UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| 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 | |||
| | | | | |||
| | | | | |||
| | | | |
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 | ||
| | | | ||
| | | |
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. | | No ☐ | ||
| Spire Missouri Inc. | | No ☐ | ||
| Spire Alabama Inc. | | 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. | | No ☐ | ||
| Spire Missouri Inc. | | No ☐ | ||
| Spire Alabama Inc. | | No ☐ |
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
|
| Accelerated |
| Smaller | Emerging growth company | ||||||
| Spire Inc. | X | |||||||||
| Spire Missouri Inc. | X | |||||||||
| Spire Alabama Inc. | X |
If an emerging growth company, indicate by check mark if each 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, 2022, was as follows:
| Spire Inc. | Common Stock, par value $1.00 per share | | |||
| Spire Missouri Inc. | Common Stock, par value $1.00 per share (all owned by Spire Inc.) | | |||
| Spire Alabama Inc. | Common Stock, par value $0.01 per share (all owned by Spire Inc.) | |
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.
| Page No. |
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| 2 | |||
| Item 1 |
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| Spire Inc. |
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| Spire Missouri Inc. |
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| Spire Alabama Inc. |
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| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3 |
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| Item 4 |
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| Item 1 |
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| Item 1A |
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| Item 2 |
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| Item 3 |
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| Item 4 |
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| Item 5 |
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| Item 6 |
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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 and its subsidiaries unless the context suggests otherwise |
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 provides natural gas marketing services |
Spire Marketing |
Spire Marketing Inc. |
|
| Gas Utility |
Segment including the 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, or the 65-mile FERC-regulated pipeline it constructed and operates to deliver natural gas into eastern Missouri |
|
| 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 |
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, 2021.
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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| (In millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Operating Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Natural gas | ||||||||||||||||
| Operation and maintenance | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Income | ||||||||||||||||
| Interest Expense, Net | ||||||||||||||||
| Other (Expense) Income, Net | ( | ) | ( | ) | ( | ) | ||||||||||
| (Loss) income Before Income Taxes | ( | ) | ||||||||||||||
| Income Tax (Benefit) Expense | ( | ) | ||||||||||||||
| Net (Loss) Income | ( | ) | ||||||||||||||
| Provision for preferred dividends | ||||||||||||||||
| Income allocated to participating securities | ||||||||||||||||
| Net (Loss) Income Available to Common Shareholders | $ | ( | ) | $ | $ | $ | ||||||||||
| Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Basic (Loss) Earnings Per Common Share | $ | ( | ) | $ | $ | $ | ||||||||||
| Diluted (Loss) Earnings Per Common Share | $ | ( | ) | $ | $ | $ | ||||||||||
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net (Loss) Income | $ | ( | ) | $ | $ | $ | ||||||||||
| Other Comprehensive Income (Loss), Before Tax: | ||||||||||||||||
| Cash flow hedging derivative instruments: | ||||||||||||||||
| Net hedging gain (loss) arising during the period | ( | ) | ||||||||||||||
| Amounts reclassified into net income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net gain (loss) on cash flow hedging derivative instruments | ( | ) | ||||||||||||||
| Net gain on defined benefit pension and other postretirement plans | ||||||||||||||||
| Net unrealized loss on available for sale securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Comprehensive Income (Loss), Before Tax | ( | ) | ||||||||||||||
| Income Tax Expense (Benefit) Related to Items of Other Comprehensive Income | ( | ) | ||||||||||||||
| Other Comprehensive Income (Loss), Net of Tax | ( | ) | ||||||||||||||
| Comprehensive Income | $ | $ | $ | $ | ||||||||||||
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | September 30, | June 30, | ||||||||||
| (Dollars in millions, except per share amounts) | 2022 | 2021 | 2021 | |||||||||
| ASSETS | ||||||||||||
| Utility Plant | $ | $ | $ | |||||||||
| Less: Accumulated depreciation and amortization | ||||||||||||
| Net Utility Plant | ||||||||||||
| Non-utility Property (net of accumulated depreciation and amortization of $, $ and $ at June 30, 2022, September 30, 2021, and June 30, 2021, respectively) | ||||||||||||
| Other Investments | ||||||||||||
| Total Other Property and Investments | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable: | ||||||||||||
| Utility | ||||||||||||
| Other | ||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Delayed customer billings | ||||||||||||
| Inventories: | ||||||||||||
| Natural gas | ||||||||||||
| Propane gas | ||||||||||||
| Materials and supplies | ||||||||||||
| Regulatory assets | ||||||||||||
| Prepayments | ||||||||||||
| Other | ||||||||||||
| Total Current Assets | ||||||||||||
| Deferred Charges and Other Assets: | ||||||||||||
| Goodwill | ||||||||||||
| Regulatory assets | ||||||||||||
| Other | ||||||||||||
| Total Deferred Charges and Other Assets | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
SPIRE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(UNAUDITED)
| June 30, | September 30, | June 30, | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| CAPITALIZATION AND LIABILITIES | ||||||||||||
| Capitalization: | ||||||||||||
| Preferred stock ($ par value per share; million depositary shares authorized, issued and outstanding at June 30, 2022, September 30, 2021, and June 30, 2021) | $ | $ | $ | |||||||||
| Common stock (par value $ per share; million shares authorized; million, million, and million shares issued and outstanding at June 30, 2022, September 30, 2021, and June 30, 2021, respectively) | ||||||||||||
| Paid-in capital | ||||||||||||
| Retained earnings | ||||||||||||
| Accumulated other comprehensive income | ||||||||||||
| Total Shareholders' Equity | ||||||||||||
| Temporary equity | ||||||||||||
| Long-term debt (less current portion) | ||||||||||||
| Total Capitalization | ||||||||||||
| Current Liabilities: | ||||||||||||
| Current portion of long-term debt | ||||||||||||
| Notes payable | ||||||||||||
| Accounts payable | ||||||||||||
| Advance customer billings | ||||||||||||
| Wages and compensation accrued | ||||||||||||
| Customer deposits | ||||||||||||
| Taxes accrued | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Deferred Credits and Other Liabilities: | ||||||||||||
| Deferred income taxes | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Deferred Credits and Other Liabilities | ||||||||||||
| Commitments and Contingencies (Note 10) | ||||||||||||
| Total Capitalization and Liabilities | $ | $ | $ | |||||||||
See the accompanying Notes to Financial Statements.
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, 2022: | ||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Common stock issued | ||||||||||||||||||||||||||||
| Dividend reinvestment plan | ||||||||||||||||||||||||||||
| Stock-based compensation costs | — | |||||||||||||||||||||||||||
| Stock issued under stock-based compensation plans | ( | ) | ||||||||||||||||||||||||||
| Employees’ tax withholding for stock-based compensation | ( | ) | ||||||||||||||||||||||||||
| Temporary equity adjustment to redemption value | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Dividends declared: | ||||||||||||||||||||||||||||
| Common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Preferred stock ($ per depositary share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended June 30, 2022: | ||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Common stock issued | ||||||||||||||||||||||||||||
| Dividend reinvestment plan | ||||||||||||||||||||||||||||
| Stock-based compensation costs | — | |||||||||||||||||||||||||||
| Stock issued under stock-based compensation plans | ( | ) | ||||||||||||||||||||||||||
| Employees’ tax withholding for stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Temporary equity adjustment to redemption value | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Dividends declared: | ||||||||||||||||||||||||||||
| Common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Preferred stock ($ per depositary share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
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, 2021: | ||||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Dividend reinvestment plan | ||||||||||||||||||||||||||||
| Stock-based compensation costs | — | |||||||||||||||||||||||||||
| Stock issued under stock-based compensation plans | ||||||||||||||||||||||||||||
| Employees’ tax withholding for stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Equity units issued | ( | ) | ( | ) | ||||||||||||||||||||||||
| Temporary equity adjustment to redemption value | — | |||||||||||||||||||||||||||
| Dividends declared: | ||||||||||||||||||||||||||||
| Common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Preferred stock ($ per depositary share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended June 30, 2021: | ||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net income | — | |||||||||||||||||||||||||||
| Dividend reinvestment plan | ||||||||||||||||||||||||||||
| Stock-based compensation costs | — | |||||||||||||||||||||||||||
| Stock issued under stock-based compensation plans | ( | ) | ||||||||||||||||||||||||||
| Employees’ tax withholding for stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Equity units issued | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Temporary equity adjustment to redemption value | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Dividends declared: | ||||||||||||||||||||||||||||
| Common stock ($ per share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Preferred stock ($ per depository share) | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
* Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended June 30, | ||||||||
| (In millions) | 2022 | 2021 | ||||||
| Operating Activities: | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income taxes and investment tax credits | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Regulatory assets and liabilities | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Delayed/advance customer billings, net | ( | ) | ( | ) | ||||
| Taxes accrued | ( | ) | ( | ) | ||||
| Other assets and liabilities | ( | ) | ( | ) | ||||
| Other | ||||||||
| Net cash provided by operating activities | ||||||||
| Investing Activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Other | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Issuance of long-term debt | ||||||||
| Repayment of long-term debt | ( | ) | ( | ) | ||||
| Issuance (repayment) of short-term debt, net | ( | ) | ||||||
| Issuance of common stock | ||||||||
| Dividends paid on common stock | ( | ) | ( | ) | ||||
| Dividends paid on preferred stock | ( | ) | ( | ) | ||||
| Other | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net Increase in Cash, Cash Equivalents, and Restricted Cash | ||||||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period | ||||||||
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $ | $ | ||||||
| Supplemental disclosure of cash paid for: | ||||||||
| Interest, net of amounts capitalized | $ | ( | ) | $ | ( | ) | ||
| Income taxes | ( | ) | ( | ) | ||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Operating Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Natural gas | ||||||||||||||||
| Operation and maintenance | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Income | ||||||||||||||||
| Interest Expense, Net | ||||||||||||||||
| Other (Expense) Income, Net | ( | ) | ( | ) | ( | ) | ||||||||||
| (Loss) Income Before Income Taxes | ( | ) | ||||||||||||||
| Income Tax (Benefit) Expense | ( | ) | ||||||||||||||
| Net (Loss) Income | ( | ) | ||||||||||||||
| Other Comprehensive Income, Net of Tax | ||||||||||||||||
| Comprehensive (Loss) Income | $ | ( | ) | $ | $ | $ | ||||||||||
See the accompanying Notes to Financial Statements.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| June 30, | September 30, | June 30, | ||||||||||
| (Dollars in millions, except per share amounts) | 2022 | 2021 | 2021 | |||||||||
| ASSETS | ||||||||||||
| Utility Plant | $ | $ | $ | |||||||||
| Less: Accumulated depreciation and amortization | ||||||||||||
| Net Utility Plant | ||||||||||||
| Other Property and Investments | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable: | ||||||||||||
| Utility | ||||||||||||
| Associated companies | ||||||||||||
| Other | ||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Delayed customer billings | ||||||||||||
| Inventories: | ||||||||||||
| Natural gas | ||||||||||||
| Propane gas | ||||||||||||
| Materials and supplies | ||||||||||||
| Regulatory assets | ||||||||||||
| Prepayments | ||||||||||||
| Other | ||||||||||||
| Total Current Assets | ||||||||||||
| Deferred Charges and Other Assets: | ||||||||||||
| Goodwill | ||||||||||||
| Regulatory assets | ||||||||||||
| Other | ||||||||||||
| Total Deferred Charges and Other Assets | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
SPIRE MISSOURI INC.
CONDENSED BALANCE SHEETS (Continued)
(UNAUDITED)
| June 30, | September 30, | June 30, | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| CAPITALIZATION AND LIABILITIES | ||||||||||||
| Capitalization: | ||||||||||||
| Paid-in capital and common stock (par value $ per share; million shares authorized; , , and shares issued and outstanding at June 30, 2022, September 30, 2021, and June 30, 2021, respectively) | $ | $ | $ | |||||||||
| Retained earnings | ||||||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Total Shareholder's Equity | ||||||||||||
| Long-term debt | ||||||||||||
| Total Capitalization | ||||||||||||
| Current Liabilities: | ||||||||||||
| Notes payable | ||||||||||||
| Notes payable – associated companies | ||||||||||||
| Accounts payable | ||||||||||||
| Accounts payable – associated companies | ||||||||||||
| Advance customer billings | ||||||||||||
| Wages and compensation accrued | ||||||||||||
| Customer deposits | ||||||||||||
| Taxes accrued | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Deferred Credits and Other Liabilities: | ||||||||||||
| Deferred income taxes | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Deferred Credits and Other Liabilities | ||||||||||||
| Commitments and Contingencies (Note 10) | ||||||||||||
| Total Capitalization and Liabilities | $ | $ | $ | |||||||||
See the accompanying Notes to Financial Statements.
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, 2022: | ||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Common stock issued to Spire Inc. | ||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Nine Months Ended June 30, 2022: | ||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Common stock issued to Spire Inc. | ||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Three Months Ended June 30, 2021: | ||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Nine Months Ended June 30, 2021: | ||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income | — | |||||||||||||||||||||||
| Other comprehensive income, net of tax | — | |||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
* Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended June 30, | ||||||||
| (In millions) | 2022 | 2021 | ||||||
| Operating Activities: | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income taxes and investment tax credits | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Regulatory assets and liabilities | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Delayed/advance customer billings, net | ( | ) | ( | ) | ||||
| Taxes accrued | ( | ) | ( | ) | ||||
| Other assets and liabilities | ( | ) | ( | ) | ||||
| Other | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Investing Activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Other | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Issuance of long-term debt | ||||||||
| Repayment of long-term debt | ( | ) | ||||||
| (Repayment) issuance of short-term debt, net | ( | ) | ||||||
| Borrowings from (repayments to) Spire, net | ( | ) | ||||||
| Issuance of common stock | ||||||||
| Other | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents at Beginning of Period | ||||||||
| Cash and Cash Equivalents at End of Period | $ | $ | ||||||
| Supplemental disclosure of cash paid for: | ||||||||
| Interest, net of amounts capitalized | $ | ( | ) | $ | ( | ) | ||
| Income taxes | ||||||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Operating Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Natural gas | ||||||||||||||||
| Operation and maintenance | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Income | ||||||||||||||||
| Interest Expense, Net | ||||||||||||||||
| Other (Expenses) Income, Net | ( | ) | ( | ) | ||||||||||||
| Income Before Income Taxes | ||||||||||||||||
| Income Tax Expense | | |||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
See the accompanying Notes to Financial Statements.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| June 30, | September 30, | June 30, | ||||||||||
| (Dollars in millions, except per share amounts) | 2022 | 2021 | 2021 | |||||||||
| ASSETS | ||||||||||||
| Utility Plant | $ | $ | $ | |||||||||
| Less: Accumulated depreciation and amortization | ||||||||||||
| Net Utility Plant | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable: | ||||||||||||
| Utility | ||||||||||||
| Associated companies | ||||||||||||
| Other | ||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Delayed customer billings | ||||||||||||
| Inventories: | ||||||||||||
| Natural gas | ||||||||||||
| Materials and supplies | ||||||||||||
| Regulatory assets | ||||||||||||
| Prepayments | ||||||||||||
| Total Current Assets | ||||||||||||
| Deferred Charges and Other Assets: | ||||||||||||
| Regulatory assets | ||||||||||||
| Deferred income taxes | ||||||||||||
| Other | ||||||||||||
| Total Deferred Charges and Other Assets | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
SPIRE ALABAMA INC.
CONDENSED BALANCE SHEETS (Continued)
(UNAUDITED)
| June 30, | September 30, | June 30, | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| CAPITALIZATION AND LIABILITIES | ||||||||||||
| Capitalization: | ||||||||||||
| Paid-in capital and common stock (par value $ per share; million shares authorized; million shares issued and outstanding) | $ | $ | $ | |||||||||
| Retained earnings | ||||||||||||
| Total Shareholder's Equity | ||||||||||||
| Long-term debt (less current portion) | ||||||||||||
| Total Capitalization | ||||||||||||
| Current Liabilities: | ||||||||||||
| Current portion of long-term debt | ||||||||||||
| Notes payable – associated companies | ||||||||||||
| Accounts payable | ||||||||||||
| Accounts payable – associated companies | ||||||||||||
| Advance customer billings | ||||||||||||
| Wages and compensation accrued | ||||||||||||
| Customer deposits | | |||||||||||
| Taxes accrued | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Deferred Credits and Other Liabilities: | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Deferred Credits and Other Liabilities | ||||||||||||
| Commitments and Contingencies (Note 10) | ||||||||||||
| Total Capitalization and Liabilities | $ | $ | $ | |||||||||
See the accompanying Notes to Financial Statements.
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, 2022: | ||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Return of capital to Spire | — | ( | ) | ( | ) | |||||||||||||||
| Dividends declared | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Nine Months Ended June 30, 2022: | ||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Return of capital to Spire | — | ( | ) | ( | ) | |||||||||||||||
| Dividends declared | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ||||||||||||||||
| Three Months Ended June 30, 2021: | ||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Dividends declared | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | ||||||||||||||||
| Nine Months Ended June 30, 2021: | ||||||||||||||||||||
| Balance at September 30, 2020 | $ | $ | $ | $ | ||||||||||||||||
| Net income | — | |||||||||||||||||||
| Return of capital to Spire | — | ( | ) | ( | ) | |||||||||||||||
| Dividends declared | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | $ | ||||||||||||||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended June 30, | ||||||||
| (In millions) | 2022 | 2021 | ||||||
| Operating Activities: | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income taxes and investment tax credits | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ( | ) | ||||
| Regulatory assets and liabilities | ( | ) | ||||||
| Accounts payable | ||||||||
| Delayed/advance customer billings | ( | ) | ( | ) | ||||
| Taxes accrued | ( | ) | ( | ) | ||||
| Other assets and liabilities | ( | ) | ( | ) | ||||
| Other | ||||||||
| Net cash provided by operating activities | ||||||||
| Investing Activities: | ||||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Other | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Issuance of long-term debt | ||||||||
| Repayment of long-term debt | ( | ) | ||||||
| Borrowings from (repayments to) Spire, net | ( | ) | ||||||
| Return of capital to Spire | ( | ) | ( | ) | ||||
| Dividends paid | ( | ) | ( | ) | ||||
| Other | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net Increase in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents at Beginning of Period | ||||||||
| Cash and Cash Equivalents at End of Period | $ | $ | ||||||
| Supplemental disclosure of cash paid for: | ||||||||
| Interest, net of amounts capitalized | $ | ( | ) | $ | ( | ) | ||
| Income taxes | ||||||||
See the accompanying Notes to Financial Statements.
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, Spire Missouri and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
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
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.
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, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Spire Missouri | ||||||||||||||||
| Purchases of natural gas from Spire Marketing Inc. | $ | $ | $ | $ | ||||||||||||
| Transportation services received from Spire STL Pipeline LLC | ||||||||||||||||
| Sales of natural gas to Spire Marketing Inc. | ||||||||||||||||
| Transportation services received from Spire NGL Inc. | ||||||||||||||||
| Spire Alabama | ||||||||||||||||
| Purchases of natural gas from Spire Marketing Inc. | $ | $ | $ | $ | ||||||||||||
| Sales of natural gas to Spire Marketing Inc. | ||||||||||||||||
RESTRICTED CASH – In Spire’s statement of cash flows for the period ended June 30, 2022, total Cash, Cash Equivalents, and Restricted Cash included $
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, | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| Spire | $ | $ | $ | |||||||||
| Spire Missouri | ||||||||||||
| Spire Alabama | ||||||||||||
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. The accounts receivable of Spire’s non-utility businesses are evaluated separately from those of the Utilities. The allowance for credit losses for those other businesses is based on a continuous evaluation of the individual counterparty risk and is not significant for the periods presented. Activity in the allowance for credit losses is shown in the following tables.
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
| Three Months Ended June 30, | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
| Allowance at beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Provision for expected credit losses | ||||||||||||||||||||||||
| Write-offs, net of recoveries | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Allowance at end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Nine Months Ended June 30, | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
| Allowance at beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Provision for expected credit losses | ||||||||||||||||||||||||
| Write-offs, net of recoveries | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Allowance at end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following tables show revenue disaggregated by source and customer type.
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Spire | ||||||||||||||||
| Gas Utility: | ||||||||||||||||
| Residential | $ | $ | $ | $ | ||||||||||||
| Commercial and industrial | ||||||||||||||||
| Transportation | ||||||||||||||||
| Off-system and other incentive | ||||||||||||||||
| Other customer revenue | ( | ) | ||||||||||||||
| Total revenue from contracts with customers | ||||||||||||||||
| Changes in accrued revenue under alternative revenue programs | ( | ) | ||||||||||||||
| Total Gas Utility operating revenues | ||||||||||||||||
| Gas Marketing | ||||||||||||||||
| Other | ||||||||||||||||
| Total before eliminations | ||||||||||||||||
| Intersegment eliminations (see Note 9, Information by Operating Segment) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total Operating Revenues | $ | $ | $ | $ | ||||||||||||
| Spire Missouri | ||||||||||||||||
| Residential | $ | $ | $ | $ | ||||||||||||
| Commercial and industrial | ||||||||||||||||
| Transportation | ||||||||||||||||
| Off-system and other incentive | ||||||||||||||||
| Other customer revenue | ( | ) | ||||||||||||||
| Total revenue from contracts with customers | ||||||||||||||||
| Changes in accrued revenue under alternative revenue programs | ( | ) | ( | ) | ||||||||||||
| Total Operating Revenues | $ | $ | $ | $ |
| Spire Alabama | ||||||||||||||||
| Residential | $ | $ | $ | $ | ||||||||||||
| Commercial and industrial | ||||||||||||||||
| Transportation | ||||||||||||||||
| Off-system and other incentive | ||||||||||||||||
| Other customer revenue | ||||||||||||||||
| Total revenue from contracts with customers | ||||||||||||||||
| Changes in accrued revenue under alternative revenue programs | ||||||||||||||||
| Total Operating Revenues | $ | $ | $ | $ |
As discussed in Note 4, Regulatory Matters, Spire Missouri (1) reduced “Commercial and industrial” revenue by approximately $
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, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Spire | $ | $ | $ | $ | ||||||||||||
| Spire Missouri | ||||||||||||||||
| Spire Alabama | ||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Basic Earnings Per Common Share: | ||||||||||||||||
| Net (Loss) Income | $ | ( | ) | $ | $ | $ | ||||||||||
| Less: Provision for preferred dividends | ||||||||||||||||
| Income allocated to participating securities | ||||||||||||||||
| (Loss) Income Available to Common Shareholders | $ | ( | ) | $ | $ | $ | ||||||||||
| Weighted Average Common Shares Outstanding (in millions) | ||||||||||||||||
| Basic (Loss) Earnings Per Common Share | $ | ( | ) | $ | $ | $ | ||||||||||
| Diluted Earnings Per Common Share: | ||||||||||||||||
| Net (Loss) Income | $ | ( | ) | $ | $ | $ | ||||||||||
| Less: Provision for preferred dividends | ||||||||||||||||
| Income allocated to participating securities | ||||||||||||||||
| (Loss) Income Available to Common Shareholders | $ | ( | ) | $ | $ | $ | ||||||||||
| Weighted Average Common Shares Outstanding (in millions) | ||||||||||||||||
| Dilutive Effect of Restricted Stock and Restricted Stock Units (in millions)* | ||||||||||||||||
| Weighted Average Diluted Common Shares (in millions) | ||||||||||||||||
| Diluted (Loss) Earnings Per Common Share | $ | ( | ) | $ | $ | $ | ||||||||||
| * 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 | ||||||||||||||||
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, 2022, September 30, 2021, and June 30, 2021.
| June 30, | September 30, | June 30, | ||||||||||
| Spire | 2022 | 2021 | 2021 | |||||||||
| Regulatory Assets: | ||||||||||||
| Current: | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Current Regulatory Assets | ||||||||||||
| Noncurrent: | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Cost of removal | ||||||||||||
| Future income taxes due from customers | ||||||||||||
| Energy efficiency | ||||||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Noncurrent Regulatory Assets | ||||||||||||
| Total Regulatory Assets | $ | $ | $ | |||||||||
| Regulatory Liabilities: | ||||||||||||
| Current: | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Current Regulatory Liabilities | ||||||||||||
| Noncurrent: | ||||||||||||
| Deferred taxes due to customers | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Accrued cost of removal | ||||||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Noncurrent Regulatory Liabilities | ||||||||||||
| Total Regulatory Liabilities | $ | $ | $ | |||||||||
| June 30, | September 30, | June 30, | ||||||||||
| Spire Missouri | 2022 | 2021 | 2021 | |||||||||
| Regulatory Assets: | ||||||||||||
| Current: | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Current Regulatory Assets | ||||||||||||
| Noncurrent: | ||||||||||||
| Future income taxes due from customers | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Energy efficiency | ||||||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Cost of removal | ||||||||||||
| Other | ||||||||||||
| Total Noncurrent Regulatory Assets | ||||||||||||
| Total Regulatory Assets | $ | $ | $ | |||||||||
| Regulatory Liabilities: | ||||||||||||
| Current: | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Current Regulatory Liabilities | ||||||||||||
| Noncurrent: | ||||||||||||
| Deferred taxes due to customers | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Accrued cost of removal | ||||||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Noncurrent Regulatory Liabilities | ||||||||||||
| Total Regulatory Liabilities | $ | $ | $ | |||||||||
| June 30, | September 30, | June 30, | ||||||||||
| Spire Alabama | 2022 | 2021 | 2021 | |||||||||
| Regulatory Assets: | ||||||||||||
| Current: | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Current Regulatory Assets | ||||||||||||
| Noncurrent: | ||||||||||||
| Future income taxes due from customers | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Cost of removal | ||||||||||||
| Other | ||||||||||||
| Total Noncurrent Regulatory Assets | ||||||||||||
| Total Regulatory Assets | $ | $ | $ | |||||||||
| Regulatory Liabilities: | ||||||||||||
| Current: | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Current Regulatory Liabilities | ||||||||||||
| Noncurrent: | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Other | ||||||||||||
| Total Noncurrent Regulatory Liabilities | ||||||||||||
| Total Regulatory Liabilities | $ | $ | $ | |||||||||
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, | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| Spire | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Future income taxes due from customers | ||||||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Regulatory Assets Not Earning a Return | $ | $ | $ | |||||||||
| Spire Missouri | ||||||||||||
| Pension and postretirement benefit costs | $ | $ | $ | |||||||||
| Future income taxes due from customers | ||||||||||||
| Unamortized purchased gas adjustments | ||||||||||||
| Other | ||||||||||||
| Total Regulatory Assets Not Earning a Return | $ | $ | $ | |||||||||
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
Spire Missouri
The MoPSC approved compliance tariffs with an effective date of December 23, 2021, in Spire Missouri’s general rate case GR-2021-0108. These new tariffs were designed to increase Spire Missouri’s aggregate annual gross base rate revenues by $
| • | $ |
| • | $ |
| • | $ |
On April 1, 2022, Spire Missouri filed tariff sheets to initiate a new general rate case proceeding which is intended to address the deferred amounts, along with other matters, and is expected to be resolved in nine to eleven months. The proposed tariff changes include revised rate schedules designed to produce an annual net increase in Spire Missouri’s gas revenues of approximately $
In mid- February 2021, the central U.S. experienced a period of unusually severe cold weather (“Winter Storm Uri”), and Spire Missouri implemented an Operational Flow Order (OFO) to preserve the integrity of its distribution system. During this time, Spire Missouri was required to purchase additional natural gas supply, both to ensure adequate supply for its firm utility customers, and to cover the shortfall created when third-party marketers failed to deliver natural gas supply to its city gates on behalf of their customers. In accordance with its tariffs, Spire Missouri invoiced the cost of gas and associated penalties totaling $
As a result of the significant net deferred gas costs and average inventory cost in the second quarter of fiscal 2021, primarily due to Winter Storm Uri, Spire Missouri filed for and received MoPSC approval for an adjustment to the PGA tariff to increase a Filing Adjustment Factor credit for three years. This credit will allow Spire Missouri to help mitigate rate impacts of Winter Storm Uri costs and the increased gas market from 2020 to 2021. All gas costs will eventually be recovered through the PGA or ACA mechanisms and carrying costs will be applied per the terms of the tariff.
On December 22, 2021, Spire Missouri filed an application with the MoPSC for approval of $
On December 23, 2021, Spire Missouri filed a new ISRS case, its first under the ISRS statute amendments of 2020, seeking accelerated recovery of $
On May 27, 2022, the Staff of the MoPSC (the "Staff") filed its ACA Review Recommendation and Report for the ACA period that first includes transportation charges incurred by Spire Missouri for service on the Spire STL Pipeline. That report concluded that the transaction complied with Missouri affiliate transaction rules and was prudent, and recommended no disallowance of any Spire STL Pipeline related costs from the ACA mechanism. On July 11, 2022, Spire Missouri filed its response comments in support of the Staff's recommendation. The Missouri Office of the Public Counsel and Environmental Defense Fund filed comments on July 29 and August 1, 2022, respectively, raising concerns about the Spire STL Pipeline transaction, the ACA process itself, and other matters. The MoPSC has not yet taken any further action in the docket.
Spire Alabama
On October 26, 2021, Spire Alabama made its annual Rate Stabilization and Equalization (RSE) rate filing with the APSC, presenting the utility’s budget for the fiscal year ending September 30, 2022, including net income and a calculation of allowed return on average common equity (ROE). Following a regulatory review, adjusted rates became effective January 1, 2022.
Spire Alabama filed GSA rate increases effective December 1, 2021, April 1, 2022, and August 1, 2022, primarily attributable to higher natural gas prices.
On July 12, 2022, the APSC approved Spire Alabama's application for an intercompany revolving credit agreement allowing Spire Alabama to borrow from Spire in a principal amount not to exceed $
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is affected by the following regulatory matters.
In October 2021, Spire Gulf made its annual RSE rate filing with the APSC based on its budget for fiscal 2022 and an allowed ROE of
On August 23, 2021, Spire Mississippi filed its Rate Stabilization Adjustment Rider (RSA) for the rate year ended June 30, 2021, which reflected an increase to annual revenue totaling $
In August 2018, the FERC approved an order issuing a Certificate of Public Convenience and Necessity for the Spire STL Pipeline ( “August 2018 Order”). In November 2018, the FERC issued a Notice to Proceed, and 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. In January 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 (“DC 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. On September 14, 2021, and December 3, 2021, the FERC issued temporary certificates to allow the pipeline to continue operating indefinitely while it considers approval of a new permanent certificate. Certain parties in the temporary certificate proceeding sought rehearing of the FERC’s December 3, 2021 temporary certificate. The FERC denied rehearing by operation of law on February 3, 2022. On March 7, 2022, one group of the rehearing parties filed a petition for review of FERC’s December 3, 2021 temporary certificate order in the DC Circuit limited to whether the temporary certificates carry eminent domain authority. On June 29, 2022, the DC Circuit issued an order holding the proceeding in abeyance pending the outcome of the FERC remand proceeding.
Meanwhile, on December 15, 2021, the FERC issued a notice of intent to prepare a supplemental environmental impact statement (EIS) regarding the Spire STL Pipeline. On June 17, 2022, the FERC staff issued its draft EIS, concluding that "impacts from the continued operation of the Spire STL [Pipeline] would be less than significant, with the exception of climate change impacts resulting from GHG [greenhouse gas] emissions that are not characterized as significant or insignificant." The final EIS is not anticipated until October 7, 2022.
Spire STL Pipeline will continue to pursue all legal and regulatory avenues to ensure access to reliable, affordable and safe delivery of energy for eastern Missouri. While there is no impairment at this time, if the pipeline is taken out of service, the Company’s financial condition and results of operations may be adversely impacted by impairment of Spire STL Pipeline’s assets, currently carried at over $
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 requests authorization to expand capacity and increase pipeline connectivity at certain of Spire Storage's natural gas storage facilities in Wyoming. On March 15, 2022, the FERC issued a final EIS for this project, concluding that construction and operation of the project would not result in significant environmental impacts and that project greenhouse gas emissions fall even below the FERC’s presumptive significance threshold for climate change impacts. On May 19, 2022, the FERC approved an order issuing certificates and granting abandonment as requested in the application. On June 21, 2022, following the submittal of an implementation plan, the FERC staff issued its limited notice to proceed with the project.
Short-term
Spire, Spire Missouri and Spire Alabama have a syndicated revolving credit facility pursuant to a loan agreement with 12 banks, which was amended July 22, 2022, to increase the commitment and sublimits and extend the agreement through July 22, 2027. The amended loan agreement has an aggregate credit commitment of $
Spire utilizes 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 $
In March 2021, Spire Missouri entered into a loan agreement with several banks for a $
Information about short-term borrowings, including Spire Missouri’s and Spire Alabama’s borrowings from Spire, is presented in the following table. As of June 30, 2022, $
| Spire (Parent Only) | Spire Missouri | Spire Alabama | Spire | |||||||||||||||||
| CP | Term | Spire | Spire | Consol- | ||||||||||||||||
| Program | Loan | Note | Note | idated | ||||||||||||||||
| Nine Months Ended June 30, 2022 | ||||||||||||||||||||
| Highest borrowings outstanding | $ | $ | $ | $ | $ | |||||||||||||||
| Lowest borrowings outstanding | ||||||||||||||||||||
| Weighted average borrowings | ||||||||||||||||||||
| Weighted average interest rate | % | % | % | % | % | |||||||||||||||
| As of June 30, 2022 | ||||||||||||||||||||
| Borrowings outstanding | $ | $ | $ | $ | $ | |||||||||||||||
| Weighted average interest rate | % | n/a | % | % | % | |||||||||||||||
| As of September 30, 2021 | ||||||||||||||||||||
| Borrowings outstanding | $ | $ | $ | $ | $ | |||||||||||||||
| Weighted average interest rate | % | % | % | % | % | |||||||||||||||
| As of June 30, 2021 | ||||||||||||||||||||
| Borrowings outstanding | $ | $ | $ | $ | $ | |||||||||||||||
| Weighted average interest rate | % | % | % | n/a | % | |||||||||||||||
Long-term
The long-term debt agreements of Spire, Spire Missouri and Spire Alabama contain customary financial covenants and default provisions. As of June 30, 2022, 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, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Spire | $ | $ | $ | $ | ||||||||||||
| Spire Missouri | ||||||||||||||||
| Spire Alabama | ||||||||||||||||
On December 7, 2021, pursuant to its registration statement on Form S-3 filed with the SEC, Spire Missouri issued $
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, 2022, September 30, 2021, and June 30, 2021.
| 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, 2022 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Notes payable | ||||||||||||||||
| Long-term debt, including current portion | ||||||||||||||||
| As of September 30, 2021 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Notes payable | ||||||||||||||||
| Long-term debt, including current portion | ||||||||||||||||
| As of June 30, 2021 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Notes payable | ||||||||||||||||
| Long-term debt, including current portion | ||||||||||||||||
| Spire Missouri | ||||||||||||||||
| As of June 30, 2022 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Notes payable – associated companies | ||||||||||||||||
| Long-term debt | ||||||||||||||||
| As of September 30, 2021 | ||||||||||||||||
| Notes payable | $ | $ | $ | $ | ||||||||||||
| Notes payable – associated companies | ||||||||||||||||
| Long-term debt | ||||||||||||||||
| As of June 30, 2021 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Notes payable | ||||||||||||||||
| Notes payable – associated companies | ||||||||||||||||
| Long-term debt | ||||||||||||||||
| Spire Alabama | ||||||||||||||||
| As of June 30, 2022 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Notes payable – associated companies | ||||||||||||||||
| Long-term debt, including current portion | ||||||||||||||||
| As of September 30, 2021 | ||||||||||||||||
| Notes payable – associated companies | $ | $ | $ | $ | ||||||||||||
| Long-term debt | ||||||||||||||||
| As of June 30, 2021 | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Long-term debt, including current portion | ||||||||||||||||
The information presented in the following tables 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, 2022, September 30, 2021, and June 30, 2021. The Company’s and the Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of the interim reporting period in which circumstances change or events occur to cause the transfer.
The mutual funds are included in “Other Investments” on the Company’s balance sheets and in “Other Property and Investments” on Spire Missouri’s balance sheets. 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) | Effects of Netting and Cash Margin Receivables /Payables | Total | |||||||||||||
| As of June 30, 2022 | ||||||||||||||||
| ASSETS | ||||||||||||||||
| Gas Utility: | ||||||||||||||||
| U.S. stock/bond mutual funds | $ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Gas Marketing: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Natural gas commodity contracts | ( | ) | ||||||||||||||
| Other: | ||||||||||||||||
| U.S. stock/bond mutual funds | ||||||||||||||||
| Interest rate swaps | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| LIABILITIES | ||||||||||||||||
| Gas Utility: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | $ | $ | $ | ( | ) | $ | ||||||||||
| Gas Marketing: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Natural gas commodity contracts | ( | ) | ||||||||||||||
| Other: | ||||||||||||||||
| Interest rate swaps | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| Quoted Prices in Active Markets (Level 1) | Significant Observable Inputs (Level 2) | Effects of Netting and Cash Margin Receivables /Payables | Total | |||||||||||||
| As of September 30, 2021 | ||||||||||||||||
| ASSETS | ||||||||||||||||
| Gas Utility: | ||||||||||||||||
| U.S. stock/bond mutual funds | $ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Gas Marketing: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Natural gas commodity contracts | ( | ) | ||||||||||||||
| Other: | ||||||||||||||||
| U.S. stock/bond mutual funds | ||||||||||||||||
| Interest rate swaps | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| LIABILITIES | ||||||||||||||||
| Gas Utility: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | $ | $ | $ | ( | ) | $ | ||||||||||
| Gas Marketing: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Natural gas commodity contracts | ( | ) | ||||||||||||||
| Other: | ||||||||||||||||
| Interest rate swaps | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| As of June 30, 2021 | ||||||||||||||||
| ASSETS | ||||||||||||||||
| Gas Utility: | ||||||||||||||||
| U.S. stock/bond mutual funds | $ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Gas Marketing: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Natural gas commodity contracts | ||||||||||||||||
| Other: | ||||||||||||||||
| U.S. stock/bond mutual funds | ||||||||||||||||
| Interest rate swaps | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| LIABILITIES | ||||||||||||||||
| Gas Marketing: | ||||||||||||||||
| NYMEX/ICE natural gas contracts | $ | $ | $ | ( | ) | $ | ||||||||||
| Natural gas commodity contracts | ||||||||||||||||
| Other: | ||||||||||||||||
| Interest rate swaps | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
Spire Missouri
| Quoted Prices in Active Markets (Level 1) | Significant Observable Inputs (Level 2) | Effects of Netting and Cash Margin Receivables /Payables | Total | |||||||||||||
| As of June 30, 2022 | ||||||||||||||||
| ASSETS | ||||||||||||||||
| U.S. stock/bond mutual funds | $ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| LIABILITIES | ||||||||||||||||
| NYMEX/ICE natural gas contracts | $ | $ | $ | ( | ) | $ | ||||||||||
| As of September 30, 2021 | ||||||||||||||||
| ASSETS | ||||||||||||||||
| U.S. stock/bond mutual funds | $ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
| LIABILITIES | ||||||||||||||||
| NYMEX/ICE natural gas contracts | $ | $ | $ | ( | ) | $ | ||||||||||
| As of June 30, 2021 | ||||||||||||||||
| ASSETS | ||||||||||||||||
| U.S. stock/bond mutual funds | $ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
8. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
Spire and the Utilities maintain pension plans for their employees.
Spire Missouri and Spire Alabama have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their 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.
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, Net” in the income statement, except for Spire Alabama’s losses on lump-sum settlements. Such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Spire | ||||||||||||||||
| Service cost – benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on projected benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service credit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of actuarial loss | ||||||||||||||||
| Loss on lump-sum settlements | ||||||||||||||||
| Subtotal | ||||||||||||||||
| Regulatory adjustment | ( | ) | ||||||||||||||
| Net pension cost | $ | $ | $ | $ | ||||||||||||
| Spire Missouri | ||||||||||||||||
| Service cost – benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on projected benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service credit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of actuarial loss | ||||||||||||||||
| Loss on lump-sum settlements | ||||||||||||||||
| Subtotal | ||||||||||||||||
| Regulatory adjustment | ( | ) | ( | ) | ||||||||||||
| Net pension cost | $ | $ | $ | $ | ||||||||||||
| Spire Alabama | ||||||||||||||||
| Service cost – benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on projected benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service credit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of actuarial loss | ||||||||||||||||
| Loss on lump-sum settlements | ||||||||||||||||
| Subtotal | ||||||||||||||||
| Regulatory adjustment | ||||||||||||||||
| Net pension cost | $ | $ | $ | $ | ||||||||||||
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 and nine months ended June 30, 2022, one Spire Missouri plan and two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $
For the three months ended March 31, 2022, one Spire Missouri plan and two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $
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 $
Effective December 23, 2021, the pension cost for Spire Missouri’s western territory (Missouri West) included in customer rates was reduced from $
Also effective December 23, 2021, Missouri East prepaid pension assets and other postretirement benefits that were previously being included in rates at $
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 2022 contributions to Spire Missouri’s pension plans through June 30, 2022 were $
Contributions to the qualified trusts of Spire Missouri’s pension plans for the remainder of fiscal 2022 are anticipated to be $
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.
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, 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, Net.”
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Spire | ||||||||||||||||
| Service cost – benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on accumulated postretirement benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service cost | ||||||||||||||||
| Amortization of actuarial gain | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Subtotal | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Regulatory adjustment | ( | ) | ||||||||||||||
| Net postretirement benefit (income) cost | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Spire Missouri | ||||||||||||||||
| Service cost – benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on accumulated postretirement benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service cost | ||||||||||||||||
| Amortization of actuarial gain | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Subtotal | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Regulatory adjustment | ||||||||||||||||
| Net postretirement benefit cost | $ | $ | $ | $ | ||||||||||||
| Spire Alabama | ||||||||||||||||
| Service cost – benefits earned during the period | $ | $ | $ | $ | ||||||||||||
| Interest cost on accumulated postretirement benefit obligation | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of prior service cost | ||||||||||||||||
| Subtotal | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Regulatory adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net postretirement benefit income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
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.
Effective December 23, 2021, the $
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
9. INFORMATION BY OPERATING SEGMENT
The Company has
| • | 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 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 to Spire Marketing, propane transportation services provided by Spire NGL Inc. to Spire Missouri, and natural gas transportation services provided by Spire STL Pipeline to Spire Missouri.
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, 2022 | ||||||||||||||||||||
| Operating Revenues: | ||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ( | ) | ||||||||||||||||||
| Total Operating Revenues | ( | ) | ||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Natural gas | ( | ) | ||||||||||||||||||
| Operation and maintenance | ( | ) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||||||
| Total Operating Expenses | ( | ) | ||||||||||||||||||
| Operating Income (Loss) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Net Economic Earnings (Loss) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||
| Operating Revenues: | ||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ( | ) | ( | ) | ||||||||||||||||
| Total Operating Revenues | ( | ) | ||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Natural gas | ( | ) | ||||||||||||||||||
| Operation and maintenance | ( | ) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||||||
| Total Operating Expenses | ( | ) | ||||||||||||||||||
| Operating Income (Loss) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Net Economic Earnings (Loss) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
| Nine Months Ended June 30, 2022 | ||||||||||||||||||||
| Operating Revenues: | ||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ( | ) | ||||||||||||||||||
| Total Operating Revenues | ( | ) | ||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Natural gas | ( | ) | ||||||||||||||||||
| Operation and maintenance | ( | ) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||||||
| Total Operating Expenses | ( | ) | ||||||||||||||||||
| Operating Income (Loss) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Net Economic Earnings (Loss) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| Gas Utility | Gas Marketing | Other | Eliminations | Consolidated | ||||||||||||||||
| Nine Months Ended June 30, 2021 | ||||||||||||||||||||
| Operating Revenues: | ||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | |||||||||||||||
| Intersegment revenues | ( | ) | ||||||||||||||||||
| Total Operating Revenues | ( | ) | ||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Natural gas | ( | ) | ||||||||||||||||||
| Operation and maintenance | ( | ) | ||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Taxes, other than income taxes | ||||||||||||||||||||
| Total Operating Expenses | ( | ) | ||||||||||||||||||
| Operating Income | $ | $ | $ | $ | $ | |||||||||||||||
| Net Economic Earnings (Loss) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
The following table reconciles the Company’s net economic earnings to net income.
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net Income | $ | ( | ) | $ | $ | $ | ||||||||||
| Adjustments, pre-tax: | ||||||||||||||||
| Missouri regulatory adjustment | ( | ) | ||||||||||||||
| Fair value and timing adjustments | ||||||||||||||||
| Income tax adjustments | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Economic Earnings | $ | $ | $ | $ | ||||||||||||
The Company’s total assets by segment were as follows:
| June 30, | September 30, | June 30, | ||||||||||
| 2022 | 2021 | 2021 | ||||||||||
| Total Assets: | ||||||||||||
| Gas Utility | $ | $ | $ | |||||||||
| Gas Marketing | ||||||||||||
| Other | ||||||||||||
| Eliminations | ( | ) | ( | ) | ( | ) | ||||||
| Total Assets | $ | $ | $ | |||||||||
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, 2022, are estimated at $
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.
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 (MoDNR) Brownfields/Voluntary Cleanup Program (BVCP). The third site is the result of an assertion by the United States Environmental Protection Agency (EPA).
In conjunction with redevelopment of the Carondelet Coke site, 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 (NFA) letter from the MoDNR. The Remediation Agreement also provides for a release of Spire Missouri and the other former site owner from certain liabilities related to the past and current environmental condition of the site and requires the developer and the environmental consultant to maintain certain insurance coverage, including remediation cost containment, premises pollution liability, and professional liability. The operative provisions of the Remediation Agreement were triggered on December 20, 2010, on which date Spire Missouri and the other former site owner, as full consideration under the Remediation Agreement, paid a small percentage of the cost of remediation of the site. The property was divided into seven parcels, and MoDNR NFA letters have been received for six of the parcels. Remediation is ongoing on the last parcel.
In a letter dated June 29, 2011, the Attorney General for the State of Missouri informed Spire Missouri that the MoDNR had completed an investigation of the second site, Station A. 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. Accordingly, Spire Missouri entered into a cost sharing agreement for remedial investigation with other PRPs. MoDNR 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, Station B. 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. 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, to identify the basis of the inquiry. The FOIA response from the EPA was received on July 15, 2015, and a response was provided to the EPA on August 15, 2015. Spire Missouri has received no further inquiry from the EPA regarding this matter.
In its western service area, Spire Missouri has 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 the owned sites since 2003 with the exception of Joplin. On September 15, 2016, a request was made with the MoDNR 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 for the Joplin site. As part of its participation in the BVCP, Spire Missouri communicates regularly with the MoDNR with respect to its remediation efforts and monitoring activities at these sites. On May 11, 2015, MoDNR approved the next phase of investigation at the Kansas City Station A Railroad area.
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. All are located in the state of Alabama.
In 2011, a removal action was completed and a "no further action" letter was received at the Huntsville manufactured gas plant site pursuant to an Administrative Settlement Agreement and Order on Consent among the EPA, Spire Alabama and the current site owner.
In 2012, Spire Alabama responded to an EPA Request for Information Pursuant to Section 104 of CERCLA relating to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama was identified as a PRP under CERCLA for the cleanup of the site or costs the EPA incurs in cleaning up the site. At this point, Spire Alabama has not been provided information that would allow it to determine the extent, if any, of its potential liability with respect to the 35th Avenue Superfund Site and vigorously denies its inclusion as a PRP.
Assessments were performed by the EPA of the former MGP sites in Gadsden and Anniston, and "no further action" letters were received after each assessment.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is aware of the following contingent matters.
Spire Marketing, along with many natural gas industry participants, faced the unprecedented effects of Winter Storm Uri in February 2021. 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). As such, Spire Marketing has recorded an estimate of potential liabilities for damages based on communications with counterparties and the facts and circumstances surrounding each transaction. These estimates are adjusted as new facts emerge or settlement agreements are reached, and it is possible that final settlement amounts may materially differ from the current estimate.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in millions, except 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 as a result of decisions by natural gas producers to reduce production or shut in producing natural gas wells and expiration or termination of existing supply and transportation arrangements that are not replaced with contracts with similar terms and pricing (including as a result of a failure of the Spire STL Pipeline to secure permanent authorization from the FERC), as well as other changes that impact supply for and access to the markets in which our subsidiaries transact business; |
| • |
Acquisitions may not achieve their intended results; |
| • |
Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting: |
| ▪ |
allowed rates of return and recovery of prudent costs, |
| ▪ |
incentive regulation, |
| ▪ |
industry structure, |
| ▪ |
purchased gas adjustment provisions, |
| ▪ |
rate design structure and implementation, |
| ▪ |
capital structures established for rate-setting purposes, |
| ▪ |
regulatory assets, |
| ▪ |
non-regulated and affiliate transactions, |
| ▪ |
franchise renewals, |
| ▪ |
authorization to operate facilities, |
| ▪ |
environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change and pipeline safety and security, |
| ▪ |
taxes, |
| ▪ |
pension and other postretirement benefit liabilities and funding obligations, or |
| ▪ |
accounting standards; |
| • |
The results of litigation; |
| • |
The availability of and access to, in general, funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital markets; |
| • |
Retention of, ability to attract, ability to collect from, and conservation efforts of, customers; |
| • |
Our ability to comply with all covenants in our indentures and credit facilities, any violations of which, if not cured in a timely manner, could trigger a default of our obligation; |
| • |
Energy commodity market conditions; |
| • |
Discovery of material weakness in internal controls; |
| • |
The disruption, failure or malfunction of our operational and information technology systems, including due to cyberattacks; and |
| • |
Employee workforce issues, including but not limited to labor disputes, the inability to attract and retain key talent, and future wage and employee benefit costs, including costs resulting from changes in discount rates and returns on benefit plan assets. |
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.
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 throughout the 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 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 currently permitted to deliver natural gas supply into eastern Missouri under a temporary certificate authorization. Spire STL Pipeline’s operating revenue is derived primarily from Spire Missouri as its foundation shipper.
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 coronavirus disease 2019 (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. Impacts on our results of operations from COVID-19 have been minimal, partly as a result of regulatory recovery mechanisms and approvals.
The Company is participating in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provisions allowing for a payroll tax deferral which did not have an impact on our results of operations but deferred the payment of the Company’s portion of certain payroll taxes until late 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. |
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.
EARNINGS – THREE MONTHS ENDED June 30, 2022
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, 2022 |
||||||||||||||||||||
| Net Income (Loss) [GAAP] |
$ | 4.2 | $ | (5.1 | ) | $ | (0.5 | ) | $ | (1.4 | ) | $ | (0.10 | ) | ||||||
| Adjustments, pre-tax: |
||||||||||||||||||||
| Fair value and timing adjustments |
— | 7.3 | — | 7.3 | 0.14 | |||||||||||||||
| Income tax adjustments* |
— | (1.8 | ) | — | (1.8 | ) | (0.03 | ) | ||||||||||||
| Net Economic Earnings (Loss) [Non-GAAP] |
$ | 4.2 | $ | 0.4 | $ | (0.5 | ) | $ | 4.1 | $ | 0.01 | |||||||||
| 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 adjustments* |
— | (0.5 | ) | — | (0.5 | ) | (0.01 | ) | ||||||||||||
| Net Economic Earnings (Loss) [Non-GAAP] |
$ | 12.3 | $ | (5.2 | ) | $ | (0.2 | ) | $ | 6.9 | $ | 0.06 | ||||||||
* Income tax adjustments include amounts calculated by applying federal, state, and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling items.
** 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 diluted common share and net economic earnings (loss) per diluted common share.
Consolidated
Spire had a net loss of $1.4 for the three months ended June 30, 2022, compared with net income of $5.3 for the three months ended June 30, 2021. Loss per diluted share was $0.10 for the current quarter compared to income of $0.03 per diluted share for the prior-year quarter. The net income decline of $6.7 was primarily driven by a $7.9 reduction in the Gas Utility segment, partly offset by $1.5 improved performance in the Gas Marketing segment.
Spire’s net economic earnings for the third quarter were $4.1 ($0.01 per diluted share), compared to $6.9 ($0.06 per diluted share) in the prior year, reflecting lower earnings at Gas Utility, partly offset by stronger performance in Gas Marketing. These impacts are described in further detail below.
Gas Utility
Net economic earnings for the Gas Utility segment decreased $8.1 from the third quarter of the prior fiscal year. The $8.1 decrease reflects a shift in the cadence of regulatory recovery in Missouri to the first two quarters of our fiscal year, an impact of approximately $6.0, combined with higher depreciation and property taxes tied to our pipeline upgrade investments.
Gas Marketing
Fiscal 2022 third quarter net economic earnings for the Gas Marketing segment were $0.4, compared to a loss of $5.2 last year, reflecting more favorable market conditions in the current-year quarter that are described in further detail below.
Other
For the three months ended June 30, 2022, net economic loss increased $0.3 compared with last year, primarily reflecting higher corporate costs partly offset by improved results at Spire Storage.
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, 2022 |
||||||||||||||||||||
| Operating Income (Loss) [GAAP] |
$ | 36.8 | $ | (6.9 | ) | $ | 8.0 | $ | — | $ | 37.9 | |||||||||
| Operation and maintenance expenses |
95.0 | 3.2 | 8.0 | (3.9 | ) | 102.3 | ||||||||||||||
| Depreciation and amortization |
58.1 | 0.3 | 2.0 | — | 60.4 | |||||||||||||||
| Taxes, other than income taxes |
43.0 | 0.4 | 0.7 | — | 44.1 | |||||||||||||||
| Less: Gross receipts tax expense |
(23.2 | ) | (0.1 | ) | — | — | (23.3 | ) | ||||||||||||
| Contribution Margin [Non-GAAP] |
209.7 | (3.1 | ) | 18.7 | (3.9 | ) | 221.4 | |||||||||||||
| Natural gas costs |
144.5 | 67.1 | — | (8.3 | ) | 203.3 | ||||||||||||||
| Gross receipts tax expense |
23.2 | 0.1 | — | — | 23.3 | |||||||||||||||
| Operating Revenues |
$ | 377.4 | $ | 64.1 | $ | 18.7 | $ | (12.2 | ) | $ | 448.0 | |||||||||
| 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 | |||||||||
Consolidated
Spire reported operating revenues of $448.0 for the three months ended June 30, 2022, a $120.2 increase versus the prior-year quarter. The Gas Utility segment experienced a quarter-over-quarter increase of $70.7 in operating revenues, while the Gas Marketing segment reported a $49.0 increase. Spire’s contribution margin increased $8.4, reflecting the increase of $5.8 in the Gas Utility segment combined with increases in Gas marketing and Other of $2.0 and $0.9, respectively (before intercompany eliminations). Gas Utility operation and maintenance (O&M) expenses of $95.0 for the quarter were $8.2 lower than last year. Gas Utility O&M run-rate was $3.8 lower after adjusting the $4.4 transfer of quarter-over-quarter non-service postretirement benefit costs to other expenses below the operating income line (the “Non-service Cost Transfer”). Depreciation and amortization expenses were up $7.3 primarily due to continuing Gas Utility capital investments. These impacts are described in further detail below.
Gas Utility
Operating Revenues – Gas Utility operating revenues for the three months ended June 30, 2022, were $377.4, or $70.7 higher than the same period in the prior year. The increase in Gas Utility operating revenues was attributable to the following factors:
| Spire Missouri and Spire Alabama – Higher PGA/GSA costs (gas cost recovery) |
$ | 28.3 | ||
| Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation) |
22.3 | |||
| Spire Alabama – RSE adjustments, net |
7.6 | |||
| Spire Missouri and Spire Alabama – Higher gross receipts taxes |
5.2 | |||
| Spire Missouri and Spire Alabama – Off-system sales and capacity release |
3.1 | |||
| All other factors |
4.2 | |||
| Total Variation |
$ | 70.7 |
The primary driver of revenue growth in the quarter was $28.3 in higher gas cost recoveries in the current year reflecting the higher average gas costs being passed through to customers, a $22.3 increase resulting from volume growth in both the Spire Missouri and Spire Alabama territories, reflecting higher year-over-year demand activity that more than offset the higher average temperatures experienced in the Spire Missouri territory in the current-year quarter versus the prior year. The current year also benefited from $7.6 in net favorable RSE adjustments at Spire Alabama, higher gross receipts taxes reflecting the growth in the underlying billing base, and slightly higher off-system sales and capacity release.
Contribution Margin – Gas Utility contribution margin was $209.7 for the three months ended June 30, 2022, a $5.8 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 |
$ | 7.1 | ||
| Spire Alabama – Volumetric usage (net of weather mitigation) |
(2.7 | ) | ||
| All other factors |
1.4 | |||
| Total Variation |
$ | 5.8 |
Quarter-over-quarter contribution margin growth was primarily driven by the $7.1 increase from the previously mentioned RSE adjustments at Spire Alabama, reflecting favorable adjustments, particularly within the Cost Control Mechanism within the RSE framework. Contribution margin also benefited from slightly higher margins at Spire Missouri net of the regulatory recovery timing shift mentioned previously. These positive impacts were only partly offset by a decrease of $2.7 stemming from volumes net of weather mitigation at Spire Alabama.
Operating Expenses – O&M expenses for the three months ended June 30, 2022, were $8.2 lower than the prior year. Run-rate expenses decreased $3.8 after removing the $4.4 impact of the Non-service Cost Transfer, largely due to lower employee-related expenses. Taxes, other than income taxes, increased $10.9, and were driven by the higher pass-through gross receipts taxes mentioned earlier, along with higher property taxes resulting from the continued infrastructure build-out by the utilities. Depreciation and amortization expenses for the fiscal 2022 third quarter were $7.2 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 $49.0 versus the prior-year period as higher commodity prices contributed to the growth from the prior-year quarter.
Contribution Margin – Gas Marketing contribution margin during the quarter ended June 30, 2022, increased $2.0 from the same period in the prior year, due principally to increased storage optimization driven by volatility in forward gas prices that more than offset $5.4 in unfavorable mark-to-market adjustments on open derivative positions.
Interest Charges
Consolidated interest charges increased by $2.4, principally due to higher Gas Utilities long-term debt, higher average short-term borrowings and interest rates in the current-year quarter. For the three months ended June 30, 2022 and 2021, average short-term borrowings were $551.5 and $536.5, respectively, and the average interest rate on these borrowings was 1.18% and 0.45%, respectively.
Other (Expenses) Income
Reported consolidated other expenses/income increased by $11.1, or $6.4 after removing the Non-service Cost Transfer of $4.7. The $6.4 increase was primarily attributable to unfavorable fair market value adjustments on investment trusts for retiree and employee benefit plans.
Income Taxes
Consolidated income tax for the three months ended June 30, 2022, decreased $2.1 versus the same period in the prior year. The variance is due principally to the lower pre-tax book income in the current-year quarter.
Spire Missouri
| Three Months Ended June 30, |
||||||||
| 2022 |
2021 |
|||||||
| Operating Income [GAAP] |
$ | 12.9 | $ | 18.4 | ||||
| Operation and maintenance expenses |
59.5 | 64.3 | ||||||
| Depreciation and amortization |
37.3 | 31.6 | ||||||
| Taxes, other than income taxes |
32.3 | 22.2 | ||||||
| Less: Gross receipts tax expense |
(16.7 | ) | (12.3 | ) | ||||
| Contribution Margin [Non-GAAP] |
125.3 | 124.2 | ||||||
| Natural gas costs |
94.7 | 55.6 | ||||||
| Gross receipts tax expense |
16.7 | 12.3 | ||||||
| Operating Revenues |
$ | 236.7 | $ | 192.1 | ||||
| Net (Loss) Income |
$ | (8.4 | ) | $ | 3.1 | |||
Revenues for the three months ended June 30, 2022 were $44.6 higher than the prior-year quarter. A key driver was an increase in gas recovery costs totaling $23.2, primarily the result of cycling higher commodity gas costs that get passed through to customers. Volume/gas usage accounted for $16.4 of the increase in the current-year quarter, as underlying increases in economic activity more than offset the impact of warmer weather. Higher gross receipts taxes contributed a further $4.4 increase.
Contribution margin for the three months ended June 30, 2022, increased $1.1 from the same period in the prior year, largely the result of net volumetric impacts.
Reported O&M expenses for the third quarter decreased $4.8 versus the prior year. Run-rate expenses decreased $1.9 after removing the $2.9 impact of the Non-service Cost Transfer. The decrease was largely due to lower employee-related expenses. Depreciation and amortization combined increased $5.7 versus the prior-year quarter due to ongoing capital investments. Taxes, other than income taxes, increased $10.1, driven by the higher pass-through gross receipts taxes, higher property taxes resulting from the continued infrastructure build-out by the utilities.
Other expense was higher by $7.1, with $2.9 due to the Non-service Cost Transfer and most of the remaining $4.2 variance due to unfavorable fair market value adjustments investment trusts for employee and retiree benefit plans. Interest expense increased $2.0, reflecting higher levels of long-term debt and higher short-term interest rates.
Resulting net loss for the quarter ended June 30, 2022, represents an $11.5 decrease in results versus the prior-year quarter.
Degree days in Spire Missouri’s service areas during the three months ended June 30, 2022, were 2.4% colder than normal, but 0.9% warmer than the same period last year. Spire Missouri’s total system therms sold and transported were 248.5 million for the quarter, compared with 242.1 million for the same period in the prior year. Total off-system therms sold and transported were 1.1 million for the current quarter, compared with 0.04 million a year ago.
Spire Alabama
| Three Months Ended June 30, |
||||||||
| 2022 |
2021 |
|||||||
| Operating Income [GAAP] |
$ | 20.0 | $ | 13.3 | ||||
| Operation and maintenance expenses |
29.2 | 31.9 | ||||||
| Depreciation and amortization |
16.9 | 16.1 | ||||||
| Taxes, other than income taxes |
8.6 | 7.9 | ||||||
| Less: Gross receipts tax expense |
(5.5 | ) | (4.7 | ) | ||||
| Contribution Margin [Non-GAAP] |
69.2 | 64.5 | ||||||
| Natural gas costs |
41.0 | 24.1 | ||||||
| Gross receipts tax expense |
5.5 | 4.7 | ||||||
| Operating Revenues |
$ | 115.7 | $ | 93.3 | ||||
| Net Income |
$ | 10.5 | $ | 6.5 | ||||
Operating revenues for the three months ended June 30, 2022, increased $22.4 from the same period in the prior year. The change in operating revenue was principally due to $7.6 net favorable rate adjustments under the RSE mechanism, and a $5.9 increase attributable to favorable weather/usage impacts, and an increase in off-system sales totaling $3.0.
Contribution margin was $4.7 higher versus the prior-year quarter, primarily driven by $7.1 favorable net rate adjustments under the RSE mechanism offset by a $2.7 decrease attributable to weather/usage, after application of weather mitigation.
O&M expenses for the three months ended June 30, 2022, decreased $2.7 versus the prior-year quarter, or $1.5 after removing the impact of the Non-service Cost Transfer. Lower field operations and administration expenses more than offset modest increases in employee expenses. Depreciation and amortization expenses were up $0.8, the result of continued investment in infrastructure upgrades.
For the quarter ended June 30, 2022, resulting net income increased $4.0 versus the prior-year quarter.
As measured in degree days, temperatures in Spire Alabama’s service area during the three months ended June 30, 2022, were 21.5% colder than normal and 48.5% colder than a year ago. Spire Alabama’s total system therms sold and transported were 225.7 million for the three months ended June 30, 2022, compared with 216.8 million for the same period in the prior year. Total off-system therms sold and transported were 27.1 million for the quarter, compared with 6.0 million a year ago.
EARNINGS – nine months ended June 30, 2022
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, 2022 |
||||||||||||||||||||
| Net Income (Loss) [GAAP] |
$ | 236.5 | $ | (0.4 | ) | $ | (8.2 | ) | $ | 227.9 | $ | 4.16 | ||||||||
| Adjustments, pre-tax: |
||||||||||||||||||||
| Fair value and timing adjustments |
— | 20.9 | — | 20.9 | 0.40 | |||||||||||||||
| Income tax effect of adjustments* |
4.1 | (5.2 | ) | — | (1.1 | ) | (0.02 | ) | ||||||||||||
| Net Economic Earnings (Loss) [Non-GAAP] |
$ | 240.6 | $ | 15.3 | $ | (8.2 | ) | $ | 247.7 | $ | 4.54 | |||||||||
| Nine Months Ended June 30, 2021 |
||||||||||||||||||||
| Net Income (Loss) [GAAP] |
$ | 255.0 | $ | 33.5 | $ | (6.9 | ) | $ | 281.6 | $ | 5.23 | |||||||||
| Adjustments, pre-tax: |
||||||||||||||||||||
| Missouri regulatory adjustment |
(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 | |||||||||
* 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, and for fiscal 2022, include a Spire Missouri regulatory adjustment.
** 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 diluted common share and net economic earnings per diluted common share.
Consolidated
Spire’s net income was $227.9 for the nine months ended June 30, 2022, compared with $281.6 for the nine months ended June 30, 2021. Basic and diluted earnings per share for the nine months ended June 30, 2022, were $4.17 and $4.16, respectively, compared with basic and diluted earnings per share of $5.24 and $5.23, respectively, for the nine months ended June 30, 2021.
The decrease in net income of $53.7 primarily reflects a $33.9 decrease in net income from the Gas Marketing segment and a $18.5 decrease in net income from the Gas Utility segment.
The decrease in the Gas Marketing segment in the current year was due to the more favorable market conditions experienced in the prior year, particularly in the second quarter's month of February that drove volume, higher local/regional basis differentials and higher realized value from storage withdrawals. Results in the current year reflected more normalized market conditions. Gas Marketing net income in the current year was also negatively impacted by unfavorable unrealized fair value mark-to-market adjustments. The Gas Utility segment was lower due to an increase of $20.2 in depreciation and amortization and $11.2 higher taxes, other than income taxes, net of gross receipts taxes. These increases were partially offset by $3.7 of lower operating and maintenance expenses and higher margins.
Net economic earnings were $247.7 ($4.54 per diluted share) for the nine months ended June 30, 2022, compared to $279.4 ($5.18 per diluted share) for the same period last year, primarily reflecting the lower earnings in the Gas Marketing and Gas Utility segments. These variances are discussed in greater detail below.
Gas Utility
Gas Utility net income decreased by $18.5 from the first nine months of the prior year. This decrease was driven primarily by the $17.7 reduction at Spire Missouri. Spire Missouri’s results for the current year were negatively impacted by timing of ISRS filings, $14.4 higher depreciation expense, $7.3 higher interest expense resulting from higher levels of long-term debt and higher short-term interest rates, the fact that the prior year included a $9.0 ($6.8 after-tax) benefit from the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances, combined with the current year being burdened with a $4.1 income tax expense resulting from Spire Missouri's general rate case GR-2021-0108 that had an effective date on December 2021 ("2021 Missouri rate order"). These negative impacts more than offset the $23.0 increase in contribution margin resulting from the new rates implemented late in the first quarter of 2022. Spire Alabama’s net income increased by $1.6, as $12.6 in net favorable RSE adjustments were offset by a $6.0 reduction in contribution relating to volume/usage and lower off-system sales, $3.8 in higher depreciation expense, higher property taxes and lower miscellaneous income.
Net economic earnings in the first nine months of fiscal 2022 were $240.6, a decrease of $7.8 over the corresponding period in the prior year, primarily the result of the $7.0 decrease at Spire Missouri and a modest $0.8 reduction experienced by the Southeast Utilities. These impacts are described in further detail below.
Gas Marketing
The Gas Marketing segment reported a net loss of $0.4 for the nine months ended June 30, 2022, versus net income of $33.5 during the same period last year, principally reflecting strong second quarter operating results in the prior year due to Winter Storm Uri. Fiscal 2022 results also reflect less favorable market conditions and basis differentials despite price volatility, offset by favorable resolution of certain customer claims. Gas Marketing also experienced $11.3 in after-tax unfavorable year-over-year derivative fair value mark-to-market valuations. Net economic earnings for the current-year period were $15.3, a decrease of $22.6 from the same period last year, as net income variance is reduced by adding back the unrealized derivative fair value impact.
Other
For the nine months ended June 30, 2022, net economic loss for Other was $8.2, versus a loss of $6.9 in the prior-year period. Included in those results were higher interest and corporate costs in the current year.
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, 2022 |
||||||||||||||||||||
| Operating Income (Loss) [GAAP] |
$ | 361.6 | $ | (0.4 | ) | $ | 17.2 | $ | — | $ | 378.4 | |||||||||
| Operation and maintenance expenses |
306.5 | 9.1 | 28.0 | (11.7 | ) | 331.9 | ||||||||||||||
| Depreciation and amortization |
169.2 | 1.0 | 6.0 | — | 176.2 | |||||||||||||||
| Taxes, other than income taxes |
150.3 | 0.8 | 2.2 | — | 153.3 | |||||||||||||||
| Less: Gross receipts tax expense |
(96.8 | ) | (0.3 | ) | — | — | (97.1 | ) | ||||||||||||
| Contribution Margin [Non-GAAP] |
890.8 | 10.2 | 53.4 | (11.7 | ) | 942.7 | ||||||||||||||
| Natural gas costs |
710.7 | 160.9 | — | (27.1 | ) | 844.5 | ||||||||||||||
| Gross receipts tax expense |
96.8 | 0.3 | — | — | 97.1 | |||||||||||||||
| Operating Revenues |
$ | 1,698.3 | $ | 171.4 | $ | 53.4 | $ | (38.8 | ) | $ | 1,884.3 | |||||||||
| 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 | |||||||||
Consolidated
Spire’s operating revenues decreased by $159.7 at the Gas Utility segment, which more than offset the $98.1 increase in the Gas Marketing segment and the $3.3 increase in Other. The Gas Utility variance was largely due to the prior year results including the benefits that resulted from Winter Storm Uri. The Gas Marketing increase was due to current year lower trading activity (trading activities are recorded as revenues net of costs) and higher volumes and pricing, while Other primarily reflects higher revenues at Spire Storage.
Spire’s contribution margin decreased $23.6 compared with the same nine-month period last year, as the $22.9 increase in the Gas Utility segment was more than offset by the $48.3 reduction at Gas Marketing. The Gas Utility contribution margin increase was primarily driven by the $18.6 increase from Spire Missouri and the $6.6 increase at Spire Alabama, offset slightly by a decline at the utilities of Spire EnergySouth. The decrease in Gas Marketing reflects very favorable market conditions in the prior year second quarter, combined with unfavorable fair value mark-to-market adjustments in the current year. Higher contribution margins in Other are primarily due to Spire Storage improvement resulting from higher utilization of its storage capacity.
Depreciation and amortization expenses were higher in the Gas Utility segment, due to ongoing capital investments in both Spire Missouri and Spire Alabama. Gas Utility O&M expenses were $3.7 lower in the current year. Run-rate O&M expenses in the current year are lower by $7.0 after removing the prior year impact of the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances totaling $9.0, and the year-to-date postretirement Non-service Cost Transfer of $5.7. These fluctuations are described in more detail below.
Gas Utility
Operating Revenues – Gas Utility operating revenues for the nine months ended June 30, 2022, were $1,698.3, or $159.7 lower than the same period last year. The decrease in Gas Utility operating revenues was attributable to the following factors:
| Spire Missouri – OFO charges |
$ | (195.8 | ) | |
| Spire Missouri and Spire Alabama – Off-system sales and capacity release |
(94.7 | ) | ||
| Spire Missouri and Spire Alabama – Higher PGA/GSA costs (gas cost recovery) |
74.7 | |||
| Spire Missouri – 2021 rate case outcomes |
23.0 | |||
| Spire Alabama – RSE adjustments, net |
13.5 | |||
| Spire Missouri and Spire Alabama – Higher gross receipts taxes |
15.2 | |||
| All other factors |
4.4 | |||
| Total Variation |
$ | (159.7 | ) |
The decrease in revenues was driven primarily by the prior year inclusion of $195.8 of cover charges and OFO penalties to certain wholesale customers at Spire Missouri, and a $94.7 decrease in off-system sales. These negative impacts more than offset the benefits of higher current year gas cost recoveries of $74.7, Spire Missouri’s new rates that resulted from the 2021 rate order, Spire Alabama’s favorable RSE adjustments, and higher gross receipts taxes.
Contribution Margin – Gas Utility contribution margin was $890.8 for the nine months ended June 30, 2022, a $22.9 increase over the same period last year. The increase was attributable to the following factors:
| Spire Missouri – 2021 rate case outcomes |
$ | 23.0 | ||
| Spire Alabama – Rate adjustment under RSE mechanism, net |
12.6 | |||
| Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation) |
(8.0 | ) | ||
| Spire Missouri and Spire Alabama – Off-system sales and capacity release |
(2.8 | ) | ||
| All other factors |
(1.9 | ) | ||
| Total Variation |
$ | 22.9 |
The contribution margin increase resulted primarily from the changes resulting from the 2021 Missouri rate order and Spire Alabama RSE adjustment impacts more than offsetting negative volumetric usage and lower off-system sales.
Operating Expenses – Gas Utility O&M expenses were $3.7 lower in the current year. Run-rate O&M expenses in the current year are lower by $7.0 after removing the Missouri Supreme Court ruling that partially reversed 2018 rate case pension cost disallowances totaling $9.0, and the year-to-date postretirement Non-service Cost Transfer of $5.7. This decrease is primarily due to lower operations and employee-related costs and lower bad debt expense. Depreciation and amortization expenses for the nine months ended June 30, 2022, increased $20.2 from the same period last year, the result of continued levels of capital investment. Taxes, other than income taxes, increased $26.3, and were driven by the higher pass-through gross receipts taxes mentioned earlier, combined with higher property taxes resulting from the continued infrastructure build-out by the utilities.
Gas Marketing
Operating Revenues – Gas Marketing operating revenues increased $98.1 from the same period last year, primarily due to higher volumes and pricing.
Contribution Margin – Gas Marketing contribution margin during the nine months ended June 30, 2022, decreased $48.3 from the same period last year, driven principally by strong second quarter results in the prior year. During that quarter, particularly the month of February, very favorable weather patterns drove significantly higher regional basis differentials and volume.
Interest Charges
Consolidated interest charges during the nine months ended June 30, 2022, were $7.0 higher than the same period last year. The increase was primarily driven by higher average short-term interest rates in the current year period, combined with the impact of net long-term debt issuances and higher levels of short-term borrowings. For the nine months ended June 30, 2022 and 2021, average short-term borrowings were $716.4 and $633.1, respectively, and the average interest rates on these borrowings were 0.6% and 0.4%, respectively.
Other (Expenses) Income
Reported consolidated other expenses/income changed by $13.2, or $7.0 after removing the Non-service Cost Transfer of $6.2. The $7.0 increase was primarily attributable to unfavorable fair market value adjustments on investment trusts for retiree and employee benefit plans.
Income Taxes
Consolidated income tax expense during the nine months ended June 30, 2022 decreased $11.6 versus the prior year. The variance is the result of the lower pre-tax book income in the current year, partly offset by a $4.1 charge resulting from Tax Cuts and Jobs Act reconciliations from the 2021 Missouri rate order that was completed late in the first quarter of this year.
Spire Missouri
| Nine Months Ended June 30, |
||||||||
| 2022 |
2021 |
|||||||
| Operating Income [GAAP] |
$ | 208.5 | $ | 214.7 | ||||
| Operation and maintenance expenses |
190.1 | 190.0 | ||||||
| Depreciation and amortization |
107.4 | 93.0 | ||||||
| Taxes, other than income taxes |
111.0 | 86.2 | ||||||
| Less: Gross receipts tax expense |
(70.6 | ) | (56.1 | ) | ||||
| Contribution Margin [Non-GAAP] |
546.4 | 527.8 | ||||||
| Natural gas costs |
538.8 | 754.6 | ||||||
| Gross receipts tax expense |
70.6 | 56.1 | ||||||
| Operating Revenues |
$ | 1,155.8 | $ | 1,338.5 | ||||
| Net Income |
$ | 135.1 | $ | 152.8 | ||||
Prior year operating revenues results included benefits derived from Winter Storm Uri. As a result, current year revenues were $182.7 below the prior year. Key drivers were a reduction in gas recovery costs totaling $131.3, primarily the result of $195.8 in cover charges and OFO penalties to certain wholesale customers in the prior year only being partly offset by higher commodity costs in the current year. Off-system sales and capacity release in the current-year quarter were $94.9 lower than the prior year, with the second quarter of 2021 benefiting from historically high off-system sales relating to Winter Storm Uri. These negative impacts were partly offset by the $23.0 increase resulting from the rate increases as a result of the 2021 Missouri rate order, $14.5 of higher gross receipts taxes, and a $7.3 increase resulting from higher volume/usage.
Contribution margin for the nine months ended June 30, 2022, increased $18.6 from the same period in the prior year, largely the result of the $23.0 increase attributable to the 2021 Missouri rate order outlined above more than offsetting a $2.1 decrease due volumetric impacts (including weather mitigation) and $3.2 lower off-system sales.
Reported O&M expenses increased $0.1 versus the prior year. Run-rate expenses decreased $5.2 after removing the $3.7 impact of the year-to-date Non-service Cost Transfer and last year’s $9.0 rate case refund ruling by the Missouri Supreme Court. The decrease was largely due to lower employee-related expenses and lower bad debt expenses. Depreciation and amortization increased $14.4 versus the prior-year quarter due to ongoing capital investments. Taxes, other than income taxes, increased $24.8, driven by the higher pass-through gross receipts taxes mentioned earlier, higher property taxes resulting from the continued infrastructure build-out by the utilities.
Net interest expense for the nine months ended June 30, 2022 increased $7.3 versus the same period in the prior year, the result of net long-term debt issuances and significantly higher short-term interest rates.
Resulting net income for the nine months ended June 30, 2022, decreased $17.7 versus the comparable prior-year period.
Temperatures in Spire Missouri’s service areas during the nine months ended June 30, 2022, were 6.1% warmer than the same period last year and 9.2% warmer than normal. The Spire Missouri total system therms sold and transported were 1,469.3 million for the nine months ended June 30, 2022, compared with 1,537.8 million for the same period last year. Total off-system therms sold and transported were 17.9 million for the nine months ended June 30, 2022, compared with 21.3 million for the same period last year.
Spire Alabama
| Nine Months Ended June 30, |
||||||||
| 2022 |
2021 |
|||||||
| Operating Income [GAAP] |
$ | 129.0 | $ | 125.0 | ||||
| Operation and maintenance expenses |
96.6 | 98.4 | ||||||
| Depreciation and amortization |
50.1 | 46.3 | ||||||
| Taxes, other than income taxes |
32.1 | 30.8 | ||||||
| Less: Gross receipts tax expense |
(22.5 | ) | (21.8 | ) | ||||
| Contribution Margin [Non-GAAP] |
285.3 | 278.7 | ||||||
| Natural gas costs |
138.6 | 129.0 | ||||||
| Gross receipts tax expense |
22.5 | 21.8 | ||||||
| Operating Revenues |
$ | 446.4 | $ | 429.5 | ||||
| Net Income |
$ | 85.1 | $ | 83.5 | ||||
Operating revenues for the nine months ended June 30, 2022, increased $16.9 from the same period last year. The change was principally driven by $13.5 net favorable RSE adjustments and by higher gas cost recoveries of $10.2. These benefits were only partly offset by a $7.7 decrease in volumes (net of weather mitigation).
Contribution margin increased $6.6, principally as a result of the RSE adjustments of $12.6 (mentioned above), partly offset by $5.9 lower volume usage and $0.1 related to lower off-system sales. O&M expenses for the nine months ended June 30, 2022, decreased $1.8 from the same period last year. Excluding the impact of the year-to-date postretirement Non-service Cost Transfer of $1.7, O&M expenses were flat with last year.
Temperatures in Spire Alabama’s service area during the nine months ended June 30, 2022, were 6.0% warmer than the same period last year and 11.5% warmer than normal. Spire Alabama’s total system therms sold and transported were 809.6 million for the nine months ended June 30, 2022, compared with 801.5 million for the same period last year. Off-system sales, and related therms sold totaled 27.2 million, versus 33.1 million in the prior year, which benefited from Winter Storm Uri.
LIQUIDITY AND CAPITAL RESOURCES
Recent Cash Flows
| Nine Months Ended June 30, |
||||||||
| Cash Flow Summary |
2022 |
2021 |
||||||
| Net cash provided by operating activities |
$ | 204.6 | $ | 220.7 | ||||
| Net cash used in investing activities |
(398.3 | ) | (461.7 | ) | ||||
| Net cash provided by financing activities |
212.5 | 260.8 | ||||||
For the nine months ended June 30, 2022, net cash from operating activities decreased $16.1 from the corresponding period of fiscal 2021. Offsetting a decline in net income of $53.7 (discussed above) were changes due principally to high recovery of deferred gas costs this year and fluctuations in working capital items, as discussed below in the Future Cash Requirements section. Those typical variance drivers have been impacted by Spire Missouri’s Operational Flow Order and Filing Adjustment Factor put into place last year, as discussed in Note 4, Regulatory Matters, of the Notes to Financial Statements in Item 1.
For the nine months ended June 30, 2022, net cash used in investing activities was $63.4 less than for the same period in the prior year, primarily as a result of a $60.7 decrease in capital expenditures. The drivers of the lower capital expenditures were a $43.2 spending decline in the Utilities, a $15.4 decline for Spire Storage, and a slight decline at Spire STL Pipeline.
Lastly, for the nine months ended June 30, 2022, net cash provided by financing activities was down $48.3 versus net cash provided for the nine months ended June 30, 2021. Current year long-term debt issuances were $300.0, or $329.1 lower than a year ago; however, net short-term borrowings were $37.2 in fiscal year 2022, compared with net repayments of short-term debt totaling $187.0 a year ago. Also, issuances of common stock during the first nine months of fiscal 2022 were $51.3 higher than during the prior-year period as a result of sales under the "at-the-market" program discussed below.
Future Cash Requirements
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.
Spire’s material cash requirements as of June 30, 2022, are related to capital expenditures, principal and interest payments on long-term debt, natural gas purchase obligations, and dividends. Except for Spire Missouri’s December 2021 issuance of $300.0 of floating rate bonds due in December 2024, there were no material changes outside the ordinary course of business from the future cash requirements discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Total Company capital expenditures are planned to be $540 for fiscal 2022.
Source of Funds
It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated requirements. Their debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of June 30, 2022, the debt ratings of the Company, Spire Missouri and Spire Alabama (shown in the following table) remain at investment grade with a stable outlook (other than Moody’s negative outlook for Spire Missouri debt).
|
|
|
S&P |
|
Moody’s |
| Spire Inc. senior unsecured long-term debt |
|
BBB+ |
|
Baa2 |
| Spire Inc. preferred stock |
|
BBB |
|
Ba1 |
| Spire Inc. short-term debt |
|
A-2 |
|
P-2 |
| Spire Missouri senior secured long-term debt |
|
A |
|
A1 |
| Spire Alabama senior unsecured long-term debt |
|
A- |
|
A2 |
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of June 30, 2022.
Short-term Debt
The Company’s short-term cash requirements can be met through the sale of up to $1,300.0 of commercial paper or through the use of Spire’s $1,300.0 revolving credit facility. For information about short-term borrowings, see Note 5 of the Notes to Financial Statements in Item 1.
Long-term Debt and Equity
At June 30, 2022, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $3,258.9, of which $1,648.0 was issued by Spire Missouri, $575.0 was issued by Spire Alabama, and $205.9 was issued by other subsidiaries. For information about long-term debt issued this fiscal year, see Note 5 of the Notes to Financial Statements in Item 1.
Effective March 5, 2022, Spire Missouri was authorized by the MoPSC to issue conventional term loans, first mortgage bonds, unsecured debt, preferred stock and common stock in an aggregate amount of up to $800.0 for financings placed any time before December 31, 2024. As of June 30, 2022, the entire amount remained available under this authorization. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance.
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 164,175 and 159,659 shares at June 30, 2022 and July 31, 2022, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 9, 2025.
On February 6, 2019, Spire entered into an “at-the-market” (ATM) equity distribution agreement, supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock pursuant to Spire’s universal shelf registration statement referenced above and a prospectus supplement dated May 14, 2019. Under this program, a total of 626,249 shares with an aggregate offering price of $47.8 were issued in fiscal 2019 and 2020, and 354,000 shares with an aggregate offering price of $23.5 were issued in the second quarter of fiscal 2022. On April 28, 2022, Spire’s board approved a new authorization for the sale of additional shares with an aggregate offering price of up to $200.0 before the May 2025 expiration of the new universal shelf registration statement on Form S-3 filed in May 2022, under which a total of 365,625 shares with an aggregate offering price of $27.7 were issued in the third quarter of fiscal 2022.
Including the current portion of long-term debt, the Company’s long-term consolidated capitalization consisted of 47% equity at both June 30, 2022 and September 30, 2021.
ENVIRONMENTAL MATTERS
The Utilities and other Spire subsidiaries own and operate natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s, Spire Missouri’s, or Spire Alabama’s financial position and results of operations. As environmental laws, regulations, and 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.
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.
ACCOUNTING PRONOUNCEMENTS
The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the effects that recently issued accounting standards will have on the companies’ financial position or results of operations upon adoption, but none are currently expected to have a significant impact.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting estimates used in the preparation of our financial statements are described in Item 7 of Spire, Spire Missouri, and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2021, and include regulatory accounting, employee benefits and postretirement obligations, impairment of long-lived assets, and income taxes. There were no significant changes to critical accounting estimates during the nine months ended June 30, 2022.
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 Spire, Spire Missouri, and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
There were no material changes in the Company’s commodity price risk or counterparty credit risk as of June 30, 2022, relative to the corresponding information provided in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In the second fiscal 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 $6.3 mark-to-market gain in accumulated other comprehensive income on these swaps for nine months ended June 30, 2022. 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 2.1075% 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 an $11.5 mark-to-market gain to accumulated other comprehensive income on these swaps for the nine months ended June 30, 2022.
In the fourth quarter of 2021, the Company entered into two swap contracts. Both contracts are ten-year interest rate swaps; the first swap has a notional amount of $50.0 with a fixed interest rate of 1.597%, while the second swap has a notional amount of $50.0 with a fixed interest rate of 1.821%. The Company recorded a $3.3 mark-to-market gain to accumulated other comprehensive income on these swaps for the nine months ended June 30, 2022.
In the first quarter of fiscal 2022, the Company entered into a ten-year interest rate swap contract with a notional amount of $50.0 with a fixed interest rate of 1.4918%. The Company recorded a $5.4 mark-to-market gain to accumulated other comprehensive income on this swap for the nine months ended June 30, 2022.
In the second quarter of fiscal 2022, the Company entered into multiple ten-year interest rate swap contracts with a cumulative total notional amount of $150.0 with fixed interest rates ranging from 1.64750% to 1.7460%. The Company recorded an $11.7 mark-to-market gain to accumulated other comprehensive income on these swaps for the nine months ended June 30, 2022.
As of June 30, 2022, the Company has recorded through accumulated other comprehensive income a cumulative mark-to-market net asset of $45.1 on open swaps for the current fiscal year.
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, 2022, 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, 2022, 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, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.
There were no material changes 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, 2021.
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, 2022 – April 30, 2022 |
250 | $ | 72.63 | — | — | |||||||||||
| May 1, 2022 – May 31, 2022 |
163 | 72.79 | — | — | ||||||||||||
| June 1, 2022 – June 30, 2022 |
207 | 77.61 | — | — | ||||||||||||
| Total |
620 | 74.33 | — | — | ||||||||||||
Spire Missouri’s outstanding first mortgage bonds contain restrictions on its ability to pay cash dividends on its common stock. As of June 30, 2022, 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.
None.
* Laclede Gas changed its name to Spire Missouri Inc. effective August 30, 2018.
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 4, 2022 |
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 4, 2022 |
By: |
/s/ Timothy W. Krick |
|
| Timothy W. Krick |
||||
| Controller and Chief Accounting Officer |
||||
| (Authorized Signatory and Chief Accounting Officer) |
||||
| Spire Alabama Inc. |
||||
| Date: |
August 4, 2022 |
By: |
/s/ Timothy W. Krick |
|
| Timothy W. Krick |
||||
| Chief Accounting Officer |
||||
| (Authorized Signatory and Chief Accounting Officer) |
||||