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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021

 

or

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

For the transition period from                        to

 

Commission

File Number

 

Name of Registrant, Address of Principal

Executive Offices and Telephone Number

 

State of Incorporation

 

I.R.S. Employer Identification Number

 

 

 

 

 

 

 

1-16681

 

Spire Inc.

700 Market Street

St. Louis, MO 63101

314-342-0500

 

Missouri

 

74-2976504

 

 

 

 

 

 

 

1-1822

 

Spire Missouri Inc.

700 Market Street

St. Louis, MO 63101

314-342-0500

 

Missouri

 

43-0368139

 

 

 

 

 

 

 

2-38960

 

Spire Alabama Inc.

605 Richard Arrington Blvd N

Birmingham, AL 35203

205-326-8100

 

Alabama

 

63-0022000

 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (only applicable for Spire Inc.):

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

 

 

 

 

 

Common Stock $1.00 par value

 

SR

 

New York Stock Exchange LLC

 

 

 

 

 

Depositary Shares, each representing a 1/1,000th interest in a share of 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $25.00 per share

 

SR.PRA

 

New York Stock Exchange LLC

 

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

Spire Inc.

 

Yes

 

No

Spire Missouri Inc.

 

Yes

 

No

Spire Alabama Inc.

 

Yes

 

No

 

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Spire Inc.

 

Yes

 

No

Spire Missouri Inc.

 

Yes

 

No

Spire Alabama Inc.

 

Yes

 

No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large

accelerated filer

 

Accelerated

filer

 

Non-

accelerated filer

 

Smaller

reporting company

 

Emerging growth company

Spire Inc.

 

X

 

 

 

 

 

 

 

 

Spire Missouri Inc.

 

 

 

 

 

X

 

 

 

 

Spire Alabama Inc.

 

 

 

 

 

X

 

 

 

 

 


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Spire Inc.

 

      

 

 

Spire Missouri Inc.

 

      

 

 

Spire Alabama Inc.

 

      

 

 

 

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

Spire Inc.

 

Yes

 

No

Spire Missouri Inc.

 

Yes

 

No

Spire Alabama Inc.

 

Yes

 

No

 

The number of shares outstanding of each registrant’s common stock as of July 31, 2021, was as follows:

Spire Inc.

 

Common Stock, par value $1.00 per share

 

51,684,120

 

Spire Missouri Inc.

 

Common Stock, par value $1.00 per share (all owned by Spire Inc.)

 

24,577

 

Spire Alabama Inc.

 

Common Stock, par value $0.01 per share (all owned by Spire Inc.)

 

1,972,052

 

 

Spire Missouri Inc. and Spire Alabama Inc. meet the conditions set forth in General Instructions H(1)(a) and (b) to Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instructions H(2) to Form 10-Q.

 

This combined Form 10-Q represents separate filings by Spire Inc., Spire Missouri Inc., and Spire Alabama Inc. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants, except that information relating to Spire Missouri Inc. and Spire Alabama Inc. are also attributed to Spire Inc.

 

 

 

 

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

Page No.

 

 

 

GLOSSARY

2

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1

Financial Statements (Unaudited)

 

 

Spire Inc.

 

 

 

Condensed Consolidated Statements of Income

4

 

 

Condensed Consolidated Statements of Comprehensive Income

5

 

 

Condensed Consolidated Balance Sheets

6

 

 

Condensed Consolidated Statements of Shareholders’ Equity

8

 

 

Condensed Consolidated Statements of Cash Flows

10

 

Spire Missouri Inc.

 

 

 

Condensed Statements of Comprehensive Income

11

 

 

Condensed Balance Sheets

12

 

 

Condensed Statements of Shareholder’s Equity

14

 

 

Condensed Statements of Cash Flows

15

 

Spire Alabama Inc.

 

 

 

Condensed Statements of Income

16

 

 

Condensed Balance Sheets

17

 

 

Condensed Statements of Shareholder’s Equity

19

 

 

Condensed Statements of Cash Flows

20

 

Notes to Financial Statements

 

 

 

Note 1. Summary of Significant Accounting Policies

21

 

 

Note 2. Revenue

24

 

 

Note 3. Earnings Per Common Share

25

 

 

Note 4. Regulatory Matters

26

 

 

Note 5. Financing

31

 

 

Note 6. Fair Value of Financial Instruments

34

 

 

Note 7. Fair Value Measurements

35

 

 

Note 8. Pension Plans and Other Postretirement Benefits

37

 

 

Note 9. Information by Operating Segment

41

 

 

Note 10. Commitments and Contingencies

43

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

46

Item 3

Quantitative and Qualitative Disclosures About Market Risk

65

Item 4

Controls and Procedures

65

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1

Legal Proceedings

66

Item 1A

Risk Factors

66

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

67

Item 3

Defaults upon Senior Securities

67

Item 4

Mine Safety Disclosures

67

Item 5

Other Information

67

Item 6

Exhibits

68

 

 

 

 

SIGNATURES

69

 

1


 

 

GLOSSARY OF KEY TERMS AND ABBREVIATIONS

 

APSC

Alabama Public Service Commission

 

PGA

Purchased Gas Adjustment

ASC

Accounting Standards Codification

 

RSE

Rate Stabilization and Equalization

Company

Spire Inc.

 

SEC

U.S. Securities and Exchange Commission

Degree days

The average of a day’s high and low temperature below 65, subtracted from 65, multiplied by the number of days impacted

 

Spire

Spire Inc.

FASB

Financial Accounting Standards Board

 

Spire Alabama

Spire Alabama Inc.

FERC

Federal Energy Regulatory Commission

 

Spire EnergySouth

Spire EnergySouth Inc., the parent of Spire Gulf and Spire Mississippi

GAAP

Accounting principles generally accepted in the United States of America

 

Spire Gulf

Spire Gulf Inc.

Gas Marketing

Segment including Spire Marketing, which is engaged in the non-regulated marketing of natural gas and related activities

 

Spire Marketing

Spire Marketing Inc.

Gas Utility

Segment including the regulated operations of the Utilities

 

Spire Mississippi

Spire Mississippi Inc.

GSA

Gas Supply Adjustment

 

Spire Missouri

Spire Missouri Inc.

ISRS

Infrastructure System Replacement Surcharge

 

Spire STL Pipeline

Spire STL Pipeline LLC

MoPSC

Missouri Public Service Commission

 

Spire Storage

The physical natural gas storage operations of Spire Storage West LLC

MSPSC

Mississippi Public Service Commission

 

U.S.

United States

O&M

Operation and maintenance expense

 

Utilities

Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

 

PART I. FINANCIAL INFORMATION

The interim financial statements included herein have been prepared by three separate registrants — Spire Inc. (“Spire” or the “Company”), Spire Missouri Inc. (“Spire Missouri”) and Spire Alabama Inc. (“Spire Alabama”) — without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). These financial statements should be read in conjunction with the financial statements and the notes thereto included in the registrants’ combined Form 10-K for the fiscal year ended September 30, 2020.

The Financial Information in this Part I includes separate financial statements (i.e., statements of income and comprehensive income, balance sheets, statements of shareholders’ equity and statements of cash flows) for Spire, Spire Missouri and Spire Alabama. The Notes to Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations are also included and presented herein on a combined basis for Spire, Spire Missouri and Spire Alabama.

3


 

Item 1. Financial Statements

SPIRE INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

(In millions, except per share amounts)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating Revenues

 

$

327.8

 

 

$

321.1

 

 

$

1,945.3

 

 

$

1,603.5

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

96.9

 

 

 

72.9

 

 

 

897.2

 

 

 

631.9

 

Operation and maintenance

 

 

112.0

 

 

 

124.9

 

 

 

342.6

 

 

 

347.2

 

Depreciation and amortization

 

 

53.1

 

 

 

50.1

 

 

 

155.4

 

 

 

146.8

 

Taxes, other than income taxes

 

 

32.6

 

 

 

31.1

 

 

 

126.6

 

 

 

122.7

 

Impairments

 

 

 

 

 

148.6

 

 

 

 

 

 

148.6

 

Total Operating Expenses

 

 

294.6

 

 

 

427.6

 

 

 

1,521.8

 

 

 

1,397.2

 

Operating Income (Loss)

 

 

33.2

 

 

 

(106.5

)

 

 

423.5

 

 

 

206.3

 

Interest Expense, Net

 

 

26.9

 

 

 

26.4

 

 

 

78.4

 

 

 

80.3

 

Other (Expense) Income, Net

 

 

(1.0

)

 

 

13.0

 

 

 

5.1

 

 

 

(0.8

)

Income (Loss) Before Income Taxes

 

 

5.3

 

 

 

(119.9

)

 

 

350.2

 

 

 

125.2

 

Income Tax (Benefit) Expense

 

 

 

 

 

(27.6

)

 

 

68.6

 

 

 

16.9

 

Net Income (Loss)

 

 

5.3

 

 

 

(92.3

)

 

 

281.6

 

 

 

108.3

 

Provision for preferred dividends

 

 

3.7

 

 

 

3.7

 

 

 

11.1

 

 

 

11.1

 

Income (loss) allocated to participating securities

 

 

0.1

 

 

 

(0.1

)

 

 

0.5

 

 

 

0.2

 

Net Income (Loss) Available to Common Shareholders

 

$

1.5

 

 

$

(95.9

)

 

$

270.0

 

 

$

97.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

51.6

 

 

 

51.2

 

 

 

51.6

 

 

 

51.1

 

Diluted

 

 

51.7

 

 

 

51.2

 

 

 

51.7

 

 

 

51.2

 

Basic Earnings (Loss) Per Common Share

 

$

0.03

 

 

$

(1.87

)

 

$

5.24

 

 

$

1.90

 

Diluted Earnings (Loss) Per Common Share

 

$

0.03

 

 

$

(1.87

)

 

$

5.23

 

 

$

1.90

 

 

See the accompanying Notes to Financial Statements.

4


 

SPIRE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

(In millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Income (Loss)

 

$

5.3

 

 

$

(92.3

)

 

$

281.6

 

 

$

108.3

 

Other Comprehensive (Loss) Income, Before Tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedging derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net hedging (loss) gain arising during the period

 

 

(4.2

)

 

 

1.4

 

 

 

56.5

 

 

 

(20.8

)

Amounts reclassified into net income

 

 

(0.3

)

 

 

(0.3

)

 

 

(1.0

)

 

 

(2.8

)

Net (loss) gain on cash flow hedging derivative instruments

 

 

(4.5

)

 

 

1.1

 

 

 

55.5

 

 

 

(23.6

)

Net gain (loss) on defined benefit pension and other postretirement plans

 

 

0.1

 

 

 

 

 

 

0.3

 

 

 

(0.1

)

Net unrealized loss on available for sale securities

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

Other Comprehensive (Loss) Income, Before Tax

 

 

(4.4

)

 

 

1.1

 

 

 

55.7

 

 

 

(23.7

)

Income Tax (Benefit) Expense Related to Items of Other Comprehensive Income

 

 

(1.0

)

 

 

0.1

 

 

 

12.6

 

 

 

(5.4

)

Other Comprehensive (Loss) Income, Net of Tax

 

 

(3.4

)

 

 

1.0

 

 

 

43.1

 

 

 

(18.3

)

Comprehensive Income (Loss)

 

$

1.9

 

 

$

(91.3

)

 

$

324.7

 

 

$

90.0

 

 

See the accompanying Notes to Financial Statements.

5


 

SPIRE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

(Dollars in millions, except per share amounts)

 

2021

 

 

2020

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Utility Plant

 

$

7,110.2

 

 

$

6,766.3

 

 

$

6,472.2

 

Less: Accumulated depreciation and amortization

 

 

2,173.1

 

 

 

2,086.2

 

 

 

1,882.1

 

Net Utility Plant

 

 

4,937.1

 

 

 

4,680.1

 

 

 

4,590.1

 

Non-utility Property (net of accumulated depreciation and

   amortization of $28.8, $19.0 and $20.8 at June 30, 2021,

   September 30, 2020, and June 30, 2020, respectively)

 

 

463.6

 

 

 

432.3

 

 

 

420.1

 

Other Investments

 

 

76.4

 

 

 

71.7

 

 

 

70.6

 

Total Other Property and Investments

 

 

540.0

 

 

 

504.0

 

 

 

490.7

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

23.9

 

 

 

4.1

 

 

 

7.4

 

Accounts receivable:

 

 

 

 

 

 

 

 

 

 

 

 

Utility

 

 

342.6

 

 

 

131.8

 

 

 

153.2

 

Other

 

 

193.9

 

 

 

146.4

 

 

 

122.4

 

Allowance for credit losses

 

 

(34.5

)

 

 

(24.9

)

 

 

(27.5

)

Delayed customer billings

 

 

13.2

 

 

 

10.0

 

 

 

10.5

 

Inventories:

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

179.9

 

 

 

154.3

 

 

 

110.5

 

Propane gas

 

 

8.7

 

 

 

10.7

 

 

 

10.7

 

Materials and supplies

 

 

27.8

 

 

 

26.5

 

 

 

27.4

 

Regulatory assets

 

 

65.1

 

 

 

69.5

 

 

 

70.2

 

Prepayments

 

 

42.4

 

 

 

29.2

 

 

 

42.2

 

Other

 

 

35.3

 

 

 

33.0

 

 

 

32.3

 

Total Current Assets

 

 

898.3

 

 

 

590.6

 

 

 

559.3

 

Deferred Charges and Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

1,171.6

 

 

 

1,171.6

 

 

 

1,171.6

 

Regulatory assets

 

 

1,119.4

 

 

 

1,069.4

 

 

 

791.8

 

Other

 

 

226.9

 

 

 

225.5

 

 

 

219.1

 

Total Deferred Charges and Other Assets

 

 

2,517.9

 

 

 

2,466.5

 

 

 

2,182.5

 

Total Assets

 

$

8,893.3

 

 

$

8,241.2

 

 

$

7,822.6

 

 

 

6


 

 

SPIRE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2020

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock ($25.00 par value per share; 10.0 million depositary shares authorized, issued and outstanding at June 30, 2021, September 30, 2020, and June 30, 2020)

 

$

242.0

 

 

$

242.0

 

 

$

242.0

 

Common stock (par value $1.00 per share; 70.0 million shares authorized; 51.7 million, 51.6 million, and 51.5 million shares issued and outstanding at June 30, 2021, September 30, 2020, and June 30, 2020, respectively)

 

 

51.7

 

 

 

51.6

 

 

 

51.5

 

Paid-in capital

 

 

1,513.9

 

 

 

1,549.2

 

 

 

1,539.9

 

Retained earnings

 

 

887.6

 

 

 

720.7

 

 

 

774.6

 

Accumulated other comprehensive gain (loss)

 

 

1.9

 

 

 

(41.2

)

 

 

(49.6

)

Total Shareholders' Equity

 

 

2,697.1

 

 

 

2,522.3

 

 

 

2,558.4

 

Temporary equity

 

 

9.3

 

 

 

3.4

 

 

 

4.1

 

Long-term debt (less current portion)

 

 

2,939.0

 

 

 

2,423.7

 

 

 

2,478.3

 

Total Capitalization

 

 

5,645.4

 

 

 

4,949.4

 

 

 

5,040.8

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

 

110.8

 

 

 

60.4

 

 

 

5.4

 

Notes payable

 

 

461.0

 

 

 

648.0

 

 

 

477.6

 

Accounts payable

 

 

294.3

 

 

 

243.3

 

 

 

200.8

 

Advance customer billings

 

 

13.8

 

 

 

45.3

 

 

 

22.4

 

Wages and compensation accrued

 

 

56.1

 

 

 

46.3

 

 

 

44.3

 

Customer deposits

 

 

29.1

 

 

 

30.6

 

 

 

35.4

 

Taxes accrued

 

 

68.1

 

 

 

71.4

 

 

 

61.0

 

Regulatory liabilities

 

 

46.8

 

 

 

113.0

 

 

 

58.8

 

Other

 

 

211.8

 

 

 

190.9

 

 

 

202.1

 

Total Current Liabilities

 

 

1,291.8

 

 

 

1,449.2

 

 

 

1,107.8

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

605.8

 

 

 

511.4

 

 

 

479.7

 

Pension and postretirement benefit costs

 

 

231.8

 

 

 

309.0

 

 

 

271.9

 

Asset retirement obligations

 

 

556.5

 

 

 

540.1

 

 

 

348.2

 

Regulatory liabilities

 

 

414.6

 

 

 

343.7

 

 

 

449.6

 

Other

 

 

147.4

 

 

 

138.4

 

 

 

124.6

 

Total Deferred Credits and Other Liabilities

 

 

1,956.1

 

 

 

1,842.6

 

 

 

1,674.0

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

Total Capitalization and Liabilities

 

$

8,893.3

 

 

$

8,241.2

 

 

$

7,822.6

 

 

See the accompanying Notes to Financial Statements.

7


 

SPIRE INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

 

 

 

Common Stock

 

 

Preferred

 

 

Paid-in

 

 

Retained

 

 

 

 

 

 

 

 

 

(Dollars in millions)

 

Shares

 

 

Par

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

AOCI*

 

 

Total

 

Three Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

51,674,256

 

 

$

51.7

 

 

$

242.0

 

 

$

1,512.2

 

 

$

920.1

 

 

$

5.3

 

 

$

2,731.3

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.3

 

 

 

 

 

 

5.3

 

Dividend reinvestment plan

 

 

5,715

 

 

 

 

 

 

 

 

 

0.4

 

 

 

 

 

 

 

 

 

0.4

 

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

 

2.0

 

 

 

 

 

 

 

 

 

2.0

 

Stock issued under stock-based

   compensation plans

 

 

824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees’ tax withholding for

   stock-based compensation

 

 

(813

)

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

(0.1

)

Equity units issued

 

 

 

 

 

 

 

 

 

 

 

(0.6

)

 

 

 

 

 

 

 

 

(0.6

)

Temporary equity adjustment

   to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.4

 

 

 

 

 

 

0.4

 

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.65 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34.5

)

 

 

 

 

 

(34.5

)

Preferred stock ($0.36875 per

   depositary share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.7

)

 

 

 

 

 

(3.7

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.4

)

 

 

(3.4

)

Balance at June 30, 2021

 

 

51,679,982

 

 

$

51.7

 

 

$

242.0

 

 

$

1,513.9

 

 

$

887.6

 

 

$

1.9

 

 

$

2,697.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

51,611,789

 

 

$

51.6

 

 

$

242.0

 

 

$

1,549.2

 

 

$

720.7

 

 

$

(41.2

)

 

$

2,522.3

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

281.6

 

 

 

 

 

 

281.6

 

Dividend reinvestment plan

 

 

18,260

 

 

 

 

 

 

 

 

 

1.1

 

 

 

 

 

 

 

 

 

1.1

 

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

 

5.4

 

 

 

 

 

 

 

 

 

5.4

 

Stock issued under stock-based

   compensation plans

 

 

65,234

 

 

 

0.1

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

Employees’ tax withholding for

   stock-based compensation

 

 

(15,301

)

 

 

 

 

 

 

 

 

(1.0

)

 

 

 

 

 

 

 

 

(1.0

)

Equity units issued

 

 

 

 

 

 

 

 

 

 

 

(40.7

)

 

 

 

 

 

 

 

 

(40.7

)

Temporary equity adjustment

   to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.7

)

 

 

 

 

 

(1.7

)

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($1.95 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(101.9

)

 

 

 

 

 

(101.9

)

Preferred stock ($1.10625 per

   depositary share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11.1

)

 

 

 

 

 

(11.1

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43.1

 

 

 

43.1

 

Balance at June 30, 2021

 

 

51,679,982

 

 

$

51.7

 

 

$

242.0

 

 

$

1,513.9

 

 

$

887.6

 

 

$

1.9

 

 

$

2,697.1

 

 

8


 

 

SPIRE INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)

(UNAUDITED)

 

 

 

 

Common Stock

 

 

Preferred

 

 

Paid-in

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Par

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

AOCI*

 

 

Total

 

Three Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

51,229,061

 

 

$

51.2

 

 

$

242.0

 

 

$

1,520.7

 

 

$

902.3

 

 

$

(50.6

)

 

$

2,665.6

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(92.3

)

 

 

 

 

 

(92.3

)

Common stock issued

 

 

208,474

 

 

 

0.2

 

 

 

 

 

 

14.9

 

 

 

 

 

 

 

 

 

15.1

 

Dividend reinvestment plan

 

 

40,968

 

 

 

0.1

 

 

 

 

 

 

3.0

 

 

 

 

 

 

 

 

 

3.1

 

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

 

1.4

 

 

 

 

 

 

 

 

 

1.4

 

Stock issued under stock-based

   compensation plans

 

 

(230

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employees’ tax withholding for

   stock-based compensation

 

 

(441

)

 

 

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

(0.1

)

Temporary equity adjustment

   to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.6

 

 

 

 

 

 

0.6

 

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($0.6225 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32.3

)

 

 

 

 

 

(32.3

)

Preferred stock ($0.36875 per

   depositary share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.7

)

 

 

 

 

 

(3.7

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.0

 

 

 

1.0

 

Balance at June 30, 2020

 

 

51,477,832

 

 

$

51.5

 

 

$

242.0

 

 

$

1,539.9

 

 

$

774.6

 

 

$

(49.6

)

 

$

2,558.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

 

50,973,515

 

 

$

51.0

 

 

$

242.0

 

 

$

1,505.8

 

 

$

775.5

 

 

$

(31.3

)

 

$

2,543.0

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108.3

 

 

 

 

 

 

108.3

 

Common stock issued

 

 

321,232

 

 

 

0.3

 

 

 

 

 

 

24.3

 

 

 

 

 

 

 

 

 

24.6

 

Dividend reinvestment plan

 

 

114,851

 

 

 

0.1

 

 

 

 

 

 

8.6

 

 

 

 

 

 

 

 

 

8.7

 

Stock-based compensation costs

 

 

 

 

 

 

 

 

 

 

 

4.5

 

 

 

 

 

 

 

 

 

4.5

 

Stock issued under stock-based

   compensation plans

 

 

108,522

 

 

 

0.1

 

 

 

 

 

 

(0.1

)

 

 

 

 

 

 

 

 

 

Employees’ tax withholding for

   stock-based compensation

 

 

(40,288

)

 

 

 

 

 

 

 

 

(3.2

)

 

 

 

 

 

 

 

 

(3.2

)

Temporary equity adjustment

   to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.7

 

 

 

 

 

 

1.7

 

Dividends declared:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock ($1.8675 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(96.1

)

 

 

 

 

 

(96.1

)

Preferred stock ($1.475 per

   depository share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14.8

)

 

 

 

 

 

(14.8

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18.3

)

 

 

(18.3

)

Balance at June 30, 2020

 

 

51,477,832

 

 

$

51.5

 

 

$

242.0

 

 

$

1,539.9

 

 

$

774.6

 

 

$

(49.6

)

 

$

2,558.4

 

 

 

Accumulated other comprehensive income (loss)

See the accompanying Notes to Financial Statements.

9


 

SPIRE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

June 30,

 

(In millions)

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net Income

 

$

281.6

 

 

$

108.3

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

155.4

 

 

 

146.8

 

Deferred income taxes and investment tax credits

 

 

68.4

 

 

 

17.0

 

Impairments

 

 

 

 

 

148.6

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(248.6

)

 

 

41.5

 

Inventories

 

 

(22.4

)

 

 

45.4

 

Regulatory assets and liabilities

 

 

(3.1

)

 

 

67.5

 

Accounts payable

 

 

79.7

 

 

 

(72.3

)

Delayed/advance customer billings, net

 

 

(34.8

)

 

 

(16.4

)

Taxes accrued

 

 

(3.3

)

 

 

(8.9

)

Other assets and liabilities

 

 

(61.7

)

 

 

(28.8

)

Other

 

 

9.5

 

 

 

5.1

 

Net cash provided by operating activities

 

 

220.7

 

 

 

453.8

 

Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(463.2

)

 

 

(475.7

)

Other

 

 

1.5

 

 

 

5.6

 

Net cash used in investing activities

 

 

(461.7

)

 

 

(470.1

)

Financing Activities:

 

 

 

 

 

 

 

 

Issuance of long-term debt

 

 

629.1

 

 

 

510.0

 

Repayment of long-term debt

 

 

(60.4

)

 

 

(147.0

)

Repayment of short-term debt, net

 

 

(187.0

)

 

 

(265.6

)

Issuance of common stock

 

 

0.6

 

 

 

33.2

 

Dividends paid on common stock

 

 

(99.6

)

 

 

(95.7

)

Dividends paid on preferred stock

 

 

(11.1

)

 

 

(11.1

)

Other

 

 

(10.8

)

 

 

(5.9

)

Net cash provided by financing activities

 

 

260.8

 

 

 

17.9

 

Net Increase in Cash and Cash Equivalents

 

 

19.8

 

 

 

1.6

 

Cash and Cash Equivalents at Beginning of Period

 

 

4.1

 

 

 

5.8

 

Cash and Cash Equivalents at End of Period

 

$

23.9

 

 

$

7.4

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash paid for:

 

 

 

 

 

 

 

 

Interest, net of amounts capitalized

 

$

(65.9

)

 

$

(63.9

)

Income taxes

 

 

(0.4

)

 

 

(2.6

)

 

See the accompanying Notes to Financial Statements.

10


 

SPIRE MISSOURI INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

(In millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating Revenues

 

$

192.1

 

 

$

203.9

 

 

$

1,338.5

 

 

$

1,035.4

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

55.6

 

 

 

68.9

 

 

 

754.6

 

 

 

478.3

 

Operation and maintenance

 

 

64.3

 

 

 

75.6

 

 

 

190.0

 

 

 

191.9

 

Depreciation and amortization

 

 

31.6

 

 

 

29.7

 

 

 

93.0

 

 

 

88.0

 

Taxes, other than income taxes

 

 

22.2

 

 

 

22.7

 

 

 

86.2

 

 

 

85.5

 

Total Operating Expenses

 

 

173.7

 

 

 

196.9

 

 

 

1,123.8

 

 

 

843.7

 

Operating Income

 

 

18.4

 

 

 

7.0

 

 

 

214.7

 

 

 

191.7

 

Interest Expense, Net

 

 

12.7

 

 

 

11.9

 

 

 

36.1

 

 

 

37.8

 

Other (Expense) Income, Net

 

 

(2.6

)

 

 

11.8

 

 

 

0.9

 

 

 

(8.1

)

Income Before Income Taxes

 

 

3.1

 

 

 

6.9

 

 

 

179.5

 

 

 

145.8

 

Income Tax Expense

 

 

 

 

 

0.4

 

 

 

26.7

 

 

 

16.8

 

Net Income

 

 

3.1

 

 

 

6.5

 

 

 

152.8

 

 

 

129.0

 

Other Comprehensive Income, Net of Tax

 

 

0.1

 

 

 

0.1

 

 

 

0.3

 

 

 

 

Comprehensive Income

 

$

3.2

 

 

$

6.6

 

 

$

153.1

 

 

$

129.0

 

 

 

See the accompanying Notes to Financial Statements.

11


 

SPIRE MISSOURI INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

(Dollars in millions, except per share amounts)

 

2021

 

 

2020

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Utility Plant

 

$

4,173.9

 

 

$

3,931.2

 

 

$

3,865.3

 

Less: Accumulated depreciation and amortization

 

 

883.3

 

 

 

825.7

 

 

 

817.7

 

Net Utility Plant

 

 

3,290.6

 

 

 

3,105.5

 

 

 

3,047.6

 

Other Property and Investments

 

 

60.7

 

 

 

56.7

 

 

 

55.6

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

4.3

 

 

 

 

 

 

0.7

 

Accounts receivable:

 

 

 

 

 

 

 

 

 

 

 

 

Utility

 

 

290.8

 

 

 

92.5

 

 

 

109.6

 

Associated companies

 

 

38.4

 

 

 

2.7

 

 

 

1.1

 

Other

 

 

21.5

 

 

 

34.1

 

 

 

21.6

 

Allowance for credit losses

 

 

(27.4

)

 

 

(18.1

)

 

 

(19.0

)

Delayed customer billings

 

 

9.9

 

 

 

2.4

 

 

 

6.6

 

Inventories:

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

133.3

 

 

 

95.1

 

 

 

68.3

 

Propane gas

 

 

8.7

 

 

 

10.7

 

 

 

10.7

 

Materials and supplies

 

 

15.4

 

 

 

15.6

 

 

 

16.2

 

Regulatory assets

 

 

36.6

 

 

 

32.1

 

 

 

29.5

 

Prepayments

 

 

28.4

 

 

 

20.7

 

 

 

27.3

 

Total Current Assets

 

 

559.9

 

 

 

287.8

 

 

 

272.6

 

Deferred Charges and Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

210.2

 

 

 

210.2

 

 

 

210.2

 

Regulatory assets

 

 

583.8

 

 

 

548.7

 

 

 

531.9

 

Other

 

 

98.0

 

 

 

96.0

 

 

 

82.2

 

Total Deferred Charges and Other Assets

 

 

892.0

 

 

 

854.9

 

 

 

824.3

 

Total Assets

 

$

4,803.2

 

 

$

4,304.9

 

 

$

4,200.1

 

 

12


 

 

SPIRE MISSOURI INC.

CONDENSED BALANCE SHEETS (Continued)

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2020

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital and common stock (par value $1.00 per share;

   50.0 million shares authorized; 24,577 shares issued and

   outstanding)

 

$

765.1

 

 

$

765.1

 

 

$

765.1

 

Retained earnings

 

 

825.7

 

 

 

672.9

 

 

 

671.7

 

Accumulated other comprehensive loss

 

 

(2.6

)

 

 

(2.9

)

 

 

(2.4

)

Total Shareholder's Equity

 

 

1,588.2

 

 

 

1,435.1

 

 

 

1,434.4

 

Long-term debt

 

 

1,338.6

 

 

 

1,092.0

 

 

 

1,091.9

 

Total Capitalization

 

 

2,926.8

 

 

 

2,527.1

 

 

 

2,526.3

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable

 

 

250.0

 

 

 

 

 

 

 

Notes payable – associated companies

 

 

217.5

 

 

 

301.2

 

 

 

218.3

 

Accounts payable

 

 

58.8

 

 

 

66.7

 

 

 

60.4

 

Accounts payable – associated companies

 

 

7.6

 

 

 

9.3

 

 

 

6.8

 

Advance customer billings

 

 

5.4

 

 

 

32.7

 

 

 

14.4

 

Wages and compensation accrued

 

 

36.6

 

 

 

33.3

 

 

 

30.4

 

Customer deposits

 

 

8.1

 

 

 

9.3

 

 

 

13.1

 

Taxes accrued

 

 

33.9

 

 

 

39.1

 

 

 

30.9

 

Regulatory liabilities

 

 

27.1

 

 

 

103.2

 

 

 

50.8

 

Other

 

 

43.6

 

 

 

39.9

 

 

 

33.5

 

Total Current Liabilities

 

 

688.6

 

 

 

634.7

 

 

 

458.6

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

475.7

 

 

 

434.7

 

 

 

398.6

 

Pension and postretirement benefit costs

 

 

155.3

 

 

 

217.2

 

 

 

206.4

 

Asset retirement obligations

 

 

158.1

 

 

 

153.4

 

 

 

178.9

 

Regulatory liabilities

 

 

342.8

 

 

 

274.8

 

 

 

378.9

 

Other

 

 

55.9

 

 

 

63.0

 

 

 

52.4

 

Total Deferred Credits and Other Liabilities

 

 

1,187.8

 

 

 

1,143.1

 

 

 

1,215.2

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

Total Capitalization and Liabilities

 

$

4,803.2

 

 

$

4,304.9

 

 

$

4,200.1

 

 

See the accompanying Notes to Financial Statements.

13


 

SPIRE MISSOURI INC.

CONDENSED STATEMENTS OF SHAREHOLDER’S EQUITY

(UNAUDITED)

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

 

 

 

 

 

 

 

(Dollars in millions)

 

Shares

 

 

Par

 

 

Capital

 

 

Earnings

 

 

AOCI*

 

 

Total

 

Three Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

822.6

 

 

$

(2.7

)

 

$

1,585.0

 

Net income

 

 

 

 

 

 

 

 

 

 

 

3.1

 

 

 

 

 

 

3.1

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Balance at June 30, 2021

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

825.7

 

 

$

(2.6

)

 

$

1,588.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

672.9

 

 

$

(2.9

)

 

$

1,435.1

 

Net income

 

 

 

 

 

 

 

 

 

 

 

152.8

 

 

 

 

 

 

152.8

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.3

 

 

 

0.3

 

Balance at June 30, 2021

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

825.7

 

 

$

(2.6

)

 

$

1,588.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

676.5

 

 

$

(2.5

)

 

$

1,439.1

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6.5

 

 

 

 

 

 

6.5

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(11.3

)

 

 

 

 

 

(11.3

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Balance at June 30, 2020

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

671.7

 

 

$

(2.4

)

 

$

1,434.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

576.6

 

 

$

(2.4

)

 

$

1,339.3

 

Net income

 

 

 

 

 

 

 

 

 

 

 

129.0

 

 

 

 

 

 

129.0

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(33.9

)

 

 

 

 

 

(33.9

)

Balance at June 30, 2020

 

 

24,577

 

 

$

0.1

 

 

$

765.0

 

 

$

671.7

 

 

$

(2.4

)

 

$

1,434.4

 

 

* Accumulated other comprehensive income (loss)

See the accompanying Notes to Financial Statements.

14


 

SPIRE MISSOURI INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

June 30,

 

(In millions)

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net Income

 

$

152.8

 

 

$

129.0

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

93.0

 

 

 

88.0

 

Deferred income taxes and investment tax credits

 

 

26.7

 

 

 

16.8

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(212.1

)

 

 

(5.8

)

Inventories

 

 

(36.0

)

 

 

28.8

 

Regulatory assets and liabilities

 

 

(17.9

)

 

 

57.9

 

Accounts payable

 

 

(1.1

)

 

 

(1.0

)

Delayed/advance customer billings, net

 

 

(34.8

)

 

 

(8.7

)

Taxes accrued

 

 

(5.2

)

 

 

(5.5

)

Other assets and liabilities

 

 

(95.8

)

 

 

(13.3

)

Other

 

 

0.5

 

 

 

0.5

 

Net cash (used in) provided by operating activities

 

 

(129.9

)

 

 

286.7

 

Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(279.2

)

 

 

(253.3

)

Other

 

 

1.1

 

 

 

0.3

 

Net cash used in investing activities

 

 

(278.1

)

 

 

(253.0

)

Financing Activities:

 

 

 

 

 

 

 

 

Issuance of long-term debt

 

 

304.1

 

 

 

275.0

 

Repayment of long-term debt

 

 

(55.0

)

 

 

(107.0

)

Issuance of short-term debt, net

 

 

250.0

 

 

 

 

Repayments of borrowings from Spire, net

 

 

(83.7

)

 

 

(168.1

)

Dividends paid

 

 

 

 

 

(33.9

)

Other

 

 

(3.1

)

 

 

(1.6

)

Net cash provided by (used in) financing activities

 

 

412.3

 

 

 

(35.6

)

Net Increase (Decrease) in Cash and Cash Equivalents

 

 

4.3

 

 

 

(1.9

)

Cash and Cash Equivalents at Beginning of Period

 

 

 

 

 

2.6

 

Cash and Cash Equivalents at End of Period

 

$

4.3

 

 

$

0.7

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash paid for:

 

 

 

 

 

 

 

 

Interest, net of amounts capitalized

 

$

(33.1

)

 

$

(32.6

)

Income taxes

 

 

 

 

 

 

 

See the accompanying Notes to Financial Statements.

15


 

SPIRE ALABAMA INC.

CONDENSED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

(In millions)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating Revenues

 

$

93.3

 

 

$

81.2

 

 

$

429.5

 

 

$

392.9

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

24.1

 

 

 

17.3

 

 

 

129.0

 

 

 

103.7

 

Operation and maintenance

 

 

31.9

 

 

 

32.5

 

 

 

98.4

 

 

 

104.8

 

Depreciation and amortization

 

 

16.1

 

 

 

15.0

 

 

 

46.3

 

 

 

43.9

 

Taxes, other than income taxes

 

 

7.9

 

 

 

7.1

 

 

 

30.8

 

 

 

29.1

 

Total Operating Expenses

 

 

80.0

 

 

 

71.9

 

 

 

304.5

 

 

 

281.5

 

Operating Income

 

 

13.3

 

 

 

9.3

 

 

 

125.0

 

 

 

111.4

 

Interest Expense, Net

 

 

5.2

 

 

 

5.1

 

 

 

15.2

 

 

 

15.8

 

Other Income, Net

 

 

0.6

 

 

 

0.8

 

 

 

2.0

 

 

 

4.2

 

Income Before Income Taxes

 

 

8.7

 

 

 

5.0

 

 

 

111.8

 

 

 

99.8

 

Income Tax Expense

 

 

2.2

 

 

 

1.4

 

 

 

28.3

 

 

 

25.2

 

Net Income

 

$

6.5

 

 

$

3.6

 

 

$

83.5

 

 

$

74.6

 

 

See the accompanying Notes to Financial Statements.

 

16


 

 

SPIRE ALABAMA INC.

CONDENSED BALANCE SHEETS

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

(Dollars in millions, except per share amounts)

 

2021

 

 

2020

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Utility Plant

 

$

2,569.1

 

 

$

2,469.9

 

 

$

2,244.8

 

Less: Accumulated depreciation and amortization

 

 

1,150.4

 

 

 

1,117.0

 

 

 

916.1

 

Net Utility Plant

 

 

1,418.7

 

 

 

1,352.9

 

 

 

1,328.7

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

9.5

 

 

 

 

 

 

 

Accounts receivable:

 

 

 

 

 

 

 

 

 

 

 

 

Utility

 

 

42.6

 

 

 

31.4

 

 

 

36.2

 

Associated companies

 

 

0.5

 

 

 

0.6

 

 

 

0.3

 

Other

 

 

5.6

 

 

 

5.8

 

 

 

8.1

 

Allowance for credit losses

 

 

(6.0

)

 

 

(5.5

)

 

 

(7.2

)

Delayed customer billings

 

 

3.2

 

 

 

7.5

 

 

 

3.9

 

Inventories:

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

24.5

 

 

 

22.5

 

 

 

18.8

 

Materials and supplies

 

 

9.7

 

 

 

8.4

 

 

 

8.8

 

Regulatory assets

 

 

17.1

 

 

 

20.4

 

 

 

23.4

 

Prepayments

 

 

8.2

 

 

 

4.3

 

 

 

8.4

 

Other

 

 

 

 

 

0.2

 

 

 

0.1

 

Total Current Assets

 

 

114.9

 

 

 

95.6

 

 

 

100.8

 

Deferred Charges and Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

508.2

 

 

 

489.9

 

 

 

232.1

 

Deferred income taxes

 

 

30.9

 

 

 

59.3

 

 

 

56.1

 

Other

 

 

53.6

 

 

 

53.7

 

 

 

61.6

 

Total Deferred Charges and Other Assets

 

 

592.7

 

 

 

602.9

 

 

 

349.8

 

Total Assets

 

$

2,126.3

 

 

$

2,051.4

 

 

$

1,779.3

 

 

17


 

 

SPIRE ALABAMA INC.

CONDENSED BALANCE SHEETS (Continued)

(UNAUDITED)

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2020

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital and common stock (par value $0.01 per share;

   3.0 million shares authorized; 2.0 million shares issued and

   outstanding)

 

$

328.9

 

 

$

350.9

 

 

$

350.9

 

Retained earnings

 

 

567.8

 

 

 

500.8

 

 

 

515.7

 

Total Shareholder's Equity

 

 

896.7

 

 

 

851.7

 

 

 

866.6

 

Long-term debt (less current portion)

 

 

571.2

 

 

 

471.8

 

 

 

471.8

 

Total Capitalization

 

 

1,467.9

 

 

 

1,323.5

 

 

 

1,338.4

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

 

50.0

 

 

 

 

 

 

 

Notes payable – associated companies

 

 

 

 

 

121.3

 

 

 

85.6

 

Accounts payable

 

 

34.8

 

 

 

43.7

 

 

 

36.3

 

Accounts payable – associated companies

 

 

4.5

 

 

 

4.2

 

 

 

4.2

 

Advance customer billings

 

 

7.2

 

 

 

11.5

 

 

 

7.2

 

Wages and compensation accrued

 

 

8.6

 

 

 

8.0

 

 

 

7.4

 

Customer deposits

 

 

18.4

 

 

 

18.7

 

 

 

19.4

 

Taxes accrued

 

 

27.8

 

 

 

28.0

 

 

 

26.6

 

Regulatory liabilities

 

 

15.5

 

 

 

3.9

 

 

 

2.5

 

Other

 

 

15.4

 

 

 

11.8

 

 

 

14.0

 

Total Current Liabilities

 

 

182.2

 

 

 

251.1

 

 

 

203.2

 

Deferred Credits and Other Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

 

65.8

 

 

 

74.9

 

 

 

53.1

 

Asset retirement obligations

 

 

385.5

 

 

 

374.3

 

 

 

153.3

 

Regulatory liabilities

 

 

17.5

 

 

 

18.5

 

 

 

20.9

 

Other

 

 

7.4

 

 

 

9.1

 

 

 

10.4

 

Total Deferred Credits and Other Liabilities

 

 

476.2

 

 

 

476.8

 

 

 

237.7

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

Total Capitalization and Liabilities

 

$

2,126.3

 

 

$

2,051.4

 

 

$

1,779.3

 

 

See the accompanying Notes to Financial Statements.

18


 

SPIRE ALABAMA INC.

CONDENSED STATEMENTS OF SHAREHOLDER’S EQUITY

(UNAUDITED)

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

 

 

 

(Dollars in millions)

 

Shares

 

 

Par

 

 

Capital

 

 

Earnings

 

 

Total

 

Three Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

1,972,052

 

 

$

 

 

$

328.9

 

 

$

566.8

 

 

$

895.7

 

Net income

 

 

 

 

 

 

 

 

 

 

 

6.5

 

 

 

6.5

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(5.5

)

 

 

(5.5

)

Balance at June 30, 2021

 

 

1,972,052

 

 

$

 

 

$

328.9

 

 

$

567.8

 

 

$

896.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

1,972,052

 

 

$

 

 

$

350.9

 

 

$

500.8

 

 

$

851.7

 

Net income

 

 

 

 

 

 

 

 

 

 

 

83.5

 

 

 

83.5

 

Return of capital to Spire

 

 

 

 

 

 

 

 

(22.0

)

 

 

 

 

 

(22.0

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(16.5

)

 

 

(16.5

)

Balance at June 30, 2021

 

 

1,972,052

 

 

$

 

 

$

328.9

 

 

$

567.8

 

 

$

896.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

1,972,052

 

 

$

 

 

$

350.9

 

 

$

518.1

 

 

$

869.0

 

Net income

 

 

 

 

 

 

 

 

 

 

 

3.6

 

 

 

3.6

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(6.0

)

 

 

(6.0

)

Balance at June 30, 2020

 

 

1,972,052

 

 

$

 

 

$

350.9

 

 

$

515.7

 

 

$

866.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

 

 

1,972,052

 

 

$

 

 

$

370.9

 

 

$

459.1

 

 

$

830.0

 

Net income

 

 

 

 

 

 

 

 

 

 

 

74.6

 

 

 

74.6

 

Return of capital to Spire

 

 

 

 

 

 

 

 

(20.0

)

 

 

 

 

 

(20.0

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(18.0

)

 

 

(18.0

)

Balance at June 30, 2020

 

 

1,972,052

 

 

$

 

 

$

350.9

 

 

$

515.7

 

 

$

866.6

 

 

See the accompanying Notes to Financial Statements.

19


 

SPIRE ALABAMA INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

June 30,

 

(In millions)

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net Income

 

$

83.5

 

 

$

74.6

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

46.3

 

 

 

43.9

 

Deferred income taxes and investment tax credits

 

 

28.3

 

 

 

25.2

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10.4

)

 

 

2.3

 

Inventories

 

 

(3.3

)

 

 

15.3

 

Regulatory assets and liabilities

 

 

7.1

 

 

 

6.7

 

Accounts payable

 

 

1.9

 

 

 

(19.8

)

Delayed/advance customer billings

 

 

(0.1

)

 

 

(7.3

)

Taxes accrued

 

 

(0.2

)

 

 

(0.7

)

Other assets and liabilities

 

 

(8.2

)

 

 

(8.6

)

Other

 

 

0.2

 

 

 

0.1

 

Net cash provided by operating activities

 

 

145.1

 

 

 

131.7

 

Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(125.5

)

 

 

(111.5

)

Other

 

 

0.6

 

 

 

1.4

 

Net cash used in investing activities

 

 

(124.9

)

 

 

(110.1

)

Financing Activities:

 

 

 

 

 

 

 

 

Issuance of long-term debt

 

 

150.0

 

 

 

100.0

 

Repayment of long-term debt

 

 

 

 

 

(40.0

)

Repayments of borrowings from Spire, net

 

 

(121.3

)

 

 

(43.1

)

Return of capital to Spire

 

 

(22.0

)

 

 

(20.0

)

Dividends paid

 

 

(16.5

)

 

 

(18.0

)

Other

 

 

(0.9

)

 

 

(0.5

)

Net cash used in financing activities

 

 

(10.7

)

 

 

(21.6

)

Net Increase in Cash and Cash Equivalents

 

 

9.5

 

 

 

 

Cash and Cash Equivalents at Beginning of Period

 

 

 

 

 

 

Cash and Cash Equivalents at End of Period

 

$

9.5

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash paid for:

 

 

 

 

 

 

 

 

Interest, net of amounts capitalized

 

$

(13.2

)

 

$

(14.1

)

Income taxes

 

 

 

 

 

 

 

See the accompanying Notes to Financial Statements.

 

20


 

 

SPIRE INC., SPIRE MISSOURI INC. AND SPIRE ALABAMA INC.

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

(Dollars in millions, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION  These notes are an integral part of the accompanying unaudited financial statements of Spire Inc. (“Spire” or the “Company”) presented on a consolidated basis, Spire Missouri Inc. (“Spire Missouri”) and Spire Alabama Inc. (“Spire Alabama”). Spire Missouri, Spire Alabama and Spire EnergySouth Inc. (“Spire EnergySouth”) are wholly owned subsidiaries of Spire. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth (Spire Gulf Inc. and Spire Mississippi Inc.) are collectively referred to as the “Utilities.”

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information with the instructions to Form 10-Q and Rule 10-01 of Regulation S‑X. Accordingly, they do not include all the disclosures required for complete financial statements. In the opinion of management, the accompanying unaudited financial statements include all adjustments necessary for the fair presentation of the results of operations for the periods presented. This Form 10-Q should be read in conjunction with the Notes to Financial Statements contained in Spire’s, Spire Missouri’s and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

The consolidated financial position, results of operations, and cash flows of Spire include the accounts of the Company and all its subsidiaries. Transactions and balances between consolidated entities have been eliminated from the consolidated financial statements of Spire. In compliance with GAAP, transactions between Spire Missouri and Spire Alabama and their affiliates, as well as intercompany balances on their balance sheets, have not been eliminated from their separate financial statements.

NATURE OF OPERATIONS – Spire has two reportable segments: Gas Utility and Gas Marketing. The Gas Utility segment consists of the regulated natural gas distribution operations of the Company and is the core business segment of Spire in terms of revenue and earnings. The Gas Utility segment is comprised of the operations of: Spire Missouri, serving St. Louis, Kansas City, and other areas in Missouri; Spire Alabama, serving central and northern Alabama; and the subsidiaries of Spire EnergySouth, serving southern Alabama and south-central Mississippi. The Gas Marketing segment includes Spire’s largest gas-related business, Spire Marketing Inc. (“Spire Marketing”), which provides non-regulated natural gas services, primarily in the central and southern United States (U.S.). The activities of other subsidiaries are reported as Other and are described in Note 9, Information by Operating Segment. Spire Missouri and Spire Alabama each have a single reportable segment.

Nearly all the Company’s earnings are derived from its Gas Utility segment. Due to the seasonal nature of the Utilities’ business and the Spire Missouri rate design, earnings are typically concentrated during the heating season of November through April each fiscal year. As a result, the interim statements of income for Spire, Spire Missouri and Spire Alabama are not necessarily indicative of annual results or representative of succeeding quarters of the fiscal year.

21


 

REGULATED OPERATIONS The Utilities account for their regulated operations in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980, Regulated Operations. This topic sets forth the application of GAAP for those companies whose rates are established by or are subject to approval by an independent third-party regulator. The provisions of this accounting guidance require, among other things, that financial statements of a regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. In addition, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). Management believes that the current regulatory environment supports the continued use of these regulatory accounting principles and that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.

As authorized by the Missouri Public Service Commission (MoPSC), the Mississippi Public Service Commission (MSPSC) and the Alabama Public Service Commission (APSC), 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 liabilities related to the PGA clauses and the GSA riders are both labeled Unamortized Purchased Gas Adjustments herein. See additional information about regulatory assets and liabilities in Note 4, Regulatory Matters.

DERIVATIVES – In the course of their business, certain subsidiaries of Spire enter into commitments associated with the purchase or sale of natural gas. Certain of their derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of FASB ASC Topic 815, Derivatives and Hedging. Those contracts are accounted for as executory contracts and recorded on an accrual basis. Revenues and expenses from such contracts are recorded gross. Contracts not designated as normal purchases or normal sales are recorded as derivatives with changes in fair value recognized in earnings in the periods prior to physical delivery. Certain of Spire Marketing’s wholesale purchase and sale transactions are classified as trading activities for financial reporting purposes, with income and expenses presented on a net basis in natural gas expenses in the Condensed Consolidated Statements of Income.

TRANSACTIONS WITH AFFILIATES Transactions between affiliates of the Company have been eliminated from the consolidated financial statements of Spire. As reflected in their separate financial statements, Spire Missouri and Spire Alabama borrowed funds from the Company and incurred related interest, and in 2021, Spire Alabama lent excess funds to the Company and earned related interest. Spire Missouri and Spire Alabama also participated in normal intercompany shared services transactions. Spire Missouri’s and Spire Alabama’s other transactions with affiliates are presented below:

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Spire Missouri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of natural gas from Spire Marketing Inc.

 

$

9.2

 

 

$

10.9

 

 

$

77.5

 

 

$

43.7

 

Transportation services received from Spire STL Pipeline LLC

 

 

7.9

 

 

 

8.0

 

 

 

23.9

 

 

 

19.8

 

Sales of natural gas to Spire Marketing Inc.

 

 

 

 

 

 

 

 

1.1

 

 

 

 

Transportation services received from Spire NGL Inc.

 

 

 

 

 

0.3

 

 

 

0.5

 

 

 

0.8

 

Spire Alabama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of natural gas from Spire Marketing Inc.

 

$

 

 

$

0.8

 

 

$

10.6

 

 

$

5.1

 

Sales of natural gas to Spire Marketing Inc.

 

 

 

 

 

0.3

 

 

 

0.1

 

 

 

0.3

 

 

 

 

22


 

 

ACCRUED CAPITAL EXPENDITURES Accrued capital expenditures, shown in the following table, are excluded from capital expenditures in the statements of cash flows until paid.

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2020

 

Spire

 

$

41.5

 

 

$

67.6

 

 

$

54.4

 

Spire Missouri

 

 

27.6

 

 

 

34.3

 

 

 

28.9

 

Spire Alabama

 

 

6.7

 

 

 

17.0

 

 

 

14.4

 

 

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES – Trade accounts receivable are recorded at the amounts due from customers, including unbilled amounts. Accounts receivable are written off when they are deemed to be uncollectible. An allowance for expected credit losses is estimated and updated based on relevant data and trends such as accounts receivable aging, historical write-off experience, current write-off trends, economic conditions, and the impact of weather and availability of customer payment assistance on collection trends. For the Utilities, net write-offs as a percentage of revenue has historically been the best predictor of base net write-off experience over time. Management judgment is applied in the development of the allowance due to the complexity of variables and subjective nature of certain relevant factors. For June 30, 2021, and September 30, 2020, the estimates for expected credit losses were increased as a result of considerations related to the outbreak of the novel coronavirus (COVID-19), including trends from previous economic downturns, the effects of moratoriums on gas service cutoffs, and the effects of slower-than-normal disconnection activity in general, offset by the amount subject to specific recovery under Missouri’s deferral order (see Note 4, Regulatory Matters). The accounts receivable of Spire’s non-utility businesses are evaluated separately from those of the Utilities. The allowance for credit losses for those other businesses is based on a continuous evaluation of the individual counterparty risk and is not significant for the periods presented. Activity in the allowance for credit losses for the three and nine months ended June 30, 2021, is shown in the following table.

 

Three Months Ended June 30, 2021

 

 

Nine Months Ended June 30, 2021

 

 

 

 

 

 

Spire

 

 

Spire

 

 

 

 

 

 

Spire

 

 

Spire

 

 

Spire

 

 

Missouri

 

 

Alabama

 

 

Spire

 

 

Missouri

 

 

Alabama

 

Allowance at beginning of period

$

34.4

 

 

$

26.6

 

 

$

6.5

 

 

$

24.9

 

 

$

18.1

 

 

$

5.5

 

Provision for expected credit losses

 

1.9

 

 

 

1.8

 

 

 

0.1

 

 

 

12.6

 

 

 

10.8

 

 

 

1.4

 

Write-offs, net of recoveries

 

(1.8

)

 

 

(1.0

)

 

 

(0.6

)

 

 

(3.0

)

 

 

(1.5

)

 

 

(0.9

)

Allowance at end of period

$

34.5

 

 

$

27.4

 

 

$

6.0

 

 

$

34.5

 

 

$

27.4

 

 

$

6.0

 

NEW ACCOUNTING PRONOUNCEMENTS – In June 2016, the FASB issued Accounting Standards Update (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 new 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 required 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 adopted the new standard for the quarter ended December 31, 2020. Based on the credit quality of the existing available-for-sale securities portfolio, no allowance for credit losses was recognized for those investments. Application of the new guidance 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 did not 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 9, Information by Operating Segment. Prior period amounts have been reclassified to conform with the current period presentation.

23


 

2. REVENUE

The following tables show revenue disaggregated by source and customer type.

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Spire

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Utility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

200.4

 

 

$

208.1

 

 

$

1,087.9

 

 

$

1,048.4

 

Commercial & industrial

 

 

63.6

 

 

 

57.5

 

 

 

535.8

 

 

 

336.8

 

Transportation

 

 

28.7

 

 

 

26.1

 

 

 

95.1

 

 

 

89.6

 

Off-system & other incentive

 

 

7.2

 

 

 

9.3

 

 

 

147.1

 

 

 

28.0

 

Other customer revenue

 

 

3.9

 

 

 

5.0

 

 

 

(5.8

)

 

 

10.6

 

Total revenue from contracts with customers

 

 

303.8

 

 

 

306.0

 

 

 

1,860.1

 

 

 

1,513.4

 

Changes in accrued revenue under alternative revenue programs

 

 

2.9

 

 

 

 

 

 

(2.1

)

 

 

2.3

 

Total Gas Utility operating revenues

 

 

306.7

 

 

 

306.0

 

 

 

1,858.0

 

 

 

1,515.7

 

Gas Marketing

 

 

15.1

 

 

 

11.6

 

 

 

73.3

 

 

 

77.2

 

Other

 

 

17.8

 

 

 

15.4

 

 

 

50.1

 

 

 

41.2

 

Total before eliminations

 

 

339.6

 

 

 

333.0

 

 

 

1,981.4

 

 

 

1,634.1

 

Intersegment eliminations (see Note 9, Information by Operating Segment)

 

 

(11.8

)

 

 

(11.9

)

 

 

(36.1

)

 

 

(30.6

)

Total Operating Revenues

 

$

327.8

 

 

$

321.1

 

 

$

1,945.3

 

 

$

1,603.5

 

 

Spire Missouri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

144.4

 

 

$

153.2

 

 

$

772.8

 

 

$

760.2

 

Commercial & industrial

 

 

35.0

 

 

 

35.9

 

 

 

408.9

 

 

 

215.9

 

Transportation

 

 

7.4

 

 

 

7.4

 

 

 

26.3

 

 

 

26.1

 

Off-system & other incentive

 

 

4.5

 

 

 

7.6

 

 

 

140.4

 

 

 

26.3

 

Other customer revenue

 

 

2.0

 

 

 

3.2

 

 

 

(12.6

)

 

 

4.6

 

Total revenue from contracts with customers

 

 

193.3

 

 

 

207.3

 

 

 

1,335.8

 

 

 

1,033.1

 

Changes in accrued revenue under alternative revenue programs

 

 

(1.2

)

 

 

(3.4

)

 

 

2.7

 

 

 

2.3

 

Total Operating Revenues

 

$

192.1

 

 

$

203.9

 

 

$

1,338.5

 

 

$

1,035.4

 

 

Spire Alabama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

$

45.6

 

 

$

44.7

 

 

$

259.6

 

 

$

239.5

 

Commercial & industrial

 

 

21.3

 

 

 

17.1

 

 

 

98.8

 

 

 

94.6

 

Transportation

 

 

18.7

 

 

 

16.2

 

 

 

60.9

 

 

 

55.7

 

Off-system & other incentive

 

 

2.8

 

 

 

1.7

 

 

 

6.7

 

 

 

1.7

 

Other customer revenue

 

 

1.2

 

 

 

0.4

 

 

 

3.2

 

 

 

3.7

 

Total revenue from contracts with customers

 

 

89.6

 

 

 

80.1

 

 

 

429.2

 

 

 

395.2

 

Changes in accrued revenue under alternative revenue programs

 

 

3.7

 

 

 

1.1

 

 

 

0.3

 

 

 

(2.3

)

Total Operating Revenues

 

$

93.3

 

 

$

81.2

 

 

$

429.5

 

 

$

392.9

 

As discussed in Note 4, Regulatory Matters, Spire Missouri recorded a $25.0 revenue adjustment related to “Off-system and other incentive” sales during February 2021, resulting in negative “Other customer revenue” for the nine months ended June 30, 2021.

Gross receipts taxes associated with the Company’s natural gas utility services are imposed on the Company, Spire Missouri, and Spire Alabama and billed to its customers. The expense amounts (shown in the table below) are reported gross in the “Taxes, other than income taxes” line in the statements of income, and corresponding revenues are reported in “Operating Revenues.”

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Spire

 

$

17.9

 

 

$

17.2

 

 

$

81.8

 

 

$

79.7

 

Spire Missouri

 

 

12.3

 

 

 

12.1

 

 

 

56.1

 

 

 

55.5

 

Spire Alabama

 

 

4.7

 

 

 

4.2

 

 

 

21.8

 

 

 

20.3

 

 

24


 

 

3. EARNINGS PER COMMON SHARE

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Basic Earnings Per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

5.3

 

 

$

(92.3

)

 

$

281.6

 

 

$

108.3

 

Less: Provision for preferred dividends

 

 

3.7

 

 

 

3.7

 

 

 

11.1

 

 

 

11.1

 

Income (loss) allocated to participating securities

 

 

0.1

 

 

 

(0.1

)

 

 

0.5

 

 

 

0.2

 

Income (Loss) Available to Common Shareholders

 

$

1.5

 

 

$

(95.9

)

 

$

270.0

 

 

$

97.0

 

Weighted Average Common Shares Outstanding (in millions)

 

 

51.6

 

 

 

51.2

 

 

 

51.6

 

 

 

51.1

 

Basic Earnings (Loss) Per Common Share

 

$

0.03

 

 

$

(1.87

)

 

$

5.24

 

 

$

1.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Common Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$

5.3

 

 

$

(92.3

)

 

$

281.6

 

 

$

108.3

 

Less: Provision for preferred dividends

 

 

3.7

 

 

 

3.7

 

 

 

11.1

 

 

 

11.1

 

Income (loss) allocated to participating securities

 

 

0.1

 

 

 

(0.1

)

 

 

0.5

 

 

 

0.2

 

Income (Loss) Available to Common Shareholders

 

$

1.5

 

 

$

(95.9

)

 

$

270.0

 

 

$

97.0

 

Weighted Average Common Shares Outstanding (in millions)

 

 

51.6

 

 

 

51.2

 

 

 

51.6

 

 

 

51.1

 

Dilutive Effect of Restricted Stock and Restricted Stock Units (in millions)*

 

 

0.1

 

 

 

 

 

 

0.1

 

 

 

0.1

 

Weighted Average Diluted Common Shares (in millions)

 

 

51.7

 

 

 

51.2

 

 

 

51.7

 

 

 

51.2

 

Diluted Earnings (Loss) Per Common Share

 

$

0.03

 

 

$

(1.87

)

 

$

5.23

 

 

$

1.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Calculation excludes certain outstanding common shares (shown in millions by

   period at the right) attributable to stock units subject to performance or market

   conditions and restricted stock, which could have a dilutive effect in the future

 

 

0.1

 

 

 

0.1

 

 

 

0.1

 

 

 

0.1

 

 

 

25


 

 

4. REGULATORY MATTERS

As explained in Note 1, Summary of Significant Accounting Policies, the Utilities account for regulated operations in accordance with FASB ASC Topic 980, Regulated Operations. The following regulatory assets and regulatory liabilities were reflected in the balance sheets of the Company, Spire Missouri and Spire Alabama as of June 30, 2021, September 30, 2020, and June 30, 2020.

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

Spire

 

2021

 

 

2020

 

 

2020

 

Regulatory Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

31.0

 

 

$

30.6

 

 

$

30.1

 

Unamortized purchased gas adjustments

 

 

0.5

 

 

 

5.5

 

 

 

9.6

 

Other

 

 

33.6

 

 

 

33.4

 

 

 

30.5

 

Total Current Regulatory Assets

 

 

65.1

 

 

 

69.5

 

 

 

70.2

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

 

377.3

 

 

 

439.3

 

 

 

415.3

 

Cost of removal

 

 

449.1

 

 

 

395.6

 

 

 

160.4

 

Future income taxes due from customers

 

 

130.2

 

 

 

123.5

 

 

 

120.7

 

Energy efficiency

 

 

45.6

 

 

 

39.6

 

 

 

38.2

 

Unamortized purchased gas adjustments

 

 

43.9

 

 

 

12.1

 

 

 

 

Other

 

 

73.3

 

 

 

59.3

 

 

 

57.2

 

Total Noncurrent Regulatory Assets

 

 

1,119.4

 

 

 

1,069.4

 

 

 

791.8

 

Total Regulatory Assets

 

$

1,184.5

 

 

$

1,138.9

 

 

$

862.0

 

Regulatory Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

5.8

 

 

$

5.8

 

 

$

5.8

 

Unamortized purchased gas adjustments

 

 

23.0

 

 

 

73.1

 

 

 

21.1

 

Other

 

 

18.0

 

 

 

34.1

 

 

 

31.9

 

Total Current Regulatory Liabilities

 

 

46.8

 

 

 

113.0

 

 

 

58.8

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred taxes due to customers

 

 

130.4

 

 

 

138.8

 

 

 

156.4

 

Pension and postretirement benefit costs

 

 

176.7

 

 

 

157.6

 

 

 

157.6

 

Accrued cost of removal

 

 

29.1

 

 

 

28.6

 

 

 

26.4

 

Unamortized purchased gas adjustments

 

 

42.2

 

 

 

4.4

 

 

 

79.9

 

Other

 

 

36.2

 

 

 

14.3

 

 

 

29.3

 

Total Noncurrent Regulatory Liabilities

 

 

414.6

 

 

 

343.7

 

 

 

449.6

 

Total Regulatory Liabilities

 

$

461.4

 

 

$

456.7

 

 

$

508.4

 

26


 

 

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

Spire Missouri

 

2021

 

 

2020

 

 

2020

 

Regulatory Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

21.9

 

 

$

21.9

 

 

$

21.9

 

Unamortized purchased gas adjustments

 

 

 

 

 

 

 

 

0.1

 

Other

 

 

14.7

 

 

 

10.2

 

 

 

7.5

 

Total Current Regulatory Assets

 

 

36.6

 

 

 

32.1

 

 

 

29.5

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Future income taxes due from customers

 

 

121.5

 

 

 

114.6

 

 

 

111.8

 

Pension and postretirement benefit costs

 

 

287.3

 

 

 

332.6

 

 

 

340.6

 

Energy efficiency

 

 

45.6

 

 

 

39.6

 

 

 

38.2

 

Unamortized purchased gas adjustments

 

 

43.9

 

 

 

12.1

 

 

 

 

Cost of removal

 

 

29.4

 

 

 

7.1

 

 

 

1.3

 

Other

 

 

56.1

 

 

 

42.7

 

 

 

40.0

 

Total Noncurrent Regulatory Assets

 

 

583.8

 

 

 

548.7

 

 

 

531.9

 

Total Regulatory Assets

 

$

620.4

 

 

$

580.8

 

 

$

561.4

 

Regulatory Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

3.6

 

 

$

3.6

 

 

$

3.6

 

Unamortized purchased gas adjustments

 

 

9.0

 

 

 

72.3

 

 

 

20.0

 

Other

 

 

14.5

 

 

 

27.3

 

 

 

27.2

 

Total Current Regulatory Liabilities

 

 

27.1

 

 

 

103.2

 

 

 

50.8

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred taxes due to customers

 

 

113.0

 

 

 

121.4

 

 

 

139.0

 

Pension and postretirement benefit costs

 

 

157.0

 

 

 

140.4

 

 

 

136.4

 

Unamortized purchased gas adjustments

 

 

42.2

 

 

 

4.4

 

 

 

79.9

 

Other

 

 

30.6

 

 

 

8.6

 

 

 

23.6

 

Total Noncurrent Regulatory Liabilities

 

 

342.8

 

 

 

274.8

 

 

 

378.9

 

Total Regulatory Liabilities

 

$

369.9

 

 

$

378.0

 

 

$

429.7

 

27


 

 

 

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

Spire Alabama

 

2021

 

 

2020

 

 

2020

 

Regulatory Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

8.2

 

 

$

7.7

 

 

$

7.2

 

Unamortized purchased gas adjustments

 

 

 

 

 

5.5

 

 

 

9.5

 

Other

 

 

8.9

 

 

 

7.2

 

 

 

6.7

 

Total Current Regulatory Assets

 

 

17.1

 

 

 

20.4

 

 

 

23.4

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

 

85.1

 

 

 

98.2

 

 

 

69.9

 

Cost of removal

 

 

419.7

 

 

 

388.6

 

 

 

159.1

 

Future income taxes due from customers

 

 

2.2

 

 

 

2.2

 

 

 

2.2

 

Other

 

 

1.2

 

 

 

0.9

 

 

 

0.9

 

Total Noncurrent Regulatory Assets

 

 

508.2

 

 

 

489.9

 

 

 

232.1

 

Total Regulatory Assets

 

$

525.3

 

 

$

510.3

 

 

$

255.5

 

Regulatory Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

2.2

 

 

$

2.2

 

 

$

2.2

 

Unamortized purchased gas adjustments

 

 

13.1

 

 

 

 

 

 

 

Other

 

 

0.2

 

 

 

1.7

 

 

 

0.3

 

Total Current Regulatory Liabilities

 

 

15.5

 

 

 

3.9

 

 

 

2.5

 

Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

 

13.9

 

 

 

14.8

 

 

 

17.2

 

Other

 

 

3.6

 

 

 

3.7

 

 

 

3.7

 

Total Noncurrent Regulatory Liabilities

 

 

17.5

 

 

 

18.5

 

 

 

20.9

 

Total Regulatory Liabilities

 

$

33.0

 

 

$

22.4

 

 

$

23.4

 

 

A portion of the Company’s and Spire Missouri’s regulatory assets are not earning a return, as shown in the table below:

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2020

 

Spire

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

194.4

 

 

$

232.3

 

 

$

234.7

 

Future income taxes due from customers

 

 

128.0

 

 

 

121.3

 

 

 

118.4

 

Other

 

 

130.5

 

 

 

12.9

 

 

 

13.2

 

Total Regulatory Assets Not Earning a Return

 

$

452.9

 

 

$

366.5

 

 

$

366.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Missouri

 

 

 

 

 

 

 

 

 

 

 

 

Pension and postretirement benefit costs

 

$

194.4

 

 

$

232.3

 

 

$

234.7

 

Future income taxes due from customers

 

 

121.5

 

 

 

114.6

 

 

 

111.8

 

Other

 

 

130.5

 

 

 

12.9

 

 

 

13.2

 

Total Regulatory Assets Not Earning a Return

 

$

446.4

 

 

$

359.8

 

 

$

359.7

 

 

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 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.

28


 

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 allowed 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. Spire Missouri filed an appeal of portions of the MoPSC’s order, including the disallowance of certain pension costs. On February 9, 2021, the Missouri Supreme Court issued its decision, reversing the MoPSC’s order with respect to certain pension costs and affirming the MoPSC’s order in all other respects. The case was remanded back to the MoPSC with directions that $9.0 in pension assets that accrued between 1994 and 1996 be added to the Company’s prepaid pension asset. Based on the court’s decision, the Company increased its noncurrent regulatory asset for “Pension and postretirement benefit costs” and reduced operation and maintenance expense for the three months ended March 31, 2021. Like the original write-down in 2018, this adjustment is excluded for the net economic earnings financial measure. Spire Missouri and MoPSC Staff agreed that the remand issue should be considered as part of Spire Missouri’s ongoing general rate case, and on July 14, 2021, the MoPSC entered an order approving that procedural treatment.  

In the first half of fiscal 2020, provisions totaling $4.8 were recorded to Spire Missouri’s regulatory liability for Infrastructure System Replacement Surcharge (ISRS) revenues related to disputed ISRS filings. The after-tax impact of these provisions reduced net income for the nine months ended June 30, 2020, by $3.7, which was excluded for the net economic earnings financial measure. As previously disclosed, these matters were settled by the end of fiscal 2020, and these provisions were adjusted during the third quarter, resulting in no net economic earnings adjustment for the nine months ended June 30, 2020.

In September 2020, Spire Missouri, the MoPSC staff and the OPC reached a Unanimous Stipulation and Agreement regarding Spire Missouri’s request for an Accounting Authority Order (AAO) pertaining to certain costs and lost customer fee revenue related to the COVID-19 pandemic. In October 2020, the MoPSC issued an order approving that agreement and granting an AAO effective through March 31, 2021. Accordingly, Spire Missouri has recorded a net regulatory asset of $2.9 as of June 30, 2021, and $3.8 as of September 30, 2020, related to the deferral of applicable costs and has tracked lost customer fee revenue. All ratemaking treatment of the deferrals and any revenue recoveries is reserved for consideration in Spire Missouri’s ongoing general rate case.

On December 11, 2020, Spire Missouri filed a general rate case with the MoPSC that includes new proposed rates for its service areas. The case proposes an increase in base rates, reflecting recovery of system investments and operating costs necessary to maintain the safety and reliability of its natural gas distribution systems as well as to support enhancements to customer service. The request, if approved, represents a net base rate increase of $64.2. Spire Missouri is already recovering $47.3 from customers through the ISRS, resulting in a total base rate increase request of $111.5. The ISRS cap would then be reset in order to continue the timely recovery of the investment in pipeline upgrades. The proposed rates are calculated on a filed rate base of $2,780 based on the end of fiscal year 2020, reflecting the significant investment made in infrastructure upgrades and other systems. The filing assumes a common equity ratio of 54.25% and a 9.95% return on equity. Direct, rebuttal, and sur-rebuttal testimony of all parties has been filed, and local public hearings have concluded. On July 30, Spire Missouri, the Staff of the MoPSC and the other parties to the case filed a unanimous Stipulation and Agreement settling nearly 40 issues. Among the key items addressed in the settlement are recovery of deferred COVID-19 costs and the combining of the ISRS revenue caps for Spire Missouri’s east and west service areas into one. Evidentiary hearings began on August 2, with a post-hearing briefing to be conducted in September 2021. True-up direct testimony is due August 6, 2021, and management anticipates that certain measures, such as rate base, capital structure and operating costs will be updated with data through May 31, 2021. In accordance with Missouri law, the MoPSC has up to 11 months from our filing date to consider this filing.

29


 

In mid-February 2021, the central U.S. experienced a period of unusually severe cold weather, and Spire Missouri implemented an Operational Flow Order (OFO) to preserve the integrity of its distribution system. During this time, Spire Missouri was required to purchase additional natural gas supply, both to ensure adequate supply for its firm utility customers, and to cover the shortfall created when third-party marketers failed to deliver natural gas supply to its city gates on behalf of their customers. In accordance with its tariffs, Spire Missouri invoiced the cost of gas and associated penalties totaling $195.8 to non-compliant marketers pursuant to the MoPSC-approved OFO tariff. Recoveries collected, including $3.2 collected to date, will be an offset to cost of natural gas for firm utility customers through the Purchased Gas Adjustment (PGA) and Actual Cost Adjustment. The three largest counterparties did not remit payment when due, so Spire Missouri filed suit against them in federal court to recover the invoiced amounts. Those suits remain pending. Some marketers have filed complaints with the MoPSC requesting review of the transactions between them and Spire; at this time, the Company has no reason to believe the MoPSC will not follow the tariff and has determined collection is probable. Evidentiary hearings of those complaints are scheduled for January through March 2022. The MoPSC has also opened a working case to investigate the effects of the February cold weather event on all Missouri utilities. Spire Missouri is not subject to any upstream OFO penalties on any interstate pipelines.

Spire Missouri is able to sell excess natural gas supply and capacity to third parties off system, resulting in significant savings to its firm utility customers through the gas incentive mechanisms of its PGA. Spire Missouri normally retains 25% and passes 75% through to its customers. During the February cold weather event, Spire Missouri had an unusually large off-system sale resulting in $100.0 of incremental gross revenue. Due to the nature and magnitude of this particular transaction, Spire Missouri anticipates distributing all or a portion of its usual 25% share to customers and plans to work with the MoPSC and community partners over the rest of the fiscal year to determine the method and timing. Accordingly, a $25.0 regulatory liability has been recorded, with a corresponding reduction in revenue.

Spire Missouri’s net deferred gas costs and average inventory cost in the second quarter of fiscal 2021 increased by approximately $110 primarily due to the February weather event, including projected offsets of off-system sales and tariff-based OFO penalties.

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 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. On June 22, 2021, that court issued an order vacating the Certificate of Public Convenience and Necessity and remanding the matter back to the FERC for further action. The vacatur mandate, however, does not take effect until after the expiration (or denial) of the court’s opportunity to reconsider its decision. Spire STL Pipeline and Spire Missouri, as the foundation shipper, will each continue to pursue all legal and regulatory avenues to ensure access to reliable, affordable and safe delivery of energy for eastern Missouri. Spire STL Pipeline filed on July 26 with the FERC for a Temporary Emergency Certificate and expects to file on August 5 a request for rehearing with the DC Circuit panel and a concurrent en banc request asking for the vacatur to be lifted while the FERC addresses the certificate on remand. While there is no impairment at this time, if Spire STL Pipeline is taken out of service, the Company’s financial condition and results of operations may be adversely impacted by impairment of Spire STL Pipeline’s assets, currently carried at over $270, and other effects. If Spire Missouri is unable to obtain sufficient pipeline capacity to meet its customers’ annual and seasonal natural gas demands, Spire Missouri’s financial condition and results of operations may be adversely impacted.

30


 

On October 9, 2020, Spire Storage West LLC (“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, which requests authorization to expand capacity and increase pipeline connectivity at certain of Spire Storage’s natural gas storage facilities in Wyoming, remains pending.

5. FINANCING

Short-term

Spire, Spire Missouri and Spire Alabama have a syndicated revolving credit facility pursuant to a loan agreement with 11 banks, expiring October 31, 2023. The loan agreement has an aggregate credit commitment of $975.0, including sublimits of $300.0 for Spire, $475.0 for Spire Missouri, and $200.0 for Spire Alabama. These sublimits may be reallocated from time to time among the three borrowers within the $975.0 aggregate commitment, with commitments fees applied for each borrower relative to its credit rating. Spire may use its line to provide for the funding needs of various subsidiaries. The agreement also contains financial covenants limiting each borrower’s consolidated total debt, including short-term debt, to no more than 70% of its total capitalization. As defined in the line of credit, on June 30, 2021, total debt was less than 60% of total capitalization for each borrower.

Spire has a commercial paper program (“CP Program”) pursuant to which Spire may issue short-term, unsecured commercial paper notes. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the notes outstanding under the CP Program at any time not to exceed $975.0. The notes may have maturities of up to 365 days from date of issue.

On March 26, 2020, Spire entered into a loan agreement with two banks providing for a term loan of $150.0, which was immediately fully funded. It was repaid on December 16, 2020. The term loan bore interest at the LIBOR Rate (as defined in the loan agreement) plus 0.85% per annum.

On March 23, 2021, Spire Missouri entered into a loan agreement with several banks for a $250.0, 364-day unsecured term loan with an interest rate based on LIBOR plus 65 basis points. The loan carries no prepayment penalty and has the same covenants as the revolving credit facility.

Information about Spire’s consolidated short-term borrowings and about Spire Missouri’s and Spire Alabama’s borrowings from Spire is presented in the following table. As of June 30, 2021, all of Spire’s short-term borrowings were used to support lending to the Utilities.

 

 

Spire (Parent Only)

 

 

Spire Missouri

 

 

Spire Alabama

 

 

Spire

 

 

 

Credit

 

 

Term

 

 

CP

 

 

Credit

 

 

Term

 

 

Spire

 

 

Credit

 

 

Spire

 

 

Consol-

 

 

 

Facility

 

 

Loan

 

 

Program

 

 

Facility

 

 

Loan

 

 

Note

 

 

Facility

 

 

Note

 

 

idated

 

Nine Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average borrowings

 

$

 

 

$

42.3

 

 

$

500.1

 

 

$

 

 

$

90.7

 

 

$

333.1

 

 

$

 

 

$

39.7

 

 

$

633.1

 

Lowest borrowings outstanding

 

 

 

 

 

 

 

 

140.0

 

 

 

 

 

 

 

 

 

95.3

 

 

 

 

 

 

 

 

 

390.0

 

Highest borrowings outstanding

 

 

 

 

 

150.0

 

 

 

775.0

 

 

 

 

 

 

250.0

 

 

 

441.9

 

 

 

 

 

 

152.2

 

 

 

850.5

 

Weighted average interest rate

 

n/a

 

 

 

1.1

%

 

 

0.3

%

 

n/a

 

 

 

0.8

%

 

 

0.2

%

 

n/a

 

 

 

0.2

%

 

 

0.4

%

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings outstanding

 

$

 

 

$

 

 

$

211.0

 

 

$

 

 

$

250.0

 

 

$

217.5

 

 

$

 

 

$

 

 

$

461.0

 

Weighted average interest rate

 

n/a

 

 

n/a

 

 

 

0.2

%

 

n/a

 

 

 

0.7

%

 

 

0.2

%

 

n/a

 

 

n/a

 

 

 

0.5

%

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

 

 

n/a

 

 

 

0.2

%

 

n/a

 

 

 

0.2

%

 

 

0.6

%

As of June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings outstanding

 

$

 

 

$

150.0

 

 

$

327.6

 

 

$

 

 

$

 

 

$

218.3

 

 

$

 

 

$

85.6

 

 

$

477.6

 

Weighted average interest rate

 

n/a

 

 

 

1.2

%

 

 

0.5

%

 

n/a

 

 

n/a

 

 

 

0.5

%

 

n/a

 

 

 

0.5

%

 

 

0.9

%

31


 

 

Long-term Debt

The long-term debt agreements of Spire, Spire Missouri and Spire Alabama contain customary financial covenants and default provisions. As of June 30, 2021, there were no events of default under these financial covenants.

Interest expense shown on the statements of income is net of the capitalized interest amounts shown in the following table.

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Spire

 

$

1.1

 

 

$

1.2

 

 

$

3.1

 

 

$

4.8

 

Spire Missouri

 

 

 

 

 

0.2

 

 

 

0.1

 

 

 

0.8

 

Spire Alabama

 

 

0.8

 

 

 

0.4

 

 

 

2.1

 

 

 

1.4

 

On December 15, 2020, Spire Alabama issued and sold to certain institutional investors in a private placement $150.0 of 2.04% Series 2020 Senior Notes due December 15, 2030. Interest is payable semi-annually. The notes are senior unsecured obligations of Spire Alabama and rank equal in right to payment with all its other senior unsecured indebtedness. Spire Alabama used the proceeds to repay short-term debt.

In February 2021, Spire issued $175.0 of 2021 Series A 0.75% Remarketable Senior Notes as part of the equity units described in the next section.

On May 20, 2021, pursuant to its registration statement on Form S-3 filed with the SEC, Spire Missouri issued $305.0 of 3.30% first mortgage bonds due June 1, 2051, secured equally with all its other first mortgage bonds. Interest is payable semi-annually. Spire Missouri used the proceeds to redeem $55.0 principal amount of 3.00% first mortgage bonds due March 15, 2023, and to repay short-term debt.

32


 

Equity Units

In February 2021, Spire issued 3.5 million equity units, initially in the form of Corporate Units, for an aggregate stated amount of $175.0, resulting in net proceeds (after underwriting fees and other issuance costs) of $169.3. Each “Corporate Unit” has a stated amount of fifty dollars and consists of (i) a stock purchase contract and (ii) a 1/20, or 5%, undivided beneficial ownership interest in one thousand dollars principal amount of Spire’s 2021 Series A 0.75% Remarketable Senior Notes due March 1, 2026 (RSNs). The RSNs are pledged as collateral to secure the holder’s obligation under the related stock purchase contracts. Each stock purchase contract obligates the holder to purchase, and Spire to issue and deliver, on March 1, 2024, for a price of fifty dollars in cash, a variable number of shares of its common stock as follows (subject to anti-dilution adjustments).

If the applicable market value* per share

of Spire common stock is:

 

Number of shares to be purchased per stock purchase contract is:

Equal to or greater than $78.6906 (“threshold appreciation price”)

 

0.6354 (“minimum settlement rate”)

Less than $78.6906, but greater than $64.24

 

$50.00 ÷ applicable market value*

Less than or equal to $64.24 (“reference price”)

 

0.7783 (“maximum settlement rate”)

*Based on the volume-weighted average price of Spire common stock during the 20 trading days before settlement.

If a holder elects to settle purchase contracts early, the holder would pay fifty dollars per unit and receive 0.6354 shares per unit.

The Company makes quarterly interest payments on the RSNs at the rate of 0.75% per year and quarterly contract adjustment payments on the stock purchase contracts at the rate of 6.75%. The RSNs and the contract adjustment payments are structurally subordinated to all liabilities of Spire’s subsidiaries.

At issuance, the Company recorded the $35.0 present value of the stock purchase contract payments as a liability (reflected in “Other” current and noncurrent liabilities on the balance sheet) offset by a charge to additional paid-in capital in equity. This noncash financing activity has been excluded from the statement of cash flows. Interest payments on the RSNs are recorded as interest expense and stock purchase contract payments are charged against the liability. Accretion of the stock purchase contract liability is recorded as imputed interest expense. In calculating diluted EPS, the Company applies the treasury stock method to the Corporate Units. These securities have not had an effect on diluted EPS.

In order to secure funds necessary for the holders to pay the purchase price of the common stock on the purchase contract settlement date, the remarketing agent will remarket the RSNs on behalf of the current holders to new third-party investors. Following any successful remarketing of the RSNs, the interest rate on the RSNs will be reset, interest will be payable on a semi-annual basis, and Spire will cease to have the option to redeem the RSNs, other than in connection with the occurrence or continuance of certain special events.

33


 

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, notes receivable, and short-term debt approximate fair value due to the short maturity of these instruments. The fair values of long-term debt are estimated based on market prices for similar issues. Refer to Note 7, Fair Value Measurements, for information on financial instruments measured at fair value on a recurring basis.

The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis are shown in the following tables, classified according to the fair value hierarchy. There were no such instruments classified as Level 3 (significant unobservable inputs) as of June 30, 2021, September 30, 2020, and June 30, 2020.

 

 

 

 

 

 

 

 

 

 

 

Classification of Estimated

Fair Value

 

 

 

Carrying

Amount

 

 

Fair

Value

 

 

Quoted

Prices in

Active Markets

(Level 1)

 

 

Significant Observable Inputs

(Level 2)

 

Spire

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23.9

 

 

$

23.9

 

 

$

23.9

 

 

$

 

Notes payable

 

 

461.0

 

 

 

461.0

 

 

 

 

 

 

461.0

 

Long-term debt, including current portion

 

 

3,049.8

 

 

 

3,440.2

 

 

 

 

 

 

3,440.2

 

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 June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7.4

 

 

$

7.4

 

 

$

7.4

 

 

$

 

Notes payable

 

 

477.6

 

 

 

477.6

 

 

 

 

 

 

477.6

 

Long-term debt, including current portion

 

 

2,483.7

 

 

 

2,875.5

 

 

 

 

 

 

2,875.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Missouri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4.3

 

 

$

4.3

 

 

$

4.3

 

 

$

 

Notes payable

 

 

250.0

 

 

 

250.0

 

 

 

 

 

 

250.0

 

Notes payable – associated companies

 

 

217.5

 

 

 

217.5

 

 

 

 

 

 

217.5

 

Long-term debt

 

 

1,338.6

 

 

 

1,548.8

 

 

 

 

 

 

1,548.8

 

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 June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

0.7

 

 

$

0.7

 

 

$

0.7

 

 

$

 

Notes payable associated companies

 

 

218.3

 

 

 

218.3

 

 

 

 

 

 

218.3

 

Long-term debt

 

 

1,091.9

 

 

 

1,303.2

 

 

 

 

 

 

1,303.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Alabama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9.5

 

 

$

9.5

 

 

$

9.5

 

 

$

 

Long-term debt, including current portion

 

 

621.2

 

 

 

710.5

 

 

 

 

 

 

710.5

 

As of September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable associated companies

 

$

121.3

 

 

$

121.3

 

 

$

 

 

$

121.3

 

Long-term debt

 

 

471.8

 

 

 

576.9

 

 

 

 

 

 

576.9

 

As of June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable associated companies

 

$

85.6

 

 

$

85.6

 

 

$

 

 

$

85.6

 

Long-term debt

 

 

471.8

 

 

 

572.3

 

 

 

 

 

 

572.3

 

 

34


 

 

7. 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.

Derivative instruments included in Level 1 are valued using quoted market prices on the New York Mercantile Exchange (NYMEX) or the Intercontinental Exchange (ICE). Derivative instruments classified in Level 2 include physical commodity derivatives that are valued using broker or dealer quotation services whose prices are derived principally from, or are corroborated by, observable market inputs. Also included in Level 2 are certain derivative instruments that have values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets. Derivative instruments included in Level 3 are valued using generally unobservable inputs that are based upon the best information available and reflect management’s assumptions about how market participants would price the asset or liability. There were no Level 3 balances as of June 30, 2021, and those Level 3 balances at September 30, 2020, and June 30, 2020, consisted of gas commodity contracts. The Company’s and the Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of the interim reporting period in which circumstances change or events occur to cause the transfer.

The mutual funds are included in “Other Investments” on the Company’s balance sheets and in “Other Property and Investments” on Spire Missouri’s balance sheets. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net in the balance sheets when a legally enforceable netting agreement exists between the Company, Spire Missouri, or Spire Alabama and the counterparty to a derivative contract.

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 June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Utility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

$

24.3

 

 

$

 

 

$

 

 

$

 

 

$

24.3

 

NYMEX/ICE natural gas contracts

 

 

25.3

 

 

 

 

 

 

 

 

 

(25.3

)

 

 

 

Gas Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

 

 

 

 

47.5

 

 

 

 

 

 

(47.5

)

 

 

 

Natural gas commodity contracts

 

 

 

 

 

20.2

 

 

 

 

 

 

 

 

 

20.2

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

 

21.5

 

 

 

 

 

 

 

 

 

 

 

 

21.5

 

Interest rate swaps

 

 

 

 

 

9.0

 

 

 

 

 

 

(5.5

)

 

 

3.5

 

Total

 

$

71.1

 

 

$

76.7

 

 

$

 

 

$

(78.3

)

 

$

69.5

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

$

 

 

$

18.8

 

 

$

 

 

$

(16.0

)

 

$

2.8

 

Natural gas commodity contracts

 

 

 

 

 

57.8

 

 

 

 

 

 

 

 

 

57.8

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

 

 

 

6.7

 

 

 

 

 

 

(5.5

)

 

 

1.2

 

Total

 

$

 

 

$

83.3

 

 

$

 

 

$

(21.5

)

 

$

61.8

 

35


 

 

 

 

 

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

 

 

$

 

 

$

 

 

$

 

 

$

21.9

 

NYMEX/ICE natural gas contracts

 

 

6.3

 

 

 

 

 

 

 

 

 

(6.3

)

 

 

 

Gasoline and heating oil contracts

 

 

0.3

 

 

 

 

 

 

 

 

 

(0.3

)

 

 

 

Gas Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

 

 

 

 

27.7

 

 

 

 

 

 

(25.4

)

 

 

2.3

 

Natural gas commodity contracts

 

 

 

 

 

14.5

 

 

 

0.4

 

 

 

 

 

 

14.9

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

 

18.6

 

 

 

 

 

 

 

 

 

 

 

 

18.6

 

Total

 

$

47.1

 

 

$

42.2

 

 

$

0.4

 

 

$

(32.0

)

 

$

57.7

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Utility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

$

0.9

 

 

$

 

 

$

 

 

$

(0.9

)

 

$

 

Gas Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

 

0.7

 

 

 

21.4

 

 

 

 

 

 

(22.1

)

 

 

 

Natural gas commodity contracts

 

 

 

 

 

22.3

 

 

 

 

 

 

 

 

 

22.3

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

 

 

 

54.2

 

 

 

 

 

 

 

 

 

54.2

 

Total

 

$

1.6

 

 

$

97.9

 

 

$

 

 

$

(23.0

)

 

$

76.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Utility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

$

20.8

 

 

$

 

 

$

 

 

$

 

 

$

20.8

 

NYMEX/ICE natural gas contracts

 

 

1.8

 

 

 

 

 

 

 

 

 

(1.8

)

 

 

 

Gasoline and heating oil contracts

 

 

0.3

 

 

 

 

 

 

 

 

 

(0.3

)

 

 

 

Gas Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

 

 

 

 

20.1

 

 

 

 

 

 

(16.4

)

 

 

3.7

 

Natural gas commodity contracts

 

 

 

 

 

17.5

 

 

 

1.0

 

 

 

(6.4

)

 

 

12.1

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

 

19.2

 

 

 

 

 

 

 

 

 

 

 

 

19.2

 

Total

 

$

42.1

 

 

$

37.6

 

 

$

1.0

 

 

$

(24.9

)

 

$

55.8

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Utility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

$

7.2

 

 

$

 

 

$

 

 

$

(7.2

)

 

$

 

Gas Marketing:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

 

0.3

 

 

 

16.1

 

 

 

 

 

 

(16.4

)

 

 

 

Natural gas commodity contracts

 

 

 

 

 

16.7

 

 

 

 

 

 

(6.4

)

 

 

10.3

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

 

 

 

66.1

 

 

 

 

 

 

 

 

 

66.1

 

Total

 

$

7.5

 

 

$

98.9

 

 

$

 

 

$

(30.0

)

 

$

76.4

 

 

36


 

 

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 June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

$

24.3

 

 

$

 

 

$

 

 

$

 

 

$

24.3

 

NYMEX/ICE natural gas contracts

 

 

25.3

 

 

 

 

 

 

 

 

 

(25.3

)

 

 

 

Total

 

$

49.6

 

 

$

 

 

$

 

 

$

(25.3

)

 

$

24.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

$

21.9

 

 

$

 

 

$

 

 

$

 

 

$

21.9

 

NYMEX/ICE natural gas contracts

 

 

6.3

 

 

 

 

 

 

 

 

 

(6.3

)

 

 

 

Gasoline and heating oil contracts

 

 

0.3

 

 

 

 

 

 

 

 

 

(0.3

)

 

 

 

Total

 

$

28.5

 

 

$

 

 

$

 

 

$

(6.6

)

 

$

21.9

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

$

0.9

 

 

$

 

 

$

 

 

$

(0.9

)

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. stock/bond mutual funds

 

$

20.8

 

 

$

 

 

$

 

 

$

 

 

$

20.8

 

NYMEX/ICE natural gas contracts

 

 

1.8

 

 

 

 

 

 

 

 

 

(1.8

)

 

 

 

Gasoline and heating oil contracts

 

 

0.3

 

 

 

 

 

 

 

 

 

(0.3

)

 

 

 

Total

 

$

22.9

 

 

$

 

 

$

 

 

$

(2.1

)

 

$

20.8

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX/ICE natural gas contracts

 

$

7.2

 

 

$

 

 

$

 

 

$

(7.2

)

 

$

 

 

8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Pension Plans

Spire and the Utilities maintain pension plans for their employees.

Spire Missouri has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its employees. Plan assets consist primarily of corporate and U.S. government obligations and a growth segment consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved through derivative instruments.

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 U.S. equities with varying strategies, global equities, alternative investments, and fixed income investments.

37


 

The net periodic pension cost includes components shown in the following tables.  The components other than the service costs and regulatory adjustment are presented in “Other Income (Expense), Net” in the income statement, except for Spire Alabama’s losses on lump-sum settlements. Such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income (Expense), Net.”

 

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Spire

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost – benefits earned during the period

 

$

5.5

 

 

$

5.7

 

 

$

16.4

 

 

$

16.8

 

Interest cost on projected benefit obligation

 

 

5.5

 

 

 

5.5

 

 

 

15.3

 

 

 

17.2

 

Expected return on plan assets

 

 

(8.5

)

 

 

(8.5

)

 

 

(23.6

)

 

 

(26.7

)

Amortization of prior service credit

 

 

(0.9

)

 

 

(0.6

)

 

 

(2.4

)

 

 

(1.8

)

Amortization of actuarial loss

 

 

3.8

 

 

 

3.3

 

 

 

11.6

 

 

 

10.9

 

Loss on lump-sum settlements

 

 

11.2

 

 

 

2.3

 

 

 

15.0

 

 

 

23.3

 

Subtotal

 

 

16.6

 

 

 

7.7

 

 

 

32.3

 

 

 

39.7

 

Regulatory adjustment

 

 

1.3

 

 

 

7.4

 

 

 

19.9

 

 

 

5.7

 

Net pension cost

 

$

17.9

 

 

$

15.1

 

 

$

52.2

 

 

$

45.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Missouri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost – benefits earned during the period

 

$

3.9

 

 

$

4.0

 

 

$

11.7

 

 

$

11.7

 

Interest cost on projected benefit obligation

 

 

3.5

 

 

 

3.8

 

 

 

10.5

 

 

 

12.0

 

Expected return on plan assets

 

 

(5.7

)

 

 

(5.9

)

 

 

(16.9

)

 

 

(18.8

)

Amortization of prior service (credit) cost

 

 

(0.2

)

 

 

 

 

 

(0.5

)

 

 

0.1

 

Amortization of actuarial loss

 

 

2.8

 

 

 

2.6

 

 

 

8.5

 

 

 

8.6

 

Loss on lump-sum settlements

 

 

9.1

 

 

 

2.3

 

 

 

9.1

 

 

 

23.3

 

Subtotal

 

 

13.4

 

 

 

6.8

 

 

 

22.4

 

 

 

36.9

 

Regulatory adjustment

 

 

(1.4

)

 

 

5.4

 

 

 

13.7

 

 

 

(0.1

)

Net pension cost

 

$

12.0

 

 

$

12.2

 

 

$

36.1

 

 

$

36.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Alabama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost – benefits earned during the period

 

$

1.3

 

 

$

1.6

 

 

$

4.2

 

 

$

4.6

 

Interest cost on projected benefit obligation

 

 

1.1

 

 

 

1.2

 

 

 

3.5

 

 

 

3.7

 

Expected return on plan assets

 

 

(1.4

)

 

 

(1.7

)

 

 

(4.5

)

 

 

(5.2

)

Amortization of prior service credit

 

 

(0.6

)

 

 

(0.6

)

 

 

(1.8

)

 

 

(1.8

)

Amortization of actuarial loss

 

 

1.0

 

 

 

0.7

 

 

 

3.1

 

 

 

2.3

 

Loss on lump-sum settlements

 

 

2.1

 

 

 

 

 

 

5.9

 

 

 

 

Subtotal

 

 

3.5

 

 

 

1.2

 

 

 

10.4

 

 

 

3.6

 

Regulatory adjustment

 

 

2.5

 

 

 

1.7

 

 

 

5.6

 

 

 

5.1

 

Net pension cost

 

$

6.0

 

 

$

2.9

 

 

$

16.0

 

 

$

8.7

 

 

 

38


 

 

Pursuant to the provisions of Spire Missouri’s and Spire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds the sum of service and interest costs in a specific year. Special termination benefits, when offered, are also recognized as settlements which can result in gains or losses. For the three months ended June 30, 2021, two Missouri plans and one Alabama plan met the criteria for settlement recognition. The lump-sum settlement resulted in losses of $9.1 for the Missouri plans and $2.1 for the Alabama plan. The lump-sum payments recognized as settlements for the remeasurement were $36.8 for the Missouri plans and $7.6 for the Alabama plan. For the remeasurement, the discount rates for the Missouri plans were updated to 3.15% from 2.85% at September 30, 2020 for the first plan, and to 3.10% from 2.75% at September 30, 2020 for the second plan. For the remeasurement, the discount rate for the Alabama plan was updated to 3.25% from 3.2% at March 31, 2021. The Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan — in this case, 11.7 years. In the quarter ended March 31, 2021, one Alabama plan met the criteria for settlement recognition. The lump-sum settlement resulted in a loss of $3.8. For the remeasurement, the discount rate for the Alabama plan was updated to 3.2% from 2.95% at September 30, 2020. The Alabama regulatory tariff requires that settlement losses be amortized over the remaining actuarial life of the individuals in the plan — in this case, 11.4 years. Therefore, no lump sum settlement expenses were recorded in the periods ended June 30, 2021 and March 31, 2021. In the quarter ended March 31, 2020, two Spire Missouri plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $59.1. The lump-sum settlement resulted in a loss of $21.0. In the quarter ended June 30, 2020, two Spire Missouri plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $6.0. The lump-sum settlement resulted in a loss of $2.3. For the remeasurements, the discount rates for the Missouri plans were updated to 3.0% from 3.2% at September 30, 2019.

The funding policy of the Utilities 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. Fiscal 2021 contributions to Spire Missouri’s pension plans through June 30, 2021 were $36.9 to the qualified trusts and none to non-qualified plans. There were $7.2 of fiscal 2021 contributions to the Spire Alabama pension plans through June 30, 2021.

Contributions to the qualified trusts of Spire Missouri’s pension plans for the remainder of fiscal 2021 are anticipated to be $4.7. Contributions to Spire Alabama’s pension plans for the remainder of fiscal 2021 are anticipated to be $2.7.

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, certain Spire Missouri plans provided medical insurance after retirement until death. The Spire Alabama plans provide medical insurance upon retirement until death for certain retirees depending on the type of employee and the date the employee was originally hired.

39


 

The net periodic postretirement benefit cost includes components shown in the following tables.  The components other than the service costs and regulatory adjustment are presented in “Other Income (Expense), Net” in the income statement, except in the event Spire Alabama incurs losses on lump-sum settlements. Any such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income (Expense), Net.”

 

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Spire

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost – benefits earned during the period

 

$

1.7

 

 

$

1.5

 

 

$

5.4

 

 

$

4.4

 

Interest cost on accumulated postretirement benefit obligation

 

 

1.4

 

 

 

1.5

 

 

 

4.4

 

 

 

4.6

 

Expected return on plan assets

 

 

(4.0

)

 

 

(4.1

)

 

 

(12.1

)

 

 

(12.3

)

Amortization of prior service cost (credit)

 

 

0.3

 

 

 

(0.1

)

 

 

0.8

 

 

 

(0.4

)

Amortization of actuarial gain

 

 

(0.4

)

 

 

(0.6

)

 

 

(1.2

)

 

 

(1.6

)

Subtotal

 

 

(1.0

)

 

 

(1.8

)

 

 

(2.7

)

 

 

(5.3

)

Regulatory adjustment

 

 

3.5

 

 

 

4.0

 

 

 

10.1

 

 

 

12.0

 

Net postretirement benefit cost

 

$

2.5

 

 

$

2.2

 

 

$

7.4

 

 

$

6.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Missouri

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost – benefits earned during the period

 

$

1.5

 

 

$

1.4

 

 

$

4.6

 

 

$

4.0

 

Interest cost on accumulated postretirement benefit obligation

 

 

1.1

 

 

 

1.2

 

 

 

3.3

 

 

 

3.5

 

Expected return on plan assets

 

 

(2.6

)

 

 

(2.8

)

 

 

(8.1

)

 

 

(8.5

)

Amortization of prior service cost (credit)

 

 

0.2

 

 

 

(0.1

)

 

 

0.6

 

 

 

(0.2

)

Amortization of actuarial gain

 

 

(0.4

)

 

 

(0.6

)

 

 

(1.1

)

 

 

(1.6

)

Subtotal

 

 

(0.2

)

 

 

(0.9

)

 

 

(0.7

)

 

 

(2.8

)

Regulatory adjustment

 

 

3.8

 

 

 

4.4

 

 

 

11.3

 

 

 

13.3

 

Net postretirement benefit cost

 

$

3.6

 

 

$

3.5

 

 

$

10.6

 

 

$

10.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Alabama

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost – benefits earned during the period

 

$

0.2

 

 

$

0.1

 

 

$

0.7

 

 

$

0.3

 

Interest cost on accumulated postretirement benefit obligation

 

 

0.3

 

 

 

0.3

 

 

 

1.0

 

 

 

1.0

 

Expected return on plan assets

 

 

(1.3

)

 

 

(1.2

)

 

 

(3.8

)

 

 

(3.6

)

Amortization of prior service cost (credit)

 

 

0.1

 

 

 

 

 

 

0.2

 

 

 

(0.2

)

Subtotal

 

 

(0.7

)

 

 

(0.8

)

 

 

(1.9

)

 

 

(2.5

)

Regulatory adjustment

 

 

(0.4

)

 

 

(0.4

)

 

 

(1.3

)

 

 

(1.3

)

Net postretirement benefit income

 

$

(1.1

)

 

$

(1.2

)

 

$

(3.2

)

 

$

(3.8

)

 

 

Missouri and Alabama state laws provide for the recovery in rates of costs accrued pursuant to GAAP provided that such costs are funded through an independent, external funding mechanism. The Utilities have established Voluntary Employees’ Beneficiary Association (VEBA) and Rabbi Trusts as external funding mechanisms. The assets of the VEBA and Rabbi Trusts consist primarily of money market securities and mutual funds invested in stocks and bonds.

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. There have been no contributions to the postretirement plans through June 30, 2021 for Spire Missouri or Spire Alabama, and none are expected to be required for the remainder of the fiscal year.

40


 

9. INFORMATION BY OPERATING SEGMENT

The Company has two reportable segments: Gas Utility and Gas Marketing. The Gas Utility segment is the aggregation of the operations of the Utilities. The Gas Marketing segment includes the results of Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities, including utilizing natural gas storage contracts for providing natural gas sales. Other components of the Company’s consolidated information include:

 

unallocated corporate items, including certain debt and associated interest costs;

 

Spire STL Pipeline, a subsidiary of Spire providing interstate natural gas pipeline transportation services;

 

Spire Storage, a subsidiary of Spire providing interstate 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, Spire Alabama and Spire Storage, sales of natural gas from Spire Missouri and Spire Alabama to Spire Marketing, propane transportation services provided by Spire NGL Inc. to Spire Missouri, and propane storage services provided by Spire Missouri to Spire NGL Inc.

Management evaluates the performance of the operating segments based on the computation of net economic earnings. Net economic earnings exclude from reported net income the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative, or GAAP standard-setting actions.

 

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Eliminations

 

 

Consolidated

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

306.7

 

 

$

15.2

 

 

$

5.9

 

 

$

 

 

$

327.8

 

Intersegment revenues

 

 

 

 

 

(0.1

)

 

 

11.9

 

 

 

(11.8

)

 

 

 

Total Operating Revenues

 

 

306.7

 

 

 

15.1

 

 

 

17.8

 

 

 

(11.8

)

 

 

327.8

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

84.9

 

 

 

20.2

 

 

 

 

 

 

(8.2

)

 

 

96.9

 

Operation and maintenance

 

 

103.2

 

 

 

3.2

 

 

 

9.2

 

 

 

(3.6

)

 

 

112.0

 

Depreciation and amortization

 

 

50.9

 

 

 

0.3

 

 

 

1.9

 

 

 

 

 

 

53.1

 

Taxes, other than income taxes

 

 

32.1

 

 

 

0.2

 

 

 

0.3

 

 

 

 

 

 

32.6

 

Total Operating Expenses

 

 

271.1

 

 

 

23.9

 

 

 

11.4

 

 

 

(11.8

)

 

 

294.6

 

Operating Income (Loss)

 

$

35.6

 

 

$

(8.8

)

 

$

6.4

 

 

$

 

 

$

33.2

 

Net Economic Earnings (Loss)

 

$

12.3

 

 

$

(5.2

)

 

$

(0.2

)

 

$

 

 

$

6.9

 

 

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Eliminations

 

 

Consolidated

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

305.7

 

 

$

11.6

 

 

$

3.8

 

 

$

 

 

$

321.1

 

Intersegment revenues

 

 

0.3

 

 

 

 

 

 

11.6

 

 

 

(11.9

)

 

 

 

Total Operating Revenues

 

 

306.0

 

 

 

11.6

 

 

 

15.4

 

 

 

(11.9

)

 

 

321.1

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

90.6

 

 

 

(9.2

)

 

 

0.1

 

 

 

(8.6

)

 

 

72.9

 

Operation and maintenance

 

 

115.5

 

 

 

2.2

 

 

 

10.5

 

 

 

(3.3

)

 

 

124.9

 

Depreciation and amortization

 

 

47.8

 

 

 

0.2

 

 

 

2.1

 

 

 

 

 

 

50.1

 

Taxes, other than income taxes

 

 

31.7

 

 

 

0.2

 

 

 

(0.8

)

 

 

 

 

 

31.1

 

Impairments

 

 

 

 

 

 

 

 

148.6

 

 

 

 

 

 

148.6

 

Total Operating Expenses

 

 

285.6

 

 

 

(6.6

)

 

 

160.5

 

 

 

(11.9

)

 

 

427.6

 

Operating Income (Loss)

 

$

20.4

 

 

$

18.2

 

 

$

(145.1

)

 

$

 

 

$

(106.5

)

Net Economic Earnings (Loss)

 

$

8.4

 

 

$

0.1

 

 

$

(1.2

)

 

$

 

 

$

7.3

 

 

41


 

 

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Eliminations

 

 

Consolidated

 

Nine Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

1,856.9

 

 

$

73.3

 

 

$

15.1

 

 

$

 

 

$

1,945.3

 

Intersegment revenues

 

 

1.1

 

 

 

 

 

 

35.0

 

 

 

(36.1

)

 

 

 

Total Operating Revenues

 

 

1,858.0

 

 

 

73.3

 

 

 

50.1

 

 

 

(36.1

)

 

 

1,945.3

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

908.4

 

 

 

14.7

 

 

 

0.1

 

 

 

(26.0

)

 

 

897.2

 

Operation and maintenance

 

 

310.2

 

 

 

13.6

 

 

 

28.9

 

 

 

(10.1

)

 

 

342.6

 

Depreciation and amortization

 

 

149.0

 

 

 

0.9

 

 

 

5.5

 

 

 

 

 

 

155.4

 

Taxes, other than income taxes

 

 

124.0

 

 

 

0.9

 

 

 

1.7

 

 

 

 

 

 

126.6

 

Total Operating Expenses

 

 

1,491.6

 

 

 

30.1

 

 

 

36.2

 

 

 

(36.1

)

 

 

1,521.8

 

Operating Income

 

$

366.4

 

 

$

43.2

 

 

$

13.9

 

 

$

 

 

$

423.5

 

Net Economic Earnings (Loss)

 

$

248.4

 

 

$

37.9

 

 

$

(6.9

)

 

$

 

 

$

279.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Eliminations

 

 

Consolidated

 

Nine Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

$

1,515.4

 

 

$

77.2

 

 

$

10.9

 

 

$

 

 

$

1,603.5

 

Intersegment revenues

 

 

0.3

 

 

 

 

 

 

30.3

 

 

 

(30.6

)

 

 

 

Total Operating Revenues

 

 

1,515.7

 

 

 

77.2

 

 

 

41.2

 

 

 

(30.6

)

 

 

1,603.5

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas

 

 

603.7

 

 

 

48.9

 

 

 

0.3

 

 

 

(21.0

)

 

 

631.9

 

Operation and maintenance

 

 

319.9

 

 

 

8.9

 

 

 

28.0

 

 

 

(9.6

)

 

 

347.2

 

Depreciation and amortization

 

 

141.2

 

 

 

0.3

 

 

 

5.3

 

 

 

 

 

 

146.8

 

Taxes, other than income taxes

 

 

121.3

 

 

 

0.9

 

 

 

0.5

 

 

 

 

 

 

122.7

 

Impairments

 

 

 

 

 

 

 

 

148.6

 

 

 

 

 

 

148.6

 

Total Operating Expenses

 

 

1,186.1

 

 

 

59.0

 

 

 

182.7

 

 

 

(30.6

)

 

 

1,397.2

 

Operating Income (Loss)

 

$

329.6

 

 

$

18.2

 

 

$

(141.5

)

 

$

 

 

$

206.3

 

Net Economic Earnings (Loss)

 

$

221.8

 

 

$

11.3

 

 

$

(10.0

)

 

$

 

 

$

223.1

 

The following table reconciles the Company’s net economic earnings to net income. For information about the Missouri regulatory adjustment for $9.0 of pension costs in fiscal 2021 and the provision for ISRS rulings in fiscal 2020, see Note 4, Regulatory Matters.

 

 

Three Months Ended

June 30,

 

 

Nine Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Income

 

$

5.3

 

 

$

(92.3

)

 

$

281.6

 

 

$

108.3

 

Adjustments, pre-tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairments

 

 

 

 

 

148.6

 

 

 

 

 

 

148.6

 

Missouri regulatory adjustment

 

 

 

 

 

 

 

 

(9.0

)

 

 

 

Provision for ISRS rulings

 

 

 

 

 

(4.8

)

 

 

 

 

 

 

Fair value and timing adjustments

 

 

2.1

 

 

 

(18.5

)

 

 

6.2

 

 

 

(3.2

)

Income tax effect of adjustments

 

 

(0.5

)

 

 

(25.7

)

 

 

0.6

 

 

 

(30.6

)

Net Economic Earnings

 

$

6.9

 

 

$

7.3

 

 

$

279.4

 

 

$

223.1

 

 

42


 

 

The Company’s total assets by segment were as follows:

 

 

June 30,

 

 

September 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2020

 

Total Assets:

 

 

 

Gas Utility

 

$

7,302.4

 

 

$

6,716.2

 

 

$

6,330.1

 

Gas Marketing

 

 

349.2

 

 

 

182.7

 

 

 

158.6

 

Other

 

 

2,256.3

 

 

 

2,443.5

 

 

 

2,324.8

 

Eliminations

 

 

(1,014.6

)

 

 

(1,101.2

)

 

 

(990.9

)

Total Assets

 

$

8,893.3

 

 

$

8,241.2

 

 

$

7,822.6

 

 

 

10. COMMITMENTS AND CONTINGENCIES

Commitments

The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through 2039, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at June 30, 2021, are estimated at $1,579.2, $1,200.6, and $275.5 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.

Contingencies

The Company and the Utilities account for contingencies, including environmental liabilities, in accordance with accounting standards under the loss contingency guidance of ASC Topic 450, Contingencies, when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

In addition to matters noted below, the Company and the Utilities are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the statements of income, balance sheets, and statements of cash flows of the Company, Spire Missouri, or Spire Alabama. However, there is uncertainty in the valuation of pending claims and prediction of litigation results.

The Company and the Utilities own and operate natural gas distribution, transmission, and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s or Utilities’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, the Company or the Utilities may incur additional environmental liabilities that may result in additional costs, which may be material.

In the natural gas industry, many gas distribution companies have incurred environmental liabilities associated with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took place. The Utilities each have former manufactured gas plant (MGP) operations in their respective service territories, some of which are discussed under the Spire Missouri and Spire Alabama headings below. To the extent costs are incurred associated with environmental remediation activities, the Utilities would request authority from their respective regulators to defer such costs (less any amounts received from insurance proceeds or as contributions from other potentially responsible parties (PRPs)) and collect them through future rates.

To date, costs incurred for all Spire MGP sites for investigation, remediation and monitoring have not been material. However, the amount of costs relative to future remedial actions at these and other sites is unknown and may be material. The actual future costs that Spire Missouri and Spire Alabama may incur could be materially higher or lower depending upon several factors, including whether remediation will be required, final selection and regulatory approval of any remedial actions, changing technologies and government regulations, the ultimate ability of other PRPs to pay, and any insurance recoveries.

43


 

In 2020, Spire retained an outside consultant to conduct probabilistic cost modeling of its former MGP sites in Missouri and Alabama. The purpose of this analysis was to develop an estimated range of probabilistic future liability for each of their MGP sites. That analysis, completed in March 2021, provided a range of demonstrated possible future expenditures to investigate, monitor and remediate the former MGP sites. Spire Missouri and Spire Alabama have recorded their best estimates of the probable expenditures that relate to these matters. The amount remains immaterial, and Spire Missouri, Spire Alabama and the Company do not expect potential liabilities that may arise from remediating these sites to have a material impact on their future financial condition or results of operations.

Spire Missouri

Spire Missouri has identified three former MGP sites in the city of St. Louis, Missouri (the “City”) where costs have been incurred and claims have been asserted. Spire Missouri has enrolled two of the sites in the Missouri Department of Natural Resources (MDNR) Brownfields/Voluntary Cleanup Program (BVCP). The third site is the result of a relatively new claim assertion by the United States Environmental Protection Agency (EPA).

In conjunction with redevelopment of one of the sites, Spire Missouri and another former owner of the site entered into an 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 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.

Spire Missouri has not owned the second site for many years. In a letter dated June 29, 2011, the Attorney General for the State 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 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. MDNR never approved the agreement, so no remedial investigation took place.

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 met with the EPA and reviewed its assertions. Both Spire Missouri and the site owner notified the EPA that 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, in March 2017 Spire Missouri requested more information from the EPA, some of which would also be utilized to identify other former owners and operators of the site that could be added as PRPs. Spire Missouri never 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 these MGP sites. While some of the insurers have denied coverage and reserved their rights, Spire Missouri retains the right to seek potential reimbursements from 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.

44


 

In its western service area, Spire Missouri has six owned MGP sites enrolled in the 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, 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 six 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 and Railroad areas.

Spire Alabama

Spire Alabama is in the chain of title of nine former MGP sites, four of which it still owns, and five former manufactured gas distribution sites, one of which it still owns.

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 matters.

Spire Marketing, along with many natural gas industry participants, faced the unprecedented effects of the February 2021 cold weather event. Numerous natural gas producers and midstream operators were unable to deliver natural gas to market as they experienced wellhead freeze-offs, power outages and equipment failure due to the extreme weather. These events resulted in supply curtailments, and related notices of force majeure to excuse performance, from and to certain counterparties. Further, these events have made Spire Marketing subject to various commercial disputes (including regarding force majeure) and a regulatory dispute regarding tariff obligations as a shipper on an interstate pipeline. As such, Spire Marketing has recorded an estimate of potential liabilities for damages based on communications with counterparties to date and the facts and circumstances surrounding each transaction. It is expected that the estimate will change as new facts emerge or settlements are reached, and it is possible that final settlement amounts may materially differ from the current estimate.  

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 alleged 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. On December 2, 2020, HUD issued a determination that found no reasonable cause exists that Spire Gulf discriminated against residents in Eight Mile, Alabama.

45


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in millions, except per unit and per share amounts)

This section analyzes the financial condition and results of operations of Spire Inc. (the “Company”), Spire Missouri Inc., and Spire Alabama Inc. Spire Missouri, Spire Alabama and Spire EnergySouth are wholly owned subsidiaries of the Company. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth (Spire Gulf and Spire Mississippi) are collectively referred to as the “Utilities.” 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.

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,

 

legal authorization to operate facilities,

 

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;

46


 

 

 

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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements, Spire Missouri’s and Spire Alabama’s Condensed Financial Statements, and the notes thereto.

OVERVIEW

The Company has two reportable segments: Gas Utility and Gas Marketing. Nearly all of Spire’s earnings are derived from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the Utilities’ business and the Spire Missouri rate design, earnings of Spire and each of the Utilities are typically concentrated during the heating season of November through April each fiscal year.

Gas Utility - Spire Missouri

Spire Missouri is Missouri’s largest natural gas distribution utility and is regulated by the MoPSC. Spire Missouri serves St. Louis, Kansas City, and other areas throughout the state. Spire Missouri purchases natural gas in the wholesale market from producers and marketers and ships the gas through interstate pipelines into its own distribution facilities for sale to residential, commercial and industrial customers. Spire Missouri also transports gas through its distribution system for certain larger customers who buy their own gas on the wholesale market. Spire Missouri delivers natural gas to customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Spire Missouri are primarily generated by the sale of heating energy.

Gas Utility - Spire Alabama

Spire Alabama is the largest natural gas distribution utility in the state of Alabama and is regulated by the APSC. Spire Alabama’s service territory is located in central and northern Alabama. Among the cities served by Spire Alabama are Birmingham, the center of the largest metropolitan area in the state, and Montgomery, the state capital. Spire Alabama purchases natural gas through interstate and intrastate suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial, and industrial customers, and other end-users of natural gas. Spire Alabama also transports gas through its distribution system for certain large commercial and industrial customers for a transportation fee. Effective December 1, 2020, for most of these transportation service customers, Spire Alabama also purchases gas on the wholesale market for sale to the customer upon delivery to the Spire Alabama distribution system. All Spire Alabama services are provided to customers 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 to approximately 100,000 customers in southern Alabama and south-central Mississippi. Spire Gulf is regulated by the APSC, and Spire Mississippi is regulated by the MSPSC.

47


 

Gas Marketing

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 central and southern U.S. It holds firm transportation and storage contracts in order to effectively manage its transactions with counterparties, which primarily include producers, municipalities, electric and gas utility companies, and large commercial and industrial customers.

Other

Other components of the Company’s consolidated information include:

 

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 which owns and operates a 65-mile pipeline connecting the Rockies Express Pipeline in Scott County, Illinois, to delivery points in St. Louis County, Missouri, including Spire Missouri’s storage facility. The pipeline is under the jurisdiction of the FERC and is capable of delivering up to 400,000 million British thermal units (MMBtu) per day of natural gas into eastern Missouri. Spire Missouri is the foundation shipper with a contractual commitment of 350,000 MMBtu per day. The Spire STL Pipeline was placed into service in November 2019.

Spire Storage is engaged 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.

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 suspending disconnections and late payment fees for our utility customers for several months in 2020.

We have experienced impacts on our results of operations from COVID-19, including:

 

lost late payment fees due to a moratorium from late March through mid-June 2020;

 

minor net margin impact from lower commercial and industrial volumes offset by additional residential fixed charges;

 

bad debt expense increases due to additional expected credit losses on accounts receivable balances; and

 

net other direct cost reductions 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 through March 31, 2021, and has recorded a related net regulatory asset of $2.9 and $3.8 as of June 30, 2021, and September 30, 2020, respectively. Even with the cost increases and lost revenues, Spire Alabama exceeded the allowed return and recorded a Rate Stabilization and Equalization (RSE) giveback in September 2020 and in January 2021, so there was no bottom-line impact of these COVID-19 effects.

48


 

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 does not have an impact on our results of operations but defers the payment of the Company’s portion of certain payroll taxes until later in 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 COVID-19 health crisis and assess our need and, as applicable, eligibility for any such relief.

NON-GAAP MEASURES

Net income, earnings per share and operating income reported by Spire, Spire Missouri and Spire Alabama are determined in accordance with accounting principles generally accepted in the United States of America (GAAP). Spire, Spire Missouri and Spire Alabama also provide the non-GAAP financial measures of net economic earnings, net economic earnings per share and contribution margin. Management and the Board of Directors use non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting, to determine incentive compensation and to evaluate financial performance. These non-GAAP operating metrics should not be considered as alternatives to, or more meaningful than, the related GAAP measures. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are provided on the following pages.

Net Economic Earnings and Net Economic Earnings Per Share

Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income the impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In addition, net economic earnings per share would exclude the impact, in the fiscal year of issuance, of any shares issued to finance acquisitions that have yet to be included in net economic earnings.

The fair value and timing adjustments are made in instances where the accounting treatment differs from what management considers the economic substance of the underlying transaction, including the following:

 

Net unrealized gains and losses on energy-related derivatives that are required by GAAP fair value accounting associated with current changes in the fair value of financial and physical transactions prior to their completion and settlement. These unrealized gains and losses 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 of the commodity falls below its original cost, to the extent that those commodities are economically hedged; and

 

Realized gains and losses resulting from the settlement of economic hedges prior to the sale of the physical commodity.

49


 

These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transactions occur. Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement and other timing differences associated with related purchase and sale transactions provides a useful representation of the economic effects of only the actual settled transactions and their effects on results of operations. While management uses these non-GAAP measures to evaluate all of its businesses, the net effect of these fair value and timing adjustments on the Utilities’ earnings is minimal because gains or losses on their natural gas derivative instruments are deferred pursuant to state regulation.

Contribution Margin

In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of contribution margin when evaluating results of operations. Contribution margin is defined as operating revenues less natural gas costs and gross receipts tax expense. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC, APSC or MSPSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses or GSA riders. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes and gross receipts tax expense (which are calculated as a percentage of revenues), with the same amount (excluding immaterial timing differences) included in revenues, have no direct effect on operating income. Therefore, management believes that contribution margin is a useful supplemental measure, along with the remaining operating expenses, for assessing the Company’s and the Utilities’ performance.

50


 

EARNINGS – THREE MONTHS ENDED JUNE 30, 2021

Spire

Net Income and Net Economic Earnings

The following tables reconcile the Company’s net economic earnings to the most comparable GAAP number, net income.

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Total

 

 

Per Diluted Common Share**

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) [GAAP]

 

$

12.1

 

 

$

(6.6

)

 

$

(0.2

)

 

$

5.3

 

 

$

0.03

 

Adjustments, pre-tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value and timing adjustments

 

 

0.2

 

 

 

1.9

 

 

 

 

 

 

2.1

 

 

 

0.04

 

Income tax effect of adjustments*

 

 

 

 

 

(0.5

)

 

 

 

 

 

(0.5

)

 

 

(0.01

)

Net Economic Earnings (Loss) [Non-GAAP]

 

$

12.3

 

 

$

(5.2

)

 

$

(0.2

)

 

$

6.9

 

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) [GAAP]

 

$

12.6

 

 

$

13.6

 

 

$

(118.5

)

 

$

(92.3

)

 

$

(1.87

)

Adjustments, pre-tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairments

 

 

 

 

 

 

 

 

148.6

 

 

 

148.6

 

 

 

2.89

 

Provision for ISRS rulings

 

 

(4.8

)

 

 

 

 

 

 

 

 

(4.8

)

 

 

(0.09

)

Fair value and timing adjustments

 

 

(0.6

)

 

 

(17.9

)

 

 

 

 

 

(18.5

)

 

 

(0.36

)

Income tax effect of adjustments*

 

 

1.2

 

 

 

4.4

 

 

 

(31.3

)

 

 

(25.7

)

 

 

(0.50

)

Net Economic Earnings (Loss) [Non-GAAP]

 

$

8.4

 

 

$

0.1

 

 

$

(1.2

)

 

$

7.3

 

 

$

0.07

 

 

*

Income tax effect is calculated by applying federal, state, and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling items and then adding any estimated effects of enacted state or local income tax laws for periods before the related effective date.

**

Net economic earnings per share is calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share calculation, which includes reductions for cumulative preferred dividends and participating shares.

Note: In the following discussion, all references to earnings (loss) per share and net economic earnings per share refer to earnings (loss) per common share and net economic earnings (loss) per common share.

Consolidated

Spire had net income of $5.3 for the three months ended June 30, 2021, compared with a net loss of $92.3 for the three months ended June 30, 2020. Income per diluted share was $0.03 for the current quarter compared to a $1.87 loss per diluted share for the prior year quarter. The net income growth of $97.6 was primarily the result of the $148.6 ($117.3 after-tax) impairment charge taken in the third quarter of the prior year. Excluding this charge net income declined by $19.7, driven by a $20.2 reduction in the Gas Marketing segment and marginally lower performance in the Gas Utility segment, slightly offset by a $1.0 increase in Other.

Spire’s net economic earnings were $6.9 ($0.06 per diluted share) for the three months ended June 30, 2021, compared to $7.3 ($0.07 per diluted share) reported for the same period in the prior year, reflecting higher earnings at the Gas Utility that were more than offset by lower Gas Marketing results, as reflected in the above table. These impacts are described in further detail below.

Gas Utility

For the three months ended June 30, 2021, net economic earnings for the Gas Utility segment increased $3.9 from the third quarter of the prior fiscal year, primarily due to a $2.9 increase at Spire Alabama and a $1.0 increase at Spire Missouri. These impacts are discussed in further detail below.

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Gas Marketing

For the three months ended June 30, 2021, the net economic loss for the Gas Marketing segment was $5.2, compared to net economic earnings of $0.1 in the three months ended June 30, 2020. Drivers of this decline are described in further detail below.

Other

For the three months ended June 30, 2021, net economic loss for Other decreased $1.0 compared with the third quarter of the prior fiscal year, reflecting improved results from Spire Storage, and slightly lower interest expense.

Operating Revenues and Expenses and Contribution Margin

Reconciliations of the Company’s contribution margin to the most directly comparable GAAP measure are shown below.

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Eliminations

 

 

Consolidated

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss) [GAAP]

 

$

35.6

 

 

$

(8.8

)

 

$

6.4

 

 

$

 

 

$

33.2

 

Operation and maintenance expenses

 

 

103.2

 

 

 

3.2

 

 

 

9.2

 

 

 

(3.6

)

 

 

112.0

 

Depreciation and amortization

 

 

50.9

 

 

 

0.3

 

 

 

1.9

 

 

 

 

 

 

53.1

 

Taxes, other than income taxes

 

 

32.1

 

 

 

0.2

 

 

 

0.3

 

 

 

 

 

 

32.6

 

Less: Gross receipts tax expense

 

 

(17.9

)

 

 

 

 

 

 

 

 

 

 

 

(17.9

)

Contribution Margin [Non-GAAP]

 

 

203.9

 

 

 

(5.1

)

 

 

17.8

 

 

 

(3.6

)

 

 

213.0

 

Natural gas costs

 

 

84.9

 

 

 

20.2

 

 

 

 

 

 

(8.2

)

 

 

96.9

 

Gross receipts tax expense

 

 

17.9

 

 

 

 

 

 

 

 

 

 

 

 

17.9

 

Operating Revenues

 

$

306.7

 

 

$

15.1

 

 

$

17.8

 

 

$

(11.8

)

 

$

327.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss) [GAAP]

 

$

20.4

 

 

$

18.2

 

 

$

(145.1

)

 

$

 

 

$

(106.5

)

Operation and maintenance expenses

 

 

115.5

 

 

 

2.2

 

 

 

10.5

 

 

 

(3.3

)

 

 

124.9

 

Depreciation and amortization

 

 

47.8

 

 

 

0.2

 

 

 

2.1

 

 

 

 

 

 

50.1

 

Taxes, other than income taxes

 

 

31.7

 

 

 

0.2

 

 

 

(0.8

)

 

 

 

 

 

31.1

 

Impairments

 

 

 

 

 

 

 

 

148.6

 

 

 

 

 

 

148.6

 

Less: Gross receipts tax expense

 

 

(17.2

)

 

 

(0.1

)

 

 

0.1

 

 

 

 

 

 

(17.2

)

Contribution Margin [Non-GAAP]

 

 

198.2

 

 

 

20.7

 

 

 

15.4

 

 

 

(3.3

)

 

 

231.0

 

Natural gas costs

 

 

90.6

 

 

 

(9.2

)

 

 

0.1

 

 

 

(8.6

)

 

 

72.9

 

Gross receipts tax expense

 

 

17.2

 

 

 

0.1

 

 

 

(0.1

)

 

 

 

 

 

17.2

 

Operating Revenues

 

$

306.0

 

 

$

11.6

 

 

$

15.4

 

 

$

(11.9

)

 

$

321.1

 

Consolidated

Spire reported operating revenue of $327.8 for the three months ended June 30, 2021, a $6.7 increase versus the prior year quarter. Both segments experienced year-over-year increases in operating revenues, as did Other. Spire’s contribution margin decreased $18.0 compared with last year, with increases of $5.7 for the Gas Utility segment, and $2.4 for Other (STL Pipeline and Spire Storage) offset by a $25.8 decrease in the Gas Marketing segment. Depreciation and amortization expenses were up $3.0, reflecting higher Gas Utility expenses. Gas Utility operation and maintenance (O&M) expenses of $103.2 for the quarter were $1.9 higher than last year, after removing the $14.2 transfer of year-over-year nonservice postretirement benefit costs to other expense below the operating income line (the “Nonservice Cost Transfer”). These impacts are described in further detail below.

52


 

Gas Utility

Operating Revenues Gas Utility operating revenues for the three months ended June 30, 2021, were $306.7, or $0.7 higher than the same period in the prior year. The increase in Gas Utility operating revenues was attributable to the following factors:

 

Spire Alabama – Rate adjustment under RSE mechanism, net

 

$

4.1

 

Spire Missouri – ISRS

 

 

1.5

 

Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation)

 

 

(2.7

)

Spire Missouri and Spire Alabama – Lower net PGA/GSA costs

 

 

(2.3

)

All other factors

 

 

0.1

 

Total Variation

 

$

0.7

 

 

The Gas Utility segment benefited $4.1 in net rate adjustments under the RSE mechanism at Spire Alabama, and a $1.5 increase in ISRS revenues. These positive impacts were mostly offset by a $2.7 reduction attributable to volumetric usage and a $2.3 reduction related to lower PGA/GSA costs.

Contribution Margin – Gas Utility contribution margin was $203.9 for the three months ended June 30, 2021, a $5.7 increase over the same period in the prior year. The increase was attributable to the following factors:

 

Spire Alabama – Rate adjustment under RSE mechanism, net

 

$

4.1

 

Spire Missouri – ISRS

 

 

1.5

 

All other factors

 

 

0.1

 

Total Variation

 

$

5.7

 

The increase in contribution margin was primarily attributable to $4.1 net favorable rate adjustments under the RSE mechanism at Spire Alabama and Spire Missouri’s $1.5 ISRS increase.

Operating Expenses – O&M expenses for the three months ended June 30, 2021 were $1.9 higher than the prior year after removing the $14.2 impact of the Nonservice Cost Transfer. The increase was largely due to modestly higher costs in operations, administrative and employee-related expenses. Depreciation and amortization expenses for the three months ended June 30, 2021, were $3.1 higher than the same period in the prior year primarily driven by continued infrastructure capital expenditures across all the Utilities.

Gas Marketing

Operating Revenues – Operating revenues increased $3.5 versus the prior-year period as higher volumes and higher commodity prices were mostly offset by derivative activity and unrealized fair value adjustments.

Contribution Margin – Gas Marketing contribution margin during the three months ended June 30, 2021, decreased $25.8 from the same period in the prior year, due principally to a $19.8 unfavorable change in derivative activity and fair value measurements. The remaining decrease of $6.0 reflects lower volumes and basis differentials, combined with higher demand charges.

Interest Charges

Consolidated interest charges during the three months ended June 30, 2021, increased by $0.5 from the same period in the prior year, principally due to the net $250.0 bond issuance by Spire Missouri in the current year, offset slightly by lower short-term interest rates. For the three months ended June 30, 2021 and 2020, average short-term borrowings were $536.5 and $473.2, respectively, and the average interest rates on these borrowings were 0.451% and 1.12%, respectively.

Income Taxes

Consolidated income tax for the three months ended June 30, 2021, increased $27.6 versus the same period in the prior year. The variance is due principally to the tax benefit booked in the prior year quarter relating to the impairment charge taken.

53


 

Spire Missouri

 

 

Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating Income [GAAP]

 

$

18.4

 

 

$

7.0

 

Operation and maintenance expenses

 

 

64.3

 

 

 

75.6

 

Depreciation and amortization

 

 

31.6

 

 

 

29.7

 

Taxes, other than income taxes

 

 

22.2

 

 

 

22.7

 

Less: Gross receipts tax expense

 

 

(12.3

)

 

 

(12.1

)

Contribution Margin [Non-GAAP]

 

 

124.2

 

 

 

122.9

 

Natural gas costs

 

 

55.6

 

 

 

68.9

 

Gross receipts tax expense

 

 

12.3

 

 

 

12.1

 

Operating Revenues

 

$

192.1

 

 

$

203.9

 

Net Income

 

$

3.1

 

 

$

6.5

 

Operating revenues for the three months ended June 30, 2021, decreased $11.8 from the same period in the prior year primarily due to $7.5 in unfavorable volumetric impacts (including weather mitigation), $3.5 lower gas costs, and a $3.2 decrease related to lower off-system sales. These negative impacts were only partly offset with $1.5 higher ISRS revenues.

Contribution margin for the three months ended June 30, 2021, increased $1.3 from the same period in the prior year, largely due to the $1.5 increase in ISRS mentioned above. Increases resulting from customer growth were largely offset by the volumetric impacts (including weather mitigation) and lower off-system sales.

O&M expenses for the three months ended June 30, 2021, increased $2.9 versus the prior year quarter after removing the $14.2 year-over-year impact of the Nonservice Cost Transfer. The increase was largely due to modestly higher costs in operations, administrative and employee-related expenses. Depreciation and amortization increased $1.9 in the current quarter versus the prior-year quarter due to ongoing capital investments.

Other expense was up $14.4, primarily due to due the impact of the Nonservice Cost Transfer. Removing this impact, other income increased $0.2, in line with prior year results. Resulting net income for the quarter ended June 30, 2021, decreased $3.4 versus the prior-year quarter.

Degree days in Spire Missouri’s service areas during the three months ended June 30, 2021, were 11.6% colder than normal, but 16.1% warmer than the same period last year, resulting in lower usage on a year-over-year comparative basis. Spire Missouri’s total system therms sold and transported were 242.1 million for the three months ended June 30, 2021, compared with 259.4 million for the same period in the prior year. Total off-system therms sold and transported were 0.04 million for the three months ended June 30, 2021, compared with 4.8 million for the same period last year.

Spire Alabama

 

 

Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating Income [GAAP]

 

$

13.3

 

 

$

9.3

 

Operation and maintenance expenses

 

 

31.9

 

 

 

32.5

 

Depreciation and amortization

 

 

16.1

 

 

 

15.0

 

Taxes, other than income taxes

 

 

7.9

 

 

 

7.1

 

Less: Gross receipts tax expense

 

 

(4.7

)

 

 

(4.2

)

Contribution Margin [Non-GAAP]

 

 

64.5

 

 

 

59.7

 

Natural gas costs

 

 

24.1

 

 

 

17.3

 

Gross receipts tax expense

 

 

4.7

 

 

 

4.2

 

Operating Revenues

 

$

93.3

 

 

$

81.2

 

Net Income

 

$

6.5

 

 

$

3.6

 

54


 

 

Operating revenues for the three months ended June 30, 2021, increased $12.1 from the same period in the prior year. The change in operating revenue was principally due to $4.8 attributable to favorable weather usage impacts, net favorable rate adjustments under the RSE mechanism of $4.1, an increase in off-system sales totaling $1.4, and higher gas costs of $1.2.

Contribution margin was $4.8 higher versus the prior year quarter, primarily driven by the favorable net rate adjustments under the RSE mechanism of $4.1 noted above.

O&M expenses for the three months ended June 30, 2021 decreased $0.6 versus the prior-year quarter, primarily due to lower field distribution and administrative expenses. Depreciation and amortization expenses for the three months ended June 30, 2021, were $1.1 higher than the same period last year, the result of continued investment in infrastructure upgrades.

For the quarter ended June 30, 2021, resulting net income increased $2.9 versus the prior-year quarter.

As measured in degree days, temperatures in Spire Alabama’s service area during the three months ended June 30, 2021 were 11.9% warmer than normal, but 17.9% colder than a year ago. Spire Alabama’s total system therms sold and transported were 216.8 million for the three months ended June 30, 2021, compared with 208.7 million for the same period in the prior year. The current quarter reflects off-system sales, and related therms sold totaled 6.0 million, versus no volume in the prior year as the program had not yet commenced.

EARNINGS – NINE MONTHS ENDED JUNE 30, 2021

Spire

Net Income and Net Economic Earnings

The following tables reconcile the Company’s net economic earnings to the most comparable GAAP number, net income.

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Total

 

 

Per Diluted Common Share**

 

Nine Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) [GAAP]

 

$

255.0

 

 

$

33.5

 

 

$

(6.9

)

 

$

281.6

 

 

$

5.23

 

Adjustments, pre-tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spire Missouri regulatory adjustments

 

 

(9.0

)

 

 

 

 

 

 

 

 

(9.0

)

 

 

(0.18

)

Fair value and timing adjustments

 

 

0.3

 

 

 

5.9

 

 

 

 

 

 

6.2

 

 

 

0.12

 

Income tax effect of adjustments*

 

 

2.1

 

 

 

(1.5

)

 

 

 

 

 

0.6

 

 

 

0.01

 

Net Economic Earnings (Loss) [Non-GAAP]

 

$

248.4

 

 

$

37.9

 

 

$

(6.9

)

 

$

279.4

 

 

$

5.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) [GAAP]

 

$

222.0

 

 

$

13.6

 

 

$

(127.3

)

 

$

108.3

 

 

$

1.90

 

Adjustments, pre-tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairments

 

 

 

 

 

 

 

 

148.6

 

 

 

148.6

 

 

 

2.90

 

Fair value and timing adjustments

 

 

(0.2

)

 

 

(3.0

)

 

 

 

 

 

(3.2

)

 

 

(0.06

)

Income tax effect of adjustments*

 

 

 

 

 

0.7

 

 

 

(31.3

)

 

 

(30.6

)

 

 

(0.60

)

Net Economic Earnings (Loss) [Non-GAAP]

 

$

221.8

 

 

$

11.3

 

 

$

(10.0

)

 

$

223.1

 

 

$

4.14

 

*

Income tax effect is calculated by applying federal, state, and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling items and then adding any estimated effects of enacted state or local income tax laws for periods before the related effective date.

**

Net economic earnings per share is calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share calculation, which includes reductions for cumulative preferred dividends and participating shares.

55


 

Consolidated

Spire’s net income was $281.6 for the nine months ended June 30, 2021, compared with $108.3 for the nine months ended June 30, 2020. Diluted earnings per share for the nine months ended June 30, 2021 was $5.23, compared with diluted earnings per share of $1.90 for the nine months ended June 30, 2020.

The prior year amount reflects the impact of the third quarter 2020 impairment charge, identified above, of $148.6 ($117.3 after tax). Excluding this charge, net income increased $56.0, driven by increases of $33.0 and $19.9 in Gas Utility and Gas Marketing, respectively, combined with a $3.1 improvement in results from Other.

Net economic earnings were $279.4 ($5.18 per diluted share) for the nine months ended June 30, 2021, compared to $223.1 ($4.14 per diluted share) for the same period last year, reflecting earnings improvements in both the Gas Marketing and Gas Utility segments. These variances are discussed in greater detail below.

Gas Utility

Gas Utility net income increased by $33.0 from the prior year. The Gas Utility segment is higher due principally to a $14.6 increase in Spire Missouri ISRS revenues (including the impact of a prior-year provision of $2.2 related to the ISRS ruling settled in the year), the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances totaling $9.0 ($6.8 after tax), $8.4 higher contribution margin due to the impacts of colder weather, $7.1 in net favorable rate adjustments under the RSE mechanism at Spire Alabama, and lower run-rate operating costs. These positive impacts were partially offset by higher depreciation and amortization reflecting increased capital investment.

Net economic earnings in the current year were $248.4, an increase of $26.6 over the same period in the prior year. The increase was primarily driven by higher contribution margin and lower operations and maintenance expense, after adjusting for the Year-To-Date Postretirement Nonservice Cost Transfer. These impacts are described in further detail below.

Gas Marketing

The Gas Marketing segment reported net income of $33.5 for the nine months ended June 30, 2021, versus $13.6 of net income during the same period last year, principally reflecting strong second quarter operating results in the current year, driven by optimization of market conditions in the second fiscal quarter due to extreme weather as a result of Winter Storm Uri. Partly offsetting this gain was $6.7 in after-tax unfavorable year-over-year fair value mark-to-market valuations. Net economic earnings for the current year were $37.9, an increase of $26.6 from the same period last year.

Other

For the nine months ended June 30, 2021, net economic loss for Other improved to $6.9 from $10.0 in the prior-year period, due principally to lower net losses from Spire Storage.

56


 

Operating Revenues and Expenses and Contribution Margin

Reconciliations of the Company’s contribution margin to the most directly comparable GAAP measure are shown in the table below:

 

 

Gas Utility

 

 

Gas Marketing

 

 

Other

 

 

Eliminations

 

 

Consolidated

 

Nine Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income [GAAP]

 

$

366.4

 

 

$

43.2

 

 

$

13.9

 

 

$

 

 

$

423.5

 

Operation and maintenance expenses

 

 

310.2

 

 

 

13.6

 

 

 

28.9

 

 

 

(10.1

)

 

 

342.6

 

Depreciation and amortization

 

 

149.0

 

 

 

0.9

 

 

 

5.5

 

 

 

 

 

 

155.4

 

Taxes, other than income taxes

 

 

124.0

 

 

 

0.9

 

 

 

1.7

 

 

 

 

 

 

126.6

 

Less: Gross receipts tax expense

 

 

(81.7

)

 

 

(0.1

)

 

 

 

 

 

 

 

 

(81.8

)

Contribution Margin [Non-GAAP]

 

 

867.9

 

 

 

58.5

 

 

 

50.0

 

 

 

(10.1

)

 

 

966.3

 

Natural gas costs

 

 

908.4

 

 

 

14.7

 

 

 

0.1

 

 

 

(26.0

)

 

 

897.2

 

Gross receipts tax expense

 

 

81.7

 

 

 

0.1

 

 

 

 

 

 

 

 

 

81.8

 

Operating Revenues

 

$

1,858.0

 

 

$

73.3

 

 

$

50.1

 

 

$

(36.1

)

 

$

1,945.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss) [GAAP]

 

$

329.6

 

 

$

18.2

 

 

$

(141.5

)

 

$

 

 

$

206.3

 

Operation and maintenance expenses

 

 

319.9

 

 

 

8.9

 

 

 

28.0

 

 

 

(9.6

)

 

 

347.2

 

Depreciation and amortization

 

 

141.2

 

 

 

0.3

 

 

 

5.3

 

 

 

 

 

 

146.8

 

Taxes, other than income taxes

 

 

121.3

 

 

 

0.9

 

 

 

0.5

 

 

 

 

 

 

122.7

 

Impairments

 

 

 

 

 

 

 

 

148.6

 

 

 

 

 

 

148.6

 

Less: Gross receipts tax expense

 

 

(79.4

)

 

 

(0.3

)

 

 

 

 

 

 

 

 

(79.7

)

Contribution Margin [Non-GAAP]

 

 

832.6

 

 

 

28.0

 

 

 

40.9

 

 

 

(9.6

)

 

 

891.9

 

Natural gas costs

 

 

603.7

 

 

 

48.9

 

 

 

0.3

 

 

 

(21.0

)

 

 

631.9

 

Gross receipts tax expense

 

 

79.4

 

 

 

0.3

 

 

 

 

 

 

 

 

 

79.7

 

Operating Revenues

 

$

1,515.7

 

 

$

77.2

 

 

$

41.2

 

 

$

(30.6

)

 

$

1,603.5

 

Consolidated

Spire’s operating revenues increased by $342.3 at the Gas Utility segment, and Other increased by $8.9. These increases more than offset the $3.9 decline in the Gas Marketing segment and higher intercompany eliminations. The Gas Utility increase was due principally to $180.6 of higher gas costs (including $195.8 of cover charges and OFO penalties to certain wholesale customers), a $92.6 increase in higher off-system sales, and a $38.5 increase due to weather/volumetric impacts (net of weather mitigation). The Gas Utility segment also benefited from higher ISRS revenues at Spire Missouri and a favorable net RSE adjustment at Spire Alabama. The Gas Marketing decrease was due to higher trading activity (trading activities are recorded as revenues net of costs) offsetting higher volumes and prices, while Other reflects $6.2 higher revenues from both Spire Storage and STL Pipeline (which entered service in late calendar 2019).

Spire’s contribution margin increased $74.4 compared with the same nine-month period last year, with all segments reporting increases. The Gas Utility contribution margin increased $35.3, primarily driven by the $26.2 increase from Spire Missouri and the $9.8 increase at Spire Alabama. The $30.5 increase in Gas Marketing reflects very favorable weather conditions in the current year second quarter, offset partly by unfavorable fair value mark-to-market adjustments. Higher contribution margins at the STL Pipeline are consistent with its in-service date early in fiscal 2020, and Spire Storage’s improvement reflects higher utilization of its storage capacity.

Depreciation and amortization expenses were higher in the Gas Utility segment, due to higher capital investments. Gas Utility O&M expenses were $9.7 lower in the current year, impacted by the Nonservice Cost Transfer of $3.9. Excluding this adjustment, O&M expenses were lower by $13.6 largely due to the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances totaling $9.0. These fluctuations are described in more detail below.

57


 

Gas Utility

Operating Revenues – Gas Utility operating revenues for the nine months ended June 30, 2021, were $1,858.0, or $342.3 higher than the same period last year. The increase in Gas Utility operating revenues was attributable to the following factors:

Spire Missouri and Spire Alabama – Higher PGA/GSA costs

 

$

180.6

 

Spire Missouri and Spire Alabama – Off -system sales and capacity release

 

 

92.6

 

Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation)

 

 

38.5

 

Spire Missouri – ISRS (including ISRS rulings prior year true-up)

 

 

14.6

 

Spire Alabama – Rate adjustment under RSE mechanism, net

 

 

6.6

 

All other factors

 

 

9.4

 

Total Variation

 

$

342.3

 

The increase in revenues was driven primarily by a $180.6 increase in gas costs (including $195.8 of cover charges and OFO penalties to certain wholesale customers), a $92.6 increase in off-system sales, and higher weather/volumetric impacts of $38.5. The segment also benefited from a $14.6 increase of Spire Missouri ISRS, and by a $6.6 increase due to Spire Alabama’s rate adjustments under the RSE mechanism.

Contribution Margin – Gas Utility contribution margin was $867.9 for the nine months ended June 30, 2021, a $35.3 increase over the same period last year. The increase was attributable to the following factors:

Spire Missouri – ISRS (including ISRS rulings prior year true-up)

 

$

14.6

 

Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation)

 

 

8.4

 

Spire Alabama – Rate adjustment under RSE mechanism, net

 

 

7.1

 

Spire Missouri and Spire Alabama – Off-system sales and capacity release

 

 

1.6

 

All other factors

 

 

3.6

 

Total Variation

 

$

35.3

 

The contribution margin increase resulted primarily from Missouri ISRS (net of ISRS ruling provisions), higher volumetric margins, Spire Alabama rate adjustments under the RSE mechanism and higher off-system sales.

Operating Expenses – Gas Utility O&M expenses decreased $9.7 from last year. Removing the Nonservice Cost Transfer, the year-over-year decrease was $13.6. Of this decrease, $9.0 is attributable to the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances. The remaining decrease of $4.6 is due to lower operations and employee-related costs. Depreciation and amortization expenses for the nine months ended June 30, 2021, increased $7.8 from the same period last year as a result of continued levels of capital investment in excess of depreciation expense.

Gas Marketing

Operating Revenues – Gas Marketing operating revenues decreased $3.9 from the same period last year, principally due to a net reduction in revenue billed to retail customers.

Contribution Margin – Gas Marketing contribution margin during the nine months ended June 30, 2021, increased $30.5 from the same period last year, driven principally by strong second quarter results in the current year. During this quarter, particularly the month of February, very favorable weather patterns drove significantly higher regional basis differentials and volumes. This was only partly offset by an unfavorable net $8.9 year-over-year fluctuation in derivative activity and mark-to-market valuations.

58


 

Spire Marketing, along with many natural gas industry participants, faced the unprecedented effects of the February 2021 cold weather event. Numerous natural gas producers and midstream operators were unable to deliver natural gas to market as they experienced wellhead freeze-offs, power outages and equipment failure from the extreme weather. These events resulted in supply curtailments, and related notices of force majeure to excuse performance, from and to certain counterparties. Further, these events have made Spire Marketing subject to various commercial disputes (including regarding force majeure) and a regulatory dispute regarding tariff obligations as a shipper on an interstate pipeline. As such, Spire Marketing has recorded an estimate of potential liabilities for damages based on the facts and circumstances surrounding each counterparty transaction as of March 31, 2021. During the current quarter, a number of these disputes have been resolved and/or exposures clarified based on further communication with the counterparties. It is expected that the estimate will change as new facts emerge or settlements are reached, and it is possible that final settlement amounts may materially differ from the current estimate.

Interest Charges

Consolidated interest charges during the nine months ended June 30, 2021, were $1.9 lower than the same period last year. The decrease was primarily driven by lower short-term borrowing rates more than offsetting the impact of net long-term debt issuances in the current period. For the nine months ended June 30, 2021 and 2020, average short-term borrowings were $633.1 and $581.7, respectively, and the average interest rates on these borrowings were 0.4% and 2.0%, respectively.

Income Taxes

Consolidated income tax expense during the nine months ended June 30, 2021 increased $51.7 versus the prior year. The variance is the result of the $31.3 tax benefit booked in the prior year relating to the impairment charge, with the remaining $20.4 the result of higher pre-tax book income in the current year, combined with a higher effective tax rate in the current year due to mix of earnings.

Spire Missouri

 

 

Nine Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating Income [GAAP]

 

$

214.7

 

 

$

191.7

 

Operation and maintenance expenses

 

 

190.0

 

 

 

191.9

 

Depreciation and amortization

 

 

93.0

 

 

 

88.0

 

Taxes, other than income taxes

 

 

86.2

 

 

 

85.5

 

Less: Gross receipts tax expense

 

 

(56.1

)

 

 

(55.5

)

Contribution Margin [Non-GAAP]

 

 

527.8

 

 

 

501.6

 

Natural gas costs

 

 

754.6

 

 

 

478.3

 

Gross receipts tax expense

 

 

56.1

 

 

 

55.5

 

Operating Revenues

 

$

1,338.5

 

 

$

1,035.4

 

Net Income

 

$

152.8

 

 

$

129.0

 

Operating revenues during the nine months ended June 30, 2021, increased $303.1 from the same period last year primarily due to a $180.6 increase attributable to higher gas costs, a $89.0 increase due to higher off-system sales, and a $13.7 increase in volumetric impacts (net of weather mitigation) relating to colder weather conditions in the second quarter of the current year. Spire Missouri also benefited from $14.6 higher ISRS.

Contribution margin increased $26.2 versus the same period in the prior year. The variance was attributable to the previously mentioned $14.6 increase in ISRS, $6.4 higher volumetric margins, primarily the result of colder weather, and $1.3 related to customer growth.

O&M expenses during the nine months ended June 30, 2021, decreased $1.9 from the same period last year. Excluding the Nonservice Cost Transfer of $5.2 and the Missouri Supreme Court ruling totaling $9.0 discussed above, O&M was higher by $1.9, reflecting higher employee-related expenses. Depreciation increased by $5.0 as a result of continuing capital investment.

59


 

Spire Missouri’s other income increased $9.0 versus the comparable prior-year period. Removing the impact of the Nonservice Cost Transfer of $5.2, other income increased $3.8, primarily due to increases in the value of investments associated with non-qualified employee benefit plans reflecting market conditions.

Resulting net income for the nine months ended June 30, 2021, increased $23.8 versus the same period in the prior year.

Temperatures in Spire Missouri’s service areas during the nine months ended June 30, 2021, were 1.4% warmer than the same period last year and 3.4% warmer than normal. Despite the slightly warmer overall period temperatures, the Spire Missouri total system therms sold and transported were 1,537.8 million for the nine months ended June 30, 2021, compared with 1,510.6 million for the same period last year. Total off-system therms sold and transported were 21.3 million for the nine months ended June 30, 2021, compared with 23.3 million for the same period last year.

Spire Alabama

 

 

Nine Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating Income [GAAP]

 

$

125.0

 

 

$

111.4

 

Operation and maintenance expenses

 

 

98.4

 

 

 

104.8

 

Depreciation and amortization

 

 

46.3

 

 

 

43.9

 

Taxes, other than income taxes

 

 

30.8

 

 

 

29.1

 

Less: Gross receipts tax expense

 

 

(21.8

)

 

 

(20.3

)

Contribution Margin [Non-GAAP]

 

 

278.7

 

 

 

268.9

 

Natural gas costs

 

 

129.0

 

 

 

103.7

 

Gross receipts tax expense

 

 

21.8

 

 

 

20.3

 

Operating Revenues

 

$

429.5

 

 

$

392.9

 

Net Income

 

$

83.5

 

 

$

74.6

 

Operating revenues for the nine months ended June 30, 2021, increased $36.6 from the same period last year. The change was principally driven by a $24.8 increase in weather and usage impacts (net of weather mitigation) and $6.6 net rate adjustments under the RSE mechanism. The commencement of off-system sales in the current year contributed $3.6 to revenue growth.

Contribution margin increased $9.8, principally as a result of the rate adjustments under the RSE mechanism of $7.1 and $1.3 related to higher off-system sales. O&M expenses for the nine months ended June 30, 2021, decreased $6.4 from the same period last year. Excluding the impact of the Nonservice Cost Transfer of $1.1, the decrease of $5.3 was primarily driven by lower operations and employee-related costs.

Resulting net income for the nine months ended June 30, 2021, increased $8.9 versus the same period in the prior year.

Temperatures in Spire Alabama’s service area during the nine months ended June 30, 2021, were 12.0% colder than the same period last year but 6.4% warmer than normal. Spire Alabama’s total system therms sold and transported were 801.5 million for the nine months ended June 30, 2021, compared with 812.4 million for the same period last year. The current year reflects off-system sales, and related therms sold totaled 33.1 million, versus no volume in the prior year as the program had not yet commenced.

 

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REGULATORY MATTERS

For discussions of regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 4, Regulatory Matters, of the Notes to Financial Statements in Item 1.

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. GAAP 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. Our critical accounting estimates used in the preparation of our financial statements are described in Item 7 of the Company’s, Spire Missouri’s, and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2020, and include regulatory accounting, employee benefits and postretirement obligations, impairment of long-lived assets, and income taxes. While accounting estimates related to these and other items such as goodwill and allowance for credit losses were considered in light of the COVID-19 health crisis and the February 2021 cold weather event, there were no significant changes to critical accounting estimates during the nine months ended June 30, 2021.

For discussion of other significant accounting policies, see Note 1 of the Notes to Financial Statements included in this Form 10-Q as well as Note 1 of the Notes to Financial Statements included in the Company’s, Spire Missouri’s, and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

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 the companies’ financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Pronouncements section in Note 1 of the Notes to Financial Statements in Item 1.

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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.

 

 

Nine Months Ended

June 30,

 

Cash Flow Summary

 

2021

 

 

2020

 

Net cash provided by operating activities

 

$

220.7

 

 

$

453.8

 

Net cash used in investing activities

 

 

(461.7

)

 

 

(470.1

)

Net cash provided by financing activities

 

 

260.8

 

 

 

17.9

 

 

For the nine months ended June 30, 2021, net cash provided by operating activities decreased $233.1 from the corresponding period of fiscal 2020. The change was due principally to regulatory timing and fluctuations in working capital items, as discussed above, in particular the large increase in accounts receivable due to the February 2021 cold weather event and related delayed collections. For more information, see the discussion of Spire Missouri’s Operational Flow Order in Note 4, Regulatory Matters, of the Notes to Financial Statements in Item 1.

For the nine months ended June 30, 2021, net cash used in investing activities was $8.4 less than for the same period in the prior year, primarily driven by a $12.5 decrease in capital expenditures. The primary driver of the lower capital expenditures was a $49.8 decline related to Spire STL Pipeline and Spire Storage, largely offset by a $39.0 capital spending increase at Gas Utility. Total capital expenditures for the full fiscal year 2021 are expected to be approximately $590.

Lastly, for the nine months ended June 30, 2021, net cash provided by financing activities was up $242.9 versus net cash provided for the nine months ended June 30, 2020. Current year long-term debt issuances were $629.1, or $119.1 higher than a year ago, while the combination of lower repayments of both long-term and short-term debt in the current year period contributed $165.2 to the period-over-period increase. Partially offsetting these increases was a $32.6 decline in issuances of common stock during the first nine months of fiscal 2021 versus the same prior year period.

CAPITAL RESOURCES

The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. Our debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of June 30, 2021, the debt ratings of the Company, Spire Missouri and Spire Alabama, shown in the following table, remain at investment grade 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

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It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements, which primarily include capital expenditures, interest payments on long-term debt, scheduled maturities of long-term debt, short-term seasonal needs and dividends.

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 5, Financing, of the Notes to Financial Statements in Item 1, 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 had $8.2 of temporary cash investments as of June 30, 2021.

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 5, Financing, of the Notes to Financial Statements in Item 1.

Long-term Debt and Equity

At June 30, 2021, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $3,069.6, of which $1,348.0 was issued by Spire Missouri, $625.0 was issued by Spire Alabama, and $231.6 was issued by other subsidiaries. For more information about long-term debt, see Note 5 of the Notes to Financial Statements in Item 1.

In February 2021, Spire issued 3.5 million equity units for an aggregate stated amount of $175.0, resulting in net proceeds of $169.3 after underwriting fees and other issuance costs. See Note 5 of the Notes to Financial Statements in Item 1 for additional discussion of these equity units.

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 $660.0 for financings placed any time before September 30, 2023. As of June 30, 2021, $355.0 remained available under this authorization. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance. On March 24, 2020, the APSC approved an application for up to $150.0 of additional long-term debt financing for Spire Alabama, which was ultimately issued on December 15, 2020.

Spire has a shelf registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (SEC) for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 188,994 and 184,184 shares at June 30, 2021 and July 31, 2021, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 14, 2022.

On February 6, 2019, Spire entered into an “at-the-market” equity distribution agreement, supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $150.0. Those shares are issued pursuant to Spire’s universal shelf registration statement referenced above and a prospectus supplement dated May 14, 2019. Under this program, a total of 626,249 shares were issued in fiscal 2019 and 2020, and as of June 30, 2021, Spire can still issue shares having an aggregate offering price of up to $102.2.

63


 

Including the current portion of long-term debt, the Company’s long-term consolidated capitalization at June 30, 2021, consisted of 47% equity and at September 30, 2020, consisted of 50% equity.

CONTRACTUAL OBLIGATIONS

During the nine months ended June 30, 2021, except for the issuance of $150.0 of ten-year notes by Spire Alabama, $305.0 of thirty-year first mortgage bonds by Spire Missouri, and $175.0 of notes by Spire as part of equity units (all described in Note 5, Financing, of the Notes to Financial Statements in Item 1), there were no material changes outside the ordinary course of business to the estimated contractual obligations from the disclosure provided in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

MARKET RISK

There were no material changes in the Company’s commodity price risk or counterparty credit risk as of June 30, 2021, relative to the corresponding information provided in the Company’s Annual Report on Form 10-K as of September 30, 2020. In the second quarter of 2020, the Company entered into multiple ten-year interest rate swaps with fixed interest rates ranging from 0.934% to 1.2975% for a total notional amount of $75.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $5.5 mark-to-market gain on these swaps for the nine months ended June 30, 2021. In the third quarter of 2021, the Company entered into multiple ten-year interest rate swaps with fixed interest rates ranging from 2.008% to 2.21075% 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 $2.4 mark-to-market loss on these swaps for the nine months ended June 30, 2021. As of June 30, 2021, the Company has recorded through other comprehensive income a cumulative mark-to-market net asset of $2.3 on open swaps.

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 and regulations, along with their 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 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 10 of the Notes to Financial Statements in Item 1.

OFF-BALANCE SHEET ARRANGEMENTS

At June 30, 2021, 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.

64


 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For this discussion, see Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk.

Item 4. 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 the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Spire Missouri

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Spire Alabama

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

65


 

 

PART II. OTHER INFORMATION

 

For a description of legal proceedings, environmental matters and regulatory matters, see Note 10, Commitments and Contingencies, and Note 4, Regulatory Matters, of the Notes to Financial Statements in Item 1 of Part I.

Item 1A. Risk Factors

The following represents a material change in the Company’s risk factors from those disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The following risk factor disclosure should be read in conjunction with the other risk factors set out in that Form 10-K.

The court decision to vacate Spire STL Pipeline’s Certificate of Public Convenience and Necessity could cause a temporary or permanent halt in the natural gas supply transported by Spire STL Pipeline, which could adversely affect the Company.

On June 22, 2021, the U.S. Court of Appeals for the District of Columbia Circuit issued an order vacating STL Pipeline’s certificates and remanding the proceeding back to the FERC, although vacatur does not take effect until after the expiration (or denial) of that court’s opportunity to reconsider its decision.

In the event the Spire STL Pipeline is taken out of service, the Company’s financial condition and results of operations may be adversely impacted by impairment of Spire STL Pipeline’s assets, currently carried at over $270 million, and other effects. Spire STL Pipeline will continue to pursue all legal and regulatory avenues to ensure its current and future operation.

In addition, Spire Missouri relies on Spire STL Pipeline to transport natural gas into the St. Louis region. In the event the Spire STL Pipeline is taken out of service, Spire Missouri’s financial condition and results of operations may be adversely impacted which could result in a material adverse effect on the Company’s financial condition and operating results, as discussed below.

The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in a timely manner.

In order to meet their customers’ annual and seasonal natural gas demands, the Utilities must obtain sufficient supplies, interstate pipeline capacity, and storage capacity. If they are unable to obtain these, either from their suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, to the extent not mitigated by tariffs, contractual indemnification or insurance, the Utilities’ financial condition and results of operations may be adversely impacted. If a substantial disruption in interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand, the Utilities’ financial results could be adversely impacted. In particular, the natural gas supply provided to Spire Missouri by Spire STL Pipeline is currently at risk due to the order issued by the U.S. Court of Appeals for the District of Columbia Circuit vacating Spire STL Pipeline’s Certificate of Public Convenience and Necessity and remanding the matter back to FERC for further action. In the event the Spire STL Pipeline is taken out of service, Spire Missouri’s ability to secure new pipeline contracts on other systems serving the region may be significantly constrained, and Spire Missouri would likely not be able to replace that supply based on similar terms or at all over the short term based on current market and operating conditions. Without the availability of the STL Pipeline, Spire Missouri may have to develop and, in the event of prolonged cold weather next winter, implement a curtailment plan in which it would have to allocate gas to its customers based upon need, leading to potentially significant service disruptions for customers.

66


 

Spire Missouri will continue to pursue all legal and regulatory avenues to ensure access to reliable, affordable and safe delivery of energy for eastern Missouri. If Spire Missouri is unable to obtain sufficient pipeline capacity to meet its customers’ annual and seasonal natural gas demands, Spire Missouri’s financial condition and results of operations may be adversely impacted which could result in a material adverse effect on the Company’s financial condition and operating results.

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

The only repurchases of Spire’s common stock in the quarter were pursuant to elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the vesting of performance-based and time-vested restricted stock and stock units. The following table provides information on those repurchases.

Period

 

(a)

Total Number of

Shares Purchased

 

 

(b)

Average Price Paid

Per Share

 

 

(c)

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans

or Programs

 

 

(d)

Maximum Number

of Shares That May

Yet be Purchased

Under the Plans

or Programs

 

April 1, 2021 –

April 30, 2021

 

 

429

 

 

$

73.37

 

 

 

 

 

 

 

May 1, 2021 –

May 31, 2021

 

 

339

 

 

 

75.62

 

 

 

 

 

 

 

June 1, 2021 –

June 30, 2021

 

 

45

 

 

 

72.20

 

 

 

 

 

 

 

Total

 

 

813

 

 

 

74.24

 

 

 

 

 

 

 

Spire Missouri’s outstanding first mortgage bonds contain restrictions on its ability to pay cash dividends on its common stock. As of June 30, 2021, all of Spire Missouri’s retained earnings were free from such restrictions.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

67


 

 

Item 6. Exhibits

 

Exhibit No.

 

Description

   4.1*

 

Thirty-Fifth Supplemental Indenture, dated as of May 20, 2021, between Spire Missouri and UMB Bank & Trust, N.A., as trustee; filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K on May 20, 2021.

   4.2*

 

Form of 3.300% Series First Mortgage Bonds due 2051; included in Exhibit 4.1 to the Company’s Current Report on Form 8-K on May 20, 2021.

31.1

 

CEO and CFO Certifications under Exchange Act Rule 13a-14(a) of Spire Inc.

31.2

 

CEO and CFO Certifications under Exchange Act Rule 13a-14(a) of Spire Missouri Inc.

31.3

 

CEO and CFO Certifications under Exchange Act Rule 13a-14(a) of Spire Alabama Inc.

32.1

 

CEO and CFO Section 1350 Certifications of Spire Inc.

32.2

 

CEO and CFO Section 1350 Certifications of Spire Missouri Inc.

32.3

 

CEO and CFO Section 1350 Certifications of Spire Alabama Inc.

101

 

Interactive Data Files including the following information from the Quarterly Report on Form 10-Q for the period ended June 30, 2021, formatted in inline extensible business reporting language (“Inline XBRL”): (i) Cover Page Interactive Data and (ii) the Financial Statements included in Item 1.

104

 

Cover Page Interactive Data File (formatted in Inline XBRL and included in the Interactive Data Files submitted under Exhibit 101).

 

*

Incorporated herein by reference and made a part hereof. Spire Inc. File No. 1-16681. Spire Missouri Inc. File No. 1-1822.

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SIGNATURES

 

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

 

 

 

 

Spire Inc.

 

 

 

 

Date:

August 5, 2021

 

By:

/s/ Steven P. Rasche

 

 

 

 

Steven P. Rasche

 

 

 

 

Executive Vice President and

Chief Financial Officer

 

 

 

 

(Authorized Signatory and

Principal Financial Officer)

 

 

 

 

Spire Missouri Inc.

 

 

 

 

Date:

August 5, 2021

 

By:

/s/ Timothy W. Krick

 

 

 

 

Timothy W. Krick

 

 

 

 

Controller and Chief Accounting Officer

 

 

 

 

(Authorized Signatory and

Chief Accounting Officer)

 

 

 

 

Spire Alabama Inc.

 

 

 

 

Date:

August 5, 2021

 

By:

/s/ Timothy W. Krick

 

 

 

 

Timothy W. Krick

 

 

 

 

Chief Accounting Officer

 

 

 

 

(Authorized Signatory and

Chief Accounting Officer)

 

69