighted average discount rate - Spire Missouri East plan |
| 3.20% |
|
| 4.30% |
|
| 3.75% |
|
Weighted average discount rate - Spire Missouri West plan |
| 3.15% |
|
| 4.35% |
|
| 3.70% |
|
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 3.00% |
|
Expected long-term rate of return on plan assets |
| 7.25% |
|
| 7.50% |
|
| 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% | ||
The assumptions used to calculate net periodic pension costs for Spire Alabama are as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
Weighted average discount rate |
| 3.25%/3.20% |
|
| 4.35% |
|
| 3.65%/3.70% |
|
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 3.00% |
|
Expected long-term rate of return on plan assets |
| 7.25% |
|
| 7.25% |
|
| 7.25% |
|
| 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 assumptions used to calculate the benefit obligations are as follows:
|
| 2020 |
|
| 2019 |
|
Weighted average discount rate - Spire Missouri East plan |
| 2.85% |
|
| 3.20% |
|
Weighted average discount rate - Spire Missouri West plan |
| 2.75% |
|
| 3.15% |
|
Weighted average discount rate - Spire Alabama plans |
| 2.95%/2.80% |
|
| 3.20%/3.25% |
|
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 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:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Projected benefit obligation |
| $ | 732.6 |
|
| $ | 751.4 |
|
| $ | 505.2 |
|
| $ | 538.4 |
|
| $ | 163.5 |
|
| $ | 152.5 |
|
Accumulated benefit obligation |
|
| 699.3 |
|
|
| 712.9 |
|
|
| 473.7 |
|
|
| 500.2 |
|
|
| 161.8 |
|
|
| 152.3 |
|
Fair value of plan assets |
|
| 473.1 |
|
|
| 521.8 |
|
|
| 336.2 |
|
|
| 379.2 |
|
|
| 88.6 |
|
|
| 93.3 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Projected benefit obligation | $ | 748.8 | $ | 794.7 | $ | 539.6 | $ | 560.0 | $ | 148.2 | $ | 174.3 | |||||||||||
| Accumulated benefit obligation | 701.4 | 724.5 | 500.4 | 517.7 | 142.8 | 149.8 | |||||||||||||||||
| Fair value of plan assets | 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 Spire Missouri and Spire Alabama:
Spire Missouri |
| 2020 Target |
|
| 2020 Actual |
|
| 2019 Target |
|
| 2019 Actual |
| ||||
Return seeking assets |
|
| 70.0 | % |
|
| 70.0 | % |
|
| 56.5 | % |
|
| 57.0 | % |
Liability hedging assets |
|
| 30.0 | % |
|
| 27.0 | % |
|
| 43.5 | % |
|
| 39.8 | % |
Other |
|
| 0 | % |
|
| 3.0 | % |
|
| 0 | % |
|
| 3.2 | % |
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Spire Alabama |
| 2020 Target |
|
| 2020 Actual |
|
| 2019 Target |
|
| 2019 Actual |
| ||||
Return seeking assets |
|
| 70.0 | % |
|
| 71.0 | % |
|
| 60.0 | % |
|
| 58.5 | % |
Liability hedging assets |
|
| 30.0 | % |
|
| 27.0 | % |
|
| 29.0 | % |
|
| 29.8 | % |
Other* |
|
| 0 |
|
|
| 2.0 | % |
|
| 11.0 | % |
|
| 11.7 | % |
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
| Spire Missouri | 2017 Target | 2017 Actual | 2016 Target | 2016 Actual | |||||||
| Equity markets | 56.4 | % | 56.8 | % | 56.2 | % | 56.9 | % | |||
| Debt securities | 43.6 | % | 42.0 | % | 43.8 | % | 43.1 | % | |||
| Cash equivalents | — | % | 1.2 | % | — | % | — | % | |||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
| 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 for 2020. For 2019, 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 plans over time, and minimize volatility of funding and costs. The policy seeks to maximize investment returns consistent with these objectives and Spire Missouri’s tolerance for risk. The duration of plan liabilities and the impact of potential 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, currently including a growth (equity) component and a liability-driven (debt) component. Investments in corporate, USU.S. government and agencies, and, to a lesser extent, international debt securities seek to provide duration matching with plan liabilities, and typically have investment grade ratings and reflect allocations across various entities and industries. There are also exposures to additional asset types in the target portfolio: commodities, real estate and inflation-indexed securities. For the Missouri East plan, the investment policy permits the use of derivative instruments, which may be used to achieve the desired market exposure of an index, adjust portfolio duration, or rebalance the total portfolio to the target asset allocation. The growth strategy utilizes a combination of derivative instruments and debt securities to achieve diversified exposure to equity and other markets while generating returns from the fixed-income investments and providing further duration matching with the liabilities. Performance and compliance with the guidelines isare regularly monitored. The policy calls for increased allocations to debt securities as the funded status improves.
Spire 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. Spire 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 plans by providing above average risk-adjusted returns with a risk exposure in the mid-range of comparable funds. Investment managers are retained by Spire Alabama to manage separate pools of assets. Funds are allocated to such managers in order to achieve an appropriate, diversified, and balanced asset mix. Comparative market and peer group benchmarks are utilized to ensure that investment managers are performing satisfactorily. Spire 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 do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund.
Following are expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five fiscal years thereafter, for Spire, Spire Missouri, and Spire Alabama:
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026- 2030 |
| ||||||
Spire |
| $ | 65.6 |
|
| $ | 64.1 |
|
| $ | 60.8 |
|
| $ | 58.6 |
|
| $ | 54.4 |
|
| $ | 246.0 |
|
Spire Missouri |
|
| 49.1 |
|
|
| 45.6 |
|
|
| 43.3 |
|
|
| 41.9 |
|
|
| 37.7 |
|
|
| 168.7 |
|
Spire Alabama |
|
| 13.5 |
|
|
| 15.4 |
|
|
| 14.3 |
|
|
| 13.5 |
|
|
| 13.3 |
|
|
| 59.0 |
|
| 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 Spire Missouri and Spire Alabama is to contribute an amount not less than the minimum required by government funding standards nor more than the maximum deductible amount for federal income tax purposes. Spire MissouriMissouri’s contributions to the pension plans in fiscal 20182021 are anticipated to be $35.5$36.4 into the qualified trusts, and $0.5$0.6 into the non-qualified plans. Spire Alabama had no requiredAlabama’s contributions to the qualified pension plans during 2017. Additionally, it is notin fiscal 2021 are anticipated that the funded status ofto be $11.3 into the qualified pension plans will fall below statutory thresholds requiring accelerated funding or constraints on benefit levels or plan administration. During fiscal 2017, Spire Alabama made discretionary contributions to the qualified pension plans totaling $11.9; none are expected in fiscal 2018.
Other Postretirement Benefits
Spire and the Utilities provide certain life insurance benefits at retirement. Spire Missouri plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, the Spire Missouri West plans provided medical insurance after retirement until death. For retirements after January 1, 2015, theThe Spire Missouri WestAlabama plans provide medical insurance after early retirement until age 65. Under the Spire 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:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Service cost – benefits earned during the period |
| $ | 5.9 |
|
| $ | 7.4 |
|
| $ | 9.4 |
|
| $ | 5.3 |
|
| $ | 6.8 |
|
| $ | 9.0 |
|
| $ | 0.4 |
|
| $ | 0.4 |
|
| $ | 0.2 |
|
Interest cost on accumulated postretirement benefit obligation |
|
| 6.3 |
|
|
| 9.0 |
|
|
| 8.6 |
|
|
| 4.7 |
|
|
| 6.9 |
|
|
| 6.9 |
|
|
| 1.4 |
|
|
| 1.8 |
|
|
| 1.5 |
|
Expected return on plan assets |
|
| (16.7 | ) |
|
| (16.2 | ) |
|
| (13.9 | ) |
|
| (11.4 | ) |
|
| (11.1 | ) |
|
| (9.6 | ) |
|
| (5.0 | ) |
|
| (4.8 | ) |
|
| (4.1 | ) |
Amortization of prior service (credit) cost |
|
| (0.5 | ) |
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.2 | ) |
|
| 0.3 |
|
|
| 0.3 |
|
|
| (0.3 | ) |
|
| (0.4 | ) |
|
| (0.4 | ) |
Amortization of actuarial (gain) loss |
|
| (2.0 | ) |
|
| (0.5 | ) |
|
| 0.8 |
|
|
| (2.0 | ) |
|
| (0.5 | ) |
|
| 0.9 |
|
|
| 0 |
|
|
| 0 |
|
|
| (0.1 | ) |
Subtotal |
|
| (7.0 | ) |
|
| (0.4 | ) |
|
| 4.8 |
|
|
| (3.6 | ) |
|
| 2.4 |
|
|
| 7.5 |
|
|
| (3.5 | ) |
|
| (3.0 | ) |
|
| (2.9 | ) |
Regulatory adjustment |
|
| 16.0 |
|
|
| 10.0 |
|
|
| 2.2 |
|
|
| 17.7 |
|
|
| 11.7 |
|
|
| 3.9 |
|
|
| (1.8 | ) |
|
| (1.8 | ) |
|
| (1.8 | ) |
Net postretirement benefit cost |
| $ | 9.0 |
|
| $ | 9.6 |
|
| $ | 7.0 |
|
| $ | 14.1 |
|
| $ | 14.1 |
|
| $ | 11.4 |
|
| $ | (5.3 | ) |
| $ | (4.8 | ) |
| $ | (4.7 | ) |
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
| Service cost – benefits earned during the period | $ | 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 | 8.6 | 10.2 | 11.2 | 6.8 | 8.1 | 8.6 | 1.6 | 2.1 | 2.6 | ||||||||||||||||||||||||||
| Expected return on plan assets | (13.6 | ) | (13.5 | ) | (13.2 | ) | (9.0 | ) | (8.5 | ) | (8.1 | ) | (4.4 | ) | (5.0 | ) | (5.1 | ) | |||||||||||||||||
| 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 | 8.5 | 14.1 | 16.7 | 11.0 | 16.9 | 18.7 | (2.8 | ) | (2.8 | ) | (2.0 | ) | |||||||||||||||||||||||
| Regulatory adjustment | (3.2 | ) | (6.6 | ) | (11.0 | ) | (1.5 | ) | (4.8 | ) | (9.2 | ) | (1.8 | ) | (1.8 | ) | (1.8 | ) | |||||||||||||||||
| Net postretirement benefit cost | $ | 5.3 | $ | 7.5 | $ | 5.7 | $ | 9.5 | $ | 12.1 | $ | 9.5 | $ | (4.6 | ) | $ | (4.6 | ) | $ | (3.8 | ) | ||||||||||||||
Other changes in plan assets and postretirement benefit obligations recognized in OCI include the following:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
| |||||||||
Current year actuarial (gain) loss |
| $ | (7.3 | ) |
| $ | (12.2 | ) |
| $ | (45.1 | ) |
| $ | (7.6 | ) |
| $ | (17.3 | ) |
| $ | (47.1 | ) |
| $ | 1.1 |
|
| $ | 5.5 |
|
| $ | 1.6 |
|
Amortization of actuarial gain (loss) |
|
| 2.0 |
|
|
| 0.5 |
|
|
| (0.8 | ) |
|
| 2.0 |
|
|
| 0.5 |
|
|
| (0.9 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0.1 |
|
Current year prior service credit (cost) |
|
| 15.8 |
|
|
| 5.5 |
|
|
| 0 |
|
|
| 9.5 |
|
|
| 4.9 |
|
|
| 0 |
|
|
| 6.3 |
|
|
| 0.6 |
|
|
| 0 |
|
Amortization of current year service cost |
|
| 0 |
|
|
| 0.4 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0.4 |
|
|
| 0 |
|
Amortization of prior service (cost) credit |
|
| 0.5 |
|
|
| (0.3 | ) |
|
| 0.1 |
|
|
| 0.2 |
|
|
| (0.3 | ) |
|
| (0.3 | ) |
|
| 0.3 |
|
|
| 0 |
|
|
| 0.4 |
|
Subtotal |
|
| 11.0 |
|
|
| (6.1 | ) |
|
| (45.8 | ) |
|
| 4.1 |
|
|
| (12.2 | ) |
|
| (48.3 | ) |
|
| 7.7 |
|
|
| 6.5 |
|
|
| 2.1 |
|
Regulatory adjustment |
|
| (11.0 | ) |
|
| 6.1 |
|
|
| 45.8 |
|
|
| (4.1 | ) |
|
| 12.2 |
|
|
| 48.3 |
|
|
| (7.7 | ) |
|
| (6.5 | ) |
|
| (2.1 | ) |
Total recognized in OCI |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| 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. TheEffective April 18, 2018, the recovery in rates for Spire Missouri’s postretirement benefit plans is based on an annual allowance of $9.5 effective January 1, 2011. $8.6.The difference between these amounts and postretirement benefit cost based on the above and that otherwise would be included in the statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
The following table sets forth the reconciliation of the beginning and ending balances of the postretirement benefit obligation at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Benefit obligation, beginning of year |
| $ | 197.3 |
|
| $ | 208.1 |
|
| $ | 147.9 |
|
| $ | 158.8 |
|
| $ | 43.4 |
|
| $ | 43.1 |
|
Service cost |
|
| 5.9 |
|
|
| 7.4 |
|
|
| 5.3 |
|
|
| 6.8 |
|
|
| 0.4 |
|
|
| 0.4 |
|
Interest cost |
|
| 6.3 |
|
|
| 9.0 |
|
|
| 4.7 |
|
|
| 6.9 |
|
|
| 1.4 |
|
|
| 1.8 |
|
Actuarial (gain) loss |
|
| 0.2 |
|
|
| (18.9 | ) |
|
| 1.7 |
|
|
| (19.5 | ) |
|
| (0.7 | ) |
|
| 1.2 |
|
Plan amendments |
|
| 15.8 |
|
|
| 5.5 |
|
|
| 9.5 |
|
|
| 4.9 |
|
|
| 6.3 |
|
|
| 0.6 |
|
Retiree drug subsidy program |
|
| — |
|
|
| 0.2 |
|
|
| — |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
Benefits paid |
|
| (13.2 | ) |
|
| (14.0 | ) |
|
| (10.7 | ) |
|
| (10.2 | ) |
|
| (2.5 | ) |
|
| (3.7 | ) |
Benefit obligation, end of year |
| $ | 212.3 |
|
| $ | 197.3 |
|
| $ | 158.4 |
|
| $ | 147.9 |
|
| $ | 48.3 |
|
| $ | 43.4 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Benefit obligation, beginning of year | $ | 259.2 | $ | 239.2 | $ | 207.9 | $ | 191.9 | $ | 45.4 | $ | 47.3 | |||||||||||
| Service cost | 11.0 | 10.9 | 10.4 | 10.6 | 0.3 | 0.3 | |||||||||||||||||
| Interest cost | 8.6 | 10.2 | 6.8 | 8.1 | 1.6 | 2.1 | |||||||||||||||||
| Actuarial (gain) loss | (22.1 | ) | 7.1 | (20.9 | ) | 6.7 | — | 0.4 | |||||||||||||||
| Plan amendments | (1.4 | ) | (1.8 | ) | — | — | (1.4 | ) | (1.8 | ) | |||||||||||||
| Spire EnergySouth acquisition | — | 5.9 | — | — | — | — | |||||||||||||||||
| Special termination benefits | — | 2.6 | — | 2.6 | — | — | |||||||||||||||||
| Curtailments | 0.4 | — | — | — | — | — | |||||||||||||||||
| Retiree drug subsidy program | 0.3 | 0.2 | 0.3 | — | — | 0.2 | |||||||||||||||||
| Gross benefits paid | (17.5 | ) | (15.1 | ) | (12.0 | ) | (12.0 | ) | (5.3 | ) | (3.1 | ) | |||||||||||
| Benefit obligation, end of year | $ | 238.5 | $ | 259.2 | $ | 192.5 | $ | 207.9 | $ | 40.6 | $ | 45.4 | |||||||||||
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Fair value of plan assets at beginning of year |
| $ | 279.8 |
|
| $ | 283.5 |
|
| $ | 188.9 |
|
| $ | 189.5 |
|
| $ | 86.4 |
|
| $ | 89.6 |
|
Actual return on plan assets |
|
| 24.2 |
|
|
| 9.7 |
|
|
| 20.8 |
|
|
| 9.0 |
|
|
| 3.1 |
|
|
| 0.5 |
|
Employer contributions |
|
| 0.2 |
|
|
| 0.6 |
|
|
| 0.2 |
|
|
| 0.6 |
|
|
| — |
|
|
| — |
|
Benefits paid |
|
| (13.2 | ) |
|
| (14.0 | ) |
|
| (10.7 | ) |
|
| (10.2 | ) |
|
| (2.5 | ) |
|
| (3.7 | ) |
Fair value of plan assets, end of year |
| $ | 291.0 |
|
| $ | 279.8 |
|
| $ | 199.2 |
|
| $ | 188.9 |
|
| $ | 87.0 |
|
| $ | 86.4 |
|
Funded status of plans, end of year |
| $ | 78.7 |
|
| $ | 82.5 |
|
| $ | 40.8 |
|
| $ | 41.0 |
|
| $ | 38.7 |
|
| $ | 43.0 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Fair value of plan assets at beginning of year | $ | 246.4 | $ | 223.3 | $ | 159.7 | $ | 143.6 | $ | 82.8 | $ | 79.7 | |||||||||||
| Actual return on plan assets | 26.2 | 19.9 | 16.8 | 13.8 | 8.9 | 6.2 | |||||||||||||||||
| Employer contributions | 10.4 | 14.3 | 10.4 | 14.3 | — | — | |||||||||||||||||
| Spire EnergySouth acquisition | — | 4.0 | — | — | — | — | |||||||||||||||||
| Gross benefits paid | (17.5 | ) | (15.1 | ) | (12.0 | ) | (12.0 | ) | (5.3 | ) | (3.1 | ) | |||||||||||
| Fair value of plan assets, end of year | $ | 265.5 | $ | 246.4 | $ | 174.9 | $ | 159.7 | $ | 86.4 | $ | 82.8 | |||||||||||
| Funded status of plans, end of year | $ | 27.0 | $ | (12.8 | ) | $ | (17.6 | ) | $ | (48.2 | ) | $ | 45.8 | $ | 37.4 | ||||||||
The following table sets forth the amounts recognized in the balance sheets at September 30:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Noncurrent assets |
| $ | 129.0 |
|
| $ | 118.3 |
|
| $ | 90.3 |
|
| $ | 75.3 |
|
| $ | 38.7 |
|
| $ | 43.0 |
|
Current liabilities |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| 0 |
|
|
| 0 |
|
Noncurrent liabilities |
|
| (49.8 | ) |
|
| (35.3 | ) |
|
| (49.0 | ) |
|
| (33.8 | ) |
|
| 0 |
|
|
| 0 |
|
Total |
| $ | 78.7 |
|
| $ | 82.5 |
|
| $ | 40.8 |
|
| $ | 41.0 |
|
| $ | 38.7 |
|
| $ | 43.0 |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Current assets | $ | 1.4 | $ | 0.3 | $ | 1.4 | $ | 0.3 | $ | — | $ | — | |||||||||||
| Noncurrent assets | 47.0 | 37.4 | 1.2 | — | 45.8 | 37.4 | |||||||||||||||||
| Current liabilities | (0.4 | ) | (0.4 | ) | (0.4 | ) | (0.4 | ) | — | — | |||||||||||||
| Noncurrent liabilities | (21.0 | ) | (50.1 | ) | (19.8 | ) | (48.1 | ) | — | — | |||||||||||||
| Total | $ | 27.0 | $ | (12.8 | ) | $ | (17.6 | ) | $ | (48.2 | ) | $ | 45.8 | $ | 37.4 | ||||||||
Pre-tax amounts recognized in accumulated other comprehensive loss not yet recognized as components of net periodic postretirement benefit cost consist of:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Net actuarial gain |
| $ | (61.7 | ) |
| $ | (56.3 | ) |
| $ | (58.3 | ) |
| $ | (52.6 | ) |
| $ | (1.5 | ) |
| $ | (2.6 | ) |
Prior service (credit) cost |
|
| 15.5 |
|
|
| (1.0 | ) |
|
| 10.4 |
|
|
| 0.6 |
|
|
| 5.1 |
|
|
| (1.6 | ) |
Subtotal |
|
| (46.2 | ) |
|
| (57.3 | ) |
|
| (47.9 | ) |
|
| (52.0 | ) |
|
| 3.6 |
|
|
| (4.2 | ) |
Adjustments for amounts included in regulatory assets |
|
| 46.2 |
|
|
| 57.3 |
|
|
| 47.9 |
|
|
| 52.0 |
|
|
| (3.6 | ) |
|
| 4.2 |
|
Total |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Net actuarial loss (gain) | $ | 1.5 | $ | 38.0 | $ | 12.3 | $ | 43.4 | $ | (9.7 | ) | $ | (5.4 | ) | |||||||||
| Prior service credit | (6.6 | ) | (5.2 | ) | (3.7 | ) | (3.4 | ) | (2.9 | ) | (1.8 | ) | |||||||||||
| Subtotal | (5.1 | ) | 32.8 | 8.6 | 40.0 | (12.6 | ) | (7.2 | ) | ||||||||||||||
| Adjustments for amounts included in regulatory assets | 5.1 | (32.8 | ) | (8.6 | ) | (40.0 | ) | 12.6 | 7.2 | ||||||||||||||
| Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
At September 30, 2017,2020, the following pre-tax amounts are expected to be amortized from accumulated other comprehensive loss into net periodic postretirement benefit cost during fiscal 2018:2020:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Amortization of net actuarial gain |
| $ | (1.6 | ) |
| $ | (1.5 | ) |
| $ | — |
|
Amortization of prior service credit |
|
| 1.0 |
|
|
| 0.7 |
|
|
| 0.3 |
|
Subtotal |
|
| (0.6 | ) |
|
| (0.8 | ) |
|
| 0.3 |
|
Regulatory adjustment |
|
| 0.6 |
|
|
| 0.8 |
|
|
| (0.3 | ) |
Total |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| Spire | Spire Missouri | Spire Alabama | |||||||||
| Amortization of net actuarial loss | $ | 0.9 | $ | 0.9 | $ | — | |||||
| Amortization of prior service (credit) cost | (0.1 | ) | 0.3 | (0.4 | ) | ||||||
| Subtotal | 0.8 | 1.2 | (0.4 | ) | |||||||
| Regulatory adjustment | (0.8 | ) | (1.2 | ) | 0.4 | ||||||
| Total | $ | — | $ | — | $ | — | |||||
The assumptions used to calculate net periodic postretirement benefit costs for Spire Missouri are as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
Weighted average discount rate - Spire Missouri plans |
| 3.15% |
|
| 4.30% |
|
| 3.60% |
|
Weighted average rate of future compensation increase |
| 3.00% |
|
| 3.00% |
|
| 3.00% |
|
Expected long-term rate of return on plan assets - Spire Missouri plans |
| 6.25% |
|
| 6.25% |
|
| 5.75%/7.75% |
|
| 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 Spire Alabama are as follows:
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
Weighted average discount rate |
| 3.15% |
|
| 4.30% |
|
| 3.80% |
|
Expected long-term rate of return on plan assets |
| 5.00%/6.25% |
|
| 5.00%/6.25% |
|
| 3.75%/6.00% |
|
| 2017 | 2016 | 2015 | |||
| Weighted average discount rate | 3.60% | 4.50% | 4.40% | ||
| Expected long-term rate of return on plan assets | 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 assumptions used to calculate the accumulated postretirement benefit obligations are as follows:
|
| 2020 |
|
| 2019 |
|
Weighted average discount rate - Spire Alabama plans |
| 2.75% |
|
| 3.15% |
|
Weighted average discount rate - Spire Missouri plans |
| 2.75% |
|
| 3.15% |
|
Weighted average rate of future compensation increase - Spire Missouri East plans |
| 3.00% |
|
| 3.00% |
|
| 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:
|
| 2020 |
|
| 2019 |
|
Medical cost trend assumed for next year - Spire Missouri |
| 6.50% |
|
| 6.75% |
|
Medical cost trend assumed for next year - Spire Alabama |
| 6.50% |
|
| 6.75% |
|
Rate to which the medical cost trend rate is assumed to decline (the ultimate medical cost trend rate) |
| 5.00% |
|
| 5.00% |
|
Year the rate reaches the ultimate trend |
| 2025 |
|
| 2025 |
|
| 2017 | 2016 | ||
| 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% | |
| Year the rate reaches the ultimate trend | 2023 | 2023 | |
The following table presents the effects of an assumed 1% change in the assumed medical cost trend rate:
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
|
| 1% Increase |
|
| 1% Decrease |
|
| 1% Increase |
|
| 1% Decrease |
|
| 1% Increase |
|
| 1% Decrease |
| ||||||
Net periodic postretirement benefit cost |
| $ | 0.8 |
|
| $ | (0.7 | ) |
| $ | 0.6 |
|
| $ | (0.6 | ) |
| $ | 0.2 |
|
| $ | (0.1 | ) |
Accumulated postretirement benefit obligation |
|
| 9.7 |
|
|
| (8.7 | ) |
|
| 6.5 |
|
|
| (5.9 | ) |
|
| 2.6 |
|
|
| (2.3 | ) |
| 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 Spire Missouri and Spire Alabama:
Spire Missouri |
| Target |
|
| 2020 Actual |
|
| 2019 Actual |
| |||
Equity securities |
|
| 60.0 | % |
|
| 57.4 | % |
|
| 58.4 | % |
Debt securities |
|
| 40.0 | % |
|
| 37.8 | % |
|
| 38.8 | % |
Other (cash and cash equivalents held to make benefit payments) |
|
| — | % |
|
| 4.8 | % |
|
| 2.8 | % |
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Spire Alabama |
| Target |
|
| 2020 Actual |
|
| 2019 Actual |
| |||
Equity securities |
|
| 60.0 | % |
|
| 61.8 | % |
|
| 60.3 | % |
Debt securities |
|
| 40.0 | % |
|
| 38.2 | % |
|
| 39.7 | % |
Total |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
| Spire Missouri | Target | 2017 Actual | 2016 Actual | |||||
| Equity securities | 60.0 | % | 59.0 | % | 59.1 | % | ||
| Debt securities | 40.0 | % | 39.4 | % | 39.4 | % | ||
| Other (cash and cash equivalents held to make benefit payments) | — | % | 1.6 | % | 1.5 | % | ||
| Total | 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 laws provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. Spire Missouri and Spire AlabamaThe Utilities have established Voluntary Employees’ Beneficiary Association and Rabbi Trusts as external funding mechanisms. Their investment policies seek to maximize investment returns consistent with their tolerance for risk. Outside investment management specialists are utilized in each asset class. Such specialists are provided with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with policy. Performance and compliance with the guidelines is regularly monitored. Spire Missouri and Spire Alabama currently invest in mutual funds which are rebalanced periodically to the target allocation. The mutual funds are diversified across USU.S. stock and bond markets, and for Spire Alabama, international stock markets.
Following are expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the five fiscal years thereafter for Spire, Spire Missouri, and Spire Alabama:
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026- 2030 |
| ||||||
Spire |
| $ | 14.7 |
|
| $ | 15.4 |
|
| $ | 16.1 |
|
| $ | 16.5 |
|
| $ | 16.6 |
|
| $ | 78.2 |
|
Spire Missouri |
|
| 11.7 |
|
|
| 12.3 |
|
|
| 12.9 |
|
|
| 13.2 |
|
|
| 13.3 |
|
|
| 61.7 |
|
Spire Alabama |
|
| 2.7 |
|
|
| 2.8 |
|
|
| 2.9 |
|
|
| 3.0 |
|
|
| 3.0 |
|
|
| 14.2 |
|
| 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 | |||||||||||||||||
The Utilities’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. For Spire Missouri, contributions to the postretirement plans in fiscal 20182021 are anticipated to be $7.2$4.8 to the qualified trusts and $0.2$0.6 paid directly to participants from Spire Missouri funds. It is not anticipated that contributions will be made to the Spire Alabama postretirement plans in fiscal 2018.2021.
Other Plans
Spire Missouri and Spire Alabama sponsorServices Inc. sponsors a 401(k) plansplan that cover substantially all employees.employees of Spire Inc. and its subsidiaries. The plans allowplan allows employees to contribute a portion of their base pay in accordance with specific guidelines. The cost of the defined contribution plan for Spire Inc. totaled $13.6, $13.8, and $12.5 for fiscal years 2020, 2019, and 2018, respectively. Spire Missouri provides a match of such contributions within specific limits. The cost of the defined contribution plans ofplan for Spire Missouri amounted to $8.4, $8.2,$9.5, $10.0, and $8.0$9.0 for fiscal years 2017, 2016,2020, 2019, and 2015,2018, respectively. Spire Alabama also provides a match of employee contributions within specific limits. The cost of the defined contribution plans ofplan for Spire Alabama amounted to $2.7, $2.3,$3.4 , $3.1, and $3.0 for fiscal years 2017, 2016,2020, 2019, and 2015,2018, respectively.
Fair Value Measurements of Pension and Other Postretirement Plan Assets
Spire
The table below categorizes the fair value measurements of the Spire pension plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 11.5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 11.5 |
|
Equity funds - global (including U.S.) |
|
| 31.4 |
|
|
| 195.6 |
|
|
| 0 |
|
|
| 227.0 |
|
Equity index funds - global (including U.S.) |
|
| 32.6 |
|
|
| 0 |
|
|
| 0 |
|
|
| 32.6 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond funds |
|
| 48.9 |
|
|
| 0 |
|
|
| 0 |
|
|
| 48.9 |
|
U.S. government index funds |
|
| 78.3 |
|
|
| 0 |
|
|
| 0 |
|
|
| 78.3 |
|
Global funds (including U.S.) |
|
| 0 |
|
|
| 74.8 |
|
|
| 0 |
|
|
| 74.8 |
|
Total |
| $ | 202.7 |
|
| $ | 270.4 |
|
| $ | 0 |
|
| $ | 473.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 42.5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 42.5 |
|
Equity mutual funds - U.S. |
|
| 40.5 |
|
|
| 17.0 |
|
|
| 0 |
|
|
| 57.5 |
|
Equity mutual funds - international |
|
| 30.1 |
|
|
| 8.6 |
|
|
| 0 |
|
|
| 38.7 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 34.8 |
|
|
| 73.9 |
|
|
| 0 |
|
|
| 108.7 |
|
U.S. government |
|
| 52.9 |
|
|
| 9.5 |
|
|
| 0 |
|
|
| 62.4 |
|
U.S. corporate |
|
| 143.7 |
|
|
| 0 |
|
|
| 0 |
|
|
| 143.7 |
|
U.S. municipal |
|
| 4.0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4.0 |
|
International |
|
| 44.1 |
|
|
| 7.5 |
|
|
| 0 |
|
|
| 51.6 |
|
Derivatives and margin receivable |
|
| 0.2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0.2 |
|
103-12 Direct Filing Entities |
|
| 0 |
|
|
| 12.5 |
|
|
| 0 |
|
|
| 12.5 |
|
Total |
| $ | 392.8 |
|
| $ | 129.0 |
|
| $ | 0 |
|
| $ | 521.8 |
|
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 | $ | 37.3 | $ | — | $ | — | $ | 37.3 | |||||||
| 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 | 34.4 | 68.5 | — | 102.9 | |||||||||||
| US government | 33.2 | 4.5 | — | 37.7 | |||||||||||
| US corporate | 183.7 | — | — | 183.7 | |||||||||||
| US municipal | 4.2 | — | — | 4.2 | |||||||||||
| International | 45.1 | 7.2 | — | 52.3 | |||||||||||
| Derivatives and margin (payable) | (2.6 | ) | — | — | (2.6 | ) | |||||||||
| Total | $ | 414.8 | $ | 116.8 | $ | — | $ | 531.6 | |||||||
| As of September 30, 2016 | |||||||||||||||
| Cash and cash equivalents | $ | 51.2 | $ | — | $ | — | $ | 51.2 | |||||||
| Stock/bond mutual funds | 99.3 | 26.7 | 0.1 | 126.1 | |||||||||||
| Debt securities: | |||||||||||||||
| US bond mutual funds | 23.0 | 126.0 | — | 149.0 | |||||||||||
| US government | 42.1 | 3.0 | — | 45.1 | |||||||||||
| US corporate | 137.4 | — | — | 137.4 | |||||||||||
| US municipal | 6.3 | — | — | 6.3 | |||||||||||
| International | 25.3 | — | — | 25.3 | |||||||||||
| Derivatives and margin (payable) | (1.0 | ) | 1.1 | — | 0.1 | ||||||||||
| Total | $ | 383.6 | $ | 156.8 | $ | 0.1 | $ | 540.5 | |||||||
The table below categorizes the fair value measurements of Spire’s postretirement plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 3.6 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3.6 |
|
U.S. stock/bond mutual funds |
|
| 199.4 |
|
|
| 72.2 |
|
|
| 0 |
|
|
| 271.6 |
|
International fund |
|
| 1.0 |
|
|
| 14.8 |
|
|
| 0 |
|
|
| 15.8 |
|
Total |
| $ | 204.0 |
|
| $ | 87.0 |
|
| $ | 0 |
|
| $ | 291.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 5.3 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5.3 |
|
U.S. stock/bond mutual funds |
|
| 187.1 |
|
|
| 71.8 |
|
|
| 0 |
|
|
| 258.9 |
|
International fund |
|
| 1.0 |
|
|
| 14.6 |
|
|
| 0 |
|
|
| 15.6 |
|
Total |
| $ | 193.4 |
|
| $ | 86.4 |
|
| $ | 0 |
|
| $ | 279.8 |
|
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 | $ | 4.0 | $ | — | $ | — | $ | 4.0 | |||||||
| US stock/bond mutual funds | 174.1 | 71.7 | — | 245.8 | |||||||||||
| International fund | 1.0 | 14.7 | — | 15.7 | |||||||||||
| Total | $ | 179.1 | $ | 86.4 | $ | — | $ | 265.5 | |||||||
| As of September 30, 2016 | |||||||||||||||
| Cash and cash equivalents | $ | 4.8 | $ | — | $ | — | $ | 4.8 | |||||||
| US stock/bond mutual funds | 157.9 | 68.5 | — | 226.4 | |||||||||||
| International fund | 0.9 | 14.3 | — | 15.2 | |||||||||||
| Total | $ | 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.
Spire Missouri
The table below categorizes the fair value measurements of Spire Missouri’s pension plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 9.5 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 9.5 |
|
Equity funds - global (including U.S.) |
|
| 22.1 |
|
|
| 137.8 |
|
|
| 0 |
|
|
| 159.9 |
|
Equity index funds - global (including U.S.) |
|
| 22.8 |
|
|
| 0 |
|
|
| 0 |
|
|
| 22.8 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond funds |
|
| 31.0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 31.0 |
|
U.S. government index funds |
|
| 59.6 |
|
|
| 0 |
|
|
| 0 |
|
|
| 59.6 |
|
Global funds (including U.S.) |
|
| 0 |
|
|
| 53.4 |
|
|
| 0 |
|
|
| 53.4 |
|
Total |
| $ | 145.0 |
|
| $ | 191.2 |
|
| $ | 0 |
|
| $ | 336.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 41.2 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 41.2 |
|
Equity mutual funds - U.S. |
|
| 0 |
|
|
| 9.1 |
|
|
| 0 |
|
|
| 9.1 |
|
Equity mutual funds - international |
|
| 0 |
|
|
| 3.3 |
|
|
| 0 |
|
|
| 3.3 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 0 |
|
|
| 73.9 |
|
|
| 0 |
|
|
| 73.9 |
|
U.S. government |
|
| 52.9 |
|
|
| 6.8 |
|
|
| 0 |
|
|
| 59.7 |
|
U.S. corporate |
|
| 143.7 |
|
|
| 0 |
|
|
| 0 |
|
|
| 143.7 |
|
U.S. municipal |
|
| 4.0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4.0 |
|
International |
|
| 44.1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 44.1 |
|
Derivatives and margin receivable |
|
| 0.2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0.2 |
|
Total |
| $ | 286.1 |
|
| $ | 93.1 |
|
| $ | 0 |
|
| $ | 379.2 |
|
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 | $ | 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 Spire Missouri’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, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 3.0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3.0 |
|
U.S. stock/bond mutual funds |
|
| 196.2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 196.2 |
|
Total |
| $ | 199.2 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 199.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 5.2 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5.2 |
|
U.S. stock/bond mutual funds |
|
| 183.7 |
|
|
| 0 |
|
|
| 0 |
|
|
| 183.7 |
|
Total |
| $ | 188.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 188.9 |
|
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 | $ | 3.9 | $ | — | $ | — | $ | 3.9 | |||||||
| US stock/bond mutual funds | 171.0 | — | — | 171.0 | |||||||||||
| Total | $ | 174.9 | $ | — | $ | — | $ | 174.9 | |||||||
| As of September 30, 2016 | |||||||||||||||
| Cash and cash equivalents | $ | 4.6 | $ | — | $ | — | $ | 4.6 | |||||||
| US stock/bond mutual funds | 155.1 | — | — | 155.1 | |||||||||||
| Total | $ | 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.
Spire Alabama
The table below categorizes the fair value measurements of Spire Alabama’s pension plan assets:
|
| Quoted Prices in Active Markets (Level 1) |
|
| Significant Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 0.9 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0.9 |
|
Equity funds - global (including U.S.) |
|
| 6.1 |
|
|
| 37.5 |
|
|
| 0 |
|
|
| 43.6 |
|
Equity index funds - global (including U.S.) |
|
| 6.4 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6.4 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond funds |
|
| 11.7 |
|
|
| 0 |
|
|
| 0 |
|
|
| 11.7 |
|
U.S. government index funds |
|
| 12.1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 12.1 |
|
Global funds (including U.S.) |
|
| 0 |
|
|
| 13.9 |
|
|
| 0 |
|
|
| 13.9 |
|
Total |
| $ | 37.2 |
|
| $ | 51.4 |
|
| $ | 0 |
|
| $ | 88.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 0.8 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0.8 |
|
Equity mutual funds - U.S. |
|
| 26.5 |
|
|
| 5.2 |
|
|
| 0 |
|
|
| 31.7 |
|
Equity mutual funds - international |
|
| 19.7 |
|
|
| 3.5 |
|
|
| 0 |
|
|
| 23.2 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. bond mutual funds |
|
| 22.8 |
|
|
| 0 |
|
|
| 0 |
|
|
| 22.8 |
|
U.S. government |
|
| 0 |
|
|
| 1.7 |
|
|
| 0 |
|
|
| 1.7 |
|
International |
|
| 0 |
|
|
| 4.9 |
|
|
| 0 |
|
|
| 4.9 |
|
103-12 Direct Filing Entities |
|
| 0 |
|
|
| 8.2 |
|
|
| 0 |
|
|
| 8.2 |
|
Total |
| $ | 69.8 |
|
| $ | 23.5 |
|
| $ | 0 |
|
| $ | 93.3 |
|
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 Spire 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, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 0 |
|
| $ | 72.2 |
|
| $ | 0 |
|
| $ | 72.2 |
|
International fund |
|
| 0 |
|
|
| 14.8 |
|
|
| 0 |
|
|
| 14.8 |
|
Total |
| $ | 0 |
|
| $ | 87.0 |
|
| $ | 0 |
|
| $ | 87.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. stock/bond mutual funds |
| $ | 0 |
|
| $ | 71.8 |
|
| $ | 0 |
|
| $ | 71.8 |
|
International fund |
|
| 0 |
|
|
| 14.6 |
|
|
| 0 |
|
|
| 14.6 |
|
Total |
| $ | 0 |
|
| $ | 86.4 |
|
| $ | 0 |
|
| $ | 86.4 |
|
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
The Company has two2 reportable segments: Gas Utility and Gas Marketing. The Gas Utility segment is the aggregation of the operations of the Utilities. The Gas Marketing segment includes the results of Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities, and Spire Storage Inc., which utilizesincluding utilizing natural gas storage contracts for providing natural gas sales. Other includes:components of the Company’s consolidated information include:
• | unallocated corporate items, including certain debt and associated interest costs; |
• | Spire STL Pipeline, a subsidiary of Spire which has constructed and, as of November 2019, operates a 65-mile FERC-regulated pipeline to deliver natural gas into eastern Missouri; |
• | Spire Storage, a subsidiary of Spire providing physical natural gas storage services; and |
• | Spire’s subsidiaries engaged in the operation of a propane pipeline, the compression of natural gas, and risk management, among other activities. |
Accounting policies are described in
Note 1, Summary of Significant Accounting Policies. Intersegment transactions include sales of natural gas from Spire Marketing to Spire Missouri and Spire Alabama, sales of natural gas from Spire Missouri to Spire Marketing, sales of natural gas from Spire Alabama to Spire Marketing, propane transportation services provided by Spire NGL Inc.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 gainsfair value accounting and losses and other timing differencesadjustments associated with energy-related transactions. Net economic earnings also excludetransactions, the after-tax impacts related toof acquisition, divestiture and restructuring activities.activities, and the largely non-cash impacts of other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In fiscal 2019, this included impacts from ISRS rulings against Spire Missouri. In fiscal 2018, these items included the revaluation of deferred tax assets and liabilities due to the Tax Cuts and Jobs Act and the write-off of certain long-standing assets as a result of disallowances in Spire Missouri’s rate proceedings.
2020 |
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Revenues from external customers |
| $ | 1,751.8 |
|
| $ | 87.9 |
|
| $ | 15.7 |
|
| $ | — |
|
| $ | 1,855.4 |
|
Intersegment revenues |
|
| 0.2 |
|
|
| — |
|
|
| 42.1 |
|
|
| (42.3 | ) |
|
| — |
|
Total Operating Revenues |
|
| 1,752.0 |
|
|
| 87.9 |
|
|
| 57.8 |
|
|
| (42.3 | ) |
|
| 1,855.4 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 660.2 |
|
|
| 65.1 |
|
|
| 0.4 |
|
|
| (29.6 | ) |
|
| 696.1 |
|
Other operation and maintenance |
|
| 421.3 |
|
|
| 11.8 |
|
|
| 38.2 |
|
|
| (12.7 | ) |
|
| 458.6 |
|
Depreciation and amortization |
|
| 189.7 |
|
|
| 0.6 |
|
|
| 7.0 |
|
|
| — |
|
|
| 197.3 |
|
Taxes, other than income taxes |
|
| 146.5 |
|
|
| 1.1 |
|
|
| 0.8 |
|
|
| — |
|
|
| 148.4 |
|
Impairments |
|
| — |
|
|
| — |
|
|
| 148.6 |
|
|
| — |
|
|
| 148.6 |
|
Total Operating Expenses |
|
| 1,417.7 |
|
|
| 78.6 |
|
|
| 195.0 |
|
|
| (42.3 | ) |
|
| 1,649.0 |
|
Operating Income (Loss) |
| $ | 334.3 |
|
| $ | 9.3 |
|
| $ | (137.2 | ) |
| $ | — |
|
| $ | 206.4 |
|
Net Economic Earnings (Loss) |
| $ | 213.4 |
|
| $ | 9.1 |
|
| $ | (14.7 | ) |
| $ | — |
|
| $ | 207.8 |
|
Capital Expenditures |
| $ | 547.8 |
|
| $ | 3.6 |
|
| $ | 87.0 |
|
| $ | — |
|
| $ | 638.4 |
|
2019 |
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Revenues from external customers |
| $ | 1,859.2 |
|
| $ | 83.7 |
|
| $ | 9.5 |
|
| $ | — |
|
| $ | 1,952.4 |
|
Intersegment revenues |
|
| 1.6 |
|
|
| — |
|
|
| 12.0 |
|
|
| (13.6 | ) |
|
| — |
|
Total Operating Revenues |
|
| 1,860.8 |
|
|
| 83.7 |
|
|
| 21.5 |
|
|
| (13.6 | ) |
|
| 1,952.4 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 794.6 |
|
|
| 47.9 |
|
|
| 0.5 |
|
|
| (2.7 | ) |
|
| 840.3 |
|
Other operation and maintenance |
|
| 441.7 |
|
|
| 11.7 |
|
|
| 31.6 |
|
|
| (10.9 | ) |
|
| 474.1 |
|
Depreciation and amortization |
|
| 179.4 |
|
|
| 0.1 |
|
|
| 2.2 |
|
|
| — |
|
|
| 181.7 |
|
Taxes, other than income taxes |
|
| 151.7 |
|
|
| 0.8 |
|
|
| 1.5 |
|
|
| — |
|
|
| 154.0 |
|
Total Operating Expenses |
|
| 1,567.4 |
|
|
| 60.5 |
|
|
| 35.8 |
|
|
| (13.6 | ) |
|
| 1,650.1 |
|
Operating Income (Loss) |
| $ | 293.4 |
|
| $ | 23.2 |
|
| $ | (14.3 | ) |
| $ | — |
|
| $ | 302.3 |
|
Net Economic Earnings (Loss) |
| $ | 199.8 |
|
| $ | 19.4 |
|
| $ | (24.1 | ) |
| $ | — |
|
| $ | 195.1 |
|
Capital Expenditures |
| $ | 565.4 |
|
| $ | 3.1 |
|
| $ | 254.8 |
|
| $ | — |
|
| $ | 823.3 |
|
2018 |
| Gas Utility |
|
| Gas Marketing |
|
| Other |
|
| Eliminations |
|
| Consolidated |
| |||||
Revenues from external customers |
| $ | 1,888.0 |
|
| $ | 71.6 |
|
| $ | 5.4 |
|
| $ | — |
|
| $ | 1,965.0 |
|
Intersegment revenues |
|
| 0.4 |
|
|
| — |
|
|
| 11.1 |
|
|
| (11.5 | ) |
|
| — |
|
Total Operating Revenues |
|
| 1,888.4 |
|
|
| 71.6 |
|
|
| 16.5 |
|
|
| (11.5 | ) |
|
| 1,965.0 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas |
|
| 842.6 |
|
|
| 30.2 |
|
|
| 0.3 |
|
|
| (1.4 | ) |
|
| 871.7 |
|
Other operation and maintenance |
|
| 449.7 |
|
|
| 7.4 |
|
|
| 30.3 |
|
|
| (10.1 | ) |
|
| 477.3 |
|
Depreciation and amortization |
|
| 167.0 |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
| 168.4 |
|
Taxes, other than income taxes |
|
| 152.5 |
|
|
| 0.2 |
|
|
| 0.8 |
|
|
| — |
|
|
| 153.5 |
|
Total Operating Expenses |
|
| 1,611.8 |
|
|
| 37.8 |
|
|
| 32.8 |
|
|
| (11.5 | ) |
|
| 1,670.9 |
|
Operating Income (Loss) |
| $ | 276.6 |
|
| $ | 33.8 |
|
| $ | (16.3 | ) |
| $ | — |
|
| $ | 294.1 |
|
Net Economic Earnings (Loss) |
| $ | 183.1 |
|
| $ | 22.9 |
|
| $ | (22.3 | ) |
| $ | — |
|
| $ | 183.7 |
|
Capital Expenditures |
| $ | 457.7 |
|
| $ | — |
|
| $ | 41.7 |
|
| $ | — |
|
| $ | 499.4 |
|
| Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | |||||||||||||||
| 2017 | |||||||||||||||||||
| Revenues from external customers | $ | 1,660.0 | $ | 79.3 | $ | 1.4 | $ | — | $ | 1,740.7 | |||||||||
| Intersegment revenues | 7.9 | — | 6.3 | (14.2 | ) | — | |||||||||||||
| Total Operating Revenues | 1,667.9 | 79.3 | 7.7 | (14.2 | ) | 1,740.7 | |||||||||||||
| Operating Expenses | |||||||||||||||||||
| Gas Utility | |||||||||||||||||||
| Natural and propane gas | 645.9 | — | — | (75.4 | ) | 570.5 | |||||||||||||
| Other operation and maintenance | 409.1 | — | — | (4.1 | ) | 405.0 | |||||||||||||
| Depreciation and amortization | 153.5 | — | — | — | 153.5 | ||||||||||||||
| Taxes, other than income taxes | 137.8 | — | — | — | 137.8 | ||||||||||||||
| Total Gas Utility Operating Expenses | 1,346.3 | — | — | (79.5 | ) | 1,266.8 | |||||||||||||
| Gas Marketing and Other * | — | 74.1 | 12.8 | 65.3 | 152.2 | ||||||||||||||
| Total Operating Expenses | 1,346.3 | 74.1 | 12.8 | (14.2 | ) | 1,419.0 | |||||||||||||
| Operating Income (Loss) | $ | 321.6 | $ | 5.2 | $ | (5.1 | ) | $ | — | $ | 321.7 | ||||||||
| Net Economic Earnings (Loss) | $ | 181.5 | $ | 6.8 | $ | (20.7 | ) | $ | — | $ | 167.6 | ||||||||
| Capital Expenditures | $ | 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 | |||||||||
Total Assets at End of Year |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Gas Utility |
| $ | 6,716.2 |
|
| $ | 6,094.6 |
|
| $ | 5,606.7 |
|
Gas Marketing |
|
| 182.7 |
|
|
| 212.3 |
|
|
| 295.3 |
|
Other |
|
| 2,443.5 |
|
|
| 2,692.7 |
|
|
| 2,508.0 |
|
Eliminations |
|
| (1,101.2 | ) |
|
| (1,380.4 | ) |
|
| (1,566.4 | ) |
Total Assets |
| $ | 8,241.2 |
|
| $ | 7,619.2 |
|
| $ | 6,843.6 |
|
Reconciliation of Consolidated Net Income to Consolidated Net Economic Earnings |
| 2020 |
|
| 2019 |
|
| 2018 |
| |||
Net Income |
| $ | 88.6 |
|
| $ | 184.6 |
|
| $ | 214.2 |
|
Adjustments, pre-tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Impairments |
| 148.6 |
|
|
| 0 |
|
|
| 0 |
| |
Provision for ISRS rulings |
|
| 0 |
|
|
| 12.2 |
|
|
| 0 |
|
Missouri regulatory adjustments |
|
| 0 |
|
|
| 0 |
|
|
| 30.6 |
|
Fair value and timing adjustments |
|
| 2.5 |
|
|
| 1.2 |
|
|
| (4.3 | ) |
Acquisition, divestiture and restructuring activities |
|
| 0 |
|
|
| 0.4 |
|
|
| 13.6 |
|
Income tax effect of adjustments |
|
| (31.9 | ) |
|
| (3.3 | ) |
|
| (10.3 | ) |
Effect of the Tax Cuts and Jobs Act |
|
| 0 |
|
|
| 0 |
|
|
| (60.1 | ) |
Net Economic Earnings |
| $ | 207.8 |
|
| $ | 195.1 |
|
| $ | 183.7 |
|
| Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | |||||||||||||||
| 2015 | |||||||||||||||||||
| Revenues from external customers | $ | 1,891.8 | $ | 82.9 | $ | 1.7 | $ | — | $ | 1,976.4 | |||||||||
| Intersegment revenues | 4.0 | 70.5 | 2.0 | (76.5 | ) | — | |||||||||||||
| Total Operating Revenues | 1,895.8 | 153.4 | 3.7 | (76.5 | ) | 1,976.4 | |||||||||||||
| Operating Expenses | |||||||||||||||||||
| Gas Utility | |||||||||||||||||||
| Natural and propane gas | 957.6 | — | — | (75.2 | ) | 882.4 | |||||||||||||
| Other operation and maintenance | 391.6 | — | — | (1.0 | ) | 390.6 | |||||||||||||
| Depreciation and amortization | 129.9 | — | — | — | 129.9 | ||||||||||||||
| Taxes, other than income taxes | 142.1 | — | — | — | 142.1 | ||||||||||||||
| Total Gas Utility Operating Expenses | 1,621.2 | — | — | (76.2 | ) | 1,545.0 | |||||||||||||
| Gas Marketing and Other * | — | 146.6 | 12.6 | (0.3 | ) | 158.9 | |||||||||||||
| Total Operating Expenses | 1,621.2 | 146.6 | 12.6 | (76.5 | ) | 1,703.9 | |||||||||||||
| Operating Income (Loss) | $ | 274.6 | $ | 6.8 | $ | (8.9 | ) | $ | — | $ | 272.5 | ||||||||
| Net Economic Earnings (Loss) | $ | 150.4 | $ | 4.2 | $ | (16.3 | ) | $ | — | $ | 138.3 | ||||||||
| Capital Expenditures | $ | 284.4 | $ | — | $ | 5.4 | $ | — | $ | 289.8 | |||||||||
| Total Assets at End of Year | 2017 | 2016 | 2015 | ||||||||
| Gas Utility | $ | 5,551.2 | $ | 5,184.7 | $ | 4,679.3 | |||||
| Gas Marketing | 246.2 | 205.0 | 160.6 | ||||||||
| Other | 2,239.5 | 1,836.6 | 1,554.5 | ||||||||
| Eliminations | (1,490.2 | ) | (1,161.9 | ) | (1,116.8 | ) | |||||
| Total Assets | $ | 6,546.7 | $ | 6,064.4 | $ | 5,277.6 | |||||
Reconciliation of Consolidated Net Income to Consolidated Net Economic Earnings | 2017 | 2016 | 2015 | ||||||||
| Net Income | $ | 161.6 | $ | 144.2 | $ | 136.9 | |||||
| Adjustments, pre-tax: | |||||||||||
| Unrealized loss (gain) on energy-related derivatives | 6.0 | (0.1 | ) | (2.8 | ) | ||||||
| Lower of cost or market inventory adjustments | — | 0.2 | 0.4 | ||||||||
Realized (gain) loss on economic hedges prior to the sale of the physical commodity | (0.3 | ) | (1.6 | ) | 2.4 | ||||||
| Acquisition, divestiture and restructuring activities | 4.0 | 9.2 | 9.8 | ||||||||
| Gain on sale of property | — | — | (7.6 | ) | |||||||
| Income tax effect of adjustments | (3.7 | ) | (2.8 | ) | (0.8 | ) | |||||
| Net Economic Earnings | $ | 167.6 | $ | 149.1 | $ | 138.3 | |||||
15. REGULATORY MATTERS
As discussed below for Spire Missouri and Spire Alabama, the Purchased Gas Adjustment (PGA) clauses and Gas Supply Adjustment (GSA) riders allow the Utilities to pass through to customers the cost of purchased gas supplies. Regulatory assets and regulatory liabilities related to the PGA clauses and the GSA rider are both labeled Unamortized Purchased Gas Adjustments herein.
The following regulatory assets and regulatory liabilities were reflected in the Balance Sheets as of September 30, 20172020 and 2016. Unamortized Purchased Gas Adjustments are also included below, which are reported separately in the current assets and liabilities sections of each balance sheet.2019.
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||||||||||||||
September 30 |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||
Regulatory Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement benefit costs |
| $ | 30.6 |
|
| $ | 30.1 |
|
| $ | 21.9 |
|
| $ | 21.9 |
|
| $ | 7.7 |
|
| $ | 7.3 |
|
Unamortized purchased gas adjustments |
|
| 5.5 |
|
|
| 18.2 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5.5 |
|
|
| 17.7 |
|
Other |
|
| 33.4 |
|
|
| 30.3 |
|
|
| 10.2 |
|
|
| 7.5 |
|
|
| 7.2 |
|
|
| 8.9 |
|
Total Current Regulatory Assets |
|
| 69.5 |
|
|
| 78.6 |
|
|
| 32.1 |
|
|
| 29.4 |
|
|
| 20.4 |
|
|
| 33.9 |
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future income taxes due from customers |
|
| 123.5 |
|
|
| 111.0 |
|
|
| 114.6 |
|
|
| 102.9 |
|
|
| 2.2 |
|
|
| 2.2 |
|
Pension and postretirement benefit costs |
|
| 439.3 |
|
|
| 416.6 |
|
|
| 332.6 |
|
|
| 333.3 |
|
|
| 98.2 |
|
|
| 77.2 |
|
Cost of removal |
|
| 395.6 |
|
|
| 150.9 |
|
|
| 7.1 |
|
|
| 0 |
|
|
| 388.6 |
|
|
| 150.9 |
|
Unamortized purchased gas adjustments |
|
| 12.1 |
|
|
| 9.1 |
|
|
| 12.1 |
|
|
| 9.1 |
|
|
| 0 |
|
|
| 0 |
|
Energy efficiency |
|
| 39.6 |
|
|
| 35.0 |
|
|
| 39.6 |
|
|
| 35.0 |
|
|
| 0 |
|
|
| 0 |
|
Other |
|
| 59.3 |
|
|
| 45.0 |
|
|
| 42.7 |
|
|
| 27.2 |
|
|
| 0.9 |
|
|
| 0.9 |
|
Total Noncurrent Regulatory Assets |
|
| 1,069.4 |
|
|
| 767.6 |
|
|
| 548.7 |
|
|
| 507.5 |
|
|
| 489.9 |
|
|
| 231.2 |
|
Total Regulatory Assets |
| $ | 1,138.9 |
|
| $ | 846.2 |
|
| $ | 580.8 |
|
| $ | 536.9 |
|
| $ | 510.3 |
|
| $ | 265.1 |
|
Regulatory Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and postretirement benefit costs |
| $ | 5.8 |
|
| $ | 5.8 |
|
| $ | 3.6 |
|
| $ | 3.6 |
|
| $ | 2.2 |
|
| $ | 2.2 |
|
Unamortized purchased gas adjustments |
|
| 73.1 |
|
|
| 26.2 |
|
|
| 72.3 |
|
|
| 25.4 |
|
|
| 0 |
|
|
| 0 |
|
Other |
|
| 34.1 |
|
|
| 28.8 |
|
|
| 27.3 |
|
|
| 23.3 |
|
|
| 1.7 |
|
|
| 1.2 |
|
Total Current Regulatory Liabilities |
|
| 113.0 |
|
|
| 60.8 |
|
|
| 103.2 |
|
|
| 52.3 |
|
|
| 3.9 |
|
|
| 3.4 |
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes due to customers |
|
| 138.8 |
|
|
| 179.8 |
|
|
| 121.4 |
|
|
| 162.5 |
|
|
| 0 |
|
|
| 0 |
|
Pension and postretirement benefit costs |
|
| 157.6 |
|
|
| 142.3 |
|
|
| 140.4 |
|
|
| 119.1 |
|
|
| 14.8 |
|
|
| 19.1 |
|
Accrued cost of removal |
|
| 28.6 |
|
|
| 41.6 |
|
|
| 0 |
|
|
| 15.7 |
|
|
| 0 |
|
|
| 0 |
|
Unamortized purchased gas adjustments |
|
| 4.4 |
|
|
| 0 |
|
|
| 4.4 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Other |
|
| 14.3 |
|
|
| 35.3 |
|
|
| 8.6 |
|
|
| 29.2 |
|
|
| 3.7 |
|
|
| 3.9 |
|
Total Noncurrent Regulatory Liabilities |
|
| 343.7 |
|
|
| 399.0 |
|
|
| 274.8 |
|
|
| 326.5 |
|
|
| 18.5 |
|
|
| 23.0 |
|
Total Regulatory Liabilities |
| $ | 456.7 |
|
| $ | 459.8 |
|
| $ | 378.0 |
|
| $ | 378.8 |
|
| $ | 22.4 |
|
| $ | 26.4 |
|
| 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’s regulatory assets are not earning a return and are shown in the schedule below:
|
| Spire |
|
| Spire Missouri |
| ||||||||||
September 30 |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Pension and postretirement benefit costs |
| $ | 232.3 |
|
| $ | 211.1 |
|
| $ | 232.3 |
|
| $ | 211.1 |
|
Future income taxes due from customers |
|
| 121.3 |
|
|
| 108.8 |
|
|
| 114.6 |
|
|
| 102.9 |
|
Other |
|
| 12.9 |
|
|
| 14.3 |
|
|
| 12.9 |
|
|
| 14.3 |
|
Total Regulatory Assets Not Earning a Return |
| $ | 366.5 |
|
| $ | 334.2 |
|
| $ | 359.8 |
|
| $ | 328.3 |
|
| Spire | Spire Missouri | ||||||||||||||
| September 30 | 2017 | 2016 | 2017 | 2016 | |||||||||||
| Future income taxes due from customers | $ | 170.5 | $ | 151.3 | $ | 170.5 | $ | 151.3 | |||||||
| Pension and postretirement benefit costs | 198.5 | 240.6 | 198.5 | 240.6 | |||||||||||
| Other | 11.3 | 12.9 | 11.3 | 12.9 | |||||||||||
| Total Regulatory Assets Not Earning a Return | $ | 380.3 | $ | 404.8 | $ | 380.3 | $ | 404.8 | |||||||
Like all the Company’s regulatory assets, these regulatory assets are expected to be recovered from customers in future rates. The recovery period for the future income taxes due from customers and pension and other postretirement benefit costs could be as long as 20 years or longer, based on current Internal Revenue Service guidelines and average remaining service life of active participants, respectively. The other items not earning a return are expected to be recovered over a period not to exceed 15 years, consistent with precedent set by the MoPSC. Spire Alabama does not have any regulatory assets that are not earning a return.
Spire Missouri
As authorized by the MoPSC, the PGA clause allows Spire Missouri to flow through to customers, subject to prudence review by the MoPSC, the cost of purchased gas supplies. To better match customer billings with market natural gas prices, Spire Missouri is allowed to file to modify, on a periodic basis, the level of gas costs in its PGA. Certain provisions of the PGA clause are included below:
• | Spire 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 Spire Missouri flexibility to make up to 3 discretionary PGA changes during each year, in addition to its mandatory November PGA change, so long as such changes are separated by at least two months. |
• | Spire Missouri is 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. |
• | The MoPSC approved a plan applicable to 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 Spire Missouri to retain 10% of cost savings, up to a maximum of $3.0 annually. Spire Missouri did not record any such incentive compensation under the plan during the three fiscal years reported. Incentives recorded under the plan, if any, are included in Gas Utility Operating Revenues on the Consolidated Statements of Income and under Operating Revenues on Spire Missouri’s Statements of Comprehensive 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. 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. Before April 19, 2018, the customer share of such income ranged from 70% to 85%. In the latest rate cases (discussed in the following paragraphs), the multiple sharing tiers and percentages were eliminated in favor of a single sharing percentage under which customers receive 75% (and Spire Missouri receives 25%) of the net margins achieved as a result of such off-system sales and capacity releases.
On March 7, 2018, the MoPSC issued its order in two general rate cases (docketed as GR-2017-0215 and GR-2017-0216), approving new tariffs that became effective on April 19, 2018. Certain provisions of the order allow less future recovery of certain deferred or capitalized costs than estimated based upon previous rate proceedings, and management determined that the related regulatory assets should be written down or off in connection with the preparation of the financial statements for the second quarter of 2018. The charges totaled $38.4 for the year ended September 30, 20162018, and are included primarily in operation and maintenance expense on the statements of income and in other cash flows from operating activities on the statements of cash flows. The after-tax reduction to net income and earnings per share was $23.6 and $0.49, respectively. The charges related to the long-standing pension and real estate assets, totaling $30.6, were excluded in the determination of 2018 net economic earnings, as shown in Note 14, Information by Operating Segment. On April 25, 2018, Spire Missouri filed an appeal of the MoPSC’s order related to increase itsthe disallowance of certain pension costs incurred prior to 1997 ($28.8), real estate sold in 2014 ($1.8), and rate case expenses ($0.9) to Missouri’s Southern District Court of Appeals. On March 15, 2019, the appeal was denied by the Southern District Court of Appeals, and Spire Missouri requested review by the Missouri Supreme Court, which agreed to take the case. Oral arguments were made before the Missouri Supreme Court on January 29, 2020. The case is awaiting a decision.
Spire Missouri filed Infrastructure System Replacement Surcharge (ISRS) revenuesapplications which were approved by $5.0the MoPSC and the costs associated therewith were included in new tariffs that went into effect from its last general rate cases on April 19, 2018. Since then, ISRS filings became effective on October 8, 2018, May 25, 2019, November 16, 2019, and May 25, 2020, bringing total authorized future annualized ISRS revenues for Spire Missouri East and $3.4 for Spire Missouri West, related to ISRS investments from March
On November 19, 2019, the two service territories were increased by the MoPSC staff-recommended amounts, effective June 1, 2017.
Additional ISRS appeals were taken by Spire Missouri and the OPC relating to the January 2019 ISRS filings with annual authorized revenue of $12.4, as approved by the MoPSC effective May 25, 2019, and the July 2019 ISRS filings with annual authorized revenue totaling $8.8, which was approved by the MoPSC effective November 16, 2019. The January 2019 ISRS decision has been upheld by the Western District, resulting in no revenue change or customer refund. On October 20, 2020, the Western District issued its opinion in the July 2019 case upholding the MoPSC’s February 10, 2016 Order grantingdecision, resulting in no revenue change or customer refund.
House Bill 2120 was passed by the General Assembly on May 15, 2020, and signed into law by Missouri Governor Parson on July 2, 2020, clarifying which infrastructure investments qualify for ISRS recovery under the statute governing the ISRS mechanism. The provisions of the bill became effective August 28, 2020, and apply to new ISRS applications made on or after that date.
In September 2020, Spire Missouri, $300.0 in long-term financing authority. On July 5, 2017, the Court deniedMoPSC staff and the OPC reached a Unanimous Stipulation and Agreement regarding Spire Missouri’s request for an Accounting Authority Order (AAO) pertaining to transfer the casecertain costs and lost customer fee revenue related to the COVID-19 pandemic. In October 2020, the MoPSC issued an order approving that agreement and granting an AAO. Accordingly, Spire Missouri Supreme Court,recorded a regulatory asset of $3.8 as of September 30, 2020, related to the deferral of applicable costs and on October 5, 2017,is tracking lost customer fee revenue. All ratemaking treatment of the Missouri Supreme Court declined to heardeferrals and any revenue recoveries is reserved for consideration in Spire Missouri’s direct appeal. next general rate case.
On March 20, 2017,October 8, 2020, Spire Missouri entered intofiled a bond purchase agreementNotice of Intended Rate Case Filing with the MoPSC, indicating its intention to initiate a general base rate case more than 60 days following the filing of the notice. The notice indicates Spire Missouri’s intention to seek rate recovery for $170.0 that was funded on September 15, 2017, and applied against the $300.0 authorization.
Spire Alabama
Effective January 1, 2014, Spire Alabama’s allowed range of return on average common equity is(ROE) was 10.5% to 10.95% with an adjusting point of 10.8%. Spire Alabama iswas eligible to receive a performance-based adjustment of 5 basis points to the return on equityROE adjusting point, based on meeting certain customer satisfaction criteria. Under RSE,its Rate Stabilization and Equalization (RSE) rate-setting process, the APSC conducts quarterly reviews to determine whether Spire Alabama’s return on average common equityROE 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 returnROE within the allowed range; increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year revenues. TheIn October 2018, the APSC approved the renewal of RSE reduction for the July 31, 2016 quarterlythrough September 30, 2022, with several modifications. Effective October 1, 2018, Spire Alabama’s allowed range of ROE is 10.15% to 10.65% with an adjusting point of test was $4.8 and went into effect October 1, 2016, and for the quarterly point of test at September 30, 2016,10.4%. Spire Alabama recordedis eligible to receive a $2.7 RSE reductionperformance-based adjustment of +/- 10 basis point to the ROE adjusting point, based upon the terms of the newly approved Accelerated Infrastructure Modernization (AIM) Program tariff. The 5-basis point adjustment for certain customer satisfaction criteria has been removed. Other modifications include an equity limitation as a percent of total capitalization from 56.5% to 55.5% and adjustments to the Cost Control Measure (CCM) as noted below.
On November 25, 2019, Spire Alabama filed an increase for rate year 2020 of $5.9, which became effective December 1, 2016. As part2019. On October 26, 2020, Spire Alabama made its annual RSE rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2021, including net income and a calculation of allowed ROE. The AIM mechanism provides for a 10 basis-point increase in the allowed ROE each year if a prescribed number of pipeline miles are replaced. Spire Alabama exceeded the threshold for 2020 and accordingly filed for a 10.5% ROE for fiscal 2021.
Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider which permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA rider, which is designed to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily to residential, small commercial and small industrial customers. Other non-temperature weather-related conditions that may affect customer usage are not included in the temperature adjustment. In November 2019, the APSC approved Spire Alabama’s proposal to establish a mechanism under its GSA rider allowing the utility to create value through off-system sales of excess natural gas supply and capacity and to retain 25% of the annual update for RSE,value created while giving 75% of the value to customers. The mechanism was effective with the establishment of new rates on November 30, 2016,December 1, 2019. Spire Alabama filed a reduction forGSA rate year 2017decrease effective February 1, 2020, of $2.5 that also became effective December 1, 2016. There was no RSE
The inflation-based Cost Control Measure (CCM),CCM, established by the APSC, allows for annual increases to operation and maintenance (O&M)(“O&M”) expense. The CCM range is Spire Alabama’s 2007 actual rate year O&M expense inflation-adjusted using 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 the Index Range,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 rate year O&M is less than the Index Range,index 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 Spire Alabama’s control may be excluded from the CCM calculation. Before fiscal 2019, the CCM index range was Spire Alabama’s 2007 actual rate year O&M expense inflation-adjusted based on the June Consumer Price Index For All Urban Consumers (CPI-U) each rate year, plus or minus 1.75%. Effective October 1, 2018, the CCM is calculated based upon O&M expense per customer and the index range is Spire Alabama’s actual 2018 O&M expense adjusted for inflation and adjusted by 2/3 and 1/3 of the 2018 CCM differential (amount below the CCM range in 2018) in 2019 and 2020, respectively, plus or minus 1.50%. As of September 30, 2017,2020, Spire Alabama recorded an RSE point of test giveback of $3.0 and a CCM benefit of $10.7$5.2 for rate year 2017,2020, which will both be reflected in rates effective December 1, 2017.2020. The CCM benefit was $7.8$5.9 for rate year 20162019 and $4.7$9.7 for rate year 2015.
On June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, and a regulatory liability to be recorded for Spire Alabama. Refunds from such negative salvage liability will bewere passed back to eligible customers on a declining basis through lower tariff rates through rate year 2019 pursuant to the terms of the Negative Salvage Rebalancing (NSR) rider. The total amount refundable to customers iswas subject to adjustments over the remaining period for charges made to the Enhanced Stability Reserve (ESR) and other APSC-approved charges. The refunds arewere 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 was2019 and 2018, NSR amounts returned to customers.customers were approximately $4.2 and $7.2, respectively.
The APSC approved an 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 $1.0 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. Spire Alabama is tracking costs and other impacts of September 30, 2017, $12.3COVID-19 in anticipation that some of these items could be recoverable under its ESR, but no related changes to regulatory assets or liabilities have been recorded to date. 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 remainingprovided 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, Spire Alabama expects to be refundedable to customers. The NSR pass backrecover 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 fiscal 2018 is $8.2 and will be reflectedrecovery in rates 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 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.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, filedSpire is affected by the following regulatory matters.
Spire Gulf has similar rate regulation to Spire Alabama. The RSE allowed range of ROE is 10.45% to 10.95% with an applicationadjusting 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 2017, excluding expenses for pensions and gas bad debt. Additionally, it has a Cast Iron Main Replacement factor that provides an enhanced return on the pro-rata costs associated with cast iron main replacement exceeding 10 miles per year based on a 75% weighting for the equity content. Spire Gulf also has an ESR for negative revenue variances over $0.1 or a force majeure event expense of $0.1 (or two events that exceed $0.15), a Self Insurance Reserve for general liability coverage, and an Environmental Cost Recovery Factor 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. Spire Gulf recorded a July 31, 2020, point of test refund under the RSE rate mechanism for approximately $1.4 and also recorded a CCM benefit for rate year 2020 of $1.8. On October 23, 2020, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for authorizationfiscal 2021 and an allowed ROE of 10.7%, reflecting an increase in annual revenue of $1.1, pending APSC review.
Spire Gulf’s rates were reduced $1.9 effective February 1, 2018, 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 lossreflect lower income taxes resulting from the settlementTCJA.
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 (currently 9.79%), and is updated on an annual basis if the equity return on an end of such interestperiod rate derivative instrumentsbase is beyond the allowed return on equity by 1.0%, with 75% of any shortfall recovered through rates.a rate increase and 50% of any excess resulting in a rate decrease. Updates may include known and measurable adjustments to historic costs from the 12 months ended June 30, submitted September 15 for an effective date of November 1, unless disputed by the Mississippi Public Utilities Staff (MPUS), with any disputes to be resolved by the MSPSC by January 15 of the following year. In December 2015, a Supplemental Growth Rider (SGR) was approved for a 3-year period to provide recovery of certain system expansion projects. On September 4, 2018, the SGR was extended to October 15, 2021. On February 5, 2019, the MSPSC approved an agreement between Spire Mississippi and the MPUS settling its Rates Stabilization and Adjustments filing that was made on September 14, 2018, resulting in a $0.7 increase in the annualized revenue requirement. New rates became effective March 1, 2019. On December 11, 2019, the MSPSC approved an agreement between Spire Mississippi and the MPUS settling its RSA filing that was made on August 30, 2019, resulting in a $0.3 increase in annual revenue. New rates became effective December 11, 2019. On August 28, 2020, Spire Mississippi filed its RSA for the rate year ended June 30, 2020, that reflected an increase to annual revenue totaling $0.6. This RSA filing is being reviewed by the MPUS.
In August 2018, the Federal Energy Regulatory Commission (FERC) approved an order issuing a Certificate of Public Convenience and Necessity for the Spire STL Pipeline (“August 2018 Order”), and in November 2018, the FERC issued a Notice to Proceed, allowing construction to begin. In November 2019, Spire STL Pipeline received FERC authorization to place the STL Pipeline into service. Also, in November 2019, the FERC issued an Order on Rehearing of the August 2018 Order dismissing or denying the outstanding requests for rehearing filed by several parties, dismissing the request for stay filed by one party, and noting the withdrawal of the request for rehearing by another party. On January 21, 2020, two of the rehearing parties filed petitions for review of the FERC’s orders with the U.S. Court of Appeals for the District of Columbia Circuit. Spire STL Pipeline and Spire Missouri have intervened and filed responsive briefs in this proceeding, which remains pending.
In August 2019, Spire Storage filed with the FERC two Prior Notice Applications of its intent to convert a total of six existing observation wells into injection/withdrawal wells and to install related gas flowlines, fuel gas lines and fiber optic communication. The applications cleared FERC authorization in October and November 2019, and both projects remain under development. On October 9, 2020,Spire Storage filed with the FERC an Abbreviated Application for an Amendment of Certificate of Public Convenience and Necessity, Reaffirmation of Market-Based Rate Authority, and Related Authorizations pursuant to Section 7(c) of the Natural Gas Act. The application was approved by the APSC October 3, 2017.
16. COMMITMENTS AND CONTINGENCIES
Commitments
The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through 2031,2032, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at September 30, 20172020, are estimated at $1,281.8, $563.9$1,745.4, $1,410.3 and $285.6$229.7 for the Company, Spire Missouri and Spire Alabama, respectively. Additional contracts are generally entered into prior to or during the heating season of November through April. The Utilities recover their costs from customers in accordance with their PGA clauses or GSA riders.
Spire NGL Inc. is providing liquid propane transportation service to Spire Missouri pursuant to an approved FERC tariff and a contractual arrangement with Spire Missouri. In accordance with the terms of that agreement, Spire Missouri is obligated to pay Spire 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.
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 $1.3$1.2 incurred in connection with various real estate ventures. Spire has no reason to believe that the other principal liable parties will not be able to meet their proportionate
| 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 | |||||||||||||||||||||||||||||
Contingencies
The Company and the Utilities account for contingencies, including 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.
In addition to matters noted below, the Company and the Utilities are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the statements of income, balance sheets, and statements of cash flows of the Company, Spire Missouri, or Spire Alabama. However, there is uncertainty in the valuation of pending claims and prediction of litigation results.
The Company and the Utilities own and operate natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s or Utilities’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, the Company or the Utilities may incur additional environmental liabilities that may result in additional costs, which may be material.
In the natural gas industry, many gas distribution companies have incurred environmental liabilities associated with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took place. The Utilities each have former manufactured gas plant (MGP) operations in their respective service territories.
Spire Missouri
Spire Missouri has identified four3 former MGP sites in easternthe city of St. Louis, Missouri (the “City”) where costs have been incurred and claims have been asserted: one in Shrewsbury, Missouri and three in the city of St. Louis, Missouri (City).asserted. Spire Missouri has enrolled two2 of the sites in the City in the Missouri Department of Natural Resources (MDNR) Brownfields/Voluntary Cleanup Program (BVCP). The third site in the City is the result of a more recentrelatively new claim assertion by the United States Environmental Protection Agency (EPA), and such claim is currently being investigated..
In conjunction with redevelopment of one of the sites, located in the City, Spire Missouri and another former owner of the site entered into an agreement (Remediation Agreement)(the “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 (MDNR).MDNR. The Remediation Agreement also provides for a release of Spire 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 Spire 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 Spire Missouri did not materially impact the financial condition, results of operations, or cash flows of the Company.
Spire Missouri has not owned the second site located in the City for many years. In a letter dated June 29, 2011, the Attorney General for the stateState of Missouri informed Spire Missouri that the MDNR had completed an investigation of the site. The Attorney General requested that Spire Missouri participate in the follow up investigations of the site. In a letter dated January 10, 2012, Spire Missouri stated that it would participate in future environmental response activities at the site in conjunction with other potentially responsible parties (PRPs)PRPs that are willing to contribute to such efforts in a meaningful and equitable fashion. Accordingly, Spire Missouri entered into a cost sharing agreement for remedial investigation with other PRPs. PendingTo date, MDNR approval, which has not occurred to date,approved the agreement, so remedial investigation of the site will begin.
Additionally, 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 requestingrequested more information from the EPA, some of which willwould 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 thethese MGP sites. While some of the insurers have denied coverage and reserved their rights, Spire Missouri continuesretains the right to discussseek potential reimbursements withfrom them.
On March 10, 2015, Spire Missouri received a Section 104(e) information request under CERCLA from EPA Region 7 regarding the former Thompson Chemical/Superior Solvents site in the City. In turn, Spire 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.
In its western service area, Spire Missouri has seven7 owned MGP sites enrolled in the BVCP:BVCP, including 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. On September 15, 2016, a request was made with the MDNR for a restrictive covenant use limitation with respect to Joplin. Remediation efforts at the seven sites are at various stages of completion, ranging from groundwater monitoring and sampling following source removal activities to the aforementioned request in respect to Joplin. As part of its participation in the BVCP, Spire Missouri communicates regularly with the MDNR with respect to its remediation efforts and monitoring activities at these sites. On May 11, 2015, MDNR approved the next phase of investigation at the Kansas City Station A North and Railroad areas.
To date, costs incurred for all Spire MissouriMissouri’s 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 Spire 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 PRPs to pay, the successful completion of remediation efforts required by the Remediation Agreement described above, and any insurance recoveries.
In 2013, Spire Missouri retained an outside consultant to conduct probabilistic cost modeling of 19 former MGP sites owned or operated by Spire 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. Spire Missouri has recorded its best estimate of the probable expenditures that relate to these matters. The amount is not material.
Spire 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.
Spire Alabama
Spire Alabama is in the chain of title of nine9 former MGP sites, four4 of which it still owns, and five5 former manufactured gas distribution sites, one1 of which it still owns. Spire Alabama does not foresee a probable or reasonably estimable loss associated with these nine sites. Spire Alabama and the Company do not expect potential liabilities that may arise from remediating these sites to have a material impact on their future financial conditionscondition or results of operations.
In 2012, Spire Alabama responded to an EPA Request for Information Pursuant to Section 104 of CERCLA relating to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama was identified as a PRP under CERCLA for the cleanup of the site or costs the EPA incurs in cleaning up the site. At this point, Spire Alabama has not been provided information that would allow it to determine the extent, if any, of its potential liability with respect to the 35th Avenue Superfund Site and vigorously denies its inclusion as a PRP.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is aware of the following contingent matter.
In February 2018, the Company was made aware of a complaint filed with the U.S. Department of Housing and Urban Development (HUD) by the South Alabama Center for Fair Housing and the National Community Reinvestment Coalition. The complaint alleges that Spire Gulf discriminated against unspecified residents of Eight Mile, Alabama, on the basis of race in violation of the Fair Housing Act by failing to adequately address the odorant release that occurred in 2008. The Company believes there is no basis for the complaint, HUD has no jurisdiction in the matter, and there will be no material impact on its future financial condition or results of operations.
17. LEASES
The lease agreement covering the Company’s primary office space in St. Louis extends through February 2035, with an incident occurred at a Housing Authority apartment complexoption to renew for an additional five years. Spire Alabama’s lease agreement for office space in Birmingham Alabamaextends through January 2024. The lease agreement covering Spire Marketing and Spire Storage office space in Houston extends through December 2028, with options to terminate three years earlier or to renew for an additional five years. The renewal options in the St. Louis and Houston leases are reasonably certain to be exercised and are included in the lease term used to determine the right-of use assets and lease liabilities. The Company and its subsidiaries have other relatively minor rental arrangements for real estate and equipment with remaining terms of up to ten years.
Operating lease cost, cash flow and noncash information for the year ended September 30, 2020, are shown in the following table.
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Operating lease cost, including amounts capitalized |
| $ | 8.7 |
|
| $ | 0.5 |
|
| $ | 3.5 |
|
Cash flow and noncash information about operating leases: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows representing cash paid for amounts included in the measurement of lease liabilities |
|
| 8.5 |
|
|
| 0.5 |
|
|
| 3.3 |
|
Right-of-use assets obtained in exchange for lease liabilities |
|
| 71.1 |
|
|
| 2.1 |
|
|
| 10.0 |
|
The following table shows balance sheet and weighted-average information about operating leases as of September 30, 2020.
| Balance sheet classification |
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
Right-of-use assets | Deferred Charges and Other Assets: Other |
| $ | 65.1 |
|
| $ | 1.7 |
|
| $ | 6.7 |
|
Lease liabilities, current | Current Liabilities, Other |
|
| 6.5 |
|
|
| 0.3 |
|
|
| 1.9 |
|
Lease liabilities, noncurrent | Deferred Credits and Other Liabilities: Other |
|
| 58.4 |
|
|
| 1.4 |
|
|
| 4.7 |
|
Weighted-average remaining lease term |
|
| 15.9 years |
|
| 5.3 years |
|
| 3.3 years |
| |||
Weighted-average discount rate |
|
|
| 4.2 | % |
|
| 2.5 | % |
|
| 2.2 | % |
Following is a maturity analysis by fiscal year for operating lease liabilities as of September 30, 2020.
|
|
| Spire |
|
| Spire Missouri |
|
| Spire Alabama |
| |||
2021 |
| $ | 6.6 |
|
| $ | 0.3 |
|
| $ | 1.9 |
| |
2022 |
|
| 7.2 |
|
|
| 0.4 |
|
|
| 2.1 |
| |
2023 |
|
| 7.2 |
|
|
| 0.3 |
|
|
| 2.1 |
| |
2024 |
|
| 5.8 |
|
|
| 0.3 |
|
|
| 0.7 |
| |
2025 |
|
| 5.1 |
|
|
| 0.3 |
|
|
| — |
| |
Thereafter |
|
| 58.4 |
|
|
| 0.2 |
|
|
| — |
| |
Total undiscounted lease payments |
|
| 90.3 |
|
|
| 1.8 |
|
|
| 6.8 |
| |
Less present value discount |
|
| (25.4 | ) |
|
| (0.1 | ) |
|
| (0.2 | ) | |
Total current and noncurrent lease liabilities |
| $ | 64.9 |
|
| $ | 1.7 |
|
| $ | 6.6 |
| |
The aggregate rental expense for fiscal years 2018 and 2019 and the annual minimum rental commitments for all leases having an initial or remaining non-cancelable term of more than one year as of September 30, 2019, were as follows (under ASC 840).
|
| Aggregate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Rental Expense |
|
| Minimum Rental Commitments as of September 30, 2019 |
| ||||||||||||||||||||||||||||||
|
| 2018 |
|
| 2019 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| Later |
|
| Total |
| |||||||||
Spire |
| $ | 10.0 |
|
| $ | 10.9 |
|
| $ | 8.2 |
|
| $ | 7.0 |
|
| $ | 6.8 |
|
| $ | 6.1 |
|
| $ | 4.8 |
|
| $ | 36.5 |
|
| $ | 69.4 |
|
Spire Missouri |
|
| 3.6 |
|
|
| 3.7 |
|
|
| 0.5 |
|
|
| 0.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.7 |
|
Spire Alabama |
|
| 4.7 |
|
|
| 5.2 |
|
|
| 2.9 |
|
|
| 2.1 |
|
|
| 2.1 |
|
|
| 2.1 |
|
|
| 0.7 |
|
|
| — |
|
|
| 9.9 |
|
There are no significant finance leases, short-term leases, subleases, variable lease payments, residual value guarantees, restrictions or covenants pertaining to leases.
The Company elected, for all asset classes, not to recognize right-of-use assets and lease liabilities for short-term leases. Instead, the lease payments are recognized in profit or loss on a straight-line basis over the lease term and variable lease payments are recognized in the period in which the obligation for those payments is incurred. The Company elected, for all asset classes, not to separate nonlease components from lease components and instead to account for each separate lease component and the nonlease components associated with that resulted in one fatality, personal injuries and property damage. Spire Alabama cooperated with the National Transportation Safety Board (NTSB) which investigated the incident. The NTSB report of findings was issued on March 30, 2016 and no safety recommendations, fines, or penalties were contained therein. Spire Alabama has been namedlease component as a defendantsingle lease component.
The discount rate used for all the leases is the applicable incremental borrowing rate, which is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in several lawsuits arising froma similar economic environment. For a subsidiary lessee, the incident, and additional lawsuits and claims may be filed against Spire Alabama.
18. INTERIM FINANCIAL INFORMATION (UNAUDITED)
Spire
In the opinion of Spire, the quarterly information presented below for fiscal years 20172020 and 20162019 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 the Utilities.
Three Months Ended |
| Dec. 31 |
|
| March 31 |
|
| June 30 |
|
| Sept. 30 |
| ||||
Fiscal Year 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 566.9 |
|
| $ | 715.5 |
|
| $ | 321.1 |
|
| $ | 251.9 |
|
Operating Income (Loss) |
|
| 102.3 |
|
|
| 210.5 |
|
|
| (106.5 | ) |
|
| 0.1 |
|
Net Income (Loss) |
|
| 67.0 |
|
|
| 133.6 |
|
|
| (92.3 | ) |
|
| (19.7 | ) |
Basic Earnings (Loss) Per Share of Common Stock |
| $ | 1.24 |
|
| $ | 2.55 |
|
| $ | (1.87 | ) |
| $ | (0.45 | ) |
Diluted Earnings (Loss) Per Share of Common Stock |
| $ | 1.24 |
|
| $ | 2.54 |
|
| $ | (1.87 | ) |
| $ | (0.45 | ) |
Fiscal Year 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 602.0 |
|
| $ | 803.5 |
|
| $ | 321.3 |
|
| $ | 225.6 |
|
Operating Income (Loss) |
|
| 105.1 |
|
|
| 209.5 |
|
|
| 13.3 |
|
|
| (25.6 | ) |
Net Income (Loss) |
|
| 67.3 |
|
|
| 154.6 |
|
|
| (3.0 | ) |
|
| (34.3 | ) |
Basic Earnings (Loss) Per Share of Common Stock |
| $ | 1.33 |
|
| $ | 3.05 |
|
| $ | (0.09 | ) |
| $ | (0.75 | ) |
Diluted Earnings (Loss) Per Share of Common Stock |
| $ | 1.32 |
|
| $ | 3.04 |
|
| $ | (0.09 | ) |
| $ | (0.74 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | Dec. 31 | March 31 | June 30 | Sept. 30 | |||||||||||
| 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 | $ | 399.4 | $ | 609.3 | $ | 249.3 | $ | 279.3 | |||||||
| Operating Income (Loss) | 87.0 | 167.7 | 35.3 | (7.7 | ) | ||||||||||
| Net Income (Loss) | 46.9 | 100.8 | 10.7 | (14.2 | ) | ||||||||||
| Basic Earnings (Loss) Per Share of Common Stock | $ | 1.08 | $ | 2.32 | $ | 0.24 | $ | (0.31 | ) | ||||||
| Diluted Earnings (Loss) Per Share of Common Stock | $ | 1.08 | $ | 2.31 | $ | 0.24 | $ | (0.31 | ) | ||||||
Spire Missouri
In the opinion of Spire Missouri, the quarterly information presented below for fiscal years 20172020 and 20162019 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 their seasonal nature.
Three Months Ended |
| Dec. 31 |
|
| March 31 |
|
| June 30 |
|
| Sept. 30 |
| ||||
Fiscal Year 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 374.0 |
|
| $ | 457.5 |
|
| $ | 203.9 |
|
| $ | 158.2 |
|
Operating Income |
|
| 67.0 |
|
|
| 117.7 |
|
|
| 7.0 |
|
|
| 13.9 |
|
Net Income |
|
| 48.0 |
|
|
| 74.5 |
|
|
| 6.5 |
|
|
| 1.2 |
|
Fiscal Year 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 413.2 |
|
| $ | 556.6 |
|
| $ | 191.4 |
|
| $ | 130.6 |
|
Operating Income (Loss) |
|
| 71.4 |
|
|
| 102.4 |
|
|
| 12.2 |
|
|
| (11.2 | ) |
Net Income (Loss) |
|
| 51.2 |
|
|
| 80.0 |
|
|
| 1.1 |
|
|
| (17.3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 Spire Alabama, the quarterly information presented below for fiscal years 20172020 and 20162019 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 their seasonal nature.
Three Months Ended |
| Dec. 31 |
|
| March 31 |
|
| June 30 |
|
| Sept. 30 |
| ||||
Fiscal Year 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 126.2 |
|
| $ | 185.5 |
|
| $ | 81.2 |
|
| $ | 62.1 |
|
Operating Income (Loss) |
|
| 20.9 |
|
|
| 81.2 |
|
|
| 9.3 |
|
|
| (8.5 | ) |
Net Income (Loss) |
|
| 13.2 |
|
|
| 57.8 |
|
|
| 3.6 |
|
|
| (8.9 | ) |
Fiscal Year 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Revenues |
| $ | 133.5 |
|
| $ | 180.4 |
|
| $ | 90.8 |
|
| $ | 60.8 |
|
Operating Income (Loss) |
|
| 17.1 |
|
|
| 79.6 |
|
|
| 11.1 |
|
|
| (12.3 | ) |
Net Income (Loss) |
|
| 10.3 |
|
|
| 56.7 |
|
|
| 5.6 |
|
|
| (12.3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | Dec. 31 | March 31 | June 30 | Sept. 30 | |||||||||||
| Fiscal Year 2017 | |||||||||||||||
| Total Operating Revenues | $ | 86.7 | $ | 158.8 | $ | 90.5 | $ | 64.5 | |||||||
| Operating Income (Loss) | 19.8 | 78.9 | 15.5 | (8.4 | ) | ||||||||||
| Net Income (Loss) | 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 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements on accounting and financial disclosure with Spire’s, Spire Missouri’s, or Spire Alabama’s outside auditors that are required to be disclosed.
Item 9A. Controls and Procedures
Spire
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Change in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonablereasonably likely to materially affect, our internal control over financial reporting.
Spire Missouri
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonablereasonably likely to materially affect, our internal control over financial reporting.
Spire Alabama
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The Management Reports on Internal Control Over Financial Reporting and the Reports of Independent Registered Public Accounting Firm are included under
Item 9B. Other Information
None.
PART III
Item 10. Directors, 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 16, 2020 (“2020 proxy statement”); |
• | our executive officers is reported in Part I of this Form 10-K; |
• | our Financial Code of Ethics is posted on our website, www.SpireEnergy.com, under Investors/Governance/Governance documents (http://investors.spireenergy.com/governance/governance-documents); and |
• | our Audit Committee, our Audit Committee financial experts, and submitting nominations to the Corporate Governance Committee |
is incorporated by reference from the discussion in our 20172020 proxy statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance”;
In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters for our Audit, Compensation and Corporate Governance Committees are available under “Governance documents” on our website, as indicated above, and a copy will be sent to any shareholder upon written request.
Item 11. Executive Compensation
Information about director and executive compensation is incorporated by reference from the discussion in our 20172020 proxy statement under the headings:headings “Directors’ Compensation,” “Compensation Discussion and Analysis,”compensation” and “Executive Compensation.compensation.” The 2017 proxy statement also includes the “Compensation Committee Report,” which is deemed furnished and not filed.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information about about:
• | security ownership of certain beneficial owners and management and |
• | aggregate information regarding the Company’s equity compensation plan |
is incorporated by reference from the discussion in our 20172020 proxy statement under “Beneficial Ownershipownership of Spire Common Stock.stock.”
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||
| (a) | (b) | (c) | |||
| Equity compensation plans approved by security holders (1) | 674,970 | $— | 505,545 | ||
| Equity compensation plans not approved by security holders | — | — | — | ||
| Total | 674,970 | $— | 505,545 | ||
Item 13. Certain 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 20172020 proxy statement under “Corporate Governance”“Governance” and is incorporated by reference. There were no related party transactions in fiscal 2017.
Item 14. Principal Accounting Fees and Services
Information about fees paid to our independent registered public accountant and our policy for pre-approval of services provided by our independent registered public accountant is incorporated by reference from our 20172020 proxy statement under “Fees of Independent Registered Public Accountant”independent registered public accountant” and “Corporate Governance,“Governance,” respectively.
PART IV
Item 15. Exhibits, Financial Statement Schedules
See Item 8, Financial Statements and Supplementary Data, filed herewith, for a list of financial statements.
Schedules have been omitted because they are not applicable, related significance tests were not met, or the required data has been included in the financial statements or notes to financial statements.
Bold items reflect management Item 16. Form 10-K Summary None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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.
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.
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.
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.
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.
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