Spire Inc.
2017 Form 10-K
2017 highlights
Fiscal years ended September 30
2017
2016
Earnings and dividends (millions, except per share amounts)
Net income
Diluted earnings per share of common stock
Net economic earnings*
Net economic earnings per share of common stock*
Dividends declared per share of common stock
Operating revenues (millions)
Gas utility
Gas marketing and other
Total operating revenues
Utility sales and customers (thousands)
Therms sold and transported
Customers
Shareholders
Common shareholders of record, end of period
Employees
Total employees, end of period
*For further discussion of these non-GAAP financial measures, see pages 30-31 of our Form 10-K.
$
$
$
$
$
161.6
3.43
167.6
3.56
2.10
$ 1,660.0
80.7
$ 1,740.7
2,968.6
1,685.5
3,240
3,279
$
$
$
$
$
144.2
3.24
149.1
3.42
1.96
$ 1,457.2
80.1
$ 1,537.3
2,565.6
1,678.7
3,428
3,296
2015
136.9
3.16
138.3
3.19
1.84
$
$
$
$
$
$ 1,891.8
84.6
$ 1,976.4
2,742.8
1,567.8
3,611
3,078
Profile
Across the communities and companies in our portfolio,
Since 1857, our teams have worked hard to empower our
we at Spire dedicate ourselves to enriching the lives of nearly
employees and the people we serve. That’s why our stock
1.7 million homes and businesses through the strength of
is the eighth longest continuously listed stock on the
our energy. Our gas companies in Alabama, Mississippi
New York Stock Exchange, a legacy that inspires us to
and Missouri are committed to going above and beyond to
continue to move our communities forward every day.
deliver safe and reliable natural gas service and exceed our
customers’ expectations at every encounter. Our non-regulated
businesses help us assure a reliable supply at an affordable price
as well as explore innovations that address the evolving needs
of our customers.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2017
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
1-16681
1-1822
2-38960
Name of Registrant, Address of Principal
Executive Offices and Telephone Number
State of
Incorporation
I.R.S. Employer
Identification
Number
Spire Inc.
700 Market Street
St. Louis, MO 63101
314-342-0500
Spire Missouri Inc.
700 Market Street
St. Louis, MO 63101
314-342-0500
Spire Alabama Inc.
2101 6th Avenue North
Birmingham, AL 35203
205-326-8100
Missouri
74-2976504
Missouri
43-0368139
Alabama
63-0022000
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Common Stock $1.00 par value
None
None
New York Stock Exchange
Not applicable
Not Applicable
Title of each class
Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Exchange Act:
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Yes [ ]
Yes [ ]
Yes [ ]
No [ X ]
No [ X ]
No [ X ]
Indicate by check mark whether each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of
1933, as amended.
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Yes [ X ]
Yes [ ]
Yes [ ]
No [ ]
No [ X ]
No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Yes [ ]
Yes [ ]
Yes [ ]
No [ X ]
No [ X ]
No [ X ]
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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.
Spire Missouri Inc.
Spire Alabama Inc.
Yes [ X ]
Yes [ X ]
Yes [ X ]
No [ ]
No [ ]
No [ ]
Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Yes [ X ]
Yes [ X ]
Yes [ X ]
No [ ]
No [ ]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
[ X ]
[ X ]
[ X ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
Accelerated
filer
Non-
accelerated filer
Smaller
reporting
company
Emerging growth
company
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
X
X
X
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
[ ]
[ ]
[ ]
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Yes [ ]
Yes [ ]
Yes [ ]
No [ X ]
No [ X ]
No [ X ]
The aggregate market value of the voting stock held by non-affiliates of Spire Inc. amounted to $2,989,327,838 as of
March 31, 2017. All of Spire Missouri Inc.’s and Spire Alabama Inc.’s equity securities are owned by Spire Inc., their parent
company and a reporting company under the Exchange Act.
The number of shares outstanding of each registrant’s common stock as of November 10, 2017 was as follows:
Spire Inc.
Spire Missouri Inc.
Spire Alabama Inc.
Common Stock, par value $1.00 per share
Common Stock, par value $1.00 per share (all owned by Spire Inc.)
Common Stock, par value $0.01 per share (all owned by Spire Inc.)
48,266,858
24,577
1,972,052
This combined Form 10-K represents separate filings by Spire Inc., Spire Missouri Inc., and Spire Alabama Inc. Information
contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes no
representation as to information relating to the other registrant, except that information relating to Spire Missouri Inc. and Spire
Alabama Inc. is also attributed to Spire Inc.
Spire Missouri Inc. and Spire Alabama Inc. meet the conditions set forth in General Instructions I(1)(a) and
(b) of Form 10-K and are therefore filing this Form 10-K with the reduced disclosure format specified in
General Instructions I(2) to Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of proxy statement for Spire Inc. to be filed on or about December 13, 2017 — Part III.
Certain exhibits as indicated in Part IV.
TABLE OF CONTENTS
GLOSSARY OF KEY TERMS AND ABBREVIATIONS
PART I
FORWARD-LOOKING STATEMENTS
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Properties
Legal Proceedings
Executive Officers of the Registrant (Item 401(b) of Regulation S-K)
PART II
Page
2
3
4
10
20
21
21
22
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
23
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6
Item 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11
Item 12
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13
Item 14
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Item 15
Exhibits, Financial Statement Schedules
SIGNATURES
26
27
52
53
135
135
136
138
138
138
139
139
140
146
1
GLOSSARY OF KEY TERMS AND ABBREVIATIONS
Spire Alabama and Spire Gulf
MMBtu
Million British thermal units
Alabama
Utilities
AOCI
APSC
ASC
ASU
Bcf
BVCP
CCM
Degree days
EPA
EPS
ESR
FASB
FERC
GAAP
Accumulated other comprehensive income
or loss
Alabama Public Service Commission
Accounting Standards Codification
Accounting Standards Update
Billion cubic feet
Brownfields/Voluntary Cleanup Program
Cost Control Measure
The average of a day’s high and low
temperature below 65, subtracted from 65,
multiplied by the number of days impacted
US Environmental Protection Agency
Earnings per share
Enhanced Stability Reserve
Financial Accounting Standards Board
Federal Energy Regulatory Commission
MoPSC
MSPSC
NYSE
NYMEX
O&M
OCI
OPC
Missouri Public Service Commission
Mississippi Public Service Commission
New York Stock Exchange
New York Mercantile Exchange, Inc.
Operation and maintenance expense
Other comprehensive income or loss
Missouri Office of the Public Counsel
OTCBB
Over-the-Counter Bulletin Board
PGA
PRP
RSE
SEC
Spire
Alabama
Purchased Gas Adjustment
Potential Responsible Party
Rate Stabilization and Equalization
US Securities and Exchange Commission
Spire Alabama Inc. (formerly Alabama Gas
Corporation)
Spire EnergySouth Inc. (formerly
EnergySouth, Inc.), parent of Spire Gulf and
Spire Mississippi
Accounting principles generally accepted in
the United States of America
Spire
EnergySouth
Gas
Marketing
Segment including Spire Marketing, a
subsidiary engaged in the non-regulated
marketing of natural gas and related
activities
Spire Gulf
Spire Gulf Inc. (formerly Mobile Gas Service
Corporation)
Gas Utility
Segment including the regulated operations
of the Utilities
Spire
Marketing
Spire Marketing Inc. (formerly Laclede Energy
Resources, Inc.)
GSA
ICE
ISRS
Gas Supply Adjustment
Intercontinental Exchange
Infrastructure System Replacement
Surcharge
LIBOR
London Inter-Bank Offered Rate
LNG
MDNR
Liquefied natural gas
Missouri Department of Natural Resources
MGP
Manufactured gas plant
Missouri
Utilities
Spire Missouri, including Spire Missouri
East and Spire Missouri West, the utilities
serving the Missouri region
Spire
Mississippi
Spire Mississippi Inc. (formerly Willmut Gas
& Oil Company)
Spire
Missouri
Spire Missouri Inc. (formerly Laclede Gas
Company)
Spire
Missouri
East
Spire
Missouri
West
TSR
US
Utilities
Spire Missouri’s eastern service territory
Spire Missouri’s western service territory
(formerly Missouri Gas Energy, or MGE)
Total shareholder return
United States
Spire Missouri, Spire Alabama and the
subsidiaries of Spire EnergySouth
2
PART I
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words,
such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and expressions identify
forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current
expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause
results to differ materially from those contemplated in any forward-looking statement are:
• Weather conditions and catastrophic events, particularly severe weather in the natural gas producing areas of the country;
• Volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on
margin deposits associated with the use of natural gas derivative instruments;
• The impact of changes and volatility in natural gas prices on our competitive position in relation to suppliers of alternative
heating sources, such as electricity;
• Changes in gas supply and pipeline availability, including decisions by natural gas producers to reduce production or shut in
producing natural gas wells, expiration of existing supply and transportation arrangements that are not replaced with
contracts with similar terms and pricing, as well as other changes that impact supply for and access to the markets in which
our subsidiaries transact business;
• The recent acquisitions may not achieve their intended results, including anticipated cost savings;
• The Spire STL Pipeline project may be hindered or halted by regulatory, legal, or other obstacles;
• Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting:
• allowed rates of return,
• incentive regulation,
• industry structure,
• purchased gas adjustment provisions,
• rate design structure and implementation,
• regulatory assets,
• non-regulated and affiliate transactions,
• franchise renewals,
• environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate
change and pipeline safety,
• taxes,
• pension and other postretirement benefit liabilities and funding obligations, or
• accounting standards;
• The results of litigation;
• The availability of and access to, in general, 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;
• Capital and energy commodity market conditions, including the ability to obtain funds with reasonable terms for necessary
capital expenditures and general operations and the terms and conditions imposed for obtaining sufficient gas supply;
• Discovery of material weakness in internal controls; and
• Employee workforce issues, including but not limited to labor disputes and future wage and employee benefit costs, including
changes in discount rates and returns on benefit plan assets.
Readers are urged to consider the risks, uncertainties, and other factors that could affect our business as described in this report.
All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities
Litigation Reform Act of 1995. We do not, by including this statement, assume any obligation to review or revise any particular
forward-looking statement in light of future events.
3
Item 1. Business
OVERVIEW
Spire Inc. (Spire or the Company) was formerly The Laclede Group, Inc., an entity formed in 2000 that, effective
October 1, 2001, became the public utility holding company for Spire Missouri Inc. (Spire Missouri or the Missouri
Utilities). Spire Missouri was founded in 1857 as The Laclede Gas Light Company, and it was listed on the New York
Stock Exchange (NYSE) in 1889, making the Company successor to the eighth longest listed stock on the NYSE. The
Laclede Gas Light Company was renamed Laclede Gas Company in 1950 and then Spire Missouri Inc. on August 30,
2017. Effective August 31, 2014, the Company purchased 100% of the common shares of Alabama Gas Corporation,
which was renamed Spire Alabama Inc. (Spire Alabama) on September 1, 2017. On September 12, 2016, the
Company purchased 100% of the common shares of EnergySouth, Inc., along with its wholly owned subsidiaries,
Mobile Gas Service Corporation and Willmut Gas & Oil Company, and on or about August 30, 2017, those
companies were renamed Spire EnergySouth Inc. (Spire EnergySouth), Spire Gulf Inc. (Spire Gulf), and Spire
Mississippi Inc. (Spire Mississippi), respectively.
Spire is committed to transforming its business and pursuing growth through 1) growing organically, 2) investing in
infrastructure, 3) acquiring and integrating, and 4) innovation and technology.
The Company has two key business segments: Gas Utility and Gas Marketing.
The Gas Utility segment includes the regulated operations of Spire Missouri, Spire Alabama, Spire Gulf and Spire
Mississippi (collectively, the Utilities). The business of the Utilities is subject to seasonal fluctuations with the peak
period occurring in the winter heating season, typically November through April of each fiscal year. Spire Missouri
is a public utility engaged in the purchase, retail distribution and sale of natural gas, with primary offices located in
St. Louis, Missouri. Spire Missouri is the largest natural gas distribution utility system in Missouri, serving more
than 1.1 million residential, commercial and industrial customers. For utility regulatory purposes Spire Missouri has
two regions, one serving St. Louis and eastern Missouri (Spire Missouri East) and the other serving Kansas City and
western Missouri (Spire Missouri West, formerly Missouri Gas Energy, or MGE). Spire Alabama is a public utility
engaged in the purchase, retail distribution and sale of natural gas principally in central and northern Alabama,
serving more than 0.4 million residential, commercial and industrial customers with primary offices located in
Birmingham, Alabama. Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and
sale of natural gas to 0.1 million customers in southern Alabama and south central Mississippi.
The Gas Marketing segment includes Spire Marketing Inc. (Spire Marketing, formerly known as Laclede Energy
Resources, Inc.), a wholly owned subsidiary engaged in the marketing of natural gas and related activities on a non-
regulated basis.
As of September 30, 2017, Spire had 3,279 employees, including 2,271 for Spire Missouri and 819 for Spire
Alabama.
Consolidated operating revenues contributed by each segment for the last three fiscal years are presented below. For
more detailed financial information regarding the segments, see Note 14, Information by Operating Segment, of the
Notes to Financial Statements in Item 8.
(In millions)
Gas Utility
Gas Marketing and other
Total Operating Revenues
2017
2016*
2015
$
$
1,660.0 $
80.7
1,740.7 $
1,457.2 $
80.1
1,537.3 $
1,891.8
84.6
1,976.4
* 2016 Gas Utility operating results include Spire EnergySouth revenues since the September 12, 2016 acquisition date.
Spire’s common stock is listed on the NYSE and trades under the ticker symbol “SR.” The following table reflects
Spire shares issued during the two most recent fiscal years:
Common Stock Issuance
Dividend Reinvestment and Stock Purchase Plan (DRIP)
Equity Incentive Plan
Total Shares Issued
4
2017
2,504,684
23,731
84,186
2,612,601
2016
2,185,000
22,878
107,752
2,315,630
Shares were issued during 2017 in conjunction with the conversion of equity units that were issued in 2014 to help
fund the Spire Alabama acquisition. Shares were issued during 2016 to partially fund the Spire EnergySouth
acquisition. During fiscal 2017 and 2016, shares were issued at historically consistent levels for Spire’s DRIP and
Equity Incentive Plan.
During fiscal 2017 and 2016, neither Spire Missouri nor Spire Alabama issued shares to Spire. For more detailed
common stock information of Spire, Spire Missouri and Spire Alabama, see Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
The information Spire, Spire Missouri and Spire Alabama file or furnish to the Securities and Exchange
Commission (SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and their amendments, and proxy statements are available free of charge under “Filings and Annual
Reports” in the Investors section of Spire’s website, SpireEnergy.com, as soon as reasonably practical after the
information is filed with or furnished to the SEC. Information contained on Spire’s website is not incorporated by
reference in this report.
GAS UTILITY
Natural Gas Supply
The Utilities’ fundamental gas supply strategy is to meet the two-fold objective of 1) ensuring a dependable gas
supply is available for delivery when needed and 2) insofar as is compatible with that dependability, purchasing gas
that is economically priced. In structuring their natural gas supply portfolio, the Utilities focus on natural gas assets
that are strategically positioned to meet the Utilities’ primary objectives.
Spire Missouri focuses its gas supply portfolio around a number of large natural gas suppliers with equity ownership
or control of assets strategically situated to complement its regionally diverse firm transportation arrangements.
Spire Missouri East utilizes both Mid-Continent and Gulf Coast gas sources to provide a level of supply diversity
that facilitates the optimization of pricing differentials as well as protecting against the potential of regional supply
disruptions. Spire Missouri West utilizes both Mid-Continent and Rocky Mountain gas sources to provide a level of
supply diversity that accesses low cost supplies.
In fiscal year 2017, Spire Missouri purchased natural gas from 40 different suppliers to meet its total service area
current gas sales and storage injection requirements. Spire Missouri entered into firm agreements with suppliers
including major producers and marketers providing flexibility to meet the temperature sensitive needs of its
customers. Natural gas purchased by Spire Missouri for delivery to its service area through the Enable Mississippi
River Transmission LLC (MRT) system totaled 45.9 billion cubic feet (Bcf). Spire Missouri also holds firm
transportation on several other interstate pipeline systems that provide access to gas supplies upstream of MRT. In
addition to natural gas deliveries from MRT, 49.7 Bcf was purchased on the Southern Star Central Gas Pipeline, Inc.
(Southern Star), 3.9 Bcf was purchased on the Tallgrass Interstate Gas Transmission, LLC (TGIT) system, 8.4 Bcf
was purchased on the Panhandle Eastern Pipe Line Company, LP (PEPL) system, and 1.4 Bcf was purchased on the
Rockies Express Pipeline, LLC (REX) system. Some of Spire Missouri’s commercial and industrial customers
purchased their own gas with Spire Missouri transporting 44.8 Bcf to them through its distribution system.
The fiscal year 2017 peak day send out of natural gas to Spire Missouri customers, including transportation
customers, occurred on December 18, 2016. The average temperature was 8 degrees Fahrenheit in St. Louis and -3
degrees Fahrenheit in Kansas City. On that day, the Missouri Utilities’ customers consumed 1.65 Bcf of natural gas.
For eastern Missouri, this peak day demand was met with natural gas transported to St. Louis through the MRT,
MoGas Pipeline LLC, and Southern Star transportation systems, and from Spire Missouri’s on-system storage and
peak shaving resources. For western Missouri, this peak day demand was met with natural gas transported to
Kansas City through the Southern Star, PEPL, TGIT, and REX transportation systems.
Spire Alabama’s distribution system is connected to two major interstate natural gas pipeline systems, Southern
Natural Gas Company, L.L.C. (Southern Natural Gas) and Transcontinental Gas Pipe Line Company, LLC
(Transco). It is also connected to two intrastate natural gas pipeline systems.
Spire Alabama purchases natural gas from various natural gas producers and marketers. Certain volumes are
purchased under firm contractual commitments with other volumes purchased on a spot market basis. The
purchased volumes are delivered to Spire Alabama’s system using a variety of firm transportation, interruptible
transportation and storage capacity arrangements designed to meet the system’s varying levels of demand.
5
In fiscal 2017, Spire Alabama purchased natural gas from 14 different suppliers to meet current gas sales, storage
injection, and liquefied natural gas (LNG) liquefaction requirements, of which seven are under long-term supply
agreements. Approximately 58.0 Bcf was transported by Southern Natural Gas, 4.4 Bcf by Transco, and 5.6 Bcf
through intrastate pipelines to the Spire Alabama delivery points for its residential, commercial, and industrial
customers.
The fiscal 2017 peak day send out for Spire Alabama was 0.6 Bcf on January 7, 2017, when the average temperature
was 31 degrees Fahrenheit in Birmingham, of which 100% was met with supplies transported through Southern
Natural Gas, Transco, intrastate facilities, and one of the four LNG peak shaving facilities.
Spire Gulf’s distribution system is directly connected to interstate pipelines, natural gas processing plants and gas
storage facilities. Spire Gulf buys from a variety of producers and marketers, with BP Energy Company being the
primary supplier.
Natural Gas Storage
Spire Missouri has a contractual right to store 21.6 Bcf of gas in MRT’s storage facility located in Unionville,
Louisiana, 16.3 Bcf of gas storage in Southern Star’s system storage facilities located in Kansas and Oklahoma, and
1.4 Bcf of firm storage on PEPL’s system storage. MRT’s tariffs allow injections into storage from May 16 through
November 15 and require the withdrawal from storage of all but 2.1 Bcf from November 16 through May 15.
Southern Star tariffs allow both injections and withdrawals into storage year round with ratchets that restrict the
associated flows dependent upon the underlying inventory level per the contracts.
In addition, Spire Missouri East supplements pipeline gas with natural gas withdrawn from its own underground
storage field located in St. Louis and St. Charles Counties in Missouri. The field is designed to provide
approximately 0.3 Bcf of natural gas withdrawals on a peak day and maximum annual net withdrawals of
approximately 4.0 Bcf of natural gas based on the inventory level that Spire Missouri plans to maintain.
Spire Alabama has a contractual right to store 12.5 Bcf of gas with Southern Natural Gas, 0.2 Bcf of gas with Transco
and 0.2 Bcf of gas with Tennessee Gas Pipeline. In addition, Spire Alabama has 1.8 Bcf of LNG storage that can
provide the system with up to an additional 0.2 Bcf of natural gas daily to meet peak day demand.
Spire Gulf obtains adequate storage capacity through South Pipeline Company, LP, and Sempra’s Bay Gas Storage.
Regulatory Matters
For details on regulatory matters, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.
Other Pertinent Matters
Spire Missouri is the only distributor of natural gas within its franchised service areas, while Spire Alabama is the
main distributor of natural gas in its service areas. The principal competition for the Utilities comes from the local
electric companies. Other competitors in the service areas include suppliers of fuel oil, coal, and propane, as well as
natural gas pipelines that can directly connect to large volume customers. For the Missouri Utilities, competition
also comes from district steam systems in the downtown areas of both St. Louis and Kansas City, and for Spire
Alabama, from municipally or publicly owned gas distributors located adjacent to its service territory. Coal is price
competitive as a fuel source for very large boiler plant loads, but environmental requirements for coal have shifted
the economic advantage to natural gas. Oil and propane can be used to fuel boiler loads and certain direct-fired
process applications, but these fuels require on-site storage, thus limiting their competitiveness. In certain cases,
district steam has been competitive with gas for downtown St. Louis and Kansas City area heating users.
Residential, commercial, and industrial markets represented approximately 91% and 82% of fiscal 2017 operating
revenues for Spire Missouri and Spire Alabama, respectively. Given the current level of natural gas supply and
market conditions, the Utilities believe that the relative comparison of natural gas equipment and operating costs
with those of competitive fuels will not change significantly in the foreseeable future, and that these markets will
continue to be supplied by natural gas. In new multi-family and commercial rental markets, the Utilities’
competitive exposures are presently limited to space and water heating applications.
Spire Missouri offers gas transportation service to its large-user industrial and commercial customers. The tariff
approved for that type of service produces a margin similar to that which the Missouri Utilities would have received
under their regular sales rates. Spire Alabama’s transportation tariff allows it to transport gas for large commercial
and industrial customers rather than buying and reselling it to them and is based on Spire Alabama’s sales profit
margin so that operating margins are unaffected. During fiscal 2017, substantially all of Spire Alabama’s large
commercial and industrial customer deliveries involved the transportation of customer-owned gas.
6
The Utilities are subject to various environmental laws and regulations that, to date, have not materially affected the
Utilities’ or the Company’s financial position and results of operations. For a detailed discussion of environmental
matters, see Note 16, Commitment and Contingencies, of the Notes to Financial Statements in Item 8.
Union Agreements
The Company believes labor relations with its employees are good. Should that condition change, the Company
could experience labor disputes, work stoppages or other disruptions in production that could negatively impact the
Company’s results of operations and cash flows.
The following table presents the Company’s various labor agreements as of September 30, 2017:
Spire Missouri
Union
United Steel, Paper and Forestry, Rubber Manufacturing,
Allied-Industrial and Service Workers International Union
(USW)
USW
USW
USW
USW
USW
Local
Employees
Covered
Contract Start
Date
Contract End
Date
884
11-6
11-194
12561
14228
11-267
64
932
85
August 1, 2015
July 31, 2018
August 1, 2015
July 31, 2018
August 1, 2015
July 31, 2018
130 August 16, 2016
July 31, 2019
41 August 16, 2016
July 31, 2019
27 August 16, 2016
July 31, 2019
Gas Workers Metal Trades locals of the United Association
of Journeyman and Apprentices of the Plumbing and
Pipefitting Industry of the United States and Canada
781-
Kansas
City
Gas Workers Metal Trades locals of the United Association
of Journeyman and Apprentices of the Plumbing and
Pipefitting Industry of the United States and Canada
781-
Monett
189 August 16, 2016
July 31, 2019
56 August 16, 2016
July 31, 2019
Total Spire Missouri
Spire Alabama
USW
USW
United Association of Gas Fitters
Total Spire Alabama
Spire Gulf
USW
Total Spire
12030
12030-A
548
1,524
200
53
122
375
May 1, 2017
May 1, 2017
July 1, 2016
April 30, 2020
April 30, 2020
April 30, 2019
3-541
65 December 1, 2013 November 30, 2017
1,964
7
Operating Revenues and Customer Information
The following information about revenues and therms sold and transported (before intersegment eliminations), and
annual average numbers of customers, includes data of acquired utilities for only the period of ownership
(beginning September 12, 2016 for the utilities of Spire EnergySouth).
Gas Utility Operating Revenues
(In millions)
Residential
Commercial & Industrial
Interruptible
Transportation
Off-System and Other Incentive
Provisions for Refunds and Other
Total Gas Utility Operating Revenues
Gas Utility Therms Sold and Transported
(In millions)
Residential
Commercial & Industrial
Interruptible
Transportation
System Therms Sold and Transported
Off-System
Total Gas Utility Therms Sold and Transported
Gas Utility Customers
Residential
Commercial & Industrial
Interruptible
Transportation
Total Gas Utility Customers
2017
2016
2015
$
$
1,084.5 $
389.2
5.1
99.8
67.9
21.4
1,667.9 $
979.0 $
331.3
2.0
93.1
50.7
3.3
1,459.4 $
1,263.1
462.3
2.3
92.2
76.2
(0.3 )
1,895.8
2017
2016
2015
866.2
446.7
12.6
1,467.5
2,793.0
175.6
2,968.6
2017
1,550,777
133,864
64
827
1,685,532
867.5
420.4
4.6
1,089.8
2,382.3
183.3
2,565.6
2016
1,540,366
137,450
42
824
1,678,682
1,065.1
491.6
3.6
989.0
2,549.3
193.5
2,742.8
2015
1,434,584
132,388
18
796
1,567,786
Total annual average number of customers for Spire Missouri and Spire Alabama for fiscal 2017 was 1,161,051 and
420,816, respectively.
Spire Missouri has franchises in nearly all the communities where it provides service with terms varying from five
years to an indefinite duration. Generally, a franchise is essentially a municipal permit to install pipes and construct
other facilities in the community. All of the franchises are free from unduly burdensome restrictions and are
adequate for the conduct of Spire Missouri’s current public utility businesses in the state of Missouri. In recent
years, although certain franchise agreements have expired, Spire Missouri has continued to provide service in those
communities without formal franchises.
Spire Alabama has franchises in nearly all the communities where it provides service with terms varying from five
years to an indefinite duration. Generally, a franchise is essentially a municipal permit to install pipes and construct
other facilities in the community. All of the franchises are free from unduly burdensome restrictions and are
adequate for the conduct of Spire Alabama’s public utility business in the state of Alabama.
8
GAS MARKETING
Spire Marketing is engaged in the marketing of natural gas and providing energy services to both on-system utility
transportation customers and customers outside of the Utilities’ traditional service areas. During fiscal 2017, Gas
Marketing utilized over 20 interstate and intrastate pipelines and over 100 suppliers to market natural gas to more
than 200 retail customers and 100 wholesale customers, primarily in the central United States (US). Through its
retail operations, Spire Marketing offers natural gas marketing services to large commercial and industrial
customers, while its wholesale business consists of producers, pipelines, power generators, municipalities, storage
operators, and utility companies. Wholesale activities currently represent a majority of the total Gas Marketing
business.
In the course of its business, Spire Marketing enters into agreements to purchase natural gas at a future date in
order to lock up supply to cover future sales commitments to its customers. To secure access to the markets it
serves, Spire Marketing contracts for transportation capacity on various pipelines from both pipeline companies
and through the secondary capacity market from third parties. Throughout fiscal 2017, Spire Marketing held
approximately 0.68 Bcf per day of firm transportation capacity. In addition, to ensure reliability of service and to
provide operational flexibility, Spire Marketing enters into firm storage contracts and interruptible park and loan
transactions with various companies, where it is able to buy and retain gas to be delivered at a future date, at which
time it sells the natural gas to third parties. As of September 30, 2017, Gas Marketing has contracted for
approximately 7.2 Bcf of such storage and park and loan capacity for the 2017-2018 winter season.
The Gas Marketing strategy is to leverage its market expertise and risk management skills to manage and optimize
the value of its portfolio of commodity, transportation, park and loan, and storage contracts while controlling costs
and acting on new marketplace opportunities. Overall, Gas Marketing saw significant growth in volumes in fiscal
2017 primarily as a result of increased business with producers and power generators and adding a sizable amount
of day-to-day trading volumes by taking advantage of the flexibility that its overall portfolio of assets provided.
OTHER
The principal drivers of the Other results in recent years has been interest expense on corporate debt and other
expenses attributable to acquisition transactions and integration. Additionally, Other includes Spire STL Pipeline
LLC, Spire NGL LLC, and subsidiaries engaged in compression of natural gas and risk management, among other
activities.
Spire STL Pipeline LLC is a wholly owned subsidiary of Spire that is planning construction and operation of a 65-
mile pipeline to connect to the Rockies Express Pipeline in Scott County, Illinois and end in St. Louis County,
Missouri. The proposed pipeline will operate under Federal Energy Regulatory Commission (FERC) jurisdiction
and will be capable of delivering up to 400,000 dekatherms per day of natural gas into eastern Missouri. Spire
Missouri will be the foundational shipper with a contractual commitment of 350,000 dekatherms per day.
Spire NGL LLC (formerly Laclede Pipeline Company) is a wholly owned subsidiary of Spire that operates a propane
pipeline under FERC jurisdiction. This pipeline allows Spire Missouri to receive propane that may be used to
supplement its natural gas supply and meet peak demands on its distribution system. Spire NGL LLC also provides
propane transportation services to third parties.
9
Item 1A. Risk Factors
Spire’s and the Utilities’ business and financial results are subject to a number of risks and uncertainties, including
those set forth below. The risks described below are those the Company and the Utilities consider to be material.
When considering any investment in Spire or the Utilities’ securities, investors should carefully consider the
following information, as well as information contained in the caption “Forward-Looking Statements,” Item 7A, and
other documents Spire, Spire Missouri, and Spire Alabama file with the SEC. This list is not exhaustive, and Spire’s
and the Utilities’ respective management places no priority or likelihood based on the risk descriptions, order of
presentation or grouping by subsidiary. All references to dollar amounts are in millions.
RISKS AND UNCERTAINTIES THAT RELATE TO THE BUSINESS AND FINANCIAL RESULTS OF
SPIRE AND ITS SUBSIDIARIES
As a holding company, Spire depends on its operating subsidiaries to meet its financial obligations.
Spire is a holding company with no significant assets other than the stock of its operating subsidiaries and cash
investments. Spire, and Spire Missouri prior to the holding company’s formation in 2000, have paid dividends
continuously since 1946. Spire’s ability to pay dividends to its shareholders is dependent on the ability of its
subsidiaries to generate sufficient net income and cash flows to pay upstream dividends and make loans or loan
repayments. In addition, because it is a holding company and the substantial portion of its assets are represented by
its holdings in the Utilities, the risks faced by the Utilities as described below under RISKS THAT RELATE TO THE
GAS UTILITY SEGMENT may also adversely affect Spire’s cash flows, liquidity, financial condition and results of
operations.
A downgrade in Spire’s and/or its subsidiaries’ credit ratings may negatively affect its ability to
access capital.
Currently, Spire and its utility subsidiaries have investment grade credit ratings, which are subject to review and
change by the rating agencies. Standard & Poor’s has rated Spire’s debt at BBB+, one notch lower than its issuer
rating of A-, and Moody’s (which does not use issuer ratings) rated Spire’s debt at Baa2. There is no assurance that
such credit ratings for any of the Spire companies will remain in effect for any given period of time or that such
ratings will not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s
judgment, circumstances so warrant. Spire has a working capital line of credit to meet its short-term liquidity
needs. Spire’s line of credit may be used to meet the liquidity needs of any of its subsidiaries, subject to sublimits. If
the rating agencies lowered the credit rating at any of these entities, particularly below investment grade, it might
significantly limit such entity’s ability to secure new or additional credit facilities and would increase its costs of
borrowing. Spire’s or the Utilities’ ability to borrow under current or new credit facilities and costs of that borrowing
have a direct impact on their ability to execute their operating strategies.
Unexpected losses may adversely affect Spire’s or its subsidiaries’ financial condition and results of
operations.
As with most businesses, there are operations and business risks inherent in the activities of Spire’s subsidiaries. If,
in the normal course of business, Spire or any of its subsidiaries becomes a party to litigation, such litigation could
result in substantial monetary judgments, fines, or penalties or be resolved on unfavorable terms. In accordance
with customary practice, Spire and its subsidiaries maintain insurance against a significant portion of, but not all,
risks and losses. In addition, in the normal course of its operations, Spire and its subsidiaries may be exposed to loss
from other sources, such as bad debt expense or the failure of a counterparty to meet its financial obligations. Spire
and its operating companies employ many strategies to gain assurance that such risks are appropriately managed,
mitigated, or insured, as appropriate. To the extent a loss is not fully covered by insurance or other risk mitigation
strategies, that loss could adversely affect the Company’s and/or its subsidiaries’ financial condition and results of
operations.
10
Increased inter-dependence on technology may hinder Spire’s and its subsidiaries’ business
operations and adversely affect their financial condition and results of operations if such
technologies fail.
Over the last several years, Spire and its subsidiaries have implemented or acquired a variety of technological tools
including both Company-owned information technology and technological services provided by outside parties.
These tools and systems support critical functions including Spire and its subsidiaries’ integrated planning,
scheduling and dispatching of field resources, its automated meter reading system, customer care and billing,
procurement and accounts payable, operational plant logistics, management reporting, and external financial
reporting. The failure of these or other similarly important technologies, or the Company’s or its subsidiaries’
inability to have these technologies supported, updated, expanded, or integrated into other technologies, could
hinder their business operations and adversely impact their financial condition and results of operations.
Although the Company and its subsidiaries have, when possible, developed alternative sources of technology and
built redundancy into their computer networks and tools, there can be no assurance that these efforts to date would
protect against all potential issues related to the loss of any such technologies or the Utilities’ use of such
technologies.
A cyber-attack may disrupt Spire’s operations or lead to a loss or misuse of confidential and
proprietary information or potential liability.
The Company and its subsidiaries are subject to cyber-security risks primarily related to breaches of security
pertaining to sensitive customer, employee, and vendor information maintained by the Company, its subsidiaries,
or its third-party vendors in the normal course of business, as well as breaches in the technology that manages
natural gas distribution operations and other business processes. A loss of confidential or proprietary data or
security breaches of other technology business tools could adversely affect the Company’s and its subsidiaries’
reputation, diminish customer confidence, disrupt operations, and subject the Company and its subsidiaries to
possible financial liability, any of which could have a material effect on the Company’s and its subsidiaries’ financial
condition and results of operations. The Company and its subsidiaries closely monitor both preventive and detective
measures to manage these risks and maintain cyber risk insurance to mitigate a significant portion, but not all, of
these risks and losses. To the extent that the occurrence of any of these cyber events is not fully covered by
insurance, it could adversely affect the Company’s and its subsidiaries’ financial condition and results of operations.
Resources expended to pursue business acquisitions, investments or other business arrangements
may adversely affect Spire’s financial position and results of operations and return on investments
made may not meet expectations.
From time to time, Spire may seek to grow through strategic acquisitions, investments or other business
arrangements. Attractive acquisition and investment opportunities may be difficult to complete on economically
acceptable terms. It is possible for Spire to expend considerable resources pursuing acquisitions and investments
but, for a variety of reasons, decide not to move forward. Similarly, investment opportunities may be hindered or
halted by regulatory or legal actions. To the extent that acquisitions or investments are made, such transactions
involve a number of risks, including but not limited to, the assumption of material liabilities, the diversion of
management’s attention from daily operations, difficulties in assimilation and retention of employees, securing
adequate capital to support the transaction, and regulatory approval. Uncertainties exist in assessing the value,
risks, profitability, and liabilities associated with certain businesses or assets and there is a possibility that
anticipated operating and financial efficiencies expected to result from an acquisition or investment do not develop.
The failure to complete an acquisition successfully or to integrate future acquisitions or investments that it may
undertake could have an adverse effect on the Company’s financial condition and results of operations and the
market’s perception of the Company’s execution of its strategy. To the extent Spire engages in any of the above
activities together with or through one or more of its subsidiaries, including the Utilities, such subsidiaries may face
the same risks.
11
Failure to obtain required approvals and land rights or significant issues during the construction of
the STL Pipeline could adversely impact Spire’s investment in the project.
The STL Pipeline is under jurisdiction of the FERC. Accordingly, the development, construction and operation of
the project is subject to extensive regulatory oversight and requires various regulatory approvals, including federal
and state environmental permits and licenses. Such projects are often subject to legal and political uncertainties
which can be difficult to predict or control. These projects also require the acquisition of land rights, mostly from
private landowners. Although FERC approval confers federal eminent domain authority, there is some risk and
uncertainty associated with the cost of acquiring land rights, including potential condemnation costs. Spire may be
unable to obtain required regulatory approvals or acquire necessary land rights, or may experience higher costs or
delays in doing so.
Construction of such assets are subject to various risks and uncertainties, including supply chain and labor
disruptions, weather conditions during construction, potential interconnection issues with other pipelines,
equipment failures and construction quality issues. Any of these adverse events regarding regulatory approvals,
land rights or construction risks could result in an impairment of Spire’s investment in the project, and such
impairment could have a materially adverse effect on Spire’s financial condition and results of operations.
Workforce risks may affect the Company’s financial results.
The Company and its subsidiaries are subject to various workforce risks, including, but not limited to, the risk that it
will be unable to attract and retain qualified personnel; that it will be unable to effectively transfer the knowledge
and expertise of an aging workforce to new personnel as those workers retire; and that it will be unable to reach
collective bargaining arrangements with the unions that represent certain of its workers, which could result in work
stoppages.
The Company and its subsidiaries have substantial indebtedness which could adversely affect their
financial condition.
Spire’s total consolidated indebtedness as of September 30, 2017 was $2,572.3 (comprising $477.3 of short-term
borrowings and $2,095.0 of long-term debt, including current portion). Spire Missouri’s total indebtedness as of
September 30, 2017 was $1,176.9 (comprising $203.0 of short-term borrowings, including borrowings from
affiliates, and $973.9 of long-term debt, including current portion). Spire Alabama’s total indebtedness as of
September 30, 2017 was $417.7 (comprising $169.9 of short-term borrowings, including borrowings from affiliates,
and $247.8 of long-term debt).
The indebtedness of the Company and its subsidiaries could have important consequences. For example, it could:
• make it difficult to pay or refinance their debts as they become due during adverse economic and industry
conditions;
• limit flexibility to pursue strategic opportunities or react to changes in its business and the industry in which
they operate and, consequently, place them at a competitive disadvantage to competitors with less debt;
• require a significant portion of cash flows from operations of their respective subsidiaries to be used for debt
service payments, thereby reducing the availability of their cash flows to fund working capital, capital
expenditures, dividend payments and other general corporate activities;
• result in a downgrade in the credit rating of Spire’s or the Utilities’ indebtedness, which could limit the ability
to borrow additional funds or increase the applicable interest rates;
• result in higher interest expense in the event of an increase in market interest rates for both short-term
commercial paper or bank loans;
• reduce the amount of credit available to support hedging activities; and
• require that additional terms, conditions or covenants be placed on Spire or the Utilities.
Based upon current levels of operations, Spire and its subsidiaries expect to be able to generate sufficient cash
through earnings on a consolidated basis or through refinancing to make all the principal and interest payments
when such payments are due under their existing credit agreements, indentures and other instruments governing
outstanding indebtedness; but there can be no assurance that Spire or its subsidiaries will be able to repay or
refinance such borrowings and obligations in future periods.
12
In addition, in order to maintain investment-grade credit ratings, Spire and its subsidiaries may consider it
appropriate to reduce the amount of indebtedness outstanding following acquisitions. This may be accomplished in
several ways, including, in the case of Spire, issuing additional shares of common stock or securities convertible into
shares of common stock, or in the case of Spire or its subsidiaries, reducing discretionary uses of cash or a
combination of these and other measures. Issuances of additional shares of common stock or securities convertible
into shares of common stock would have the effect of diluting the ownership percentage that shareholders hold in
the Company, increasing the Company’s dividend payment obligations and perhaps reducing the reported earnings
per share.
Recent acquisitions may not achieve their intended results, including anticipated efficiencies and
cost savings.
Although the Company and its subsidiaries expect that the recent acquisitions will result in various benefits,
including a significant cost savings and other financial and operational benefits, there can be no assurance
regarding when or the extent to which the Company and its subsidiaries will be able to realize or retain these
benefits. Achieving and retaining the anticipated benefits, including cost savings, is subject to a number of
uncertainties, including whether the assets acquired can be operated in the manner the Company and its
subsidiaries intended. Events outside of the control of the Company and its subsidiaries, including but not limited
to regulatory changes or developments, could also adversely affect their ability to realize the anticipated benefits
from the acquisitions.
Thus, the integration of acquired businesses may be unpredictable, subject to delays or changed circumstances, and
the Company and its subsidiaries can give no assurance that the acquisitions will perform in accordance with their
expectations or that their expectations with respect to integration or cost savings as a result of the acquisitions will
materialize. In addition, the anticipated costs to the Company and its subsidiaries to achieve the integration of the
acquired businesses may differ significantly from current estimates. The integration may place an additional burden
on management and internal resources, and the diversion of management’s attention during the integration process
could have an adverse effect on the Company’s and its subsidiaries’ business, financial condition and expected
operating results.
In connection with acquisitions, Spire Missouri and Spire recorded goodwill and long-lived assets
that could become impaired and adversely affect its financial condition and results of operations.
Spire and Spire Missouri assess goodwill for impairment annually or more frequently if events or circumstances
occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. The
Company and Spire Missouri assess their long-lived assets for impairment whenever events or circumstances
indicate that an asset’s carrying amount may not be recoverable. To the extent the value of goodwill or long-lived
assets becomes impaired, the Company and Spire Missouri may be required to incur impairment charges that could
have a material impact on their results of operations.
Since interest rates are a key component, among other assumptions, in the models used to estimate the fair values
of the Company’s reporting units, as interest rates rise, the calculated fair values decrease and future impairments
may occur. Due to the subjectivity of the assumptions and estimates underlying the impairment analysis, Spire and
Spire Missouri cannot provide assurance that future analyses will not result in impairment. These assumptions and
estimates include projected cash flows, current and future rates for contracted capacity, growth rates, weighted
average cost of capital and market multiples. For additional information, see Item 7, Critical Accounting Estimates.
Changes in accounting standards may adversely impact the Utilities’ financial condition and results
of operations.
Spire and its subsidiaries are subject to changes in US generally accepted accounting principles (GAAP), SEC
regulations and other interpretations of financial reporting requirements for public utilities. Neither the Company
nor any of its subsidiaries have any control over the impact these changes may have on their financial condition or
results of operations nor the timing of such changes. The potential issues associated with rate-regulated accounting,
along with other potential changes to GAAP that the US Financial Accounting Standards Board (FASB) continues to
consider may be significant.
13
Climate change and regulatory and legislative developments in the energy industry related to
climate change may in the future adversely affect operations and financial results.
Climate change, and the extent regulatory or legislative changes occur to address the potential for climate change,
could adversely affect operations and financial results of the Company. Management believes it is likely that any
such resulting impacts would occur very gradually over a long period of time and thus would be difficult to quantify
with any degree of specificity. To the extent climate change results in warmer temperatures, financial results could
be adversely affected through lower gas volumes and revenues and lack of marketing opportunities. Another
possible impact of climate change may be more frequent and more severe weather events, such as hurricanes and
tornadoes, which could increase costs to repair damaged facilities and restore service to customers. If the Company
were unable to deliver natural gas to customers, financial results would be impacted by lost revenues, and the
Utilities generally would have to seek approval from regulators to recover restoration costs. To the extent the
Utilities would be unable to recover those costs, or if higher rates resulting from recovery of such costs would result
in reduced demand for the Company’s services, the Company’s and the Utilities’ future business, financial condition
or financial results could be adversely impacted. In addition, there have been a number of federal and state
legislative and regulatory initiatives proposed in recent years in an attempt to control or limit the effects of global
warming and overall climate change, including greenhouse gas emissions, such as methane and carbon dioxide. The
adoption of this type of legislation by Congress or similar legislation by states or the adoption of related regulations
by federal or state governments mandating a substantial reduction in greenhouse gas emissions in the future could
have far-reaching and significant impacts on the energy industry. Such new legislation or regulations could result in
increased compliance costs or additional operating restrictions, affect the demand for natural gas or impact the
prices charged to customers. At this time, we cannot predict the potential impact of such laws or regulations that
may be adopted on the Company’s and the Utilities’ future business, financial condition or financial results.
Changes to income tax policy, certain tax elections, tax regulations and future taxable income could
adversely impact the Company’s financial condition and results of operations.
The Company has significantly reduced its federal and state income tax obligations over the past few years through
tax planning strategies and the extension of bonus depreciation deductions for certain expenditures for property. As
a result, the Company has generated large annual taxable losses that have resulted in significant federal and state
net operating losses. The Company plans to utilize these net operating losses in the future to reduce income tax
obligations. The value of these net operating losses could be reduced if the Company cannot generate enough
taxable income in the future to utilize all of the net operating losses before they expire due to lower than expected
financial performance or if the Internal Revenue Service does not agree with the filing positions of the Company.
Changes to income tax policy, laws and regulations, including but not limited to changes in tax rates, the
deductibility of certain expenses including interest and state and local income taxes and/or changes in the
deductibility of certain expenditures for property, could adversely impact the Company. If enacted, those impacts
could include reducing the value of its net operating losses and could result in material charges to earnings. Further,
the Company’s financial condition and results of operations may be adversely impacted.
Spire’s pension and other postretirement benefits plans are subject to investment and interest rate
risk that could negatively impact its financial condition.
The Company and its subsidiaries have pension and other postretirement benefits plans that provide benefits to
many of their employees and retirees. Costs of providing benefits and related funding requirements of these plans
are subject to changes in the market value of the assets that fund the plans. The funded status of the plans and the
related costs reflected in our financial statements are affected by various factors, which are subject to an inherent
degree of uncertainty, including economic conditions, financial market performance, interest rates, life expectancies
and demographics. Recessions and volatility in the domestic and international financial markets have negatively
affected the asset values of Spire’s pension plans at various times in the past. Poor investment returns or lower
interest rates may necessitate accelerated funding of the plans to meet minimum federal government requirements,
which could have an adverse impact on the Company’s and its subsidiaries’ financial condition and results of
operations.
14
RISKS THAT RELATE TO THE GAS UTILITY SEGMENT
Regulation of the Utilities’ businesses may impact rates they are able to charge, costs, and
profitability.
The Utilities are subject to regulation by federal, state and local authorities. At the state level, the Utilities are
regulated in Missouri by the Missouri Public Service Commission (MoPSC), in Alabama by the Alabama Public
Service Commission (APSC), and in Mississippi by the Mississippi Public Service Commission (MSPSC). These state
public service commissions regulate many aspects of the Utilities’ distribution operations, including construction
and maintenance of facilities, operations, safety, the rates the Utilities may charge customers, the terms of service to
their customers, transactions with their affiliates, the rate of return they are allowed to realize, and the accounting
treatment for certain aspects of their operations. For further discussion of these accounting matters, see Item 7,
Critical Accounting Estimates pertaining to the Utilities’ operations.
The Utilities’ ability to obtain and timely implement rate increases and rate supplements to maintain the current
rate of return is subject to regulatory review and approval. There can be no assurance that they will be able to obtain
rate increases or rate supplements or continue earning the current authorized rates of return. Spire Alabama’s and
Spire Gulf’s rate setting process, Rate Stabilization and Equalization (RSE), is subject to regulation by the APSC and
is implemented pursuant to an APSC order that will continue beyond September 30, 2018 and September 30, 2021,
respectively, unless the APSC enters an order to the contrary in a manner consistent with the law. Spire Mississippi
is subject to regulation by the MSPSC and utilizes the Rate Stabilization Adjustment (RSA) Rider. For further
details, see Regulatory and Other Matters in Item 7.
The Utilities could incur additional costs if required to adjust to new laws or regulations, revisions to existing laws
or regulations or changes in interpretations of existing laws or regulations such as the Dodd-Frank Act. In addition,
as the regulatory environment for the natural gas industry increases in complexity, the risk of inadvertent
noncompliance could also increase. If the Utilities fail to comply with applicable laws and regulations, whether
existing or new, they could be subject to fines, penalties or other enforcement action by the authorities that regulate
the Utilities’ operations.
The Utilities are involved in legal or administrative proceedings before various courts and
governmental bodies that could adversely affect their results of operations, cash flows and financial
condition.
The Utilities are involved in legal or administrative proceedings before various courts and governmental bodies with
respect to general claims, rates, environmental issues, gas cost prudence reviews and other matters. For further
details, see Contingencies in Note 15 to the financial statements in Item 8. Adverse decisions regarding these
matters, to the extent they require the Utilities to make payments in excess of amounts provided for in their
financial statements, or to the extent they are not covered by insurance, could adversely affect the Utilities’ results of
operations, cash flows and financial condition.
The Utilities’ liquidity may be adversely affected by delays in recovery of their costs, due to
regulation.
In the normal course of business, there is a lag between when the Utilities incur increases in certain of their costs
and the time in which those costs are considered for recovery in the ratemaking process. Cash requirements for
increased operating costs, increased funding levels of defined benefit pension and postretirement costs, capital
expenditures, and other increases in the costs of doing business can require outlays of cash prior to the
authorization of increases in rates charged to customers, as approved by the MoPSC, APSC, and MSPSC.
Accordingly, the Utilities’ liquidity can be adversely impacted to the extent higher costs are not timely recovered
from their customers.
The Utilities’ ability to meet their customers’ natural gas requirements may be impaired if
contracted gas supplies, interstate pipeline and/or storage services are not available or delivered in
a timely manner.
In order to meet their customers’ annual and seasonal natural gas demands, the Utilities must obtain sufficient
supplies, interstate pipeline capacity, and storage capacity. If they are unable to obtain these, either from their
suppliers’ inability to deliver the contracted commodity or the inability to secure replacement quantities, the
Utilities’ financial condition and results of operations may be adversely impacted. If a substantial disruption in
interstate natural gas pipelines’ transmission and storage capacity were to occur during periods of heavy demand,
the Utilities’ financial results could be adversely impacted.
15
The Utilities’ liquidity and, in certain circumstances, the Utilities’ results of operations may be
adversely affected by the cost of purchasing natural gas during periods in which natural gas prices
are rising significantly.
The tariff rate schedules of the Missouri Utilities, Spire Gulf and Spire Mississippi contain Purchased Gas
Adjustment (PGA) clauses and Spire Alabama’s tariff rate schedule contains a Gas Supply Adjustment (GSA) rider
that permit the Utilities to file for rate adjustments to recover the cost of purchased gas. Changes in the cost of
purchased gas are flowed through to customers and may affect uncollectible amounts and cash flows and can
therefore impact the amount of capital resources.
Currently, the Missouri Utilities are allowed to adjust the gas cost component of rates up to four times each year
while Spire Alabama and Spire Gulf (collectively, the Alabama Utilities) and Spire Mississippi may adjust the gas
cost component of their rates on a monthly basis. The Missouri Utilities must make a mandatory gas cost
adjustment at the beginning of the winter, in November, and during the next twelve months may make up to three
additional discretionary gas cost adjustments, so long as each of these adjustments is separated by at least two
months.
The MoPSC typically approves the Missouri Utilities’ PGA changes on an interim basis, subject to refund and the
outcome of a subsequent audit and prudence review. Due to such review process, there is a risk of a disallowance of
full recovery of these costs. Any material disallowance of purchased gas costs would adversely affect revenues. The
Alabama Utilities’ gas supply charges are submitted for APSC review on a monthly basis, regardless of whether
there is a request for a change, so prudence review occurs on an ongoing basis. Spire Mississippi’s PGA is adjusted
on a monthly basis for the most recent charges, and is filed at the MSPSC on a monthly basis.
Increases in the prices the Utilities charge for gas may also adversely affect revenues because they could lead
customers to reduce usage and cause some customers to have trouble paying the resulting higher bills. These higher
prices may increase bad debt expenses and ultimately reduce earnings. Rapid increases in the price of purchased
gas may result in an increase in short-term debt.
To lower financial exposure to commodity price fluctuations, Spire Missouri enters into contracts to hedge the
forward commodity price of its natural gas supplies. As part of this strategy, Spire Missouri may use fixed-price,
forward, physical purchase contracts, swaps, futures, and option contracts. However, Spire Missouri does not hedge
the entire exposure of energy assets or positions to market price volatility, and the coverage will vary over time. Any
costs, gains, or losses experienced through hedging procedures, including carrying costs, generally flow through the
PGA clause, thereby limiting the Missouri Utilities’ exposure to earnings volatility. However, variations in the
timing of collections of such gas costs under the PGA clause and the effect of cash payments for margin deposits
associated with the Missouri Utilities’ use of natural gas derivative instruments may cause short-term cash
requirements to vary. These procedures remain subject to prudence review by the MoPSC.
Spire Alabama currently does not utilize risk mitigation strategies that incorporate commodity hedge instruments,
but has the ability to do so through its GSA. Spire Gulf hedges gas supply for up to 30 months in advance, and Spire
Mississippi utilizes hedging for the upcoming heating season.
The Utilities’ business activities are concentrated in three states.
The Utilities provide natural gas distribution services to customers in Alabama, Mississippi, and Missouri. Changes
in the regional economies, politics, regulations and weather patterns of these states could negatively impact the
Utilities’ growth opportunities and the usage patterns and financial condition of customers and could adversely
affect the Utilities’ earnings, cash flow, and financial position.
The Utilities may be adversely affected by economic conditions.
Periods of slowed economic activity generally result in decreased energy consumption, particularly by industrial and
large commercial companies, a loss of existing customers, fewer new customers especially in newly constructed
buildings. As a consequence, national or regional recessions or other downturns in economic activity could
adversely affect the Utilities’ revenues and cash flows or restrict their future growth. Economic conditions in the
Utilities’ service territories may also adversely impact the Utilities’ ability to collect accounts receivable, resulting in
an increase in bad debt expense.
16
Environmental laws and regulations may require significant expenditures or increase operating
costs.
The Utilities are subject to federal, state and local environmental laws and regulations affecting many aspects of
their present and future operations. These laws and regulations require the Utilities to obtain and comply with a
wide variety of environmental licenses, permits, inspections, and approvals. Failure to comply with these laws and
regulations and failure to obtain any required permits and licenses may result in costs to the Utilities in the form of
fines, penalties or business interruptions, which may be material. In addition, existing environmental laws and
regulations could be revised or reinterpreted and/or new laws and regulations could be adopted or become
applicable to the Utilities or their facilities, thereby impacting the Utilities’ cost of compliance. The discovery of
presently unknown environmental conditions, including former manufactured gas plant sites, and claims against
the Utilities under environmental laws and regulations may result in expenditures and liabilities, which could be
material. To the extent environmental compliance costs are not fully covered by insurance or recovered in rates
from customers, those costs may have an adverse effect on the Utilities’ financial condition and results of
operations.
The Utilities are subject to pipeline safety and system integrity laws and regulations that may
require significant expenditures or significant increases in operating costs.
Such laws and regulations affect various aspects of the Utilities’ present and future operations. These laws and
regulations require the Utilities to maintain pipeline safety and system integrity by identifying and reducing
pipeline risks. Compliance with these laws and regulations, or future changes in these laws and regulations, may
result in increased capital, operating and other costs which may not be recoverable in a timely manner from
customers in rates.
Failure to comply may result in fines, penalties, or injunctive measures that would not be recoverable from
customers in rates and could result in a material effect on the Utilities’ financial condition and results of operations.
Transporting, distributing, and storing natural gas and propane involves numerous risks that may
result in accidents and other operating risks and costs.
Gas distribution activities inherently involve a variety of hazards and operations risks, such as leaks, accidental
explosions, damage caused by third parties, and mechanical problems, which could cause substantial financial
losses. In addition, these risks could result in serious injury to employees and non-employees, loss of human life,
significant damage to property, environmental pollution, impairment of operations, and substantial losses to the
Utilities. The location of pipelines and storage facilities near populated areas, including residential areas,
commercial business centers, and industrial sites, could increase the level of damages resulting from these risks.
Similar risks also exist for Spire Missouri’s propane storage, transmission and minor distribution operations. These
activities may subject the Utilities to litigation or administrative proceedings. Such litigation or proceedings could
result in substantial monetary judgments, fines, or penalties against the Utilities or be resolved on unfavorable
terms. The Utilities are subject to federal and state laws and regulations requiring the Utilities to maintain certain
safety and system integrity measures by identifying and managing storage and pipeline risks. Compliance with these
laws and regulations, or future changes in these laws and regulations, may result in increased capital, operating and
other costs which may not be recoverable in a timely manner from customers in rates. In accordance with
customary industry practices, the Utilities maintain insurance against a significant portion, but not all, of these risks
and losses. To the extent that the occurrence of any of these events is not fully covered by insurance, it could
adversely affect the Utilities’ financial condition and results of operations.
Because of the highly competitive nature of its business, the Utilities may not be able to retain
existing customers or acquire new customers, which could have an adverse impact on their
business, operating results and financial condition.
The Utilities face the risk that customers may bypass gas distribution services by gaining distribution directly from
interstate pipelines or, in the case of Spire Alabama and Spire Gulf, also from municipally or publicly owned gas
distributors located adjacent to its service territory. The Utilities cannot provide any assurance that increased
competition or other changes in legislation, regulation or policies will not have a material adverse effect on their
business, financial condition or results of operations.
17
The Utilities compete with distributors offering a broad range of services and prices, from full-service distributors to
those offering delivery only. The Utilities also compete for retail customers with suppliers of alternative energy
products, principally propane and electricity. If they are unable to compete effectively, the Utilities may lose existing
customers and/or fail to acquire new customers, which could have a material adverse effect on their business,
operating results and financial condition.
Changes in the wholesale costs of purchased natural gas supplies may adversely impact the Utilities’
competitive position compared with alternative energy sources.
Changes in wholesale natural gas prices compared with prices for electricity, fuel oil, coal, propane, or other energy
sources may affect the Utilities’ retention of natural gas customers and may adversely impact their financial
condition and results of operations.
Significantly warmer-than-normal weather conditions, the effects of climate change, legislative and
regulatory initiatives in response to climate change or in support of increased energy efficiency,
and other factors that influence customer usage may affect the Utilities’ sale of heating energy and
adversely impact their financial position and results of operations.
The Utilities’ earnings are primarily generated by the sale of heating energy. The Missouri Utilities have weather
mitigation rate designs and the Alabama Utilities have Temperature Adjustment Riders (TARs), each of which is
approved by the respective state regulatory body, which provide better assurance of the recovery of fixed costs and
margins during winter months despite variations in sales volumes due to the impacts of weather and other factors
that affect customer usage. However, significantly warmer-than-normal weather conditions in the Utilities’ service
areas and other factors, such as climate change, alternative energy sources and increased efficiency of gas furnaces
and other appliances, may result in reduced profitability and decreased cash flows attributable to lower gas sales.
Furthermore, continuation of the weather mitigation rate design at Spire Missouri East, the rate design whereby
distribution costs are recovered predominantly through fixed monthly charges at Spire Missouri West, or the RSE at
Spire Alabama and Spire Gulf, are subject to regulatory discretion.
In addition, the promulgation of regulations by the U. S. Environmental Protection Agency (EPA), particularly those
regulating the emissions of greenhouse gases, and by the U. S. Department of Energy supporting higher efficiency
for residential gas furnaces and other gas appliances or the potential enactment of congressional legislation
addressing global warming and climate change may decrease customer usage, encourage fuel switching from gas to
other energy forms, and may result in future additional compliance costs that could impact the Utilities’ financial
conditions and results of operations.
Regional supply/demand fluctuations and changes in national infrastructure, as well as regulatory
discretion, may adversely affect the Missouri Utilities’ ability to profit from off-system sales and
capacity release.
The Missouri Utilities’ income from off-system sales and capacity release is subject to fluctuations in market
conditions and changing supply and demand conditions in areas the Missouri Utilities hold pipeline capacity rights.
Specific factors impacting the Missouri Utilities’ income from off-system sales and capacity release include the
availability of attractively-priced natural gas supply, availability of pipeline capacity, and market demand. Income
from off-system sales and capacity release is shared with customers. The Missouri Utilities are allowed to retain 15%
to 25% of the first $6.0 in annual income earned (depending on the level of income earned) and 30% of income
exceeding $6.0 annually. In accordance with an agreement approved by the MoPSC, Spire Missouri East deferred,
until fiscal 2017, its ability to retain 15% of the first $2.0. Spire Missouri West is allowed to retain 15% to 25% of the
first $3.6 in annual income earned (depending on the level of income earned) and 30% of income exceeding $3.6
annually. The Missouri Utilities’ ability to retain such income in the future is subject to regulatory discretion in a
base rate proceeding.
Catastrophic events may adversely affect the Utilities’ facilities and operations.
Catastrophic events such as fires, earthquakes, explosions, floods, tornadoes, hurricanes, tropical storms, terrorist
acts, acts of civil unrest, pandemic illnesses or other similar occurrences could adversely affect the Utilities’ facilities
and operations. The Utilities have emergency planning and training programs in place to respond to events that
could cause business interruptions. However, unanticipated events or a combination of events, failure in resources
needed to respond to events, or slow or inadequate response to events may have an adverse impact on the Utilities’
operations, financial condition, and results of operations. The availability of insurance covering catastrophic events
may be limited or may result in higher deductibles, higher premiums, and more restrictive policy terms.
18
RISKS THAT RELATE TO THE GAS MARKETING SEGMENT
Increased competition, fluctuations in natural gas commodity prices, expiration of supply and
transportation arrangements, and infrastructure projects may adversely impact the future
profitability of Gas Marketing.
Competition in the marketplace and fluctuations in natural gas commodity prices have a direct impact on the Gas
Marketing business. Changing market conditions and prices, the narrowing of regional and seasonal price
differentials and limited future price volatility may adversely impact its sales margins or affect its ability to procure
gas supplies and/or to serve certain customers, which may reduce sales profitability and/or increase certain credit
requirements caused by reductions in netting capability. Also, Gas Marketing profitability may be impacted by the
effects of the expiration, in the normal course of business, of certain of its natural gas supply contracts if those
contracts cannot be replaced and/or renewed with arrangements with similar terms and pricing. Although the
FERC regulates the interstate transportation of natural gas and establishes the general terms and conditions under
which Spire Marketing may use interstate gas pipeline capacity to purchase and transport natural gas, it must
occasionally renegotiate its transportation agreements with a concentrated group of pipeline companies.
Renegotiated terms of new agreements, or increases in FERC-authorized rates of existing agreements, may impact
Gas Marketing’s future profitability. Profitability may also be adversely impacted if pipeline capacity or future
storage capacity secured is not fully utilized and/or its costs are not fully recovered.
Reduced access to credit and/or capital markets may prevent the Gas Marketing business from
executing operating strategies.
The Gas Marketing segment relies on its cash flows, ability to effect net settlements with counterparties, parental
guarantees, and access to Spire’s liquidity resources to satisfy its credit and working capital requirements. Spire
Marketing’s ability to rely on parental guarantees is dependent upon Spire’s financial condition and credit ratings. If
Spire’s credit ratings were lowered, particularly below investment grade, counterparty acceptance of parental
guarantees may diminish, resulting in decreased availability of credit. Additionally, under such circumstances,
certain counterparties may require Spire Marketing to provide prepayments or cash deposits, amounts of which
would be dependent upon natural gas market conditions. Reduced access to credit or increased credit requirements,
which may also be caused by factors such as higher overall natural gas prices, may limit Spire Marketing’s ability to
enter into certain transactions. In addition, Spire Marketing has concentrations of counterparty credit risk in that a
significant portion of its transactions are with (or are associated with) energy producers, utility companies, and
pipelines. These concentrations of counterparties have the potential to affect the Company’s overall exposure to
credit risk, either positively or negatively, in that each of these three groups may be affected similarly by changes in
economic, industry, or other conditions. Spire Marketing also has concentrations of credit risk in certain
individually significant counterparties. Spire Marketing closely monitors its credit exposure and, although
uncollectible amounts have not been significant, increased counterparty defaults are possible and may result in
financial losses and/or capital limitations.
Risk management policies, including the use of derivative instruments, may not fully protect Gas
Marketing’s sales and results of operations from volatility and may result in financial losses.
In the course of its business, Spire Marketing enters into contracts to purchase and sell natural gas at fixed prices
and index-based prices. Commodity price risk associated with these contracts has the potential to impact earnings
and cash flows. To minimize this risk, Spire Marketing has a risk management policy that provides for daily
monitoring of a number of business measures, including fixed price commitments.
Spire Marketing currently manages the commodity price risk associated with fixed-price commitments for the
purchase or sale of natural gas by either closely matching the offsetting physical purchase or sale of natural gas at
fixed prices or through the use of natural gas futures, options, and swap contracts traded on or cleared through the
New York Mercantile Exchange, Inc. (NYMEX) and the Intercontinental Exchange (ICE) to lock in margins. These
exchange-traded/cleared contracts may be designated as cash flow hedges of forecasted transactions. However,
market conditions and regional price changes may cause ineffective portions of matched positions to result in
financial losses. Additionally, to the extent that Spire Marketing’s natural gas contracts are classified as trading
activities or do not otherwise qualify for the normal purchases or normal sales designation (or the designation is not
elected), the contracts are recorded as derivatives at fair value each period. Accordingly, the associated gains and
losses are reported directly in earnings and may cause volatility in results of operations. Gains or losses (realized
and unrealized) on certain wholesale purchase and sale contracts, consisting of those classified as trading activities,
are required to be presented on a net basis (instead of a gross basis) in the statements of consolidated income. Such
presentation could result in volatility in the Company’s operating revenues.
19
Spire Marketing’s ability to meet its customers’ natural gas requirements may be impaired if
contracted gas supplies and interstate pipeline services are not available or delivered in a timely
manner.
Spire Marketing’s ability to deliver natural gas to its customers is contingent upon the ability of natural gas
producers, other gas marketers, and interstate pipelines to fulfill delivery obligations to Spire Marketing under firm
contracts. If these counterparties fail to perform, they have a contractual obligation to reimburse Spire Marketing
for adverse consequences. Spire Marketing will attempt to use such reimbursements to obtain the necessary
supplies so that it may fulfill its customer obligations. To the extent that it is unable to obtain the necessary
supplies, Spire Marketing’s financial position and results of operations may be adversely impacted.
Regulatory and legislative developments pertaining to the energy industry may adversely impact
Spire Marketing’s results of operations, financial condition and cash flows.
The Spire Marketing business is non-regulated, in that the rates it charges its customers are not established by or
subject to approval by any regulatory body with jurisdiction over utilities. However, it is subject to various laws and
regulations affecting the energy industry. New regulatory and legislative actions may adversely impact Spire
Marketing’s results of operations, financial condition, and cash flows by potentially reducing customer growth
opportunities and/or increasing the costs of doing business.
For example, Spire Marketing incurs additional costs to comply with new laws and regulations, such as the Dodd-
Frank Act amendments to the Commodity Exchange Act, which authorizes the Commodity Futures Trading
Commission (the CFTC) to regulate futures contracts, options and swaps. These derivative transactions include
instruments and bilateral contracts that Spire Marketing uses to hedge or mitigate ongoing commercial risks. The
Dodd-Frank Act contemplates that most standardized swaps will be required to be cleared through a registered
clearing facility and traded on a designated exchange or swap execution facility, subject to certain exceptions. In
addition, the CFTC’s rules require companies, include Spire Marketing, to maintain regulatory records of swap
transactions, and to report swaps to centralized swap data repositories (SDRs), among other new compliance
obligations. Although Spire Marketing may qualify for exceptions to certain of the new CFTC rules, its derivatives
counterparties will be subject to new capital, margin, documentation and business conduct requirements imposed
as a result of the Dodd-Frank Act. Such new rules will increase transaction costs, and may make it more difficult for
Spire Marketing to enter into hedging transactions on favorable terms or affect the number and/or creditworthiness
of available swap counterparties. The full impact of the new CFTC requirements will not be known definitively until
all of the Dodd-Frank Act regulations have been finalized and fully implemented. Spire Marketing’s inability to
enter into derivatives instruments or other commercial risk hedging transactions on favorable terms, or at all, could
increase operating expenses and expose it to unhedged commercial risks, including potential adverse changes in
commodity prices.
In addition, as the regulatory environment for the natural gas industry increases in complexity, the risk of
inadvertent noncompliance could also increase. If the business fails to comply with applicable laws and regulations,
whether existing or new ones, it could be subject to fines, penalties or other enforcement action by the authorities
that regulate its operations.
Item 1B. Unresolved Staff Comments
None.
20
Item 2. Properties
Spire
Refer to the information below about the principal properties of Spire Missouri and Spire Alabama. The Spire
EnergySouth utilities own approximately 5,500 miles of pipelines. Other properties of Spire and its subsidiaries,
including Spire Marketing and Spire EnergySouth, do not constitute a significant portion of its properties. The
current leases for office space in downtown St. Louis commenced in early 2015, with terms ranging from 10 to 20
years, with multiple renewal options. For further information on leases see Note 16, Commitments and
Contingencies, of the Notes to Financial Statements in Item 8.
Spire Missouri
The principal properties of Spire Missouri consist of its gas distribution system, which includes more than 30,000
miles of main and related service lines, odorization and regulation facilities, and customer meters. The mains and
service lines are located in municipal streets or alleys, public streets or highways, or on lands of others for which we
have obtained the necessary legal rights to place and operate our facilities on such property. Spire Missouri has an
underground natural gas storage facility, several operating centers, and other related properties. Substantially all of
Spire Missouri’s utility plant is subject to the liens of its mortgage. All the properties of Spire Missouri are held in
fee, or by easement, or under lease agreements. The principal lease agreements include underground storage rights
that are of indefinite duration.
Spire Alabama
The properties of Spire Alabama consist primarily of its gas distribution system, which includes approximately
23,000 miles of main and related service lines, odorization and regulation facilities, and customer meters. The
mains and service lines are located in municipal streets or alleys, public streets or highways, or on lands of others
for which we have obtained the necessary legal rights to place and operate our facilities on such property. Spire
Alabama also has four LNG facilities, several operating centers, and other related properties. All of the properties of
Spire Alabama are held in fee, or by easement, or under lease agreements.
Item 3. Legal Proceedings
For a description of pending regulatory matters of Spire, see Note 15, Regulatory Matters, of the Notes to Financial
Statements in Item 8. For a description of environmental matters, see Note 16, Commitments and Contingencies, of
the Notes to Financial Statements in Item 8.
Spire and its subsidiaries are involved in litigation, claims, and investigations arising in the normal course of
business. Management, after discussion with counsel, believes the final outcome will not have a material effect on
the consolidated financial position or results of operations reflected in the consolidated financial statements
presented herein.
21
EXECUTIVE OFFICERS OF THE REGISTRANT – Listed below are executive officers as defined by the SEC
for Spire, Spire Missouri and Spire Alabama. Their ages, at September 30, 2017, and positions are listed below along
with their business experience during the past five years.
Name
Age Position with Company (1)
S. Sitherwood
57
Spire
President and Chief Executive Officer
Spire Missouri
Chairman of the Board
Chairman of the Board and Chief Executive Officer
Chairman of the Board, Chief Executive Officer and President
Spire Alabama
Chairman of the Board
S. L. Lindsey (3)
51
Spire
Executive Vice President, Chief Operating Officer, Distribution
Operations
Spire Missouri
Chief Executive Officer and President
President
Spire Alabama
Chief Executive Officer
S. P. Rasche
57
Spire
Executive Vice President and Chief Financial Officer
Senior Vice President, Chief Financial Officer
Senior Vice President, Finance and Accounting
Spire Missouri
Chief Financial Officer
Spire Alabama
Chief Financial Officer
Appointed (2)
February 2012
January 2015
October 2012
February 2012
September 2014
October 2012
January 2015
October 2012
September 2014
November 2013
October 2013
May 2012
May 2012
September 2014
M. C. Darrell
59
Spire
Senior Vice President, General Counsel and Chief Compliance Officer May 2012
M. C. Geiselhart
58
Spire
Senior Vice President, Strategic Planning and Corporate Development
Vice President, Strategic Planning and Corporate Development
Vice President, Strategic Development and Planning
January 2015
February 2014
August 2006
K. A. Smith
59
Spire Alabama
President
Vice President, System Integrity
April 2015
August 2011
(1) The information provided relates to the Company and its principal subsidiaries. Many of the executive officers have
served or currently serve as officers or directors for other subsidiaries of the Company.
(2) Officers of Spire are normally reappointed by the Board of Directors in November of each year. Officers of Spire
Missouri and Spire Alabama are normally reappointed by their boards of directors in January of each year.
(3) Mr. Lindsey served as Senior Vice President, Southern Operations of AGL Resources, Inc. and President of its
Atlanta Gas Light, Chattanooga Gas and Florida City Gas subsidiaries from December 2011 to October 2012.
22
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
Spire
Spire’s common stock trades on The New York Stock Exchange (NYSE) under the symbol “SR.” The high and the
low sales price for the common stock for each quarter in the two most recent fiscal years were:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2017
2016
High
Low
High
Low
$
66.65 $
68.30
72.83
78.00
59.54 $
62.33
63.84
68.30
61.04 $
68.79
70.87
71.21
53.86
57.10
61.00
61.96
The number of holders of record as of November 10, 2017 was 3,224.
Dividends declared on common stock for the two most recent fiscal years were:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
2017
2016
0.525 $
0.525
0.525
0.525
0.49
0.49
0.49
0.49
We have continuously paid a cash dividend to our common shareholders since 1946, with 2017 marking the 14th
consecutive year of increasing the dividend on an annualized basis. Dividends are payable at the discretion of our
Board of Directors. Future payment of dividends, and the amount of these dividends, will depend on our financial
condition, results of operations, capital requirements, and other factors. We declared quarterly cash dividends on
our common stock in 2017 and 2016, totaling $2.10 per share and $1.96 per share, respectively.
For disclosures related to securities authorized for issuance under equity compensation plans, see Item 12.
During the three months ended September 30, 2017, the only repurchases of our common stock was pursuant to
elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the
vesting of performance-based and time-vested restricted stock and stock units. The following table provides
information on those repurchases:
Period
July 1, 2017 -
July 31, 2017
August 1, 2017 -
August 31, 2017
September 1, 2017 -
September 30, 2017
Total
(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
347
—
—
347
$69.55
—
—
$69.55
—
—
—
—
—
—
—
—
23
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
September 30
Spire Inc.
S&P 500 Index
S&P Utilities Index
2012
2013
2014
2015
2016
2017
$ 100.00
$ 108.90
$ 116.61
$ 142.06
$ 171.23
$ 206.75
100.00
100.00
119.34
106.99
142.89
125.32
142.02
133.55
163.93
156.74
194.44
175.60
* Cumulative total return is based on a $100 investment on September 30, 2012, assuming reinvestment of dividends.
24
Spire Missouri
Spire Missouri common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange. Dividends
declared on common stock for the two most recent fiscal years were:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2017
2016
$ 600.15 $ 864.30
866.20
909.86
569.64
—
—
—
Spire Missouri’s mortgage contains restrictions on its ability to pay cash dividends on its common stock, as
described in further detail in Note 5, Shareholders’ Equity, of the Notes to Financial Statements in Item 8. As of
September 30, 2017 and 2016, the amount under the mortgage’s formula that was available to pay dividends was
$1,010.8 and $916.8, respectively.
Spire periodically purchases common stock of Spire Missouri with the price set at the book value of Spire Missouri
common stock as of the most recently completed fiscal quarter. There were no sales of Spire Missouri common stock
during the three most recent fiscal years.
Spire Alabama
Spire Alabama common stock is owned by its parent, Spire Inc., and is not traded on any stock exchange.
Dividends declared on common stock for the two most recent fiscal years were:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$
2017
2016
3.42 $
1.90
3.42
4.94
3.80
4.06
4.06
4.06
25
Item 6. Selected Financial Data
Spire
Fiscal Years Ended September 30
(Dollars in millions, except per share amounts)
2017
2016(1)
2015
2014(2) 2013(3)
Statements of Income data
Total Operating Revenues
Net Income
Common Stock data
$ 1,740.7 $ 1,537.3 $ 1,976.4 $ 1,627.2 $ 1,017.0
52.8
161.6
136.9
144.2
84.6
Diluted Earnings Per Share of Common Stock
Dividends Declared Per Share of Common Stock
$
3.43 $
2.10
3.24 $
1.96
3.16 $
1.84
2.35 $
1.76
2.02
1.70
Balance Sheet data (4)
Total Assets
Long-Term Debt (less current portion)
Net Economic Earnings data (5)
Net Income (GAAP)
Unrealized loss (gain) on energy-related derivatives
Lower of cost or market inventory adjustments
Realized (gain) loss on economic hedges prior to the sale of the
physical commodity
Acquisition, divestiture and restructuring activities
Gain on sale of property
Income tax effect of adjustments
Net Economic Earnings (Non-GAAP)
Diluted Earnings per Share of Common Stock:
Net Income (GAAP)
Unrealized loss (gain) on energy-related derivatives
Lower of cost or market inventory adjustments
Realized (gain) loss on economic hedges prior to the sale of the
physical commodity
Acquisition, divestiture and restructuring activities
Gain on sale of property
Income tax effect of adjustments
Weighted average shares adjustment
Net Economic Earnings (Non-GAAP)
$ 6,546.7 $ 6,064.4 $ 5,277.6 $ 5,059.3 $ 3,117.3
904.6
1,836.3
1,995.0
1,820.7
1,758.9
$
$
$
$
161.6 $
6.0
—
(0.3 )
4.0
—
(3.7 )
167.6 $
3.43 $
0.13
—
(0.01 )
0.09
—
(0.08 )
—
3.56 $
144.2 $
(0.1 )
0.2
(1.6 )
9.2
—
(2.8 )
149.1 $
3.24 $
—
0.01
(0.04 )
0.21
—
(0.06 )
0.06
3.42 $
136.9 $
(2.8)
0.4
2.4
9.8
(7.6)
(0.8)
138.3 $
3.16 $
(0.07)
0.01
0.06
0.23
(0.18)
(0.02)
—
3.19 $
84.6 $
(1.6 )
(1.1 )
(0.4 )
29.5
—
(10.9 )
100.1 $
2.35 $
(0.04 )
(0.03 )
(0.01 )
0.82
—
(0.31 )
0.27
3.05 $
52.8
1.0
1.4
—
17.3
—
(7.6 )
64.9
2.02
0.04
0.05
—
0.67
—
(0.29 )
0.38
2.87
(1) Effective September 12, 2016, Spire completed the purchase of 100% of the outstanding common stock of Spire EnergySouth for $344
(including assumed debt of $67.0). Spire funded the purchase price with a combination of the issuance of approximately 2.2 million shares of
common stock on May 17, 2016, the issuance of $165.0 aggregate principal amount of senior notes on September 9, 2016, and cash on hand.
(2) Effective August 31, 2014, Spire completed the purchase of 100% of the outstanding common stock of Spire Alabama for $1,590.3 (including
assumed debt of $264.8), funded with a combination of the issuance of 10.35 million shares of common stock and 2.875 million equity units
completed on June 11, 2014, the issuance of $625.0 aggregate principal amount of senior notes on August 19, 2014, and cash on hand.
(3) Effective September 1, 2013, Spire Missouri completed the purchase of substantially all of the assets and liabilities of Missouri Gas Energy
(now Spire Missouri West) for $940.2, supported by a combination of the issuance of approximately 10.0 million shares of common stock
completed on May 29, 2013 and the issuance by Spire Missouri of $450.0 of first mortgage bonds on August 13, 2013.
(4) Balance Sheet data for fiscal years 2013-2016 has been restated to retrospectively reflect the impact of implementing Accounting Standards
Update (ASU) No. 2015-03, Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, during fiscal 2017.
(5) This section contains the non-GAAP financial measures of net economic earnings (NEE) and net economic earnings per share (NEEPS).
NEEPS are calculated by replacing consolidated net income with consolidated NEE in the GAAP diluted earnings per share calculation. Each
reconciling item between NEE and net income is shown pre-tax, with total related income taxes calculated by applying effective federal, state,
and local income tax rates applicable to ordinary income to those amounts. 2016 NEEPS excludes the impact of the May 2016 equity offering
to fund the acquisition of Spire EnergySouth. 2014 NEEPS excludes the impact of the June 2014 equity offerings to fund the acquisition of
Spire Alabama. 2013 NEEPS excludes the impact of the May 2013 equity offering to fund the Spire Missouri West acquisition. The weighted-
average diluted shares used in the NEEPS calculation for fiscal years 2016, 2014, and 2013 were 43.5, 32.7, and 22.5, respectively, compared
to 44.3, 35.9, and 26.0, respectively, used in the GAAP EPS calculations for those years. For more information on net economic earnings
data, refer to the Earnings section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
(Dollars in millions, except per share and per unit amounts)
INTRODUCTION
This section analyzes the financial condition and results of operations of Spire Inc. (Spire or the Company), Spire
Missouri Inc. (Spire Missouri or the Missouri Utilities), and Spire Alabama Inc. (Spire Alabama). Spire Missouri,
Spire Alabama, and Spire EnergySouth Inc. (Spire EnergySouth) are wholly owned subsidiaries of the Company.
Spire Missouri changed its name from Laclede Gas Company on August 30, 2017, and Spire Alabama changed its
name from Alabama Gas Corporation on September 1, 2017. Spire Missouri, Spire Alabama and the subsidiaries of
Spire EnergySouth Inc. (formerly known as EnergySouth, Inc.) are collectively referred to as the Utilities. The
subsidiaries of Spire EnergySouth are Spire Gulf Inc. (Spire Gulf, formerly known as Mobile Gas Service
Corporation) and Spire Mississippi Inc. (Spire Mississippi, formerly known as Willmut Gas & Oil Company). This
section includes management’s view of factors that affect the respective businesses of the Company, Spire Missouri,
and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods,
and the effects of such factors on the Company’s, Spire Missouri’s and Spire Alabama’s overall financial condition
and liquidity.
Reference is made to “Item 1A. Risk Factors” and “Forward-Looking Statements,” which describe important factors
that could cause actual results to differ from expectations and non-historical information contained herein. In
addition, the following discussion should be read in conjunction with the audited financial statements and
accompanying notes thereto of Spire, Spire Missouri and Spire Alabama included in “Item 8. Financial Statements
and Supplementary Data.”
RESULTS OF OPERATIONS
Overview
The Company has two key business segments: Gas Utility and Gas Marketing. Spire’s earnings are primarily derived
from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the
Utilities’ business, earnings of Spire, Spire Missouri and Spire Alabama are typically concentrated during the
heating season of November through April each fiscal year.
Gas Utility - Spire Missouri
Spire Missouri is Missouri’s largest natural gas distribution utility and is regulated by the Missouri Public Service
Commission (MoPSC). Spire Missouri serves St. Louis and eastern Missouri through Spire Missouri East (formerly
Laclede Gas Company) and serves Kansas City and western Missouri through Spire Missouri West (formerly
Missouri Gas Energy, or MGE). Spire Missouri delivers natural gas to retail customers at rates and in accordance
with tariffs authorized by the MoPSC. The earnings of Spire Missouri are primarily generated by the sale of heating
energy. The rate design for each service territory serves to lessen the impact of weather volatility on its customers
during cold winters and stabilize Spire Missouri’s earnings.
Gas Utility - Spire Alabama
Spire Alabama is the largest natural gas distribution utility in the state of Alabama. Spire Alabama’s service territory
is located in central and northern Alabama. Among the cities served by Spire Alabama are Birmingham, the center
of the largest metropolitan area in the state, and Montgomery, the state capital. Spire Alabama is regulated by the
Alabama Public Service Commission (APSC). Spire Alabama purchases natural gas through interstate and intrastate
suppliers and distributes the purchased gas through its distribution facilities for sale to residential, commercial, and
industrial customers and other end-users of natural gas. Spire Alabama also provides transportation services to
large industrial and commercial customers located on its distribution system. These transportation customers, using
Spire Alabama as their agent or acting on their own, purchase gas directly from marketers or suppliers and arrange
for delivery of the gas into the Spire Alabama distribution system. Spire Alabama charges a fee to transport such
customer-owned gas through its distribution system to the customers’ facilities.
27
Gas Marketing
Spire Marketing Inc. (Spire Marketing) is engaged in the marketing of natural gas and related activities on a non-
regulated basis and is reported in the Gas Marketing segment. Spire Marketing markets natural gas across the
country with the core of its footprint located in and around the central United States (US). It holds firm
transportation and storage contracts in order to effectively manage its customer base, which consists of producers,
pipelines, power generators, storage operators, municipalities, utility companies, and large commercial and
industrial customers.
Business Evaluation Factors
Based on the nature of the business of the Company and its subsidiaries, as well as current economic conditions,
management focuses on the following key variables in evaluating the financial condition and results of operations
and managing the business.
Gas Utility segment:
•
the Utilities’ ability to recover the costs of purchasing and distributing natural gas from their customers;
•
the impact of weather and other factors, such as customer conservation, on revenues and expenses;
• changes in the regulatory environment at the federal, state, and local levels, as well as decisions by
regulators, that impact the Utilities’ ability to earn its authorized rate of return in all service territories they
serve;
the Utilities’ ability to access credit markets and maintain working capital sufficient to meet operating
requirements;
the effect of natural gas price volatility on the business; and
the ability to integrate the operations of all acquisitions.
•
•
•
Gas Marketing segment:
•
the risks of competition;
•
fluctuations in natural gas prices;
• new national infrastructure projects;
•
• credit and/or capital market access;
• counterparty risks; and
•
the effect of natural gas price volatility on the business.
the ability to procure firm transportation and storage services at reasonable rates;
Further information regarding how management seeks to manage these key variables is discussed below.
Gas Utility
The Utilities seek to provide reliable natural gas services at a reasonable cost, while maintaining and building secure
and dependable infrastructures. The Utilities’ strategies focus on improving both performance and the ability to
recover their authorized distribution costs and rates of return. The Utilities’ distribution costs are the essential,
primarily fixed, expenditures it must incur to operate and maintain more than 58,000 miles of mains and services
comprising the natural gas distribution systems and related storage facilities for Spire Missouri, Spire Alabama and
the subsidiaries of Spire EnergySouth.
The Utilities’ distribution costs include wages and employee benefit costs, depreciation and maintenance expenses,
and other regulated utility operating expenses, excluding natural and propane gas expense. Distribution costs are
considered in the rate-making process, and recovery of these types of costs is included in revenues generated
through the Utilities’ tariff rates. Spire Missouri’s tariff rates are approved by the MoPSC, whereas Spire Alabama’s
tariff rates are approved by the APSC. The subsidiaries of Spire EnergySouth, Spire Gulf and Spire Mississippi, have
tariff rates that are approved by the APSC and Mississippi Public Service Commission (MSPSC), respectively. Spire
Missouri also has an off-system sales and capacity release income stream that is regulated by tariff.
28
Spire Missouri’s income from off-system sales and capacity release remains subject to fluctuations in market
conditions. Spire Missouri is allowed to retain the following portions of annual income (shown by service territory):
Customer Share
Company Share
Spire Missouri East
First $2.0 of pre-tax income*
Next $2.0 of pre-tax income
Next $2.0 of pre-tax income
Amounts of pre-tax income exceeding $6.0
* Customer share was set to 85% and company share set to 15% in fiscal 2017. For fiscal 2016 and 2015, the customer share
and company share were 100% and 0%, respectively.
85%
80%
75%
70%
15%
20%
25%
30%
Spire Missouri West
First $1.2 of pre-tax income
Next $1.2 of pre-tax income
Next $1.2 of pre-tax income
Amounts of pre-tax income exceeding $3.6
85%
80%
75%
70%
15%
20%
25%
30%
Some of the factors impacting the level of off-system sales include the availability and cost of Spire Missouri’s
natural gas supply, the weather in its service area, and the weather in other markets. When Spire Missouri’s service
area experiences warmer-than-normal weather while other markets experience colder weather or supply
constraints, some of Spire Missouri’s natural gas supply is available for off-system sales.
The Utilities work actively to reduce the impact of wholesale natural gas price volatility on their costs by strategically
structuring their natural gas supply portfolios to increase their gas supply availability and pricing alternatives. They
may also use derivative instruments to hedge against significant changes in the commodity price of natural gas.
Nevertheless, the overall cost of purchased gas remains subject to fluctuations in market conditions. The Purchased
Gas Adjustment (PGA) clause of Spire Missouri, Spire Gulf, and Spire Mississippi and Spire Alabama’s Gas Supply
Adjustment (GSA) rider allow the Utilities to flow through to customers, subject to prudence review by the public
service commissions, the cost of purchased gas supplies, including costs, cost reductions, and related carrying costs
associated with the use of derivative instruments to mitigate volatility in the cost of natural gas, as well as gas
inventory carrying costs. As of September 30, 2017, Spire Missouri had active derivative positions, but Spire
Alabama has had no gas supply derivative instrument activity since 2010. The Utilities believe they will continue to
be able to obtain sufficient gas supply. The price of natural gas supplies and other economic conditions may affect
sales volumes, due to the conservation efforts of customers, and cash flows associated with the timing of collection
of gas costs and related accounts receivable from customers.
The Utilities rely on short-term credit and long-term capital markets, as well as cash flows from operations, to
satisfy their seasonal cash requirements and fund their capital expenditures. The Utilities’ ability to issue
commercial paper, access their lines of credit, issue long-term bonds, or obtain new lines of credit is dependent on
current conditions in the credit and capital markets. Management focuses on maintaining a strong balance sheet
and believes it currently has adequate access to credit and capital markets and will have sufficient capital resources
to meet their foreseeable obligations. See the Liquidity and Capital Resources section for additional information.
Gas Marketing
Spire Marketing is engaged in the marketing of natural gas and providing energy services to both on-system utility
transportation customers and customers outside of the Utilities’ traditional service areas. Spire Marketing utilizes
its natural gas supply agreements, transportation agreements, park and loan agreements, storage agreements, and
other executory contracts to support a variety of services to its customers at competitive prices. It closely monitors
and manages the natural gas commodity price and volatility risks associated with providing such services to its
customers through the use of a variety of risk management activities, including the use of exchange-traded/cleared
derivative instruments and other contractual arrangements. Spire Marketing is committed to managing commodity
price risk while it seeks to expand the services that it now provides. Nevertheless, income from the Gas Marketing
operations is subject to more fluctuations in market conditions than the Utilities’ operations.
The Gas Marketing business is directly impacted by the effects of competition in the marketplace, the impacts of
new infrastructure, surplus natural gas supplies, and the addition of new demand from exports, power generation
and industrial load. Spire Marketing’s management expects a growing need for marketing services across the
country as customers manage seasonal variability and marketplace volatility.
29
In addition to its operating cash flows, Spire Marketing relies on Spire’s parental guarantees to secure its purchase
and sales obligations of natural gas, and it also has access to Spire’s liquidity resources. A large portion of Spire
Marketing’s receivables are from customers in the energy industry. It also enters into netting arrangements with
many of its energy counterparties to reduce overall credit and collateral exposure. Although Spire Marketing’s
uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from
customers are possible and could adversely affect Gas Marketing’s liquidity and results of operations.
Spire Marketing carefully monitors the creditworthiness of counterparties to its transactions. It performs in-house
credit reviews of potential customers and may require credit assurances such as prepayments, letters of credit, or
parental guarantees when appropriate. Credit limits for customers are established and monitored.
As a result of infrastructure optimization activities and an abundance of natural gas supply, Spire Marketing cannot
be certain that all of its wholesale purchase and sale transactions will settle physically. As such, certain transactions
are designated as trading activities for financial reporting purposes, due to their settlement characteristics. Results
of operations from trading activities are reported on a net basis in Gas Marketing operating revenues (or expenses,
if negative), which may cause volatility in the Company’s operating revenues, but have no effect on operating
income or net income.
In the course of its business, Spire Marketing enters into commitments associated with the purchase or sale of
natural gas. In accordance with US generally accepted accounting principles (GAAP), some of its purchase and sale
transactions are not recognized in earnings until the natural gas is physically delivered, while other energy-related
transactions, including those designated as trading activities, are required to be accounted for as derivatives, with
the changes in their fair value (representing unrealized gains or losses) recorded in earnings in periods prior to
settlement. Because related transactions of a purchase and sale strategy may be accounted for differently, there may
be timing differences in the recognition of earnings under GAAP and economic earnings realized upon settlement.
The Company reports both GAAP and net economic earnings (non-GAAP), as discussed below.
Other
In addition to the Gas Utility and Gas Marketing segments, other non-utility activities of the Company include:
• unallocated corporate items, including certain debt and associated interest costs;
• Spire STL Pipeline, a subsidiary of Spire planning construction and operation of a proposed 65-mile Federal
Energy Regulatory Commission (FERC) regulated pipeline to deliver natural gas into eastern Missouri; and
• Spire’s subsidiaries engaged in the operation of a propane pipeline, compression of natural gas and risk
management, among other activities.
EARNINGS
Net income reported by Spire, Spire Missouri and Spire Alabama is determined in accordance with GAAP.
Management also uses the non-GAAP financial measures of net economic earnings, net economic earnings per
share and contribution margin when internally evaluating and reporting results of operations. These non-GAAP
operating metrics should not be considered as alternatives to, or more meaningful than, GAAP measures such as net
income, earnings per share and operating income. Reconciliations of non-GAAP financial measures to the most
directly comparable GAAP measures are provided on the following pages.
Non-GAAP Measures - Net Economic Earnings and Net Economic Earnings Per Share
Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income
the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions as
well as acquisition, divestiture, and restructuring activities. These fair value and timing adjustments are made in
instances where the accounting treatment differs from what management considers the economic substance of the
underlying transaction, including the following:
• Net unrealized gains and losses on energy-related derivatives that are required by GAAP fair value
accounting associated with current changes in the fair value of financial and physical transactions prior to
their completion and settlement. These unrealized gains and losses result primarily from two sources:
1) changes in the fair values of physical and/or financial derivatives prior to the period of settlement;
2)
and,
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;
30
• Lower of cost or market adjustments to the carrying value of commodity inventories resulting when the
market price of the commodity falls below its original cost, to the extent that those commodities are
economically hedged; and
• Realized gains and losses resulting from the settlement of economic hedges prior to the sale of the physical
commodity.
These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of
financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded
in each period until being replaced with the actual gains or losses realized when the associated physical transactions
occur. While management uses these non-GAAP measures to evaluate both the Utilities and non-utility businesses,
the net effect of adjustments on the Utilities’ earnings is minimal because gains or losses on their natural gas
derivative instruments are deferred pursuant to state regulation.
Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to
settlement and other timing differences associated with related purchase and sale transactions provides a useful
representation of the economic effects of only the actual settled transactions and their effects on results of
operations. In addition, management excludes the impact related to certain acquisition, divestiture, and
restructuring activities when evaluating on-going performance, and therefore excludes these impacts from net
economic earnings. Similarly, in fiscal years 2016, 2014 and 2013, net economic earnings per share excludes the
impact of shares issued in those years to finance acquisitions that closed late in each fiscal year. Management
believes that this presentation provides a useful representation of operating performance by facilitating
comparisons of year-over-year results. The definition and measurement of net economic earnings provided above is
consistent with that used by management and the Board of Directors in assessing the Company’s, Spire Missouri’s
and Spire Alabama’s performance as well as determining performance under the Company’s, Spire Missouri’s and
Spire Alabama’s incentive compensation plans. Further, the Company believes this better enables an investor to
view the Company’s, Spire Missouri’s and Spire Alabama’s performance in that period on a basis that would be
comparable to prior periods.
Reconciliations of net economic earnings and net economic earnings per share to the Company’s most directly
comparable GAAP measures are provided on the following pages.
Non-GAAP Measure - 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. The Utilities pass to their customers (subject to
prudence review by, as applicable, the MoPSC, APSC, or MSPSC) increases and decreases in the wholesale cost of
natural gas in accordance with their PGA clauses or GSA rider. 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, has no direct effect on operating income. Contribution margin
is defined as operating revenues less natural and propane gas costs and gross receipts tax expense. As these items
are reflected in both operating revenue and operating expenses and management has little control over these
amounts for the Utilities, management believes that contribution margin is a useful supplemental measure. In
addition, it is management’s belief that contribution margin and the remaining operating expenses that calculate
operating income are useful in assessing the Company’s and the Utilities’ performance as management has more
ability to influence control over these revenues and expenses.
31
Spire
Overview – Net Income (Loss)
Year Ended September 30, 2017
Net Income (Loss) (GAAP)
Adjustments, pre-tax:
Unrealized loss on energy-related derivatives
Realized gain on economic hedges prior
to the sale of the physical commodity
Acquisition, divestiture and restructuring activities
Income tax effect of adjustments*
Net Economic Earnings (Loss) (Non-GAAP)
$
Gas
Utility
Gas
Marketing Other
Consol-
idated
Per
Diluted
Share**
$
180.5 $
3.4 $
(22.3 ) $
161.6 $
3.43
0.1
5.9
—
6.0
0.13
—
1.5
(0.6 )
181.5 $
(0.3 )
—
(2.2 )
6.8 $
—
2.5
(0.9 )
(20.7 ) $
(0.3 )
4.0
(3.7 )
167.6 $
(0.01 )
0.09
(0.08 )
3.56
Year Ended September 30, 2016
Net Income (Loss) (GAAP)
Adjustments, pre-tax:
Unrealized (gain) loss on energy-related derivatives
Lower of cost or market inventory adjustments
Realized gain on economic hedges prior
to the sale of the physical commodity
Acquisition, divestiture and restructuring activities
Income tax effect of adjustments*
Weighted average shares adjustment**
Net Economic Earnings (Loss) (Non-GAAP)
$
$
159.0 $
7.1 $
(21.9 ) $
144.2 $
3.24
(0.3 )
—
—
2.3
(0.7 )
—
160.3 $
0.2
0.2
(1.6 )
—
0.5
—
6.4 $
—
—
—
6.9
(2.6 )
—
(17.6 ) $
(0.1 )
0.2
(1.6 )
9.2
(2.8 )
—
149.1 $
—
0.01
(0.04 )
0.21
(0.06 )
0.06
3.42
Year Ended September 30, 2015
Net Income (Loss) (GAAP)
Adjustments, pre-tax:
Unrealized gain on energy-related derivatives
Lower of cost or market inventory adjustments
Realized loss on economic hedges prior
to the sale of the physical commodity
Acquisition, divestiture and restructuring activities
Gain on sale of property
Income tax effect of adjustments*
Net Economic Earnings (Loss) (Non-GAAP)
$
$
153.3 $
4.1 $
(20.5 ) $
136.9 $
3.16
(0.1 )
—
—
3.1
(7.6 )
1.7
150.4 $
(2.7 )
0.4
2.4
—
—
—
4.2 $
—
—
(2.8 )
0.4
—
6.7
—
(2.5 )
(16.3 ) $
2.4
9.8
(7.6 )
(0.8 )
138.3 $
(0.07 )
0.01
0.06
0.23
(0.18 )
(0.02 )
3.19
*
**
Income tax effect is calculated by applying federal, state, and local income tax rates applicable to ordinary income to the
amounts of the pre-tax reconciling items.
Fiscal 2016 net economic earnings per share excludes the impact of the May 2016 equity issuance to fund a portion of the
acquisition of Spire EnergySouth. The weighted average diluted shares used in the net economic earnings per share
calculation for the fiscal year ended September 30, 2016 was 43.5 compared to 44.3 in the GAAP diluted earnings per
share (EPS) calculation. For fiscal years 2017 and 2015, net economic earnings per share is calculated by replacing
consolidated net income with consolidated net economic earnings in the GAAP diluted EPS calculation.
32
2017 vs. 2016
Consolidated
Spire’s net income was $161.6 in fiscal 2017, compared with $144.2 in fiscal 2016. Basic and diluted earnings per
share were $3.44 and $3.43, respectively, for fiscal 2017 compared with basic and diluted earnings per share of
$3.26 and $3.24, respectively, for fiscal 2016. Net economic earnings were $167.6 (or $3.56 per share) in fiscal
2017, compared with $149.1 (or $3.42 per share) in fiscal 2016, an increase of $18.5. Net income increased in fiscal
2017 compared to fiscal 2016 primarily due to $21.5 income growth in the Gas Utility segment, partly offset by a
$3.7 income decline in the Gas Marketing segment and a $0.4 larger loss from other activities.
Gas Utility
Gas Utility net income and net economic earnings increased by $21.5 and $21.2, respectively, in fiscal 2017,
compared to fiscal 2016. The increases to net income and net economic earnings were driven by the $9.6 income
growth generated by the Spire EnergySouth acquisition, margin growth and combined lower O&M expenses at Spire
Missouri and Spire Alabama. The margin growth was driven by higher Infrastructure System Replacement
Surcharge (ISRS) charges at the Missouri Utilities and net favorable regulatory adjustments at Spire Alabama,
partly offset by weather impacts resulting from warmer winter temperatures. These impacts were partly offset by
increases in depreciation and amortization expenses. Additionally, interest expense was higher due to the Spire
EnergySouth acquisition and higher interest charges experienced by Spire Missouri. Income taxes were also higher
due to the Spire EnergySouth acquisition and higher pre-tax income for both Spire Missouri and Spire Alabama.
Further details are discussed in the Gas Utility, Spire Missouri, and Spire Alabama sections below.
Gas Marketing
Gas Marketing reported net income totaling $3.4, a decrease of $3.7 compared with the same period last year. Net
economic earnings for fiscal 2017 increased $0.4 from fiscal 2016. The decrease in net income was primarily
attributable to unfavorable mark-to-market (MTM) activity in the current year. Net economic earnings benefited
from increased value from spreads and asset optimization in the current year versus the prior year. Further details
are discussed in the Gas Marketing section below.
Other
The combined increase in net loss and net economic loss for the Company’s other non-utility activities were $0.4
and $3.1, respectively, for fiscal 2017 compared to the same period last year. The increased loss was primarily the
result of higher current year interest charges associated with the September 2016 acquisition of Spire EnergySouth.
Operating Revenues and Operating Expenses
Reconciliations of contribution margin to the most directly comparable GAAP measure are shown below.
Gas
Utility
Gas
Marketing Other
Eliminations Consolidated
Year Ended September 30, 2017
Operating Income (Loss)
Operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Less: Gross receipts tax expense
Contribution Margin (Non-GAAP)
Natural and propane gas costs
Gross receipts tax expense
Operating Revenues
$
$
321.6 $
409.1
153.5
137.8
(83.0 )
939.0
645.9
83.0
1,667.9 $
5.2 $
5.9
0.1
0.5
(0.1 )
11.6
67.6
0.1
79.3 $
(5.1 ) $
11.8
0.5
0.2
—
7.4
0.3
—
7.7 $
— $
(5.5 )
—
—
—
(5.5 )
(8.7 )
—
(14.2 ) $
321.7
421.3
154.1
138.5
(83.1 )
952.5
705.1
83.1
1,740.7
33
Year Ended September 30, 2016
Operating Income (Loss)
Operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Less: Gross receipts tax expense
Contribution Margin (Non-GAAP)
Natural and propane gas costs
Gross receipts tax expense
Operating Revenues
Year Ended September 30, 2015
Operating Income (Loss)
Operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Less: Gross receipts tax expense
Contribution Margin (Non-GAAP)
Natural and propane gas costs
Gross receipts tax expense
Operating Revenues
Consolidated
Gas
Utility
Gas
Marketing
Other
Eliminations Consolidated
278.3 $
379.3
136.9
125.2
(75.3 )
844.4
539.7
75.3
1,459.4 $
11.8 $
5.6
0.1
0.3
(0.1 )
17.7
60.7
0.1
78.5 $
(7.8 ) $
12.1
0.5
(0.2 )
—
4.6
0.2
—
4.8 $
— $
(2.4 )
—
(2.4 )
(3.0 )
—
(5.4 ) $
282.3
394.6
137.5
125.3
(75.4)
864.3
597.6
75.4
1,537.3
Gas
Utility
Gas
Marketing
Other
Eliminations Consolidated
274.6 $
391.5
129.9
142.2
(96.1 )
842.1
957.6
96.1
1,895.8 $
6.8 $
5.4
0.3
0.4
(0.2 )
12.7
140.5
0.2
153.4 $
(8.9 ) $
11.7
0.6
—
—
3.4
0.3
—
3.7 $
— $
(1.0 )
—
—
—
(1.0 )
(75.5 )
—
(76.5 ) $
272.5
407.6
130.8
142.6
(96.3)
857.2
1,022.9
96.3
1,976.4
$
$
$
$
Spire reported operating revenues of $1,740.7 for the year ended September 30, 2017 compared with for $1,537.3
the same period last year. The increase was driven primarily by the Utilities, the result of the Spire EnergySouth
acquisition, higher ISRS charges at Spire Missouri, favorable regulatory adjustments at Spire Alabama, and higher
gas costs passed on to customers in both Missouri and Alabama. These positive drivers were partly offset by lower
demand as a result of warmer weather. Spire’s contribution margin increased $88.2 for the twelve months ended
September 30, 2017, compared to the same period last year. The increase was primarily due to higher contribution
margin of $94.6 for the Gas Utility segment, slightly offset by the lower contribution margin reported in Gas
Marketing. Operation and maintenance (O&M) expenses increased $26.7 for the twelve months ended
September 30, 2017 as compared to the same period last year, as discussed below. Depreciation and amortization
expenses increased $16.6, driven principally by the Spire EnergySouth acquisition and continued infrastructure
investment at Spire Missouri and Spire Alabama in fiscal 2017.
Gas Utility
Operating Revenues – Gas Utility operating revenues for fiscal 2017 increased $208.5 compared to fiscal 2016,
and was attributable to the following factors:
New customer revenue from Spire EnergySouth acquisition
Higher wholesale gas costs passed on to customers
Spire Alabama – Lower Rate Stabilization and Equalization (RSE) revenue reduction and higher Cost Control
Measure (CCM) benefit
Spire Missouri - Higher off-system sales and capacity release
Spire Missouri - Higher ISRS charges
Higher gross receipts tax
Weather / temperature adjustment impact
All other
Total Variation
34
$
$
92.1
87.2
19.2
17.9
14.2
4.9
(27.3 )
0.3
208.5
Contribution Margin – Gas Utility contribution margin was $939.0 for fiscal 2017, a $94.6 increase over the
same period last year. The increase was attributable to the following factors:
Contribution margin from Spire EnergySouth acquisition
Spire Alabama – Lower RSE revenue reduction and higher CCM benefit
Spire Missouri - Higher ISRS charges
Spire Missouri - Higher off-system sales and capacity release
Weather / temperature adjustment impact
All other
Total Variation
$
$
66.6
19.2
14.2
1.4
(8.6 )
1.8
94.6
The increase was primarily attributable to the $66.6 of operating margin resulting from the Spire EnergySouth
acquisition, lower RSE revenue adjustments, beneficial CCM and return on capital impacts totaling $19.2 for Spire
Alabama, and benefits of higher ISRS charges for the Missouri Utilities in 2017 of $14.2. These positive impacts
offset the negative impact of weather and temperature adjustments. Temperatures in the Spire Missouri territory
experienced degree days that were 1% warmer than last year and 20% warmer than normal. Degree days in the
Spire Alabama service areas in fiscal 2017 were 15% warmer than the prior year, and 35% warmer than normal.
Temperatures are a significant part of the Utilities’ rate cases, contributing to the constrained margins experienced
in the current year.
Operating Expenses – Depreciation and amortization expenses for the twelve months ended September 30, 2017
increased $16.6 from the same period last year, $10.0 the result of the Spire EnergySouth acquisition, $4.5 due to
Spire Missouri and $2.1 relating to Spire Alabama, principally the result of continued infrastructure capital
spending in fiscal 2017. O&M expenses increased $29.8 for the twelve months ended September 30, 2017 compared
to the same period in the prior year. Excluding the impact of the $33.5 increase relating to the Spire EnergySouth
acquisition, O&M expenses were $3.7 below prior year levels due primarily to lower employee-related costs that
were only partly offset by higher professional services. The employee labor-costs were favorably impacted by the
warmer weather experienced in both the Spire Missouri and Spire Alabama service territories. Taxes other than
income taxes were $12.6 higher in the current year, with $7.6 of the increase attributable to the Spire EnergySouth
acquisition. $4.2 of the increase was related to the higher gross receipt taxes due to the higher revenues, with the
remainder of the variance related to property tax expense at Spire Missouri.
Gas Marketing
Operating Revenues – Gas Marketing operating revenue for the twelve months ended September 30, 2017
increased $0.8 from the same period last year. The variance in revenues reflects the impact of higher total volumes
and higher commodity pricing levels offset by the effect of increased trading activities, and unfavorable mark-to-
market adjustments on derivatives. Under GAAP, revenues associated with trading activities are presented net of
related costs. Average pricing for the twelve months ended September 30, 2017 was approximately $2.897/MMBtu
versus approximately $2.286/MMBtu for fiscal 2016, an increase of $0.611/MMBtu.
Contribution Margin – Gas Marketing contribution margin was $11.6 for fiscal 2017, a $6.1 decrease compared
to the same period last year, with that variance significantly impacted by unfavorable fair value adjustments on
derivative holdings in the current year, and favorable adjustments in the prior year. Removing these fair value
adjustments from both periods, contribution margin is $0.7 higher than last year, reflecting favorable wholesale
trading volumes and storage optimization.
Other
Other operating revenue increased $2.9 for the twelve months ended September 30, 2017 compared to the same
period in 2016, driven by higher reinsurance premiums. Other operating expenses were essentially flat with the
prior year, as an increase in costs related to the reinsurance premiums was offset by a decrease in corporate-level
integration expenses.
35
Interest Charges
Consolidated interest charges during the twelve months ended September 30, 2017 increased $11.9 versus the same
period last year. The increase was primarily driven by the debt incurred and assumed as a result of the Spire
EnergySouth acquisition generating interest expense of $8.5, combined with marginally higher interest rates on
floating rate debt in the first six months of the year and higher interest rates on the senior notes issued in March of
this year that were used to retire the $250.0 of floating rate debt. Also, for the twelve months ended September 30,
2017 and 2016, average short-term borrowings were $485.8 and $273.9, respectively, and the average interest rates
on these borrowings were 1.2% and 0.9%, respectively.
Income Taxes
Consolidated income tax expense increased $8.1 in fiscal 2017 from fiscal 2016 primarily due to higher pre-tax
income. The current year effective tax rate of 32.4% was essentially flat versus fiscal 2016’s effective rate of 32.5%.
Spire Missouri
Summary Operating Results
Year ended September 30,
Operating Income
Operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Less: Gross receipts tax expense
Contribution Margin (non-GAAP)
Natural and propane gas costs
Gross receipts tax expense
Operating Revenues
2017
2016
$
$
196.9 $
243.8
93.1
99.8
(60.0 )
573.6
538.3
60.0
1,171.9 $
186.9
244.4
88.6
96.3
(57.4 )
558.8
471.3
57.4
1,087.5
Operating revenues during the twelve months ended September 30, 2017 increased $84.4 from the same period last
year. Revenues were impacted primarily by higher gas costs of $50.9 passed on to customers, $17.9 higher off-
system and capacity release sales, higher ISRS charges of $14.2, and higher gross receipts taxes of $3.3. These
impacts were slightly offset by negative weather impacts.
Contribution margin for the twelve months ended September 30, 2017 increased $14.8 from the same period last
year. Higher ISRS charges of $14.2 were only partly offset by a negative $2.6 weather impact attributable to the 1%
warmer weather experienced in the current year.
O&M for the twelve months ended September 30, 2017 were $0.6 lower than the prior year. Lower employment-
related costs were almost completely offset by higher professional services. Depreciation and amortization increased
$4.5, reflecting continued infrastructure investments throughout Missouri. Interest expense in the current year was
$1.7 greater than prior year, the result of a combination of higher short-term borrowings and higher average
effective interest rates. Income taxes were $2.1 higher for the twelve months ended September 30, 2017 versus the
comparable prior year period due to higher pre-tax book income, mitigated by a slightly lower effective tax rate.
Temperatures experienced in the Missouri Utilities’ service area during fiscal 2017 were 1% warmer than the same
period last year and 20% warmer than normal. Normal temperatures are part of Spire Missouri’s rate case design,
meaning the warmer than normal temperatures continued to constrain margins. Total system therms sold and
transported were 1,482.1 million for fiscal 2017 compared with 1,479.3 million for fiscal 2016. Total off-system
therms sold and transported outside of Spire Missouri’s service area were 175.6 million for fiscal 2017 compared
with 183.3 million for fiscal 2016.
36
Spire Alabama
Summary Operating Results
Year ended September 30,
Operating Income
Operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Less: Gross receipts tax expense
Contribution Margin (Non-GAAP)
Natural and propane gas costs
Gross receipts tax expense
Operating Revenues
2017
2016
105.8 $
130.4
49.9
29.9
(19.5 )
296.5
84.5
19.5
400.5 $
91.5
133.5
47.8
28.4
(17.9 )
283.3
67.3
17.9
368.5
$
$
Operating revenues for the twelve months ended September 30, 2017 increased $32.0 versus the comparable period
ended September 30, 2016. Of the increase, $19.2 of the increase related to lower RSE return on equity revenue
adjustments and higher CCM benefits in the current year, $11.2 resulted from weather/temperature adjustments,
along with slightly higher gross receipts taxes of $1.6.
Contribution margin increased $13.2 versus prior year, as $19.2 in favorable RSE, CCM adjustments and return on
capital more than offset negative weather and usage impacts of $6.0. Contributing to the favorable current year RSE
return on equity adjustment impact was a fiscal 2016 reduction in revenues relating to a legal settlement of $6.0.
There was no impact to net income, as this revenue adjustment offset a corresponding $6.0 gain recorded in other
income.
O&M expenses for the twelve months ended September 30, 2017 decreased $3.1 versus the year ended
September 30, 2016. The decrease in other operating expenses was driven primarily by lower employee-related
costs, which were favorably impacted by the warmer weather in the current year. Depreciation and amortization
was $2.1 higher versus the same period last year, the result of continued infrastructure investment throughout Spire
Alabama’s service territory. Income tax expense increased $3.4, primarily due to the higher pre-tax book income
earned in the current year.
Temperatures in Spire Alabama’s service area during the twelve months ended September 30, 2017 were 35%
warmer than normal and 15% warmer than the same period a year earlier. Spire Alabama’s total therms sold and
transported were 900.6 million for the twelve months ended September 30, 2017, compared with 878.1 million for
the same period last year.
For further information on the GSA, RSE and CCM mechanisms, please see Note 1, Summary of Significant
Accounting Policies, and Note 15, Regulatory Matters, in the Notes to Financial Statements.
2016 vs. 2015
Spire
Consolidated
Spire’s net income was $144.2 in fiscal 2016, compared with $136.9 in fiscal 2015. Basic and diluted earnings per
share were $3.26 and $3.24, respectively, for fiscal 2016 compared with basic and diluted earnings per share of
$3.16 for fiscal 2015. Net economic earnings were $149.1 (or $3.42 per share) in fiscal 2016, compared with $138.3
(or $3.19 per share) in fiscal 2015. Net income increased in fiscal 2016 compared to fiscal 2015 primarily due to $5.7
income growth in the Gas Utility segment and $3.0 income growth in the Gas Marketing segment, partly offset by a
$1.4 larger loss from other activities.
37
Gas Utility
Gas Utility net income and net economic earnings increased by $5.7 and $9.9, respectively, in fiscal 2016, compared
to 2015. The increases to net income and net economic earnings were driven by higher ISRS charges at Spire
Missouri and net favorable regulatory adjustments at Spire Alabama, partly offset by lower volumes resulting from
warmer winter temperatures. The segment also benefited from a decrease in O&M, which includes effects of the
warmer weather. These impacts were partly offset by an increase in depreciation and amortization expenses.
Additionally, interest expense was higher due to the increase experienced by Spire Missouri. Income taxes were also
higher due to higher pre-tax income for both the Spire Missouri and Spire Alabama.
Gas Marketing
Gas Marketing reported net income totaling $7.1 in fiscal 2016, an increase of $3.0 compared to fiscal 2015. Net
economic earnings for fiscal 2016 increased $2.2 from fiscal 2015. The increases in net income and net economic
earnings were primarily attributable to increases in contribution margin, with the impact to net economic earnings
being partly offset by mark-to-market activity as discussed in the Gas Marketing section below.
Other
The combined increase in net loss and net economic loss for the Company’s other non-utility activities were $1.4
and $1.3, respectively, for fiscal 2016 compared to the prior year. The increase was primarily the result of higher
interest charges.
Operating Revenues and Operating Expenses
Reconciliations of the Company’s contribution margin to the most directly comparable GAAP measure are shown
above.
Consolidated
Spire reported operating revenues of $1,537.3 for the fiscal year ended September 30, 2016 compared with $1,976.4
for the same prior year period. The decrease was driven primarily by the Utilities, the result of lower volumes and
lower gas costs passed on to customers. Spire’s contribution margin increased $7.1 for the twelve months ended
September 30, 2016, compared to the same prior year period. The increase was primarily due to higher contribution
margin of $5.0 and $2.3 for the Gas Marketing and Gas Utility segments, respectively, slightly offset by the lower
contribution margin reported in Other. O&M expenses decreased $9.4 for the twelve months ended September 30,
2016 as compared to fiscal 2015, as discussed below. The decrease in O&M expenses was partially offset by $6.7
higher depreciation and amortization expense, driven principally by continued infrastructure investment at the
Utilities in fiscal 2016.
Gas Utility
Operating Revenues – Gas Utility Operating Revenues for fiscal 2016 decreased $436.4 compared to fiscal 2015,
and was primarily attributable to the following factors:
Lower wholesale gas costs passed on to customers
Lower system sales volumes
Spire Missouri - Lower off-system sales and capacity release
Lower gross receipts tax
Spire Missouri - Higher ISRS charges
Spire Alabama - Lower RSE revenue adjustments
New customer revenue from Spire EnergySouth acquisition
All other
Total Variation
$
(262.8)
(147.4 )
(25.3 )
(21.8 )
13.8
4.5
3.3
(0.7 )
$
(436.4)
38
Contribution Margin – Gas Utility contribution margin was $844.4 for fiscal 2016, a $2.3 increase over the same
period of fiscal 2015. The increase was attributable to the following factors:
Lower system sales volume
Spire Missouri - Higher ISRS charges
Spire Alabama - Lower RSE revenue adjustments
Contribution margin from Spire EnergySouth acquisition
All other
Total Variation
$
$
(18.0)
13.8
4.5
2.2
(0.2 )
2.3
The increase was primarily attributable to benefits of higher ISRS charges for Spire Missouri in 2016 of $13.8, lower
RSE revenue adjustments, beneficial CCM and return on capital impacts totaling $4.5 for Spire Alabama, and $2.2
of contribution margin resulting from the Spire EnergySouth acquisition, which were mostly offset by the negative
impact of lower sales volume. A $6.0 gain related to a legal settlement was recorded in other income, but
contribution margin was reduced by a revenue adjustment corresponding to the $6.0 gain, resulting in no impact on
net income. Temperatures in the Spire Missouri and Spire Alabama service areas in fiscal 2016 were 19.7% and 30%
warmer than in the same period in the prior year, respectively, significantly contributing to the $18.0 negative
volume impact on contribution margin in fiscal 2016.
Operating Expenses – Depreciation and amortization expenses for the twelve months ended September 30, 2016
increased $7.0 from the twelve months ended September 30, 2015, due principally to continued infrastructure
capital spending in fiscal 2016. O&M expenses decreased $8.4 for the twelve months ended September 30, 2016
compared to the same period in the prior year. Excluding the impact of a $7.6 gain on the sale of property in 2015,
O&M expenses were $16.0 below 2015 levels due primarily to lower bad debt expense (reflecting the impact of
warmer weather experienced during the heating season) and employee-related costs.
Gas Marketing
Operating Revenues – Gas Marketing operating revenue for the twelve months ended September 30, 2016
decreased $74.9 from the same prior year period. The decrease in revenues reflects the impact of higher total
volumes being more than offset by lower commodity pricing levels, the effect of increased trading activities, and
favorable mark-to-market adjustments on derivatives. Average pricing for the twelve months ended September 30,
2016 was approximately $2.286/MMBtu versus approximately $3.066/MMBtu for 2015, a $0.781 decline.
Contribution Margin – Gas Marketing contribution margin was $17.7 for fiscal 2016, a $5.0 increase compared
to fiscal 2015. Favorable wholesale trading volumes and storage optimization resulted in an $11.7 increase more
than offsetting $7.9 of negative pricing impacts. Fair value adjustments accounted for an additional $1.2 favorable
impact in fiscal 2016.
Other
Operating Revenue and Operating Expenses – Other operating revenue increased $1.1 for the twelve months
ended September 30, 2016 compared to the same period in fiscal 2015, reflecting higher insurance revenues. Other
O&M expenses were essentially flat with the prior year.
Interest Charges
Interest charges during the twelve months ended September 30, 2016 increased $2.6 from fiscal 2015. Interest
expense reductions from the refinancing of $115.0 in Spire Alabama long-term debt in September and December of
2015, along with lower average short-term borrowings, have been offset by higher rates on short-term borrowings,
interest on debt issued to finance the Spire EnergySouth acquisition, interest on acquired debt, and charges related
to a temporary bridge facility commitment obtained and terminated during the third quarter of fiscal 2016 related
to the Spire EnergySouth acquisition. For the twelve months ended September 30, 2016 and 2015, average short-
term borrowings were $273.9 and $300.6, respectively, and the average interest rates on those borrowings were
0.9% and 0.7%, respectively.
39
Income Taxes
Consolidated income tax expense increased $7.3 in fiscal 2016 from fiscal 2015 primarily due to higher pre-tax
income and a higher effective tax rate. The fiscal 2016 effective tax rate of 32.5% is approximately 1.3 percentage
points higher than the rate for fiscal 2015. The higher fiscal 2016 rate includes tax expense associated with a
valuation allowance on deferred tax assets.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition, results of operations, liquidity, and capital resources are
based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our
estimates on historical experience and on various other assumptions that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We
believe the following represent the more significant items requiring the use of judgment and estimates in preparing
our financial statements:
Regulatory Accounting – The Utilities account for their regulated operations in accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980, “Regulated Operations.”
The provisions of this accounting guidance require, among other things, that financial statements of a rate-
regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition
of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs,
costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts
are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously
collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory
liabilities). Management believes that the current regulatory environment supports the continued use of these
regulatory accounting principles and that all regulatory assets and regulatory liabilities are recoverable or
refundable through the regulatory process. For Spire Missouri and Spire Alabama, management believes the
following represent the more significant items recorded through the application of this accounting guidance:
PGA Clause – Spire Missouri’s PGA clauses allows the Missouri Utilities to flow through to customers,
subject to a prudence review by the MoPSC, the cost of purchased gas supplies, including the costs, cost
reductions, and related carrying costs associated with the Missouri Utilities’ use of natural gas derivative
instruments to hedge the purchase price of natural gas. The difference between actual costs incurred and
costs recovered through the application of the PGA clauses are recorded as regulatory assets and regulatory
liabilities that are recovered or refunded in a subsequent period. The PGA clauses also permit the
application of carrying costs to all over- or under-recoveries of gas costs, including costs and cost reductions
associated with the use of derivative instruments, and also provide for a portion of income from off-system
sales and capacity release revenues to be flowed through to customers. Spire Missouri’s PGA clauses also
authorizes it to recover costs it incurs to finance its investment in gas supplies that are purchased during the
storage injection season for sale during the heating season.
GSA Rider – Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider,
established in 1993, which permits the pass-through to customers of changes in the cost of gas supply. Spire
Alabama’s tariff provides a temperature adjustment mechanism, also included in the GSA, that is designed
to moderate the impact of departures from normal temperatures on Spire Alabama’s earnings. The
temperature adjustment applies primarily to residential, small commercial and small industrial customers.
Other non-temperature weather related conditions that may affect customer usage are not included in the
temperature adjustment. In prior years, Spire Alabama entered into cash flow derivative commodity
instruments to hedge its exposure to price fluctuations on its gas supply. Spire Alabama recognizes all
derivatives at fair value as either assets or liabilities on the balance sheet. Any realized gains or losses are
passed through to customers using the mechanisms of the GSA rider in accordance with Spire Alabama’s
APSC approved tariff and are recognized as a regulatory asset or regulatory liability. All derivative
commodity instruments in a gain position are valued on a discounted basis incorporating an estimate of
performance risk specific to each related counterparty. Derivative commodity instruments in a loss position
are valued on a discounted basis incorporating an estimate of performance risk specific to Spire Alabama.
Spire Alabama currently has no active gas supply derivative positions.
40
Goodwill – Goodwill is measured as the excess of the acquisition-date fair value of the consideration transferred
over the amount of acquisition-date identifiable assets acquired net of assumed liabilities, and adjustments are
recorded during the measurement period to finalize the allocation of purchase price. Spire Missouri has recorded
goodwill related to the 2013 acquisition of Spire Missouri West, and Spire also has recorded goodwill related to the
2016 and 2014 acquisitions of Spire EnergySouth and Spire Alabama, respectively. Neither Spire EnergySouth nor
Spire Alabama have goodwill on their balance sheets as push down accounting was not applied. Spire and Spire
Missouri evaluate goodwill for impairment as of July 1 of each year, or more frequently if events and circumstances
indicate that goodwill might be impaired. The goodwill impairment test compares the fair value of each reporting
unit to its carrying amount, including goodwill. At July 1, 2017, 2016 and 2015, Spire and Spire Missouri each
applied a quantitative goodwill evaluation model to their reporting units and concluded goodwill was not impaired
because the fair value exceeded the carrying amounts.
Employee Benefits and Postretirement Obligations – Pension and postretirement obligations are calculated
by actuarial consultants that utilize several statistical factors and other assumptions provided by management
related to future events, such as discount rates, returns on plan assets, compensation increases, and mortality rates.
For the Utilities, the amount of expense recognized and the amounts reflected in other comprehensive income are
dependent upon the regulatory treatment provided for such costs, as discussed further below. Certain liabilities
related to group medical benefits and workers’ compensation claims, portions of which are self-insured and/or
contain “stop-loss” coverage with third-party insurers to limit exposure, are established based on historical trends.
The amount of net periodic pension and other postretirement benefit costs recognized in the financial statements
related to the Utilities’ qualified pension plans and other postretirement benefit plans is based upon allowances, as
approved by the MoPSC (for Spire Missouri) and as approved by the APSC (for Spire Alabama). The allowances
have been established in the rate-making process for the recovery of these costs from customers. The differences
between these amounts and actual pension and other postretirement benefit costs incurred for financial reporting
purposes are deferred as regulatory assets or regulatory liabilities. GAAP also requires that changes that affect the
funded status of pension and other postretirement benefit plans, but that are not yet required to be recognized as
components of pension and other postretirement benefit costs, be reflected in other comprehensive income. For the
Utilities’ qualified pension plans and other postretirement benefit plans, amounts that would otherwise be reflected
in other comprehensive income are deferred with entries to regulatory assets or regulatory liabilities.
The tables below reflect the sensitivity of Spire’s plans to potential changes in key assumptions:
Pension Plan Benefits:
Actuarial Assumptions
Discount Rate
Expected Return on Plan Assets
Rate of Future Compensation Increase
Postretirement Benefits:
Actuarial Assumptions
Discount Rate
Expected Return on Plan Assets
Annual Medical Cost Trend
Increase/
(Decrease)
Estimated Increase/
(Decrease) to Projected
Benefit Obligation
Estimated Increase/
(Decrease) to Annual
Net Pension Cost*
0.25 %
(0.25 )%
0.25 %
(0.25 )%
0.25 %
(0.25 )%
$
(17.9 )
18.7
—
—
4.9
(4.7 )
$
0.6
(0.6 )
(1.1 )
1.3
0.6
(0.5 )
Increase/
(Decrease)
Estimated Increase/
(Decrease) to Projected
Postretirement Benefit
Obligation
Estimated Increase/
(Decrease) to Annual
Net Postretirement
Benefit Cost*
0.25 %
(0.25 )%
0.25 %
(0.25 )%
1.00 %
(1.00 )%
$
(5.0 )
5.2
—
—
10.0
(9.2 )
$
0.1
(0.1 )
(0.6 )
0.6
1.7
(1.4 )
* Excludes the impact of regulatory deferral mechanism. See Note 13, Pension Plans and Other Postretirement Benefits, of the
Notes to Financial Statements for information regarding the regulatory treatment of these costs.
For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of
the Notes to Financial Statements.
41
REGULATORY AND OTHER MATTERS
Spire Missouri
On September 30, 2016, Spire Missouri filed to increase its ISRS revenues by $5.0 for Spire Missouri East and $3.4
for Spire Missouri West, related to ISRS investments from March 2016 through October 2016. On November 29,
2016, MoPSC staff recommended $4.5 and $3.4 for Spire Missouri East and Spire Missouri West, respectively,
based on updated filings. On January 3, 2017, the MoPSC held a hearing to decide two issues raised by the Missouri
Office of the Public Counsel (OPC) pertaining to the ISRS eligibility of hydrostatic testing done by Spire Missouri
West and of the replacement of cast iron main interspersed with portions of plastic pipe. On January 18, 2017, the
MoPSC found in favor of the Missouri Utilities on the interspersed plastics issue, but against Spire Missouri West on
hydrostatic testing, and issued an order setting the ISRS increases at $4.5 and $3.2 for Spire Missouri East and
Spire Missouri West, respectively, bringing total annualized ISRS revenue to $29.5 and $13.4, respectively. Rates
were effective January 28, 2017. On March 3, 2017, the OPC filed an appeal to Missouri’s Western District Court of
Appeals of the MoPSC’s decision permitting Spire Missouri to include in the ISRS the replacement of cast iron main
interspersed with plastic pipe. The appeal will be heard in November 2017.
On February 3, 2017, Spire Missouri filed to increase its ISRS revenues, by $3.3 for Spire Missouri East and $2.9 for
Spire Missouri West, related to ISRS investments from November 2016 through February 2017. Following the
submission of updated information, on April 4, 2017, MoPSC staff submitted its recommendation for an increase in
rates of approximately $3.0 each, for a cumulative total of $32.6 and $16.4 for Spire Missouri East and Spire
Missouri West, respectively. On that same date, the OPC again raised an objection to the ISRS eligibility of replacing
cast iron main interspersed with portions of plastic. On April 18, 2017, the parties filed with the MoPSC a
unanimous stipulation and agreement proposing to apply the judicial outcome of the OPC’s March 3, 2017 appeal
on the plastics issue to both the ISRS cases on appeal and the current ISRS cases. The agreement was approved by
the MoPSC on April 26, 2017. ISRS rates for each of the two service territories were increased by the MoPSC staff-
recommended amounts, effective June 1, 2017.
On April 15, 2015, Spire Missouri applied to the MoPSC for a new authorization of long-term financing in the
amount of $550.0. On February 10, 2016, the MoPSC issued an order, by a 3-2 vote, authorizing Spire Missouri
financing authority of $300.0 for long-term financings placed any time before September 30, 2018. Spire Missouri
filed an application for rehearing, which was denied on March 9, 2016. On March 31, 2016, Spire Missouri filed an
appeal with Missouri’s Western District Court of Appeals concerning this matter. The parties filed briefs and oral
arguments were heard on November 17, 2016. On May 30, 2017, Missouri’s Western District Court of Appeals
issued a decision upholding the MoPSC’s February 10, 2016 Order granting Spire Missouri $300.0 in long-term
financing authority. On July 5, 2017, the Court denied Spire Missouri’s request to transfer the case to the Missouri
Supreme Court, and on October 5, 2017, the Missouri Supreme Court declined to hear Spire Missouri’s direct
appeal. On March 20, 2017, Spire Missouri entered into a bond purchase agreement for $170.0 that was funded on
September 15, 2017, and applied against the $300.0 authorization.
On April 11, 2017, both Spire Missouri East and Spire Missouri West filed for a general rate case, and did so
concurrently as agreed to in GM-2013-0254, as part of the acquisition of Spire Missouri West by Spire Missouri in
fiscal 2013. The request for Spire Missouri East represents a net rate increase of $25.5. With the $32.6 already being
billed in ISRS, the total base rate increase request was $58.1. Spire Missouri West’s request represents a net rate
increase of $34.0. With the $16.4 already being billed in ISRS, the total base rate increase request was $50.4. The
rates were premised upon a 10.35% return on equity and the details of the filing can be found in GR-2017-0215 and
GR-2017-0216 for Spire Missouri East and Spire Missouri West, respectively. An evidentiary hearing has been set
for December 4 through 15, 2017, with a MoPSC decision expected by February 2018. Missouri statutes require new
rates to be effective within 11 months of the filing, or by March 8, 2018.
Spire Alabama
Spire Alabama is subject to regulation by the APSC which established the RSE rate-setting process in 1983. Spire
Alabama’s current RSE order has a term extending beyond September 30, 2018, unless the APSC enters an order to
the contrary in a manner consistent with law. In the event of unforeseen circumstances, whether physical or
economic, of the nature of force majeure and including a change in control, the APSC and Spire Alabama will
consult in good faith with respect to modifications, if any. Effective January 1, 2014, Spire Alabama’s allowed range
of return on average common equity is 10.5% to 10.95% with an adjusting point of 10.8%. Spire Alabama is eligible
to receive a performance-based adjustment of 5 basis points to the return on equity adjusting point, based on
meeting certain customer satisfaction criteria. Under RSE, the APSC conducts quarterly reviews to determine
whether Spire Alabama’s return on average common equity at the end of the rate year will be within the allowed
range of return. Reductions in rates can be made quarterly to bring the projected return within the allowed range;
42
increases, however, are allowed only once each rate year, effective December 1, and cannot exceed 4% of prior-year
revenues. The RSE reduction for the July 31, 2016 quarterly point of test was $4.8 and went into effect October 1,
2016, and for the quarterly point of test at September 30, 2016, Spire Alabama recorded a $2.7 RSE reduction
effective December 1, 2016. As part of the annual update for RSE, on November 30, 2016, Spire Alabama filed a
reduction for rate year 2017 of $2.5 that also became effective December 1, 2016. There was no RSE reduction for
the January 31, 2017, April 30, 2017 and July 31, 2017 points of test. As of September 30, 2017, Spire Alabama
recorded a $2.7 RSE reduction to operating revenues to bring the expected rate of return on average common equity
at the end of the year to within the allowed range of return.
The inflation-based CCM, established by the APSC, allows for annual increases to O&M expense. The CCM range is
Spire Alabama’s 2007 actual rate year O&M expense inflation-adjusted using the June Consumer Price Index For
All Urban Consumers (CPI-U) each rate year plus or minus 1.75% (Index Range). If rate year O&M expense falls
within the Index Range, no adjustment is required. If rate year O&M expense exceeds the Index Range, three-
quarters of the difference is returned to customers through future rate adjustments. To the extent rate year O&M is
less than the Index Range, Spire Alabama benefits by one-half of the difference through future rate adjustments.
Certain items that fluctuate based on situations demonstrated to be beyond Spire Alabama’s control may be
excluded from the CCM calculation. As of September 30, 2017, Spire Alabama recorded a CCM benefit of $10.7 for
rate year 2017, which will be reflected in rates effective December 1, 2017. The CCM benefit was $7.8 for rate year
2016 and $4.7 for rate year 2015.
On June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, and a regulatory
liability recorded for Spire Alabama. Refunds from such negative salvage liability will be passed back to eligible
customers on a declining basis through lower tariff rates through rate year 2019 pursuant to the terms of the
Negative Salvage Rebalancing (NSR) rider. The total amount refundable to customers is subject to adjustments over
the remaining period for charges made to the Enhanced Stability Reserve (ESR) and other APSC-approved charges.
The refunds are due to a re-estimation of future removal costs provided for through the prior depreciation rates. For
fiscal 2017, approximately $6.3 of the customer refund was returned to customers. As of September 30, 2017, $12.3
is remaining to be refunded to customers. The NSR pass back for fiscal 2018 is $8.2 and will be reflected in rates
effective December 1, 2017 through March 31, 2018.
The APSC approved an ESR in 1998, which was subsequently modified and expanded in 2010. As currently
approved, the ESR provides deferred treatment and recovery for the following: (1) extraordinary O&M expenses
related to environmental response costs; (2) extraordinary O&M expenses related to self-insurance costs that exceed
$1.0 per occurrence; (3) extraordinary O&M expenses, other than environmental response costs and self-insurance
costs, resulting from a single force majeure event or multiple force majeure events greater than $0.3 and $0.4,
respectively, during a rate year; and (4) negative individual large commercial and industrial customer budget
revenue variances that exceed $0.4 during a rate year. Charges to the ESR are subject to certain limitations which
may disallow deferred treatment and which prescribe the timing of recovery. Funding to the ESR is provided as a
reduction to the refundable negative salvage balance over its nine-year term beginning December 1, 2010.
Subsequent to the nine-year period and subject to APSC authorization, Spire Alabama expects to be able to recover
underfunded ESR balances over a five-year amortization period with an annual limitation of $0.7. Amounts in
excess of this limitation are deferred for recovery in future years.
Spire Alabama has APSC approval for an intercompany revolving credit agreement allowing Spire Alabama to
borrow from Spire in a principal amount not to exceed $200.0 at any time outstanding in combination with its bank
line of credit, and to loan to Spire in a principal amount not to exceed $25.0 at any time outstanding. Borrowings
may be used for the following purposes: (a) meeting increased working capital requirements; (b) financing
construction requirements related to additions, extensions, and replacements of the distribution systems; and (c)
financing other expenditures that may arise from time to time in the normal course of business.
On September 18, 2017, Spire Alabama filed an application with the APSC for authorization to issue and sell $75.0
principal amount of debt and to purchase interest rate derivative instruments for the purpose of locking in favorable
interest rates and to include the associated interest charges, issuance costs, fees and any gain or loss resulting from
the settlement of such interest rate derivative instruments through rates. The application was approved by the APSC
October 3, 2017.
43
Spire
In addition to the matters described above, the following regulatory matters affect Spire.
Spire Gulf has similar rate regulation to Spire Alabama. The RSE allowed range of return on average common equity
is 10.45% to 10.95% with an adjusting point of 10.7%. The CCM has the same return and similar recovery provisions
when expenses exceed or are under a band of +/- 1.50% around the CPI-U inflated O&M per customer expense level
from September 30, 2017, excluding expenses for pensions and gas bad debt. Additionally, it has a Cast Iron Main
Replacement (CIMR) factor that provides an enhanced return on the pro-rata costs associated with cast iron main
replacement for miles over 10 miles per year based on a 75% weighting for the equity content. Spire Gulf also has an
ESR for negative revenue variances over $o.1 or a force majeure event expense of $0.1 (or two events that exceed
$0.15), a Self Insurance Reserve (SIR) for general liability coverage, and an Environmental Cost Recovery Factor
(ECRF) as part of its PGA that recovers 90% of prudently incurred costs for compliance with environmental laws,
rules and regulations. It also has an APSC-approved intercompany revolving credit agreement with Spire to borrow
in a principal amount not to exceed $50.0, and to loan up to $25.0.
On September 21, 2017, Spire Gulf filed an application to defer certain pension and post-retirement health plan
costs. The application was approved by the APSC October 3, 2017.
Spire Mississippi utilizes a formula rate-making process under the Rate Stabilization Adjustment (RSA) Rider. It is
based on a formulaically derived return on equity, and is updated on an annual basis if the equity return on an end
of period rate base is beyond the allowed return on equity by 1.0%, with 75% of any shortfall back to the midpoint
being put into a rate increase and 50% of any excess back to the midpoint resulting in a rate decrease. Updates are
made based on known and measurable adjustments to historic costs from 12-months ended June 30, submitted
September 15 for an effective date of November 1, unless disputed by the Mississippi Public Utilities Staff, with any
disputes to be resolved by the MSPSC by January 15 of the following year. Spire Mississippi had approved December
3, 2015 a Supplemental Growth Rider (SGR) for a 3-year period to provide enhanced returns of a 12.0% return on
equity for a period of 10 years on certain system expansion projects.
In July 2016, the proposed project of Spire STL Pipeline LLC, a wholly owned subsidiary of Spire, was accepted into
the pre-filing process at the FERC. The proposal outlined the plan to build, own, operate, and maintain a pipeline
interconnecting with the Rockies Express pipeline to deliver natural gas to the St. Louis, Missouri area. As an
interstate project, the Spire STL Pipeline is being reviewed for siting and permitting by the FERC, which is the lead
agency for other federal, state, and local permitting authorities. In January 2017, Spire submitted an application
with the FERC requesting issuance of a certificate of convenience and necessity authorizing it to construct, own, and
operate an interstate pipeline. Several parties have filed interventions and comments regarding the Spire STL
Pipeline project. The company is monitoring these closely and has responded where appropriate. In April 2017,
Spire STL Pipeline filed an amended certificate application to adjust the preferred route to include a new six-mile
segment rather than an existing line, offering a number of benefits including eliminating potential supply disruption
risk for Spire Missouri during construction, eliminating uncertainty regarding upgrade costs, and reducing long-
term integrity management costs. In its Environmental Assessment issued on September 29, 2017, the FERC
concluded that approval of the Spire STL Pipeline, with appropriate mitigating measures, would not constitute a
major federal action significantly affecting the quality of the human environment. Spire anticipates the FERC will
deliver a Final Order by the end of calendar year 2017.
ACCOUNTING PRONOUNCEMENTS
The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the impact that
recently issued accounting standards will have on their financial position or results of operations upon adoption.
For disclosures related to the adoption of new accounting standards, see the New Accounting Pronouncements
section of Note 1 of the Notes to Financial Statements.
INFLATION
The accompanying financial statements reflect the historical costs of events and transactions, regardless of the
purchasing power of the dollar at the time. Due to the capital-intensive nature of the businesses of the Company,
Spire Missouri and Spire Alabama, the most significant impact of inflation is on the depreciation of utility plant.
Rate regulation, to which the Utilities are subject, allows recovery through its rates of only the historical cost of
utility plant as depreciation. The Utilities expect to incur significant capital expenditures in future years, primarily
related to the planned increased replacements of distribution plant. The Company, Spire Missouri and Spire
Alabama believe that any higher costs experienced upon replacement of existing facilities will be recovered through
the normal regulatory process.
44
FINANCIAL CONDITION
CASH FLOWS
The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow
money to cover the lag between when they purchase natural gas and when their customers pay for that gas. Changes
in the wholesale cost of natural gas (including cash payments for margin deposits associated with Spire Missouri’s
use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utilities’ PGA
clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of storage gas
inventories cause short-term cash requirements to vary during the year and from year to year, and may cause
significant variations in the Company’s cash provided by or used in operating activities.
Cash Flow Summary
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
2017
2016
2015
$
288.3 $
(433.5 )
147.4
328.3 $
(612.7 )
275.8
322.4
(298.7)
(26.0)
Net cash provided by operating activities decreased $39.9 from fiscal 2016 to fiscal 2017. The change is primarily
due to fluctuations in working capital, as mentioned above, largely driven by the relative weather conditions and gas
prices during the periods. Cash was provided by increases in accounts payable, net income, depreciation, and
deferred income taxes. These benefits were more than offset by a net decrease in advance customer billings and net
increases in accounts receivable and natural gas inventory values.
The Company used $179.2 less cash in investing activities in fiscal 2017 versus fiscal 2016 but $134.8 more than in
fiscal 2015. Fiscal 2016 included $317.7 net cash used for the acquisition of Spire EnergySouth, while fiscal 2017 and
fiscal 2015 included only smaller acquisition settlements. Capital expenditures increased $144.8 from fiscal 2016 to
fiscal 2017, primarily as a result of the higher level of infrastructure upgrades across both Missouri and Alabama, as
well as $16.0 from the addition of EnergySouth and $25.5 for the Spire STL Pipeline project. Spire estimates its
capital expenditures for fiscal 2018 will be approximately $485.0, including approximately $415.0 for the Utilities.
The increase in investment reflects the continued commitment to infrastructure upgrades at the Utilities and the
beginning of the construction phase of the Spire STL Pipeline.
Cash provided by financing activities was $128.5 lower in fiscal 2017 than in fiscal 2016. This change primarily
reflects the effect of a $26.2 net issuance of long-term debt in fiscal 2017 compared with a $165.0 net issuance the
previous year, while short-term borrowings continued to increase, reflecting the Company’s growing operations.
Stock issuances in fiscal 2017, which included the conversion of equity units issued in 2014, provided $9.7 more
cash than last year, which included the offering to help fund the Spire EnergySouth acquisition. These net cash
inflows were partially offset by continued increases in dividend payments and other financing activities this year. In
fiscal 2015, the net issuances of long-term debt and common stock were not significant. In the first half of fiscal
2018, Spire Alabama plans to issue long-term notes totaling $75.0. Spire Missouri expects to refinance $100.0 of
bonds due in August 2018.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments
as of September 30, 2017 or 2016. Due to lower yields available to Spire on short-term investments, the Company
elected to provide a portion of Spire Missouri’s and Spire Alabama’s short-term funding through intercompany
lending during the past fiscal year.
Short-term Debt
The Utilities’ short-term borrowing requirements typically peak during the colder months, while the Company’s
needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper or
through the use of a revolving credit facility.
45
On December 14, 2016, Spire, Spire Missouri, and Spire Alabama entered into a new syndicated revolving credit
facility pursuant to a loan agreement with 11 banks, expiring December 14, 2021. The largest portion provided by a
single bank under the line is 12.3%. The loan agreement replaced Spire’s and Spire Missouri’s existing loan
agreements dated as of September 3, 2013 and amended September 3, 2014, which were set to expire on
September 3, 2019, and Spire Alabama’s existing loan agreement dated September 2, 2014, which was set to expire
September 2, 2019. All three previous agreements were terminated on December 14, 2016.
The loan agreement has an aggregate credit commitment of $975.0, including sublimits of $300.0 for Spire, $475.0
for Spire Missouri, and $200.0 for Spire Alabama. These sublimits may be reallocated from time to time among the
three borrowers within the $975.0 aggregate commitment. Spire may use its line to provide for the funding needs of
various subsidiaries. Spire, Spire Missouri, and Spire Alabama expect to use the loan agreement for general
corporate purposes, including short-term borrowings and letters of credit. The agreement also contains financial
covenants limiting each borrower’s consolidated total debt, including short-term debt, to no more than 70% of its
total capitalization. As defined in the line of credit, on September 30, 2017, total debt was 56% of total capitalization
for the consolidated Company, 50% for Spire Missouri, and 33% for Spire Alabama. There were no borrowings
against this credit facility as of September 30, 2017.
On December 21, 2016, Spire established a commercial paper program (Program) pursuant to which Spire may
issue short-term, unsecured commercial paper notes (Notes). Amounts available under the Program may be
borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the Notes
outstanding under the Program at any time not to exceed $975.0. The Notes may have maturities of up to 365 days
from date of issue. The net proceeds of the issuances of the Notes are expected to be used for general corporate
purposes, including to provide working capital for both utility and non-utility subsidiaries. As of September 30,
2017, Notes outstanding under the Program totaled $477.3.
Information about Spire’s consolidated short-term borrowings is presented in the following table. Based on average
short-term borrowings for the year ended September 30, 2017, an increase in the average interest rate of 100 basis
points would decrease Spire’s pre-tax earnings and cash flows by approximately $4.9 on an annual basis, portions of
which may be offset through the application of PGA or GSA carrying costs.
Year Ended September 30, 2017
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2017
Borrowings outstanding
Weighted average interest rate
Year Ended September 30, 2016
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2016
Borrowings outstanding
Weighted average interest rate
Spire
Short-term
Borrowings1
Spire Missouri
Commercial
Paper
Borrowings2
Spire Alabama
Bank Line
Borrowings
Total
Short-term
Borrowings
$369.0
1.3%
$73.0 - $675.6
$88.5
0.9%
$0.0 - $329.7
$28.3
1.6%
$0.0 - $102.5
$485.8
1.2%
$395.5 - $675.6
$477.3
1.5%
$—
—%
$—
—%
$477.3
1.5%
$42.7
1.6%
$0.0 - $82.0
$201.0
0.7%
$43.0 - $307.2
$30.2
1.4%
$0.0 - $82.0
$273.9
0.9%
$73.1 - $427.2
$73.0
1.8%
$243.7
0.8%
$82.0
1.5%
$398.7
1.1%
1 Spire Short-term Borrowings includes bank line borrowings of Spire Inc. (excluding its subsidiaries) and, since January 1,
2017, commercial paper. Of Spire’s $477.3 borrowings outstanding as of September 30, 2017, $440.0 was used to provide
funding to its subsidiaries, including Spire Missouri ($203.0), Spire Alabama ($169.9), Spire EnergySouth and subsidiaries
($12.9), Spire STL Pipeline LLC ($26.6), and others ($27.6).
2 The commercial paper program for Spire Missouri terminated February 2, 2017.
46
Long-term Debt and Equity
At September 30, 2017, including the current portion but excluding unamortized discounts and debt issuance costs,
Spire had long-term debt totaling $2,112.0, of which $980.0 was issued by Spire Missouri, $250.0 was issued by
Spire Alabama, and $67.0 was issued by other subsidiaries. All long-term debt bears fixed rates and is subject to
changes in fair value as market interest rates change. However, increases and decreases in fair value would impact
earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to
maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemption of long-
term debt typically would be deferred as regulatory assets or liabilities and amortized over a future period.
Of the Company’s $2,112.0 long-term debt (including the current portion), $25.0 has no call options, $1,037.0 has
make-whole call options, $5.0 is callable currently, and $1,045.0 is callable at par one to six months prior to
maturity.
Maturities of long-term debt for Spire on a consolidated basis, Spire Missouri and Spire Alabama for the five fiscal
years subsequent to September 30, 2017 are as follows:
2018
2019
2020
2021
2022
$
Spire
Spire
Missouri
Spire
Alabama
100.0 $
180.0
40.0
55.0
50.0
100.0 $
50.0
—
—
—
—
—
40.0
—
50.0
Spire’s, Spire Missouri’s and Spire Alabama’s short-term credit facilities and long-term debt agreements contain
customary covenants and default provisions. As of September 30, 2017, there were no events of default under these
covenants.
The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper
market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the
capital markets. The credit ratings of the Company, Spire Missouri and Spire Alabama remain at investment grade,
but are subject to review and change by the rating agencies.
It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital
markets and will have sufficient capital resources, both internal and external, to meet anticipated capital
requirements, which primarily include capital expenditures, interest payments on long-term debt, scheduled
maturities of long-term debt, short-term seasonal needs, and dividends.
On March 10, 2017, Spire redeemed in full at par its $250.0 floating rate notes due August 15, 2017, plus accrued
and unpaid interest.
On March 15, 2017, Spire completed the issuance and sale of $100.0 in aggregate principal amount of Senior Notes
due March 15, 2027. The notes bear interest at the rate of 3.93% per annum, payable semi-annually. The notes are
senior unsecured obligations of the Company. The Company used the proceeds from the sale of the notes for the
repayment of other debt.
In 2014, Spire issued 2.875 million equity units as a portion of the Spire Alabama acquisition financing. The equity
units were originally issued at $50 per unit pursuant to the Purchase Contract and Pledge Agreement (Purchase
Contract) dated as of June 11, 2014 between Spire and U.S. Bank National Association, as purchase contract agent,
collateral agent, custodial agent and securities intermediary. These units consisted of $143.8 aggregate principal
amount of 2014 Series A 2.00% remarketable junior subordinated notes due 2022 (the Junior Notes) and the
Purchase Contract obligating the holder to purchase common shares at a future settlement date (anticipated to be
three years in the future and prior to the Junior Notes maturity).
47
The equity unit investments were effectively replaced as planned in a series of transactions outlined below:
• On February 22, 2017, the selling securityholders (as defined below) agreed to purchase the Junior Notes in
connection with the remarketing of the junior subordinated notes that comprised a component of the equity
units.
• On the same day, Spire entered two related agreements: (1) a Securities Purchase and Registration Rights
Agreement (the SPRRA), among Spire and the several purchasers named therein (the selling securityholders),
obligating the selling securityholders to sell the Junior Notes to Spire in exchange for $143.8 aggregate principal
amount of Spire’s 3.543% Senior Notes due 2024 (the Senior Notes) and a cash payment, and (2) an
underwriting agreement with the selling securityholders and the several underwriters named therein in
connection with the public offering of $150.0 aggregate principal amount of Senior Notes consisting of $6.2
principal amount of the Senior Notes issued and sold by Spire and $143.8 principal amount of the Senior Notes
sold by the selling securityholders. The SPRRA granted the selling securityholders the right to offer the Senior
Notes to the public in secondary public offerings.
• The public offering was completed on February 27, 2017. Spire used its net proceeds from its sale of the Senior
Notes to repay short-term debt. Spire did not receive any proceeds from the sale of the Senior Notes by the
selling securityholders.
• On April 3, 2017, Spire settled the Purchase Contracts underlying its 2.875 million equity units by issuing
2,504,684 shares of its common stock at a purchase price of $57.3921 per share. Fractional shares were settled
in cash at $67.50 per share. The purchase price was funded with the proceeds of the Junior Notes. Under the
contract term, the equity units were converted to common stock at the rate of 0.8712, with a corresponding
adjustment to purchase price. Spire received net cash proceeds of approximately $142.0, which it used to repay
short-term debt incurred the previous month to redeem the floating rate notes.
On September 15, 2017, Spire Missouri issued and sold in a private placement $50.0 in aggregate principal amount
of its first mortgage bonds due September 15, 2032, $70.0 in aggregate principal amount of its first mortgage bonds
due September 15, 2047 and $50.0 in aggregate principal amount of its first mortgage bonds due September 15,
2057. Spire Missouri used the proceeds to refinance existing indebtedness and for other general corporate purposes.
The 2032 bonds, 2047 bonds and 2057 bonds bear interest at a rate per annum of 3.68%, 4.23% and 4.38%,
respectively, payable semi-annually on the 15th day of March and September of each year.
Spire Missouri has authority from the MoPSC to issue debt securities and preferred stock, including on a private
placement basis, as well as to issue common stock, receive paid-in-capital, and enter into capital lease agreements,
all for a total of up to $300.0 for financings placed any time before September 30, 2018. During the year ended
September 30, 2017, Spire Missouri issued $170.0 in securities under this authorization, so as of that date, $130.0
remains available to be issued.
Spire has a shelf registration statement on Form S-3 on file with the US Securities and Exchange Commission (SEC)
for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct
Stock Purchase Plan. There were 244,130 and 239,945 at September 30, 2017 and November 10, 2017, respectively,
remaining available for issuance under this Form S-3. Spire also has a shelf registration statement on Form S-3 on
file with the SEC for the issuance of equity and debt securities. Spire Missouri has a shelf registration on Form S-3
on file with the SEC for issuance of first mortgage bonds, unsecured debt, and preferred stock, which expires on
September 22, 2019.
Including the current portion of long-term debt, the Company’s capitalization at September 30, 2017 consisted of
48.7% of common stock equity and 51.3% long-term debt, compared to 46.1% of common stock equity and 53.9% of
long-term debt at September 30, 2016.
48
CONTRACTUAL OBLIGATIONS
As of September 30, 2017, Spire had contractual obligations with payments due as summarized below:
Contractual Obligations
Total
Payments due by period
Less than
1 Year
1-3
Years
3-5
Years
More than
5 Years
Principal Payments on Long-term Debt
Interest Payments on Long-term Debt (a)
Operating Leases (b)
Purchase Obligations – Natural Gas (c)
Purchase Obligations – Other (d)
Asset Retirement Obligations
Total (e)
$
$
2,112.0 $
1,242.5
83.7
1,281.8
74.9
296.6
5,091.5 $
100.0 $
85.8
10.1
703.3
63.6
10.1
972.9 $
220.0 $
160.4
17.1
373.9
9.2
23.3
803.9 $
105.0 $
144.6
12.1
66.8
1.8
16.8
347.1 $
1,687.0
851.7
44.4
137.8
0.3
246.4
2,967.6
(a) Includes interest payments over the terms of the debt. Interest is calculated using the applicable interest rate and
outstanding principal for each instrument with the terms ending at each instrument’s stated maturity. See Note 6, Long-
Term Debt, of the Notes to Financial Statements.
(b) Lease obligations are primarily for office space, vehicles, and power operated equipment. Additional payments will be
incurred if renewal options are exercised under the provisions of certain agreements.
(c) These purchase obligations represent the minimum payments required under existing natural gas transportation and
storage contracts and natural gas supply agreements in the Gas Utility and Gas Marketing segments. These amounts reflect
fixed obligations as well as obligations to purchase natural gas at future market prices, calculated using September 30, 2017
forward market prices. Each of the Utilities generally recovers costs related to its purchases, transportation, and storage of
natural gas through the operation of its PGA clause or GSA rider, subject to prudence review by the appropriate regional
public service commission. Variations in the timing of collections of gas costs from customers may affect short-term cash
requirements. Additional contractual commitments are generally entered into prior to or during the heating season.
(d) These purchase obligations primarily reflect miscellaneous agreements for the purchase of materials and the procurement of
services necessary for normal operations.
(e) Long-term liabilities associated with unrecognized tax benefits, totaling $11.0, have been excluded from the table above
because the timing of future cash outflows, if any, cannot be reasonably estimated. Also, commitments related to pension
and postretirement benefit plans have been excluded from the table above. The Company expects to contribute $35.5 to its
qualified, trusteed pension plans and $0.5 to its non-qualified pension plans during fiscal 2018. With regard to the
postretirement benefits, the Company anticipates it will contribute $7.2 to the qualified trusts and $0.2 directly to
participants from Spire Missouri funds during fiscal 2018. For further discussion of the Company’s pension and
postretirement benefit plans, refer to Note 13, Pension Plans and Other Postretirement Benefits, of the Notes to Financial
Statements.
49
MARKET RISK
Commodity Price Risk
Gas Utility
The Utilities’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily
managed through the operation of the Missouri Utilities’ PGA clauses and Spire Alabama’s GSA rider. The PGA
clauses and GSA rider allows the Utilities to flow through to customers, subject to prudence review by the MoPSC
and APSC, the cost of purchased gas supplies, as well as gas inventory carrying costs. Spire Missouri is allowed the
flexibility to make up to three discretionary PGA changes during each year, in addition to its mandatory November
PGA change, so long as such changes are separated by at least two months. Spire Missouri is able to mitigate, to
some extent, changes in commodity prices through the use of physical storage supplies and regional supply
diversity. The Utilities also have risk management policies that allow for the purchase of natural gas derivative
instruments with the goal of managing its price risk associated with purchasing natural gas on behalf of its
customers. These policies prohibit speculation. As of September 30, 2017, Spire Missouri had active natural gas
derivative positions, but Spire Alabama did not. Costs and cost reduction, including carrying costs, associated with
the use of natural gas derivative instruments are allowed to be passed on to customers through the operation of the
PGA clauses or GSA rider. Accordingly, the Utilities do not expect any adverse earnings impact as a result of the use
of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements
may cause short-term cash requirements to vary. For more information about the Utilities’ natural gas derivative
instruments, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements.
Gas Marketing
In the course of its business, Spire’s non-regulated gas marketing subsidiary, Spire Marketing, enters into contracts
to purchase and sell natural gas at fixed prices and natural gas index-based prices. Commodity price risk associated
with these contracts has the potential to impact earnings and cash flows. To minimize this risk, Spire Marketing has
a risk management policy that provides for daily monitoring of a number of business measures, including fixed
price commitments. In accordance with the risk management policy, Spire Marketing manages the price risk
associated with its fixed price commitments. This risk is currently managed either by closely matching the offsetting
physical purchase or sale of natural gas at fixed-prices or through the use of natural gas futures, options, and swap
contracts traded on or cleared through the New York Mercantile Exchange (NYMEX) and Intercontinental
Exchange (ICE) to lock in margins. At September 30, 2017 and 2016, Spire Marketing’s unmatched fixed-price
positions were not material to Spire’s financial position or results of operations.
As mentioned above, Spire Marketing uses natural gas futures, options, and swap contracts traded on or cleared
through the NYMEX and ICE to manage the commodity price risk associated with its fixed-price natural gas
purchase and sale commitments. These derivative instruments may be designated as cash flow hedges of forecasted
purchases or sales. Such accounting treatment, if elected, generally permits a substantial portion of the gain or loss
to be deferred from recognition in earnings until the period that the associated forecasted purchase or sale is
recognized in earnings. To the extent a hedge is effective, gains or losses on the derivatives will be offset by changes
in the value of the hedged forecasted transactions. Information about the fair values of Spire Marketing’s exchange-
traded/cleared natural gas derivative instruments is presented below:
Net balance of derivative assets at September 30, 2016
Changes in fair value
Settlements/purchases - net
Changes in cash margin
Net balance of derivative assets at September 30, 2017
Derivative
Fair
Values
Cash
Margin
Derivatives
and Cash
Margin
$
$
(1.3 ) $
4.4
(2.7)
—
0.4 $
4.1 $
—
—
(2.2)
1.9 $
2.8
4.4
(2.7)
(2.2)
2.3
50
Maturity by Fiscal Year
Total
2018
2019
2020
2021
2022
As of September 30, 2017
Fair values of exchange-traded/cleared natural gas
derivatives - net
Fair values of basis swaps - net
$
$
0.6
(0.1 )
$
0.6
(0.3 )
$
—
0.2
$
—
—
$
—
—
Position volumes:
MMBtu - net (short) long futures/swap/option positions
MMBtu - net (short) long basis swap positions
(16.1 )
(4.2 )
(18.6 )
(2.9 )
(0.9)
(1.1)
1.9
(0.2)
0.8
—
—
—
0.7
—
Certain of Spire Marketing’s physical natural gas derivative contracts are designated as normal purchases or normal
sales, as permitted by GAAP. This election permits the Company to account for the contract in the period the
natural gas is delivered. Contracts not designated as normal purchases or normal sales, including those designated
as trading activities, are accounted for as derivatives with changes in fair value recognized in earnings in the periods
prior to settlement.
Below is a reconciliation of the beginning and ending balances for physical natural gas contracts accounted for as
derivatives, none of which will settle beyond fiscal 2020:
Net balance of derivative assets at September 30, 2016
Changes in fair value
Settlements
Net balance of derivative liabilities at September 30, 2017
$
$
6.3
(0.7 )
(7.1 )
(1.5 )
For further details related to Spire Marketing’s derivatives and hedging activities, see Note 10, Derivative
Instruments and Hedging Activities, of the Notes to Financial Statements.
Counterparty Credit Risk
Spire Marketing has concentrations of counterparty credit risk in that a significant portion of its transactions are
with energy producers, utility companies, and pipelines. These concentrations of counterparties have the potential
to affect the Company’s overall exposure to credit risk, either positively or negatively, in that each of these three
groups may be affected similarly by changes in economic, industry, or other conditions. Spire Marketing also has
concentrations of credit risk with certain individually significant counterparties. To the extent possible, Spire
Marketing enters into netting arrangements with its counterparties to mitigate exposure to credit risk. It is also
exposed to credit risk associated with its derivative contracts designated as normal purchases and normal sales.
Spire Marketing closely monitors its credit exposure and, although uncollectible amounts have not been significant,
increased counterparty defaults are possible and may result in financial losses and/or capital limitations. For more
information on these concentrations of credit risk, including how Spire Marketing manages these risks, see Note 11,
Concentrations of Credit Risk, of the Notes to Financial Statements.
Interest Rate Risk
The Company is subject to interest rate risk associated with its long-term and short-term debt issuances. Based on
average short-term borrowings during fiscal 2017, an increase of 100 basis points in the underlying average interest
rate for short-term debt would have caused an increase in interest expense of approximately $4.9 on an annual
basis. Portions of such increases may be offset through the application of PGA carrying costs. At September 30,
2017, Spire had no variable rate long-term debt outstanding but had fixed-rate long-term debt totaling $2,112.0,
which includes $67.0 of fixed-rate long-term debt assumed through the acquisition of Spire EnergySouth. Spire
Missouri had fixed-rate long-term debt totaling $980.0 and Spire Alabama had fixed rate long-term debt of $250.0,
both included in Spire’s total long-term debt. While these long-term debt issues are fixed-rate, they are subject to
changes in fair value as market interest rates change. However, increases or decreases in fair value would impact
earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to
maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemptions of long-
term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future
period.
51
During the second quarter of fiscal 2016, Spire entered into five-year interest rate swap transactions with a fixed
interest rate of 1.776% and a notional amount of $105.0 to protect itself against adverse movement in interest rates
in anticipation of the issuance of long-term debt in fiscal 2017. During the third quarter of fiscal 2016, the Company
entered into seven-year swap transactions with an average fixed interest rate of 1.501% and a notional amount of
$120.0 to hedge additional debt expected to be issued in fiscal 2017. All of these hedge positions were settled during
the second quarter of fiscal 2017, resulting in a gain of $14.1 which will be amortized over the hedged periods. Also
during the second quarter of fiscal 2017, Spire entered into a ten-year interest rate swap with a fixed interest rate of
2.658% and a notional amount of $60.0 to protect itself against adverse movements in interest rates on future
interest rate payments. The Company recorded a $0.9 mark-to-market loss on this swap for the year ended
September 30, 2017. Refer to Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial
Statements for additional details on these interest rate swap transactions.
ENVIRONMENTAL MATTERS
The Utilities own and operate natural gas distribution, transmission, and storage facilities, the operations of which
are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting
from such operations arise in the ordinary course of business, such issues have not materially affected the
Company’s, Spire Missouri’s, or Spire Alabama’s financial position and results of operations. As environmental
laws, regulations, and their interpretations change, however, the Utilities may be required to incur additional costs.
For information relative to environmental matters, see Note 16, Commitments and Contingencies, of the Notes to
Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
At September 30, 2017, the Company had no off-balance sheet financing arrangements, other than operating leases
and letters of credit entered into in the ordinary course of business. The Company does not expect to engage in any
significant off-balance sheet financing arrangements in the near future.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
For this discussion, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Market Risk, of this report.
52
Item 8. Financial Statements and Supplementary Data
Management Reports on Internal Control over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Financial Statements (for years ended September 30, 2017, 2016, and 2015):
Spire Inc.
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Capitalization
Consolidated Statements of Common Shareholders’ Equity
Consolidated Statements of Cash Flows
Spire Missouri Inc.
Statements of Income
Statements of Comprehensive Income
Balance Sheets
Statements of Capitalization
Statements of Common Shareholder’s Equity
Statements of Cash Flows
Spire Alabama Inc.
Statements of Income
Balance Sheets
Statements of Capitalization
Statements of Common Shareholder’s Equity
Statements of Cash Flows
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Acquisitions
Note 3. Stock-Based Compensation
Note 4. Earnings Per Common Share
Note 5. Shareholders’ Equity
Note 6. Long-Term Debt
Note 7. Notes Payable and Credit Agreements
Note 8. Fair Value of Financial Instruments
Note 9. Fair Value Measurements
Note 10. Derivative Instruments and Hedging Activities
Note 11. Concentrations of Credit Risk
Note 12. Income Taxes
Note 13. Pension Plans and Other Postretirement Benefits
Note 14. Information by Operating Segment
Note 15. Regulatory Matters
Note 16. Commitments and Contingencies
Note 17. Interim Financial Information (Unaudited)
53
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60
61
63
64
65
66
67
68
70
71
72
73
74
76
77
78
79
88
89
91
92
93
95
98
99
101
109
110
114
125
127
130
134
Management Reports on Internal Control over Financial Reporting
Spire Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting.
Spire Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable
assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Inc.’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an
assessment of the effectiveness of Spire Inc.’s internal control over financial reporting as of September 30, 2017. In
making this assessment, management used the criteria in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that assessment,
management concluded that Spire Inc.’s internal control over financial reporting was effective as of September 30,
2017. Deloitte & Touche LLP, an independent registered public accounting firm, has issued an attestation report on
Spire Inc.’s internal control over financial reporting, which is included herein.
Spire Missouri Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting.
Spire Missouri Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only
reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Missouri Inc.’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an
assessment of the effectiveness of Spire Missouri Inc.’s internal control over financial reporting as of September 30,
2017. In making this assessment, management used the criteria in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that assessment,
management concluded that Spire Missouri Inc.’s internal control over financial reporting was effective as of
September 30, 2017.
Spire Alabama Inc.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting.
Spire Alabama Inc.’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements and can provide only
reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Spire Alabama Inc.’s management, including our Chief Executive Officer and Chief Financial Officer, conducted an
assessment of the effectiveness of Spire Alabama Inc.’s internal control over financial reporting as of September 30,
2017. In making this assessment, management used the criteria in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that assessment,
management concluded that Spire Alabama Inc.’s internal control over financial reporting was effective as of
September 30, 2017.
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Spire Inc.
St. Louis, Missouri
We have audited the internal control over financial reporting of Spire Inc. and subsidiaries (the “Company”) as of
September 30, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Spire section of Management Reports on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion
or improper management override of controls, material misstatements due to error or fraud may not be prevented
or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over
financial reporting to future periods are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of September 30, 2017, based on the criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements as of and for the year ended September 30, 2017 of the Company and
our report dated November 15, 2017 expressed an unqualified opinion on those consolidated financial statements.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 15, 2017
55
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Spire Inc.
St. Louis, Missouri
We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of
Spire Inc. and subsidiaries (the “Company”) as of September 30, 2017 and 2016, and the related consolidated
statements of income, comprehensive income, common shareholders’ equity, and cash flows for each of the three
years in the period ended September 30, 2017. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position
of Spire Inc. and subsidiaries as of September 30, 2017 and 2016, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 2017, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of September 30, 2017, based on the criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated November 15, 2017, expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 15, 2017
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Spire Missouri Inc.
St. Louis, Missouri
We have audited the accompanying balance sheets and statements of capitalization of Spire Missouri Inc. (formerly
Laclede Gas Company) (a wholly owned subsidiary of Spire Inc.) (the “Company”) as of September 30, 2017 and
2016, and the related statements of income, comprehensive income, common shareholder’s equity, and cash flows
for each of the three years in the period ended September 30, 2017. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Spire
Missouri Inc. as of September 30, 2017 and 2016, and the results of its operations and its cash flows for each of the
three years in the period ended September 30, 2017, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
St. Louis, Missouri
November 15, 2017
57
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Spire Alabama Inc.
Birmingham, Alabama
We have audited the accompanying balance sheets and statements of capitalization of Spire Alabama Inc. (formerly
Alabama Gas Corporation) (a wholly owned subsidiary of Spire Inc.) (the “Company”) as of September 30, 2017 and
2016, and the related statements of income, common shareholder’s equity, and cash flows for each of the three years
in the period ended September 30, 2017. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Spire
Alabama Inc. as of September 30, 2017 and 2016, and the results of its operations and its cash flows for each of the
three years in the period ended September 30, 2017, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
November 15, 2017
58
SPIRE INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
Years Ended September 30
Operating Revenues:
Gas Utility
Gas Marketing and other
Total Operating Revenues
Operating Expenses:
Gas Utility
Natural and propane gas
Other operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Total Gas Utility Operating Expenses
Gas Marketing and other
Total Operating Expenses
Operating Income
Other Income – Net
Interest Charges:
Interest on long-term debt
Other interest charges
Total Interest Charges
Income Before Income Taxes
Income Tax Expense
Net Income
Weighted Average Number of Common Shares Outstanding:
Basic
Diluted
Basic Earnings Per Share of Common Stock
Diluted Earnings Per Share of Common Stock
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
1,660.0 $
80.7
1,740.7
1,457.2 $
80.1
1,537.3
1,891.8
84.6
1,976.4
570.5
405.0
153.5
137.8
1,266.8
152.2
1,419.0
321.7
6.6
76.8
12.3
89.1
239.2
77.6
161.6 $
46.9
47.0
3.44 $
3.43 $
492.2
377.5
136.9
125.2
1,131.8
123.2
1,255.0
282.3
8.6
67.6
9.6
77.2
213.7
69.5
144.2 $
44.1
44.3
3.26 $
3.24 $
882.4
390.6
129.9
142.1
1,545.0
158.9
1,703.9
272.5
1.2
66.6
8.0
74.6
199.1
62.2
136.9
43.2
43.3
3.16
3.16
$
$
$
59
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SPIRE INC.
(In millions)
Years Ended September 30
Net Income
Other Comprehensive Income (Loss), Before Tax:
Cash flow hedging derivative instruments:
Net hedging gain (loss) arising during the period
Reclassification adjustment for loss included in net income
Net unrealized gain (loss) on cash flow hedging derivative instruments
Defined benefit pension and other postretirement benefit plans:
Net actuarial gain arising during the period
Amortization of actuarial loss (gain) included in net periodic pension and
postretirement benefit cost
Net defined benefit pension and other postretirement benefit plans
Loss on available for sale securities
Other Comprehensive Income (Loss), Before Tax
Income Tax Expense (Benefit) Related to Items of Other Comprehensive Income (Loss)
Other Comprehensive Income (Loss), Net of Tax
Comprehensive Income
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
161.6 $
144.2 $
136.9
11.5
—
11.5
—
0.4
0.4
(0.1)
11.8
4.4
7.4
169.0 $
(4.0)
1.1
(2.9)
—
(0.3)
(0.3)
—
(3.2)
(1.0)
(2.2)
142.0 $
(5.5)
4.4
(1.1)
0.1
0.4
0.5
—
(0.6)
(0.3)
(0.3)
136.6
$
60
SPIRE INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
September 30
ASSETS
Utility Plant
Less: Accumulated depreciation and amortization
Net Utility Plant
Non-utility property (net of accumulated depreciation and amortization, $8.6 and $8.1 at
September 30, 2017 and 2016, respectively)
Goodwill
Other investments
Other Property and Investments
Current Assets:
Cash and cash equivalents
Accounts receivable:
Utility
Other
Allowance for doubtful accounts
Delayed customer billings
Inventories:
Natural gas
Propane gas
Materials and supplies
Natural gas receivable
Derivative instrument assets
Unamortized purchased gas adjustments
Other regulatory assets
Prepayments and other
Total Current Assets
Deferred Charges:
Regulatory assets
Other
Total Deferred Charges
Total Assets
$
2017
2016
5,278.4 $
1,613.2
3,665.2
52.0
1,171.6
64.2
1,287.8
4,793.6
1,506.4
3,287.2
13.7
1,164.9
62.1
1,240.7
7.4
140.5
149.2
(18.3 )
3.4
194.9
12.0
18.9
1.9
5.9
102.6
72.9
34.2
725.5
5.2
127.8
113.4
(20.5 )
1.6
174.0
12.0
16.3
9.7
11.4
49.7
44.2
24.8
569.6
791.1
77.1
868.2
6,546.7 $
838.0
128.9
966.9
6,064.4
$
61
CONSOLIDATED BALANCE SHEETS (Continued)
SPIRE INC.
September 30
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity
Long-term debt
Total Capitalization
Current Liabilities:
Current portion of long-term debt
Notes payable
Accounts payable
Advance customer billings
Wages and compensation accrued
Dividends payable
Customer deposits
Interest accrued
Unamortized purchased gas adjustments
Taxes accrued
Other 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 16)
Total Capitalization and Liabilities
See the accompanying Notes to Financial Statements.
2017
2016
$
1,991.3 $
1,995.0
3,986.3
100.0
477.3
257.1
32.0
38.7
26.6
34.9
14.6
1.0
61.0
21.6
33.1
1,097.9
707.5
237.4
296.6
157.2
63.8
1,462.5
1,768.2
1,820.7
3,588.9
250.0
398.7
210.9
70.2
39.8
23.5
34.9
14.8
1.7
55.2
28.9
32.7
1,161.3
607.3
303.7
206.4
130.7
66.1
1,314.2
$
6,546.7 $
6,064.4
62
CONSOLIDATED STATEMENTS OF CAPITALIZATION
SPIRE INC.
(Dollars in millions, except per share amounts)
September 30
Common Stock Equity:
Common stock, par value $1 per share:
Authorized – 70,000,000 shares
Outstanding – 48,263,243 shares and 45,650,642 shares, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total Common Stock Equity
Long-Term Debt - Spire:
2.55% Senior Notes, due August 15, 2019
2.52% Senior Notes, due September 1, 2021
2.0% Series A Remarketable Subordinated Notes, due April 1, 2022
3.31% Notes Payable, due December 15, 2022
3.54% Senior Notes, due February 27, 2024
3.13% Senior Notes, due September 1, 2026
3.93% Senior Notes, due March 15, 2027
4.70% Senior Notes, due August 15, 2044
Long-Term Debt - Spire Missouri:
First Mortgage Bonds:
2.0% Series, due August 15, 2018
5.5% Series, due May 1, 2019
3.0% Series, due March 15, 2023
3.4% Series, due August 15, 2023
3.4% Series, due March 15, 2028
7.0% Series, due June 1, 2029
7.9% Series, due September 15, 2030
3.68% Series, due September 15, 2032
6.0% Series, due May 1, 2034
6.15% Series, due June 1, 2036
4.625% Series, due August 15, 2043
4.23% Series, due September 15, 2047
4.38% Series, due September 15, 2057
Long-Term Debt - Spire Alabama:
5.2% Notes, due January 15, 2020
3.86% Notes, due December 23, 2021
3.21% Notes, due September 15, 2025
5.9% Notes, due January 15, 2037
4.31% Notes, due December 1, 2045
Long-Term Debt - Other:
3.10% Note, due December 30, 2018
4.14% First Mortgage Bonds, due September 30, 2021
5.00% First Mortgage Bonds, due September 30, 2031
Total Principal of Long-Term Debt
Unamortized debt issuance costs
Unamortized discounts on long-term debt
Total Long-Term Debt
Total Capitalization
Long-term debt dollar amounts are exclusive of current portion.
See the accompanying Notes to Financial Statements.
63
2017
2016
$
48.3 $
1,325.6
614.2
3.2
1,991.3
45.6
1,175.9
550.9
(4.2 )
1,768.2
125.0
35.0
—
25.0
150.0
130.0
100.0
250.0
—
50.0
55.0
250.0
45.0
25.0
30.0
50.0
100.0
55.0
100.0
70.0
50.0
40.0
50.0
35.0
45.0
80.0
125.0
35.0
143.8
25.0
—
130.0
—
250.0
100.0
50.0
55.0
250.0
45.0
25.0
30.0
—
100.0
55.0
100.0
—
—
40.0
50.0
35.0
45.0
80.0
5.0
20.0
42.0
2,012.0
(15.2)
(1.8)
1,995.0
5.0
20.0
42.0
1,835.8
(13.0 )
(2.1 )
1,820.7
$ 3,986.3 $ 3,588.9
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS’ EQUITY
SPIRE INC.
(Dollars in millions, except per share amounts)
Balance at September 30, 2014
Net income
Dividend reinvestment plan
Stock-based compensation costs
Paid-in
Capital
Retained
Earnings
AOCI*
Common Stock
Outstanding
Shares
43,178,405 $
Amount
—
31,166
—
43.2 $
—
—
—
1,029.4 $
—
1.6
6.7
437.5 $
136.9
—
—
Stock issued under stock-based compensation
plans
156,925
0.1
Total
1,508.4
136.9
1.6
6.7
1.4
(1.6 )
0.7
(80.2 )
(0.3 )
1,573.6
144.2
133.2
1.4
6.7
0.5
(1.7 )
(87.5 )
(2.2 )
1,768.2
161.6
145.5
1.6
8.3
0.1
(2.2 )
(1.7) $
—
—
—
—
—
—
—
(0.3 )
(2.0) $
—
—
—
—
—
—
—
(2.2 )
(4.2) $
—
—
—
—
—
—
1.3
(1.6 )
0.7
—
—
1,038.1 $
—
131.0
1.4
6.7
—
—
—
(80.2 )
—
494.2 $
144.2
—
—
—
0.4
(1.7 )
—
—
—
—
1,175.9 $
—
143.0
1.6
7.4
(0.1 )
(2.2 )
(87.5 )
—
550.9 $
161.6
—
—
0.9
—
—
—
—
—
—
43.3 $
—
2.2
—
—
0.1
—
—
—
45.6 $
—
2.5
—
—
0.2
—
—
—
48.3 $
—
—
1,325.6 $
(99.2 )
—
614.2 $
—
7.4
3.2 $
(99.2 )
7.4
1,991.3
Employees’ tax withholding for stock-based
compensation
Tax benefit – stock compensation
Dividends declared:
Common stock ($1.84 per share)
Other comprehensive loss, net of tax
Balance at September 30, 2015
Net income
Common stock offering
Dividend reinvestment plan
Stock-based compensation costs
Stock issued under stock-based compensation
plans
Employees’ tax withholding for stock-based
compensation
Dividends declared:
Common stock ($1.96 per share)
Other comprehensive loss, net of tax
Balance at September 30, 2016
Net income
Common stock offering
Dividend reinvestment plan
Stock-based compensation costs
Stock issued under stock-based compensation
plans
Employees’ tax withholding for stock-based
compensation
Dividends declared:
Common stock ($2.10 per share)
Other comprehensive income, net of tax
(31,484 )
—
—
—
43,335,012 $
—
2,185,000
22,878
—
136,979
(29,227 )
—
—
45,650,642 $
—
2,504,684
23,731
—
119,700
(35,514 )
—
—
Balance at September 30, 2017
48,263,243 $
*Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
64
CONSOLIDATED STATEMENTS OF CASH FLOWS
SPIRE INC.
(In millions)
Years Ended September 30
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 – net
Unamortized purchased gas adjustments
Accounts payable
Delayed/advance customer billings – net
Taxes accrued
Inventories
Other assets and liabilities
Other
Net cash provided by operating activities
Investing Activities:
Capital expenditures
Acquisition of Spire EnergySouth (net of $2.0 cash acquired) and final settlement
Final settlement related to acquisition of Spire Alabama
Other
Net cash used in investing activities
Financing Activities:
Issuance of long-term debt
Repayment of long-term debt
Issuance of short-term debt - net
Issuance of common stock
Dividends paid
Other
Net cash provided by (used in) financing activities
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
Supplemental disclosure of cash (paid) refunded for:
Interest
Income taxes
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
161.6 $
144.2 $
136.9
154.1
77.0
(63.0)
(50.9)
51.1
(40.0)
5.8
(23.5)
11.9
4.2
288.3
(438.1)
3.8
—
0.8
(433.5)
420.0
(393.8)
78.6
146.9
(96.2)
(8.1)
147.4
2.2
5.2
7.4 $
137.5
68.8
(12.3 )
(52.8 )
30.0
26.9
(0.4 )
16.5
(35.0 )
4.9
328.3
(293.3 )
(317.7 )
—
(1.7 )
(612.7 )
245.0
(80.0 )
60.7
137.1
(85.2 )
(1.8 )
275.8
(8.6 )
13.8
5.2 $
130.8
65.5
(4.8 )
27.1
(30.0 )
20.3
(17.0 )
54.8
(67.6 )
6.4
322.4
(289.8 )
—
(8.2 )
(0.7 )
(298.7 )
35.0
(34.8 )
50.8
3.1
(79.0 )
(1.1 )
(26.0 )
(2.3 )
16.1
13.8
(85.5 ) $
(1.3)
(72.5 ) $
2.9
(65.3 )
1.3
$
$
65
SPIRE MISSOURI INC.
STATEMENTS OF INCOME
(In millions)
Years Ended September 30
Operating Revenues:
Utility
Total Operating Revenues
Operating Expenses:
Utility
Natural and propane gas
Other operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Total Operating Expenses
Operating Income
Other Income and (Income Deductions) - Net
Interest Charges:
Interest on long-term debt
Other interest charges
Total Interest Charges
Income Before Income Taxes
Income Tax Expense
Net Income
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
1,171.9 $
1,171.9
1,087.5 $
1,087.5
1,416.6
1,416.6
538.3
243.8
93.1
99.8
975.0
196.9
2.7
32.9
6.2
39.1
160.5
47.5
113.0 $
471.3
244.4
88.6
96.3
900.6
186.9
1.8
32.9
4.5
37.4
151.3
45.4
105.9 $
786.1
253.6
82.6
108.9
1,231.2
185.4
(0.5 )
33.1
3.3
36.4
148.5
43.2
105.3
$
66
SPIRE MISSOURI INC.
STATEMENTS OF COMPREHENSIVE INCOME
2017
2016
2015
$
113.0 $
105.9 $
105.3
0.1
(0.2 )
(0.1 )
—
0.3
0.3
(0.1 )
0.1
—
0.1
113.1 $
—
0.5
0.5
—
(0.3 )
(0.3 )
(0.1 )
0.1
0.2
(0.1 )
105.8 $
(1.2 )
0.9
(0.3 )
0.1
0.4
0.5
—
0.2
—
0.2
105.5
(In millions)
Years Ended September 30
Net Income
Other Comprehensive Income, Before Tax:
Cash flow hedging derivative instruments:
Net hedging gain (loss) arising during the period
Reclassification adjustment for (gain) loss included in net income
Net unrealized (loss) gain on cash flow hedging derivative instruments
Defined benefit pension and other postretirement benefit plans:
Net actuarial gain arising during the period
Amortization of actuarial loss (gain) included in net periodic pension and
postretirement benefit cost
Net defined benefit pension and other postretirement benefit plans
Loss on available for sale securities
Other Comprehensive Income, Before Tax
Income Tax Expense Related to Items of Other Comprehensive Income
Other Comprehensive Income (Loss), Net of Tax
Comprehensive Income
$
See the accompanying Notes to Financial Statements.
67
SPIRE MISSOURI INC.
BALANCE SHEETS
(In Millions)
September 30
ASSETS
Utility Plant
Less: Accumulated depreciation and amortization
Net Utility Plant
Goodwill
Other Property and Investments
Other Property and Investments
Current Assets:
Cash and cash equivalents
Accounts receivable:
Utility
Associated companies
Other
Allowance for doubtful accounts
Delayed customer billings
Inventories:
Natural gas
Propane gas
Materials and supplies
Derivative instrument assets
Unamortized purchased gas adjustments
Other regulatory assets
Prepayments and other
Total Current Assets
Deferred Charges:
Regulatory assets
Other
Total Deferred Charges
Total Assets
2017
2016
$
3,091.8 $
681.6
2,410.2
210.2
59.4
269.6
2,718.5
604.5
2,114.0
210.2
57.3
267.5
2.5
101.7
3.3
15.0
(14.1 )
3.4
138.2
12.0
11.3
0.1
57.4
38.2
19.6
388.6
2.1
87.9
2.2
11.4
(16.1 )
1.6
127.3
12.0
9.2
4.9
43.1
23.9
14.5
324.0
557.8
5.3
563.1
3,631.5 $
589.8
1.1
590.9
3,296.4
$
68
SPIRE MISSOURI INC.
BALANCE SHEETS (continued)
September 30
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity
Long-term debt
Total Capitalization
Current Liabilities:
Current portion of long-term debt
Notes payable
Notes payable – associated companies
Accounts payable
Accounts payable to associated companies
Advance customer billings
Wages and compensation accrued
Dividends payable
Customer deposits
Interest accrued
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 16)
Total Capitalization and Liabilities
See the accompanying Notes to Financial Statements.
2017
2016
$
1,171.0 $
873.9
2,044.9
1,068.5
804.1
1,872.6
100.0
—
203.0
89.9
5.4
13.3
29.6
—
13.3
8.0
34.1
2.7
8.5
507.8
623.8
173.0
158.6
81.2
42.2
1,078.8
—
243.7
—
67.6
5.4
49.1
29.9
14.0
13.5
7.7
29.1
1.3
9.9
471.2
556.9
211.8
75.2
67.3
41.4
952.6
$
3,631.5 $
3,296.4
69
SPIRE MISSOURI INC.
STATEMENTS OF CAPITALIZATION
(Dollars in millions, except per share amounts)
September 30
Common Stock Equity:
Common stock, par value $1 per share:
Authorized – 50,000,000 shares
Outstanding – 24,577 shares
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total Common Stock Equity
Long-Term Debt:
First Mortgage Bonds:
2.0% Series, due August 15, 2018
5.5% Series, due May 1, 2019
3.0% Series, due March 15, 2023
3.4% Series, due August 15, 2023
3.4% Series, due March 15, 2028
7.0% Series, due June 1, 2029
7.9% Series, due September 15, 2030
3.68% Series, due September 15, 2032
6.0% Series, due May 1, 2034
6.15% Series, due June 1, 2036
4.625% Series, due August 15, 2043
4.23% Series, due September 15, 2047
4.38% Series, due September 15, 2057
Total Principal of Long-Term Debt
Unamortized debt issuance costs
Unamortized discounts on long-term debt
Total Long-Term Debt
Total Capitalization
Long-term debt dollar amounts are exclusive of current portion.
See the accompanying Notes to Financial Statements.
2017
2016
$
0.1 $
756.1
416.5
(1.7 )
1,171.0
—
50.0
55.0
250.0
45.0
25.0
30.0
50.0
100.0
55.0
100.0
70.0
50.0
880.0
(4.6 )
(1.5 )
873.9
2,044.9 $
$
0.1
751.9
318.3
(1.8 )
1,068.5
100.0
50.0
55.0
250.0
45.0
25.0
30.0
—
100.0
55.0
100.0
—
—
810.0
(4.2 )
(1.7 )
804.1
1,872.6
70
SPIRE MISSOURI INC.
STATEMENTS OF COMMON SHAREHOLDER’S EQUITY
(Dollars in millions)
Balance at September 30, 2014
Net income
Stock-based compensation costs
Tax benefit – stock compensation
Dividends declared
Other comprehensive income, net of tax
Balance at September 30, 2015
Net income
Stock-based compensation costs
Dividends declared
Other comprehensive loss, net of tax
Balance at September 30, 2016
Net income
Stock-based compensation costs
Dividends declared
Other comprehensive income, net of tax
Balance at September 30, 2017
Common Stock
Outstanding
Shares
Amount
Paid-in
Capital
Retained
Earnings
AOCI*
24,577 $
—
—
—
—
—
24,577 $
—
—
—
—
24,577 $
—
—
—
—
24,577 $
0.1 $
—
—
—
—
—
0.1 $
—
—
—
—
0.1 $
—
—
—
—
0.1 $
744.0 $
—
3.7
0.5
—
—
748.2 $
—
3.7
—
—
751.9 $
—
4.2
—
—
756.1 $
265.6 $
105.3
—
—
(79.7 )
—
291.2 $
105.9
—
(78.8 )
—
318.3 $
113.0
—
(14.8 )
—
416.5 $
(1.9 ) $
—
—
—
—
0.2
(1.7 ) $
—
—
—
(0.1 )
(1.8 ) $
—
—
—
0.1
(1.7 ) $
Total
1,007.8
105.3
3.7
0.5
(79.7 )
0.2
1,037.8
105.9
3.7
(78.8 )
(0.1 )
1,068.5
113.0
4.2
(14.8 )
0.1
1,171.0
*Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
71
SPIRE MISSOURI INC.
STATEMENTS OF CASH FLOWS
(In millions)
Years Ended September 30
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 – net
Unamortized purchased gas adjustments
Accounts payable
Delayed/advance customer billings – net
Taxes accrued
Inventories
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 first mortgage bonds
(Repayment) issuance of short-term debt - net
Borrowings from Spire
Repayment of borrowings from Spire
Dividends paid
Other
Net cash provided by (used in) financing activities
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year
Supplemental disclosure of cash (paid) refunded for:
Interest
Income taxes
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
113.0 $
105.9 $
105.3
93.1
47.5
(20.5 )
(11.6 )
16.8
(37.6 )
5.0
(13.0 )
(11.6 )
1.6
182.7
(282.2 )
1.1
(281.1 )
170.0
(243.7 )
203.0
—
(28.7 )
(1.8 )
98.8
0.4
2.1
2.5 $
88.6
45.3
35.7
(18.7 )
0.9
24.9
4.9
11.0
(29.6 )
2.3
271.2
(197.8 )
1.1
(196.7 )
—
10.7
—
—
(84.8 )
—
(74.1 )
0.4
1.7
2.1 $
82.6
45.4
9.9
21.3
(11.4 )
17.9
(14.6 )
51.2
(32.8 )
2.8
277.6
(198.6 )
2.9
(195.7 )
—
(5.7 )
18.4
(18.4 )
(78.7 )
0.5
(83.9 )
(2.0 )
3.7
1.7
(38.6 ) $
—
(35.7 ) $
2.1
(31.0)
0.7
$
$
72
SPIRE ALABAMA INC.
STATEMENTS OF INCOME
(In millions)
Years Ended September 30
Operating Revenues:
Utility
Total Operating Revenues
Operating Expenses:
Utility
Natural and propane gas
Other operation and maintenance expenses
Depreciation and amortization
Taxes, other than income taxes
Total Operating Expenses
Operating Income
Other Income - Net
Interest Charges:
Interest on long-term debt
Other interest charges
Total Interest Charges
Income Before Income Taxes
Income Tax Expense
Net Income
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
400.5 $
400.5
368.5 $
368.5
84.5
130.4
49.9
29.9
294.7
105.8
2.5
11.2
3.2
14.4
93.9
35.8
58.1 $
67.3
133.5
47.8
28.4
277.0
91.5
7.9
11.4
2.4
13.8
85.6
32.4
53.2 $
$
479.2
479.2
171.5
138.0
47.3
33.2
390.0
89.2
2.0
11.6
2.3
13.9
77.3
29.3
48.0
73
SPIRE ALABAMA INC.
BALANCE SHEETS
(In millions)
September 30
ASSETS
Utility Plant
Less: Accumulated depreciation and amortization
Net Utility Plant
Current Assets:
Cash and cash equivalents
Accounts receivable:
Utility
Other
Allowance for doubtful accounts
Inventories:
Natural gas
Materials and supplies
Unamortized purchased gas adjustments
Other regulatory assets
Prepayments and other
Total Current Assets
Deferred Charges:
Regulatory assets
Deferred income tax
Other
Total Deferred Charges
Total Assets
2017
2016
$
1,838.0 $
782.0
1,056.0
1,729.6
756.6
973.0
0.1
32.0
6.2
(2.6 )
33.9
6.5
45.2
19.4
6.7
147.4
—
34.0
7.2
(3.3 )
34.6
5.9
5.6
14.9
5.1
104.0
197.0
185.6
57.0
439.6
1,643.0 $
230.7
221.4
60.8
512.9
1,589.9
$
74
SPIRE ALABAMA INC.
BALANCE SHEETS (continued)
September 30
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity
Long-term debt
Total Capitalization
Current Liabilities:
Notes payable
Notes payable – associated companies
Accounts payable
Accounts payable to associated companies
Advance customer billings
Wages and compensation accrued
Customer deposits
Interest accrued
Taxes accrued
Other 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 16)
Total Capitalization and Liabilities
See the accompanying Notes to Financial Statements.
2017
2016
$
867.4 $
247.8
1,115.2
867.3
247.6
1,114.9
—
169.9
44.4
1.6
18.6
7.4
17.9
3.3
23.4
12.0
2.9
301.4
50.2
128.4
39.6
8.2
226.4
82.0
—
34.3
0.4
21.1
7.8
18.2
3.3
21.6
22.7
6.3
217.7
74.3
120.1
41.7
21.2
257.3
$
1,643.0 $
1,589.9
75
SPIRE ALABAMA INC.
STATEMENTS OF CAPITALIZATION
(Dollars in millions, except per share amounts)
September 30
Common Stock Equity:
Common stock, par value $0.01 per share, and paid-in capital:
Authorized – 3,000,000 shares
Outstanding – 1,972,052 shares
Retained earnings
Total Common Stock Equity
Long-Term Debt:
5.2% Notes, due January 15, 2020
3.86% Notes, due December 23, 2021
3.21% Notes, due September 15, 2025
5.9% Notes, due January 15, 2037
4.31% Notes, due December 1, 2045
Total Principal of Long-Term Debt
Unamortized debt issuance costs
Total Long-Term Debt
Total Capitalization
Long-term debt dollar amounts are exclusive of current portion.
See the accompanying Notes to Financial Statements.
2017
2016
$
420.9 $
446.5
867.4
451.9
415.4
867.3
40.0
50.0
35.0
45.0
80.0
250.0
(2.2)
247.8
1,115.2 $
40.0
50.0
35.0
45.0
80.0
250.0
(2.4)
247.6
1,114.9
$
76
SPIRE ALABAMA INC.
STATEMENTS OF COMMON SHAREHOLDER’S EQUITY
Common Stock
Outstanding
Amount
Paid-in
Capital
Retained
Earnings
Total
(Dollars in millions)
Balance at September 30, 2014
Net income
Return of capital to Spire
Purchase accounting adjustments
Balance at September 30, 2015
Net income
Dividends declared
Return of capital to Spire
Balance at September 30, 2016
Net income
Dividends declared
Return of capital to Spire
Balance at September 30, 2017
See the accompanying Notes to Financial Statements.
— $
—
—
—
—
—
—
—
—
—
—
—
— $
503.9 $
—
(27.0 )
4.0
480.9
—
—
(29.0 )
451.9
—
—
(31.0 )
420.9 $
345.7 $
48.0
—
—
393.7
53.2
(31.5 )
—
415.4
58.1
(27.0 )
—
446.5 $
849.6
48.0
(27.0 )
4.0
874.6
53.2
(31.5 )
(29.0 )
867.3
58.1
(27.0 )
(31.0 )
867.4
Shares
1,972,052 $
—
—
—
1,972,052
—
—
—
1,972,052
—
—
—
1,972,052 $
77
SPIRE ALABAMA INC.
STATEMENTS OF CASH FLOWS
(In millions)
Years Ended September 30
Operating Activities:
Net Income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Changes in assets and liabilities:
Accounts receivable – net
Unamortized purchased gas adjustments
Accounts payable
Advance customer billings
Taxes accrued
Inventories
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
(Repayment) issuance of short-term debt - net
Borrowings from Spire
Return of capital to Spire
Dividends paid
Other
Net cash provided by (used in) financing activities
Net Increase (Decrease) 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) refunded for:
Interest
Income taxes
See the accompanying Notes to Financial Statements.
2017
2016
2015
$
58.1 $
53.2 $
48.0
49.9
35.8
(10.0 )
(39.6 )
8.8
(2.5 )
1.8
0.1
(16.6 )
(1.3 )
84.5
(113.9 )
(0.4 )
(114.3 )
—
—
(82.0 )
169.9
(31.0 )
(27.0 )
—
29.9
0.1
—
0.1 $
47.8
33.2
(11.1 )
(33.8 )
9.1
2.0
(5.2 )
5.3
(3.2 )
0.9
98.2
(93.4 )
(2.5 )
(95.9 )
80.0
(80.0 )
51.0
—
(29.0 )
(31.5 )
—
(9.5 )
(7.2 )
7.2
— $
47.3
29.2
(9.1 )
5.8
(10.4 )
2.4
(4.0 )
7.2
(18.0 )
2.0
100.4
(85.8 )
(1.0 )
(86.8 )
35.0
(34.8 )
15.0
—
(27.0 )
—
(0.2 )
(12.0 )
1.6
5.6
7.2
(12.8 ) $
—
(12.4 ) $
0.8
(12.3)
—
$
$
78
SPIRE INC., SPIRE MISSOURI INC., AND SPIRE ALABAMA INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share, per unit and per gallon amounts)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION – These notes are an integral part of the accompanying audited financial statements
of Spire Inc. presented on a consolidated basis (Spire or the Company), Spire Missouri Inc. (Spire Missouri or the
Missouri Utilities) and Spire Alabama Inc. (Spire Alabama). Spire Missouri and Spire Alabama are wholly owned
subsidiaries of the Company. Spire Missouri changed its name from Laclede Gas Company on August 30, 2017, and
Spire Alabama changed its name from Alabama Gas Corporation on September 1, 2017. Spire Missouri, Spire
Alabama and the subsidiaries of Spire EnergySouth Inc. (formerly known as EnergySouth, Inc.) are collectively
referred to as the Utilities. The subsidiaries of Spire EnergySouth Inc. (Spire EnergySouth) are Spire Gulf Inc. (Spire
Gulf, formerly known as Mobile Gas Service Corporation) and Spire Mississippi Inc. (Spire Mississippi, formerly
known as Willmut Gas & Oil Company). The accompanying audited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP).
Unless otherwise indicated, references to years herein are references to the fiscal years ending September 30 for the
Company and its subsidiaries.
The consolidated financial position, results of operations, and cash flows of Spire are primarily derived from the
financial position, results of operations, and cash flows of the Utilities. 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. The Company’s September 12, 2016
acquisition of Spire EnergySouth is included in the results of operations since the acquisition date and impacts the
comparability of the financial statement periods presented for the Company. For a further discussion of the
acquisition, see Note 2, Acquisitions. The Utilities are regulated natural gas distribution utilities. Due to the
seasonal nature of the Utilities, the earnings of Spire, Spire Missouri and Spire Alabama are typically concentrated
during the heating season of November through April each fiscal year.
NATURE OF OPERATIONS – Spire Inc. (NYSE: SR) is a public utility holding company with principal offices in
St. Louis, Missouri. The Company has two reportable segments: Gas Utility and Gas Marketing. The Gas Utility
segment consists of the regulated natural gas distribution operations of the Company and is the core business
segment of Spire in terms of revenue and earnings generation. The Gas Utility segment is comprised of the
operations of: the Missouri Utilities, serving St. Louis and eastern Missouri (Spire Missouri East) and Kansas City
and western Missouri (Spire Missouri West, formerly Missouri Gas Energy, or MGE); Spire Alabama, serving
central and northern Alabama; and the subsidiaries of Spire EnergySouth, serving southern Alabama and south-
central Mississippi. Spire’s primary non-utility business, Spire Marketing Inc. (Spire Marketing), included in the
Gas Marketing segment, provides non-regulated natural gas services. The activities of other subsidiaries are
described in Note 14, Information by Operating Segment, and are reported as Other. Spire Missouri and Spire
Alabama each have a single reportable segment.
USE OF ESTIMATES – The preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
SYSTEM OF ACCOUNTS – The accounts of the Utilities are maintained in accordance with the Uniform System
of Accounts prescribed by the applicable state public service commissions, which systems substantially conform to
that prescribed by the Federal Energy Regulatory Commission (FERC).
PROPERTY, PLANT, AND EQUIPMENT –
Utility Plant – Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work,
direct labor and materials, allocable overheads, and an allowance for funds used during construction. The costs of
units of property retired, replaced, or renewed are removed from utility plant and are charged to accumulated
depreciation. Maintenance and repairs of property and replacement and renewal of items determined to be less
than units of property are charged to maintenance expenses.
79
For Spire Missouri, utility plant is depreciated on a straight-line basis at rates based on estimated service lives of the
various classes of property. In fiscal years 2017, 2016 and 2015, annual depreciation and amortization expense
averaged 3.0% of the original cost of depreciable and amortizable property.
For Spire Alabama, depreciation is provided using the composite method of depreciation on a straight-line basis
over the estimated useful lives of utility property at rates approved by the Alabama Public Service Commission
(APSC). The composite depreciation rate is approximately 3.1%.
Non-utility Property – Non-utility property is recorded at the original cost of acquisition or construction, which
includes material, labor, contractor services and, for FERC-regulated projects, an allowance for funds used during
construction. Repairs, replacements and renewals of items of property determined to be less than a unit of property
or that do not increase the property’s life or functionality are charged to maintenance expense. Upon retirement or
sale of non-utility property, the original cost and related accumulated depreciation are removed from the accounts
and any gain or loss is included in the income statements. Costs related to software developed or obtained for
internal use are capitalized and amortized on a straight-line basis over the estimated useful life of the related
software. If software is retired prior to being fully amortized, the difference is recorded as a loss in the income
statements.
Accrued Capital Expenditures – Accrued capital expenditures, shown in the following table, are excluded from
capital expenditures in the statements of cash flows.
September 30
Spire
Spire Missouri
Spire Alabama
2017
2016
2015
$
41.0 $
28.9
9.4
30.4 $
14.8
6.8
13.4
9.6
3.1
ASSET RETIREMENT OBLIGATIONS – Spire, Spire Missouri, and Spire Alabama record legal obligations
associated with the retirement of long-lived assets in the period in which the obligations are incurred, if sufficient
information exists to reasonably estimate the fair value of the obligations. Obligations are recorded as both a cost of
the related long-lived asset and as a corresponding liability. Subsequently, the asset retirement costs are depreciated
over the life of the asset and the asset retirement obligations are accreted to the expected settlement amounts. The
Company, Spire Missouri and Spire Alabama record asset retirement obligations associated with certain safety
requirements to purge and seal gas distribution mains upon retirement, the plugging and abandonment of storage
wells and other storage facilities, specific service line obligations, and certain removal and disposal obligations
related to components of Spire Missouri’s, Spire Alabama’s and Spire Gulf’s distribution systems and general plant.
Asset retirement obligations recorded by Spire’s other subsidiaries are not material. As authorized by the Missouri
Public Service Commission (MoPSC) and APSC, Spire Missouri, Spire Alabama and Spire Gulf accrue future asset
removal costs associated with their property, plant and equipment even if a legal obligation does not exist. Such
accruals are provided for through depreciation expense and are recorded with corresponding credits to regulatory
liabilities or regulatory assets. When those utilities retire depreciable utility plant and equipment, they charge the
associated original costs to accumulated depreciation and amortization, and any related removal costs incurred are
charged to regulatory liabilities or regulatory assets. The difference between removal costs recognized in
depreciation rates and the accretion expense and depreciation expense recognized for financial reporting purposes
is a timing difference between recovery of these costs in rates and their recognition for financial reporting purposes.
Accordingly, these differences are deferred as regulatory liabilities or regulatory assets. In the rate setting process,
the regulatory liabilities or regulatory assets are excluded from the rate base upon which those utilities have the
opportunity to earn their allowed rates of return. The costs associated with asset retirement obligations of Spire
Missouri, Spire Alabama and Spire Gulf are either currently being recovered in rates or are probable of recovery in
future rates.
80
The following table presents a reconciliation of the beginning and ending balances of asset retirement obligations at
September 30, as reported in the balance sheets.
Asset retirement obligations, beginning of year
Liabilities incurred during the period
Liabilities settled during the period
Accretion
Revisions in estimated cash flows
Addition of Spire EnergySouth asset retirement obligations
Asset retirement obligations, end of year
Spire
2017
2016
Spire Missouri
2016
2017
Spire Alabama
2016
2017
$
$
206.4 $
5.5
(4.6 )
9.1
80.2
—
296.6 $
159.2 $
4.1
(9.5 )
13.2
27.5
11.9
206.4 $
75.2 $
0.3
(1.1 )
3.6
80.6
—
158.6 $
72.4 $
1.2
(1.9 )
3.5
—
—
75.2 $
120.1 $
5.2
(1.9 )
5.0
—
—
128.4 $
86.6
2.9
(6.8 )
9.7
27.7
—
120.1
REGULATED OPERATIONS – The Utilities account for their regulated operations in accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980, “Regulated Operations.”
This Topic sets forth the application of GAAP for those companies whose rates are established by or are subject to
approval by an independent third-party regulator. The provisions of this accounting guidance require, among other
things, that financial statements of a regulated enterprise reflect the actions of regulators, where appropriate. These
actions may result in the recognition of revenues and expenses in time periods that are different than non-regulated
enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as
expenses when those amounts are reflected in rates. In addition, regulators can impose liabilities upon a regulated
company for amounts previously collected from customers and for recovery of costs that are expected to be incurred
in the future (regulatory liabilities). Management believes that the current regulatory environment supports the
continued use of these regulatory accounting principles and that all regulatory assets and regulatory liabilities are
recoverable or refundable through the regulatory process. See additional discussion on regulated operations in Note
15, Regulatory Matters.
As discussed below for Spire Missouri and Spire Alabama, the Purchased Gas Adjustment (PGA) clauses and Gas
Supply Adjustment (GSA) riders allow the Utilities to pass through to customers the cost of purchased gas supplies.
Regulatory assets and regulatory liabilities related to the PGA clauses and the GSA rider are both labeled
Unamortized Purchased Gas Adjustments herein.
Spire Missouri
As authorized by the MoPSC, the PGA clause allows Spire Missouri to flow through to customers, subject to
prudence review by the MoPSC, the cost of purchased gas supplies. To better match customer billings with market
natural gas prices, Spire Missouri is allowed to file to modify, on a periodic basis, the level of gas costs in its PGA.
Certain provisions of the PGA clause are included below:
• Spire Missouri has a risk management policy that allows for the purchase of natural gas derivative instruments
with the goal of managing price risk associated with purchasing natural gas on behalf of its customers. The
MoPSC clarified that costs, cost reductions, and carrying costs associated with the Utility’s use of natural gas
derivative instruments are gas costs recoverable through the PGA mechanism.
• The tariffs allow Spire Missouri flexibility to make up to three discretionary PGA changes during each year, in
addition to its mandatory November PGA change, so long as such changes are separated by at least two
months.
• Spire Missouri is authorized to apply carrying costs to all over- or under-recoveries of gas costs, including costs
and cost reductions associated with the use of derivative instruments, including cash payments for margin
deposits. Spire Missouri East is also authorized to recover gas inventory carrying costs through its PGA rates to
recover costs it incurs to finance its investment in gas supplies that are purchased during the storage injection
season for sale during the heating season.
• The MoPSC approved a plan applicable to Spire Missouri’s gas supply commodity costs under which it retains
a portion of cost savings associated with the acquisition of natural gas below an established benchmark level.
This gas supply cost management program allows Spire Missouri to retain 10% of cost savings, up to a
maximum of $3.0 annually. Spire Missouri did not record any such incentive compensation under the plan
during the three fiscal years reported. Incentives recorded under the plan, if any, are included in Gas Utility
Operating Revenues on the Consolidated Statements of Income and under Operating Revenues on Spire
Missouri’s Statements of Income.
81
Pursuant to the provisions of the PGA clause, the difference between actual costs incurred and costs recovered
through the application of the PGA clause are reflected as a deferred charge or credit at the end of the fiscal year.
These costs include costs and cost reductions associated with the use of derivative instruments and gas inventory
carrying costs, amounts due to or from customers related to operation of the gas supply cost management program,
refunds received from the Company’s suppliers in connection with gas supply, transportation, and storage services,
and carrying costs on such over- or under-recoveries. At that time, the balance is classified as a current asset or
current liability and recovered from, or credited to, customers over an annual period commencing in November.
The balance in the current account is amortized as amounts are reflected in customer billings.
The PGA clause also provides for the treatment of income from off-system sales and capacity release revenues. Pre-
tax income from off-system sales and capacity release revenues is shared with customers, with an estimated amount
assumed in PGA rates. The difference between the actual amount allocated to customers for each fiscal year and the
estimated amount assumed in PGA rates is recovered from, or credited to, customers over an annual period
commencing in the subsequent November. The customer share of such income is determined in accordance with the
following tables, shown for each service territory for which the PGA clauses were approved by the MoPSC.
Customer Share
Company Share
Spire Missouri East
First $2.0 of pre-tax income*
Next $2.0 of pre-tax income
Next $2.0 of pre-tax income
Amounts of pre-tax income exceeding $6.0
* Customer share was set to 85% and company share set to 15% in fiscal 2017. For fiscal 2016 and 2015, the customer share
and company share were 100% and 0%, respectively.
85%
80%
75%
70%
15%
20%
25%
30%
Spire Missouri West
First $1.2 of pre-tax income
Next $1.2 of pre-tax income
Next $1.2 of pre-tax income
Amounts of pre-tax income exceeding $3.6
Spire Alabama
85%
80%
75%
70%
15%
20%
25%
30%
Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider, established in 1993, which
permits the pass-through to customers of changes in the cost of gas supply. Spire Alabama’s tariff provides a
temperature adjustment mechanism, also included in the GSA rider, which is designed to moderate the impact of
departures from normal temperatures on Spire Alabama’s earnings. The temperature adjustment applies primarily
to residential, small commercial and small industrial customers. Other non-temperature weather-related conditions
that may affect customer usage are not included in the temperature adjustment.
NATURAL GAS AND PROPANE GAS – For Spire Missouri East, inventory of natural gas in storage is priced on
a last in, first out (LIFO) basis and inventory of propane gas in storage is priced on a first in, first out (FIFO) basis.
For the rest of the Gas Utility segment, inventory of natural gas in storage is priced on the weighted average cost
basis. The replacement cost of Spire Missouri’s natural gas for current use in eastern Missouri at September 30,
2017 and September 30, 2016 was less than the LIFO cost by $20.8 and $11.4, respectively. The carrying value of
the Utilities’ inventory is not adjusted to the lower of cost or market prices because, pursuant to PGA or GSA, actual
gas costs are recovered in customer rates. Natural gas and propane gas storage inventory in Spire’s other operating
segments is recorded at the lower of average cost or market.
BUSINESS COMBINATIONS – The Spire EnergySouth acquisition was accounted for by Spire using business
combination accounting. Under this method, the purchase price paid by the acquirer is allocated to the assets
acquired and liabilities assumed as of the acquisition date based on their fair value. For additional information on
the acquisition of Spire EnergySouth, refer to Note 2, Acquisitions.
82
GOODWILL – Goodwill is measured as the excess of the acquisition-date fair value of the consideration
transferred over the amount of acquisition-date identifiable assets acquired net of assumed liabilities. Spire and
Spire Missouri evaluate goodwill for impairment as of July 1 of each year, or more frequently if events and
circumstances indicate that goodwill might be impaired. At July 1, 2017, 2016 and 2015, Spire and Spire Missouri
each applied a quantitative goodwill evaluation model to their reporting units and concluded goodwill was not
impaired because the fair value exceeded the carrying amount. The changes in the carrying amount of goodwill by
reportable segment were as follows:
Balance as of September 30, 2014
Adjustments to finalize the acquisition of Spire Alabama
Balance as of September 30, 2015
Acquisition of Spire EnergySouth
Balance as of September 30, 2016
Adjustments to finalize the acquisition of Spire EnergySouth
Balance as of September 30, 2017
Gas
Utility
Gas
Marketing
Other
Total
$
$
210.2 $
—
210.2
—
210.2
—
210.2 $
— $
—
—
—
—
—
— $
727.6 $
8.2
735.8
218.9
954.7
6.7
961.4 $
937.8
8.2
946.0
218.9
1,164.9
6.7
1,171.6
IMPAIRMENT OF LONG-LIVED ASSETS – Long-lived assets classified as held and used are evaluated for
impairment when events or changes in circumstances indicate that the carrying value of such assets may not be
recoverable. Whether impairment has occurred is determined by comparing the estimated undiscounted cash flows
attributable to the assets with the carrying value of the assets. If the carrying value exceeds the undiscounted cash
flows, the Company recognizes an impairment charge equal to the amount of the carrying value that exceeds the
estimated fair value of the assets. In the period in which the Company determines an asset meets held-for-sale
criteria, an impairment charge is recorded to the extent the book value exceeds its fair value less cost to sell.
REVENUE RECOGNITION – The Utilities read meters and bill customers on monthly cycles. The Missouri
Utilities, Spire Gulf and Spire Mississippi record their gas utility revenues from gas sales and transportation services
on an accrual basis that includes estimated amounts for gas delivered, but not yet billed. The accruals for unbilled
revenues are reversed in the subsequent accounting period when meters are actually read and customers are billed.
The amounts of accrued unbilled revenues for Spire Missouri at September 30, 2017 and 2016 were $30.1 and
$26.1, respectively. Spire Alabama records natural gas distribution revenues in accordance with the tariff
established by the APSC. Unbilled revenue is accrued in an amount equal to the related gas cost, as profit margin is
not considered earned until billed. The amounts of accrued unbilled revenues for Spire Alabama at September 30,
2017 and 2016 were $1.9 and $5.9. Spire’s other subsidiaries, including Spire Marketing, record revenues when
earned, either when the product is delivered or when services are performed.
In the course of its business, Spire Marketing enters into commitments associated with the purchase or sale of
natural gas. Certain of its derivative natural gas contracts are designated as normal purchases or normal sales and,
as such, are excluded from the scope of ASC Topic 815, “Derivatives and Hedging.” Those contracts are accounted
for as executory contracts and recorded on an accrual basis. Revenues and expenses from such contracts are
recorded using a gross presentation. Contracts not designated as normal purchases or normal sales are recorded as
derivatives with changes in fair value recognized in earnings in the periods prior to physical delivery. For additional
information on derivative instruments, refer to Note 10, Derivative Instruments and Hedging Activities. Certain of
Spire Marketing’s wholesale purchase and sale transactions are classified as trading activities for financial reporting
purposes. Under GAAP, revenues and expenses associated with trading activities are presented on a net basis in Gas
Marketing operating revenues (or expenses, if negative) in the Consolidated Statements of Income. This net
presentation has no effect on operating income or net income.
INCOME TAXES – Spire and its subsidiaries account for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amount of existing assets and liabilities and the respective tax basis and for tax
credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be recovered or settled. The effects
on deferred tax assets and liabilities of a change in enacted tax rates is recognized in income or loss for a non-
regulated company, and in a regulatory asset or regulatory liability for a regulated company. A valuation allowance
is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
83
The Company accounts for uncertain tax positions in accordance with authoritative guidance. The authoritative
guidance addresses the determination of whether tax benefits claimed, or expected to be claimed, on a tax return
should be recorded in the financial statements. Spire may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the position will be sustained upon examination by the taxing authority, based
on the technical merits of the position. Tax-related interest and penalties, if any, are classified as a liability on the
balance sheets.
CASH AND CASH EQUIVALENTS – All highly liquid debt instruments purchased with original maturities of
three months or less are considered to be cash equivalents. Such instruments are carried at cost, which
approximates market value. Outstanding checks on the Company’s and Utilities’ bank accounts in excess of funds
on deposit create book overdrafts (which are funded at the time checks are presented for payment) and are
classified as Other in the Current Liabilities section of the balance sheets. Changes in book overdrafts are reflected
as Operating Activities in the statements of cash flows.
NATURAL GAS RECEIVABLE – Spire Marketing enters into natural gas transactions with natural gas pipeline
companies known as park and loan arrangements. Under the terms of the arrangements, Spire Marketing purchases
natural gas from a third party and delivers that natural gas to the pipeline company for the right to receive the same
quantity of natural gas from the pipeline company at the same location in a future period. These arrangements are
accounted for as non-monetary transactions under GAAP and are recorded at the carrying amount. As such, natural
gas receivables are reflected on the Consolidated Balance Sheets at cost, which includes related pipeline fees
associated with the transactions. In the period that the natural gas is returned to Spire Marketing, concurrent with
the sale of the natural gas to a third party, the related natural gas receivable is expensed in the Consolidated
Statements of Income. In conjunction with these transactions, Spire Marketing usually enters into New York
Mercantile Exchange (NYMEX) and Intercontinental Exchange (ICE) natural gas futures, options, and swap
contracts or fixed price sales agreements to protect against market changes in future sales prices.
EARNINGS PER COMMON SHARE – GAAP requires dual presentation of basic and diluted earnings per share
(EPS). EPS is computed using the two-class method, which is an earnings allocation method for computing EPS that
treats a participating security as having rights to earnings that would otherwise have been available to common
shareholders. Certain of the Company’s stock-based compensation awards pay non-forfeitable dividends to the
participants during the vesting period and, as such, are deemed participating securities. Basic EPS is computed by
dividing net income available to common shareholders by the weighted average number of common shares
outstanding during the period. Diluted EPS is computed by dividing net income available to common shareholders
by the weighted average number of common shares outstanding that are increased for additional shares that would
be outstanding if potentially dilutive non-participating securities were converted to common shares, pursuant to the
treasury stock method. Shares attributable to equity units, non-participating stock options and time-vested
restricted stock/units are excluded from the calculation of diluted earnings per share if the effect would be
antidilutive. Shares attributable to non-participating performance-contingent restricted stock awards are only
included in the calculation of diluted earnings per share to the extent the underlying performance and/or market
conditions are satisfied (a) prior to the end of the reporting period or (b) would be satisfied if the end of the
reporting period were the end of the related contingency period and the result would be dilutive. The Company’s
EPS computations are presented in Note 4, Earnings Per Common Share.
GROSS RECEIPTS AND SALES TAXES – Gross receipts taxes associated with the Company’s natural gas
utility services are imposed on the Company, Spire Missouri, and Spire Alabama and billed to its customers. The
revenue and expense amounts are recorded gross in the “Operating Revenues” and “Taxes, other than income taxes”
lines, respectively, in the statements of income.
The following table presents gross receipts taxes recorded as revenues:
Spire
Spire Missouri
Spire Alabama
2017
2016
$
84.6 $
60.7
19.5
75.5 $
57.4
17.9
2015
97.3
74.5
22.6
Sales taxes imposed on applicable Spire Alabama and Spire Missouri sales are billed to customers. These amounts
are not recorded in the statements of income but are recorded as tax collections payable and included in the “Other”
line of the Current Liabilities section of the balance sheets.
84
TRANSACTIONS WITH AFFILIATES – Transactions between affiliates of the Company have been eliminated
from the consolidated financial statements of Spire. Spire Missouri and Spire Alabama borrowed funds from the
Company and incurred related interest, as reflected in their separate financial statements, and participated in
normal intercompany shared services transactions. In addition, Spire Missouri’s other transactions with affiliates
included:
Purchases of natural gas from Spire Marketing
Sales of natural gas to Spire Marketing
Transportation services received from Spire NGL Inc.
2017
2016
$
74.4 $
7.8
1.0
46.3 $
1.9
1.0
2015
74.1
4.0
1.0
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS – Trade accounts receivable
are recorded at the amounts due from customers, including unbilled amounts. Estimates of the collectability of
trade accounts receivable are based on historical trends, age of receivables, economic conditions, credit risk of
specific customers, and other factors. Accounts receivable are written off against the allowance for doubtful
accounts when they are deemed to be uncollectible. Spire’s provision for uncollectible accounts includes the
amortization of previously deferred uncollectible expenses for Spire Missouri and Spire Alabama, as approved by
the MoPSC and the APSC, respectively.
FINANCE RECEIVABLES – Spire Alabama finances third party contractor sales of merchandise including gas
furnaces and appliances. At September 30, 2017 and September 30, 2016, the Company’s finance receivable totaled
approximately $12.5 and $11.8, respectively. Financing is available only to qualified customers who meet
creditworthiness thresholds for customer payment history and external agency credit reports. Spire Alabama relies
upon ongoing payments as the primary indicator of credit quality during the term of each contract. The allowance
for credit losses is recognized using an estimate of write-off percentages based on historical experience applied to an
aging of the finance receivable balance. Delinquent accounts are evaluated on a case-by-case basis and, absent
evidence of debt repayment, after 90 days are due in full and assigned to a third-party collection agency. The
remaining finance receivable is written off approximately 12 months after being assigned to the third-party
collection agency. Spire Alabama had finance receivables past due 90 days or more of $0.4 at September 30, 2017
and September 30, 2016. Spire Alabama recorded a related allowance for credit losses at September 30, 2017 and
September 30, 2016 of $0.4.
GROUP MEDICAL AND WORKERS’ COMPENSATION RESERVES – The Company self-insures its group
medical and workers’ compensation costs and carries stop-loss coverage in relation to medical claims and workers’
compensation claims. Reserves for amounts incurred but not reported are established based on historical cost levels
and lags between occurrences and reporting.
FAIR VALUE MEASUREMENTS – Certain assets and liabilities are recognized or disclosed at fair value, which
is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (exit price). GAAP establishes a fair value hierarchy that
prioritizes the inputs used to measure fair value.
The levels of the hierarchy are described below:
• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2 – Pricing inputs other than quoted prices included within Level 1, which are either directly or
indirectly observable for the asset or liability as of the reporting date. These inputs are derived principally
from, or corroborated by, observable market data.
• Level 3 – Pricing that is based upon inputs that are generally unobservable that are based on the best
information available and reflect management’s assumptions about how market participants would price
the asset or liability.
Assessment of the significance of a particular input to the fair value measurements may require judgment and may
affect the valuation of the asset or liability and its placement within the fair value hierarchy. Additional information
about fair value measurements is provided in Note 8, Fair Value of Financial Instruments, Note 9, Fair Value
Measurements, and Note 13, Pension Plans and Other Postretirement Benefits.
85
STOCK-BASED COMPENSATION – The Company measures stock-based compensation awards at fair value at
the date of grant and recognizes the compensation cost of the awards over the requisite service period. Effective
with the adoption of Accounting Standards Update No. 2016-09 at the beginning of fiscal 2017 (described under
New Accounting Pronouncements below), forfeitures are recognized in the period they occur. In fiscal 2016 and
fiscal 2015, forfeitures were estimated at the time of grant and revised, when necessary, in subsequent periods when
the actual forfeitures differed from those estimates. Refer to Note 3, Stock-Based Compensation, for further
discussion of the accounting for the Company’s stock-based compensation plans.
REVISIONS TO PRIOR FINANCIAL STATEMENTS – Certain prior period amounts have been adjusted to
conform with the current period presentation. Net income and total equity were not affected by these
reclassifications.
NEW ACCOUNTING PRONOUNCEMENTS – In April 2015, the FASB issued Accounting Standards Update
(ASU) No. 2015-03, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs. Under
prior GAAP, debt issuance costs were recorded as a deferred charge (asset), while debt discount and debt premium
costs were recorded as a liability adjustment. This amendment requires that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that
debt liability, consistent with debt discounts. Spire, Spire Missouri and Spire Alabama adopted this ASU as of
December 31, 2016. Retrospective adjustments have been made to the previous year balance sheets as of September
30, 2016, and the amounts of unamortized debt issuance costs are shown separately on the statements of
capitalization. The ASU does not address the presentation of debt issuance costs related to line-of-credit
arrangements, and those continue to be reported as deferred charges.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation: Improvements to
Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for
share-based compensation arrangements, including the income tax impact, classification on the statement of cash
flows and forfeitures. Spire, Spire Missouri and Spire Alabama adopted this ASU in the interim quarterly reporting
period ended June 30, 2017. Amendments related to the timing of excess tax benefits recognition, minimum
statutory withholding requirements, and forfeitures were applied using a modified retrospective transition method
by means of a cumulative-effect adjustment to retained earnings as of October 1, 2016, and amendments requiring
recognition of excess tax benefits and tax deficiencies in the income statement were applied prospectively as of that
date. Amendments related to the presentation of excess tax benefits on the statement of cash flows and the
presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the
minimum statutory withholding requirement were applied retrospectively. There were no material impacts on the
financial statements of the Company, Spire Missouri or Spire Alabama, all of which adopted a policy of accounting
for forfeitures when they occur.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Under the new
standard, an entity will recognize revenue when it transfers promised goods or services to customers in an amount
that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.
In doing so, companies may need to use more judgment and make more estimates than under current guidance.
ASU No. 2014-09 also requires disclosures that will enable users of financial statements to understand the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Existing
alternative revenue program guidance, though excluded by the FASB in updating specific guidance associated with
revenue from contracts with customers, was relocated without substantial modification to accounting guidance for
rate-regulated entities. It will require separate presentation of such revenues (subject to the above-noted
deliberations) in the statement of income. Entities have the option of using either a full retrospective or modified
retrospective approach to adopting this guidance. In August 2015, the FASB issued ASU No. 2015-14, which made
the guidance in ASU No. 2014-09 effective for fiscal years beginning after December 15, 2017 and interim periods
within those years. In 2016, the FASB issued related ASU Nos. 2016-08, 2016-10, 2016-11, 2016-12, and 2016-20
which further modified the standards for accounting for revenue. The Company, Spire Missouri and Spire Alabama
have nearly completed their evaluation of their sources of revenue and related contracts and plan to adopt the new
guidance in the first quarter of fiscal 2019 using the modified retrospective approach, and they expect no material
effect on their financial position, results of operations, or cash flows.
86
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall: Recognition and
Measurement of Financial Assets and Financial Liabilities, which provides revised guidance concerning certain
matters involving the recognition, measurement, and disclosure of financial instruments. It is effective for fiscal
years beginning after December 15, 2017, including interim periods within those fiscal years. Unrealized gains and
losses on equity securities previously classified as available-for-sale will be recognized immediately in earnings
rather than recorded in other comprehensive income. Entities will record a cumulative-effect adjustment as of the
beginning of the fiscal year in which the guidance is adopted, which requires amounts reported in accumulated
other comprehensive income for such equity securities to be reclassified to retained earnings. Based on an
assessment of their current financial instruments, the Company, Spire Missouri and Spire Alabama expect to adopt
this standard in the first quarter of fiscal 2019 with no significant impact.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard requires lessees to recognize a
right-of-use asset and lease liability for almost all lease contracts based on the present value of lease payments.
There is an exemption for short-term leases. The ASU provides new guidelines for identifying and classifying a
lease, and classification affects the pattern and income statement line item for the related expense. This update will
be applied using a modified retrospective transition approach for leases existing at, or entered into after, the
beginning of the earliest comparative period presented in the financial statements. The ASU is effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. The Company, Spire
Missouri and Spire Alabama are currently assessing the timing and impacts of adopting this standard, which must
be adopted by the first quarter of fiscal 2020.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit
Losses on Financial Instruments. The standard introduces new guidance for the accounting for credit losses on
instruments within its scope, including trade receivables. It is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years, and may be adopted a year earlier. The new guidance will
be initially applied through a cumulative-effect adjustment to retained earnings as of the beginning of the period of
adoption. The Company, Spire Missouri and Spire Alabama are currently assessing the timing and impacts of
adopting this standard, which must be adopted by the first quarter of fiscal 2021.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment, which eliminates Step 2 of the goodwill test, where the measurement of a goodwill
impairment loss was determined by comparing the implied fair value of a reporting unit’s goodwill with the carrying
amount of that goodwill. Upon adoption, a goodwill impairment will be the amount by which a reporting unit’s
carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This new guidance is required
for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and early
adoption is permitted. The Company and Spire Missouri do not expect this standard change to have a material
impact on their financial statements and will adjust their goodwill impairment procedures accordingly upon
adoption, no later than their annual tests for fiscal 2021. Step 1 of the tests for fiscal 2017 did not indicate potential
impairment, so Step 2 was not necessary.
In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits: Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amended guidance
requires that the service cost component of pension and postretirement benefit costs be presented within the same
line item in the income statement as other compensation costs (except for the amount being capitalized), while
other components are to be presented outside the subtotal of operating income and are no longer eligible for
capitalization. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods
within those annual periods. The amended guidance will be applied retrospectively for income statement
presentation and prospectively for capitalization. The Company, Spire Missouri and Spire Alabama are currently
assessing the regulatory and other impacts of adopting this standard, which must be adopted by the first quarter of
fiscal 2019.
In August 2017, the FASB issued ASU No.2017-12, Derivatives and Hedging: Targeted Improvements to
Accounting for Hedging Activities. The amendments in this ASU more closely align the results of hedge accounting
with risk management activities through changes to both the designation and measurement guidance for qualifying
hedging relationships and the presentation of hedge results in the financial statements. They are effective for fiscal
years beginning after December 15, 2018, and interim periods within those fiscal years, and early application is
permitted. The Company, Spire Missouri and Spire Alabama are currently assessing the effects of this new guidance,
as well as the timing of adoption.
87
2.
ACQUISITIONS
Effective September 12, 2016, Spire completed the acquisition of 100% of the common stock of Spire EnergySouth,
the parent company of Spire Gulf and Spire Mississippi, serving natural gas utility customers in Alabama and
Mississippi. This acquisition is supportive of the strategic focus on growing Spire’s gas utility business and creating
geographic and regulatory diversity. Total cash consideration paid, net of cash acquired, debt assumed, and a
working capital settlement payment received, was $313.9. The goodwill of $225.6 arising from this acquisition,
which is not deductible for tax purposes, is attributable to the assembled workforce and the expected cost
efficiencies and strategic benefits of the transaction. The Company did not elect pushdown accounting, so the
goodwill was recorded on the Spire parent company balance sheet rather than the Spire EnergySouth subsidiary
balance sheet and is included in disclosures of segment assets under Other. The following table summarizes the
consideration paid and the amounts of the assets acquired and liabilities assumed at the acquisition date.
Recognized amounts of identifiable assets acquired
and liabilities assumed:
Utility plant
Cash
Other current assets
Other assets
Long-term debt
Other current liabilities
Deferred tax liabilities
Other liabilities
Total identifiable net assets
Goodwill
Consideration (cash)
As
originally
recorded
Measurement
period
adjustments
As
adjusted
$
$
199.5 $
2.0
17.5
79.8
(67.0 )
(42.7 )
(35.5 )
(52.8 )
100.8
218.9
319.7 $
— $
—
0.2
(10.7 )
—
—
—
—
(10.5 )
6.7
(3.8 ) $
199.5
2.0
17.7
69.1
(67.0 )
(42.7 )
(35.5 )
(52.8 )
90.3
225.6
315.9
Spire EnergySouth’s results of operations are included in the Spire statements of income from the date of
acquisition, as shown in the following table.
Total Operating Revenues
Net Income (Loss)
Earnings Per Share
2017
2016
$
$
95.5 $
9.4
0.20 $
3.3
(0.2)
—
The following unaudited pro forma financial information presents Spire’s combined results of operations as though
the Spire EnergySouth acquisition had occurred as of the beginning of fiscal 2015. The unaudited pro forma
financial information is not necessarily indicative of either future results of operations or results that would have
been achieved if the acquisition had occurred as of the earlier date. It includes estimates and assumptions which
management believes are reasonable. The timing of integration costs was not changed.
2017
2015
2016
$ 1,740.7 $ 1,632.4 $ 2,081.6
143.6
3.32
3.31
161.6
3.44 $
3.43
153.9
3.48 $
3.46
$
Total Operating Revenues
Net Income
Basic Earnings Per Share
Diluted Earnings Per Share
88
3.
STOCK-BASED COMPENSATION
Spire’s 2015 incentive plan, The Laclede Group 2015 Equity Incentive Plan (the 2015 Plan), was approved at the
annual meeting of shareholders of Spire on January 29, 2015. The purpose of the 2015 Plan is to encourage
directors, officers, and employees of the Company and its subsidiaries to contribute to the Company’s success and
align their interests with that of shareholders. To accomplish this purpose, the Compensation Committee
(Committee) of the Board of Directors may grant awards under the 2015 Plan that may be earned by achieving
performance objectives and/or other criteria as determined by the Committee. Under the terms of the 2015 Plan,
officers and employees of the Company and its subsidiaries, as determined by the Committee, are eligible to be
selected for awards. The 2015 Plan provides for restricted stock, restricted stock units, qualified and non-qualified
stock options, stock appreciation rights, and performance shares payable in stock, cash, or a combination of both.
The 2015 Plan generally provides a minimum vesting period of at least three years for each type of award, with pro
rata vesting permitted during the minimum three-year vesting period. The maximum number of shares reserved for
issuance under the 2015 Plan is 1,000,000. The 2015 Plan replaced The Laclede Group 2006 Equity Incentive Plan
(the 2006 Plan), which in turn replaced The Laclede Group, Inc. 2002 Equity Incentive Plan (the 2002 Plan).
Shares reserved under the 2006 Plan and the 2002 Plan, other than those needed for outstanding awards, were
canceled upon shareholder approval of the 2015 Plan.
The Company issues new shares to satisfy employee restricted stock awards and stock option exercises.
Restricted Stock Awards
During fiscal 2017, the Company granted 196,400 performance-contingent restricted share units to executive
officers and key employees at a weighted average grant date fair value of $45.01 per share. This number represents
the maximum shares that can be earned pursuant to the terms of the awards. The share units have a performance
period ending September 30, 2019. While the participants have no interim voting rights on these share units,
dividends accrue during the performance period and are paid to the participants upon vesting, but are subject to
forfeiture if the underlying share units do not vest.
The number of share units that will ultimately vest is dependent upon the attainment of certain levels of earnings
and other strategic goals, as well as the Company’s level of total shareholder return (TSR) during the performance
period relative to a comparator group of companies. This TSR provision is considered a market condition under
GAAP and is discussed further below.
The weighted average grant date fair value of performance-contingent restricted shares and share units granted
during fiscal years 2016 and 2015 was $45.95 and $36.69 per share, respectively.
Fiscal 2017 activity of restricted stock and restricted stock units subject to performance and/or market conditions is
presented below:
Nonvested at September 30, 2016
Granted (maximum shares that can be earned)
Vested
Forfeited
Nonvested at September 30, 2017 (at maximum)
Nonvested at September 30, 2017 (at target)
Weighted
Average
Grant Date
Fair Value
Per Share
40.37
45.01
42.37
33.03
42.51
56.32
Shares/
Units
510,583 $
196,400 $
(78,825 ) $
(64,128 ) $
564,030 $
282,015 $
During fiscal 2017, the Company granted 33,240 shares of time-vested restricted stock to executive officers and key
employees at a weighted average grant date fair value of $63.05 per share. Unless forfeited based on terms of the
agreements, these shares will vest in fiscal 2020. In the interim, participants receive full voting rights and
dividends, which are not subject to forfeiture. The weighted average grant date fair value of time-vested restricted
stock and restricted stock units awarded to employees during fiscal years 2016 and 2015 was $59.40 and $50.90 per
share, respectively.
89
During fiscal 2017, the Company granted 10,850 shares of time-vested restricted stock to non-employee directors at
a weighted average grant date fair value of $63.45 per share. These shares vested in fiscal 2017, six months after the
grant date. The weighted average grant date fair value of restricted stock awarded to non-employee directors during
fiscal years 2016 and 2015 was $63.93 and $54.66 per share, respectively.
Time-vested restricted stock and stock unit activity for fiscal 2017 is presented below:
Nonvested at September 30, 2016
Granted
Vested
Forfeited
Nonvested at September 30, 2017
Weighted
Average
Grant Date
Fair Value
Per Share
49.83
63.15
47.67
55.58
55.85
Shares/
Units
132,779 $
44,090 $
(58,200 ) $
(7,729 ) $
110,940 $
For restricted stock and stock units (performance-contingent and time-vested) that vested during fiscal years 2017,
2016, and 2015, the Company withheld 35,514 shares, 30,712 shares, and 31,688, respectively, at weighted average
prices of $63.83, $57.29, and $50.65 per share, respectively, pursuant to elections by employees to satisfy tax
withholding obligations. The total fair value of restricted stock (performance-contingent and time-vested) that
vested during fiscal years 2017, 2016, and 2015 was $8.9, $6.3, and $6.4, respectively, and the related tax benefit
was $3.3, $2.4, and $2.4, respectively. None of the tax benefits have been realized.
Stock Option Awards
No stock options were granted during fiscal years 2017, 2016, and 2015. There was no stock option activity in fiscal
2017, as all outstanding stock options either vested or forfeited in fiscal 2016. During fiscal 2016, cash received from
the exercise of stock options was $0.7 and the related intrinsic value was $0.7. During fiscal 2015, cash received
from the exercise of stock options was $1.5 and the related intrinsic value was $0.9. Related tax benefits were not
material in any of those years.
Equity Compensation Costs
Compensation cost for performance-contingent restricted stock and stock unit awards is based upon the probable
outcome of the performance conditions. For shares or units that do not vest or that are not expected to vest due to
the outcome of the performance conditions (excluding market conditions), no compensation cost is recognized and
any previously recognized compensation cost is reversed.
The fair value of awards of performance-contingent and time-vested restricted stock and restricted stock units, not
subject to the TSR provision, are estimated using the closing price of the Company’s stock on the grant date. For
those awards that do not pay dividends during the vesting period, the estimate of fair value is reduced by the
present value of the dividends expected to be paid on the Company’s common stock during the performance period,
discounted using an appropriate United States (US) Treasury yield. For shares subject to the TSR provision, the
estimated impact of this market condition is reflected in the grant date fair value per share of the awards.
Accordingly, compensation cost is not reversed to reflect any actual reductions in the awards that may result from
the TSR provision. However, if the Company’s TSR during the performance period ranks below the level specified in
the award agreements, relative to a comparator group of companies, and the Committee elects not to reduce the
award (or reduce by a lesser amount), this election would be accounted for as a modification of the original award
and additional compensation cost would be recognized at that time. The grant date fair value of the awards subject
to the TSR provision awarded during fiscal years 2017, 2016, and 2015 was valued by a Monte Carlo simulation
model that assessed the probabilities of various TSR outcomes. The significant assumptions used in the Monte
Carlo simulations are as follows:
Risk-free interest rate
Expected dividend yield of stock
Expected volatility of stock
Vesting period
2017
2016
2015
1.39%
—
16.3%
2.8 years
1.14%
—
15.0%
2.8 years
0.83%
—
14.0%
2.8 years
90
The risk-free interest rate was based on the yield on US Treasury securities matching the vesting period. A zero
percent dividend yield was used, which is mathematically equivalent to the assumption that dividends are
reinvested as they are paid. The expected volatility is based on the historical volatility of the Company’s stock.
Volatility assumptions were also made for each of the companies included in the comparator group. The vesting
period is equal to the performance period set forth in the terms of the award.
The amounts of compensation cost recognized for share-based compensation arrangements are presented below:
Total compensation cost
Compensation cost capitalized
Compensation cost recognized in net income
Income tax benefit recognized in net income
Compensation cost recognized in net income, net of income tax
2017
2016
2015
$
$
$
7.4 $
(3.3)
4.1 $
(1.5)
2.6 $
6.7 $
(2.2)
4.5 $
(1.7)
2.8 $
6.7
(1.8)
4.9
(1.9)
3.0
As of September 30, 2017, there was $8.9 of total unrecognized compensation cost related to non-vested share-
based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.8
years.
4.
EARNINGS PER COMMON SHARE
Basic EPS:
Net Income
Less: Income allocated to participating securities
Net Income Available to Common Shareholders
Weighted Average Shares Outstanding (millions)
Earnings Per Share of Common Stock
Diluted EPS:
Net Income
Less: Income allocated to participating securities
Net Income Available to Common Shareholders
Weighted Average Shares Outstanding (millions)
Dilutive Effect of Stock Options, Restricted Stock, and Restricted Stock Units (millions)
Weighted Average Diluted Shares (millions)
Earnings Per Share of Common Stock
2017
2016
2015
0.4
0.5
$ 161.6 $ 144.2 $ 136.9
0.5
$ 161.2 $ 143.7 $ 136.4
43.2
3.16
46.9
3.44 $
44.1
3.26 $
$
0.4
0.5
$ 161.6 $ 144.2 $ 136.9
0.5
$ 161.2 $ 143.7 $ 136.4
43.2
0.1
43.3
3.16
46.9
0.1
47.0
3.43 $
44.1
0.2
44.3
3.24 $
$
Outstanding Shares (in millions) Excluded from the Calculation of Diluted EPS Attributable to:
Restricted stock and stock units subject to performance and/or market conditions
0.5
0.3
0.3
Spire’s 2.875 million equity units issued in June 2014 were anti-dilutive for the periods they were outstanding.
Accordingly, they were also excluded from the calculation of weighted average diluted shares for those periods. On
April 3, 2017, Spire settled the purchase contracts underlying those equity units by issuing approximately 2.5
million shares of its common stock. See Note 5 for more information.
91
5.
SHAREHOLDERS’ EQUITY
Spire
In 2014, Spire issued 2.875 million equity units as a portion of the Spire Alabama acquisition financing. The equity
units were originally issued at $50 per unit pursuant to the Purchase Contract and Pledge Agreement (Purchase
Contract) dated as of June 11, 2014 between Spire and U.S. Bank National Association, as purchase contract agent,
collateral agent, custodial agent and securities intermediary. These units consisted of $143.8 aggregate principal
amount of 2014 Series A 2.00% remarketable junior subordinated notes due 2022 and the Purchase Contract
obligating the holder to purchase common shares at a future settlement date. The equity unit investments were
effectively replaced as planned in a series of transactions outlined in Note 6, resulting in the issuance of 2,504,684
shares of the Company’s common stock at a purchase price of $57.3921 per share. Under the contract terms, the
equity units were converted to common stock at the rate of 0.8712 shares per unit, with a corresponding adjustment
to purchase price.
Spire filed a registration statement on Form S-3 with the US Securities and Exchange Commission (SEC) on June
15, 2017 for the issuance and sale of up to 250,000 shares of its common stock under its Dividend Reinvestment
and Direct Stock Purchase Plan. There were 244,130 and 239,945 shares at September 30, 2017 and November 10,
2017, respectively, remaining available for issuance under this Form S-3.
On May 17, 2016, Spire completed a public offering of 2,185,000 shares of its common stock, generating $133.2 of
proceeds net of issuance costs. On September 23, 2016, Spire and Spire Missouri filed with the SEC a joint shelf
registration statement on Form S-3 for issuance of various types of debt and equity securities, which registration
statement will expire September 22, 2019. The amount, timing, and type of additional financing to be issued under
this shelf registration statement will depend on cash requirements and market conditions.
At September 30, 2017 and 2016, Spire had authorized 5,000,000 shares of preferred stock, but none were issued
and outstanding.
Spire Missouri
Substantially all of Spire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains
several restrictions on Spire Missouri’s ability to pay cash dividends on its common stock or to make loans to its
parent company. These mortgage restrictions are applicable regardless of whether the stock is publicly held or held
solely by Spire Missouri’s parent company. Under the most restrictive of these provisions, no cash dividend may be
declared or paid if, after the dividend, the aggregate net amount spent for all dividends after September 30, 1953
would exceed a maximum amount determined by a formula set out in the mortgage. Under that formula, the
maximum amount is the sum of $8.0 plus earnings applicable to common stock (adjusted for stock repurchases and
issuances) for the period from September 30, 1953 to the last day of the quarter before the declaration or payment
date for the dividends. As of September 30, 2017 and 2016, the amount under the mortgage’s formula that was
available to pay dividends was $1,010.8 and $916.8, respectively. Thus, all of Spire Missouri’s retained earnings
were free from such dividend restrictions as of those dates.
On September 23, 2016, Spire and Spire Missouri filed with the SEC a joint shelf registration statement on Form S-3
for issuance of various types of debt and equity securities, which registration statement will expire September 22,
2019. The amount, timing, and type of additional financing to be issued under this shelf registration statement will
depend on cash requirements and market conditions, as well as future MoPSC authorizations.
Spire Missouri has authority from the MoPSC to issue debt securities and preferred stock, including on a private
placement basis, as well as to issue common stock, receive paid-in capital, and enter into capital lease agreements,
all for a total of up to $300.0. On September 15, 2017, Spire Missouri issued $170.0 in first mortgage bonds, leaving
$130.0 available under the MoPSC authorization.
At September 30, 2017 and 2016, Spire Missouri had authorized 1,480,000 shares of preferred stock, but none were
issued and outstanding.
Spire Alabama
At September 30, 2017 and 2016, Spire Alabama had authorized 120,000 shares of preferred stock, but none were
issued and outstanding.
92
Other Comprehensive Income
The components of accumulated other comprehensive income (loss), net of income taxes, recognized in the balance
sheets at September 30 were as follows:
Net
Unrealized
Gains (Losses)
on Cash Flow
Hedges
Defined Benefit
Pension and
Other
Postretirement
Benefit Plans
Net
Unrealized
Losses on
Available for
Sale Securities
Total
$
$
Spire
Balance at September 30, 2015
Other comprehensive loss
Balance at September 30, 2016
Other comprehensive income (loss)
Balance at September 30, 2017
Spire Missouri
Balance at September 30, 2015
Other comprehensive income (loss)
Balance at September 30, 2016
Other comprehensive income (loss)
Balance at September 30, 2017
$
(0.4 ) $
(1.9 )
(2.3 )
7.2
4.9 $
(0.2 )
0.3
0.1
—
0.1 $
(1.5) $
(0.3 )
(1.8 )
0.3
(1.5) $
(1.5 )
(0.3 )
(1.8 )
0.2
(1.6) $
(0.1 ) $
—
(0.1 )
(0.1 )
(0.2 ) $
— $
(0.1 )
(0.1 )
(0.1 )
(0.2 ) $
(2.0 )
(2.2 )
(4.2 )
7.4
3.2
(1.7 )
(0.1 )
(1.8 )
0.1
(1.7 )
Income tax expense (benefit) recorded for items of other comprehensive income (loss) reported in the statements of
comprehensive income is calculated by applying statutory federal, state, and local income tax rates applicable to
ordinary income. The tax rates applied to individual items of other comprehensive income (loss) are similar within
each reporting period. For the periods presented, Spire Alabama had no accumulated other comprehensive income
(loss) balances.
6.
LONG-TERM DEBT
Composition of long-term debt for Spire, Spire Missouri and Spire Alabama are shown in each registrant’s
statements of capitalization as part of the financial statements. Maturities of long-term debt for Spire on a
consolidated basis, Spire Missouri and Spire Alabama for the five fiscal years subsequent to September 30, 2017 are
as follows:
2018
2019
2020
2021
2022
$
Spire
Spire
Missouri
Spire
Alabama
100.0 $
180.0
40.0
55.0
50.0
100.0 $
50.0
—
—
—
—
—
40.0
—
50.0
Spire’s, Spire Missouri’s and Spire Alabama’s short-term credit facilities and long-term debt agreements contain
customary covenants and default provisions. As of September 30, 2017, there were no events of default under these
covenants.
The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper
market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the
capital markets. The credit ratings of the Company, Spire Missouri and Spire Alabama remain at investment grade,
but are subject to review and change by the rating agencies.
It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital
markets and will have sufficient capital resources, both internal and external, to meet anticipated capital
requirements, which primarily include capital expenditures, interest payments on long-term debt, scheduled
maturities of long-term debt, short-term seasonal needs, and dividends.
93
Spire
On March 10, 2017, Spire redeemed in full at par its $250.0 floating rate notes due August 15, 2017, plus accrued
and unpaid interest.
On March 15, 2017, Spire completed the issuance and sale of $100.0 in aggregate principal amount of Senior Notes
due March 15, 2027. The notes bear interest at the rate of 3.93% per annum, payable semi-annually. The notes are
senior unsecured obligations of the Company. The Company used the proceeds from the sale of the notes for the
repayment of other debt.
In 2014, Spire issued 2.875 million equity units as a portion of the Spire Alabama acquisition financing. The equity
units were originally issued at $50 per unit pursuant to the Purchase Contract dated as of June 11, 2014 between
Spire and U.S. Bank National Association, as purchase contract agent, collateral agent, custodial agent and
securities intermediary. These units consisted of $143.8 aggregate principal amount of 2014 Series A 2.00%
remarketable junior subordinated notes due 2022 (the Junior Notes) and the Purchase Contract obligating the
holder to purchase common shares at a future settlement date.
The equity unit investments were effectively replaced as planned in a series of transactions outlined below:
• On February 22, 2017, the selling securityholders (as defined below) agreed to purchase the Junior Notes in
connection with the remarketing of the junior subordinated notes that comprised a component of the equity
units.
• On the same day, Spire entered two related agreements: (1) a Securities Purchase and Registration Rights
Agreement (the SPRRA), among Spire and the several purchasers named therein (the selling securityholders),
obligating the selling securityholders to sell the Junior Notes to Spire in exchange for $143.8 aggregate principal
amount of Spire’s 3.543% Senior Notes due 2024 (the Senior Notes) and a cash payment, and (2) an
underwriting agreement with the selling securityholders and the several underwriters named therein in
connection with the public offering of $150.0 aggregate principal amount of Senior Notes consisting of $6.2
principal amount of the Senior Notes issued and sold by Spire and $143.8 principal amount of the Senior Notes
sold by the selling securityholders. The SPRRA granted the selling securityholders the right to offer the Senior
Notes to the public in secondary public offerings.
• The public offering was completed on February 27, 2017. Spire used its net proceeds from its sale of the Senior
Notes to repay short-term debt. Spire did not receive any proceeds from the sale of the Senior Notes by the
selling securityholders.
• On April 3, 2017, Spire settled the Purchase Contracts underlying its 2.875 million equity units by issuing
2,504,684 shares of its common stock at a purchase price of $57.3921 per share. Fractional shares were settled
in cash at $67.50 per share. The purchase price was funded with the proceeds from the Junior Notes. Under the
contract terms, the equity units were converted to common stock at the rate of 0.8712, with a corresponding
adjustment to purchase price. Spire received net cash proceeds of approximately $142.0, which it used to repay
short-term debt incurred the previous month to redeem the floating rate notes.
At September 30, 2017, including the current portion but excluding unamortized discounts and debt issuance costs,
Spire had long-term debt totaling $2,112.0, of which $980.0 was issued by Spire Missouri, $250.0 was issued by
Spire Alabama, and $67.0 was issued by other subsidiaries. All long-term debt bears fixed rates and is subject to
changes in fair value as market interest rates change. However, increases and decreases in fair value would impact
earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to
maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemption of long-
term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future
period.
Of the Company’s $2,112.0 long-term debt (including the current portion), $25.0 has no call options, $1,037.0 has
make-whole call options, $5.0 is callable currently, and $1,045.0 is callable at par one to six months prior to
maturity.
As indicated in Note 5, Shareholders’ Equity, Spire has a shelf registration statement on Form S-3 on file with the
SEC for the issuance of equity and debt securities.
Including the current portion of long-term debt, the Company’s capitalization at September 30, 2017 consisted of
48.7% of common stock equity and 51.3% long-term debt, compared to 46.1% of common stock equity and 53.9% of
long-term debt at September 30, 2016.
94
Spire Missouri
On September 15, 2017, Spire Missouri issued and sold in a private placement $50.0 in aggregate principal amount
of its first mortgage bonds due September 15, 2032, $70.0 in aggregate principal amount of its first mortgage bonds
due September 15, 2047 and $50.0 in aggregate principal amount of its first mortgage bonds due September 15,
2057. Spire Missouri used the proceeds to refinance existing indebtedness and for other general corporate purposes.
The 2032 bonds, 2047 bonds and 2057 bonds bear interest at a rate per annum of 3.68%, 4.23% and 4.38%,
respectively, payable semi-annually on the 15th day of March and September of each year.
Spire Missouri has authority from the MoPSC to issue debt securities and preferred stock, including on a private
placement basis, as well as to issue common stock, receive paid-in-capital, and enter into capital lease agreements,
all for a total of up to $300.0 for financings placed any time before September 30, 2018. During the year ended
September 30, 2017, Spire Missouri issued $170.0 in securities under this authorization, so as of that date, $130.0
remains available to be issued.
At September 30, 2017, including the current portion but excluding unamortized discounts and debt issuance costs,
Spire Missouri had long-term debt totaling $980.0. While these long-term debt issues are fixed-rate, they are
subject to changes in fair value as market interest rates change. Of Spire Missouri’s $980.0 in long-term debt, $25.0
has no call options, $435.0 has make-whole call options and $520.0 is callable at par three to six months prior to
maturity.
As indicated in Note 5, Shareholders’ Equity, Spire Missouri has a shelf registration on Form S-3 on file with the
SEC for issuance of first mortgage bonds, unsecured debt, and preferred stock, which expires on September 22,
2019.
Substantially all of Spire Missouri’s plant is subject to the liens of its first mortgage bonds. The mortgage contains
several restrictions on Spire Missouri’s ability to pay cash dividends on its common stock, which are described in
Note 5, Shareholders’ Equity.
Including the current portion of long-term debt, Spire Missouri’s capitalization at September 30, 2017 consisted of
54.6% of common stock equity and 45.4% long-term debt compared to 57.1% of common stock equity and 42.9% of
long-term debt at September 30, 2016.
Spire Alabama
At September 30, 2017, excluding unamortized debt issuance costs, Spire Alabama had fixed-rate long-term debt
totaling $250.0. While these long-term debt issues are fixed-rate, they are subject to changes in fair value as market
interest rates change. All of Spire Alabama’s $250.0 long-term debt has make-whole call options.
Spire Alabama’s capitalization at September 30, 2017 consisted of 77.8% of common stock equity and 22.2% long-
term debt, consistent with 77.8% of common stock equity and 22.2% of long-term debt at September 30, 2016.
Because Spire Alabama has no standing authority to issue long-term debt, it must petition the APSC for each
planned issuance. On October 3, 2017, Spire Alabama received authorization and approval from the APSC to borrow
up to $75.0 for general corporate purposes and to retire short-term debt.
7.
NOTES PAYABLE AND CREDIT AGREEMENTS
Short-term cash requirements outside of the Utilities have generally been funded by Spire or met with internally
generated funds. The Utilities’ short term borrowing requirements typically peak during the colder months. Total
short-term borrowing requirements can be met through the sale of commercial paper supported by a revolving
credit facility or through direct use of the revolving credit facility.
On December 14, 2016, Spire, Spire Missouri, and Spire Alabama entered into a new syndicated revolving credit
facility pursuant to a loan agreement with 11 banks, expiring December 14, 2021. The largest portion provided by a
single bank under the line is 12.3%. The loan agreement replaced Spire’s and Spire Missouri’s existing loan
agreements dated as of September 3, 2013 and amended September 3, 2014, which were set to expire on
September 3, 2019, and Spire Alabama’s existing loan agreement dated September 2, 2014, which was set to expire
September 2, 2019. All three previous agreements were terminated on December 14, 2016.
95
The loan agreement has an aggregate credit commitment of $975.0, including sublimits of $300.0 for Spire, $475.0
for Spire Missouri, and $200.0 for Spire Alabama. These sublimits may be reallocated from time to time among the
three borrowers within the $975.0 aggregate commitment. Spire may use its line to provide for the funding needs of
various subsidiaries. Spire, Spire Missouri, and Spire Alabama expect to use the loan agreement for general
corporate purposes, including short-term borrowings and letters of credit. The agreement also contains financial
covenants limiting each borrower’s consolidated total debt, including short-term debt, to no more than 70% of its
total capitalization. As defined in the line of credit, on September 30, 2017, total debt was 56% of total capitalization
for the consolidated Company, 50% for Spire Missouri, and 33% for Spire Alabama. There were no borrowings
against this credit facility as of September 30, 2017.
On December 21, 2016, Spire established a commercial paper program (Program) pursuant to which Spire may
issue short-term, unsecured commercial paper notes (Notes). Amounts available under the Program may be
borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the Notes
outstanding under the Program at any time not to exceed $975.0. The Notes may have maturities of up to 365 days
from date of issue. The net proceeds of the issuances of the Notes are expected to be used for general corporate
purposes, including to provide working capital for both utility and non-utility subsidiaries. As of September 30,
2017, Notes outstanding under the Program totaled $477.3.
Information about Spire’s consolidated short-term borrowings is presented below. Based on average short-term
borrowings for the year ended September 30, 2017, an increase in the average interest rate of 100 basis points
would decrease Spire’s pre-tax earnings and cash flows by approximately $4.9 on an annual basis, portions of which
may be offset through the application of PGA or GSA carrying costs.
Year Ended September 30, 2017
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2017
Borrowings outstanding
Weighted average interest rate
Year Ended September 30, 2016
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2016
Borrowings outstanding
Weighted average interest rate
Spire
Short-term
Borrowings1
Spire Missouri
Commercial
Paper
Borrowings2
Spire Alabama
Bank Line
Borrowings
Total
Short-term
Borrowings
$369.0
1.3%
$73.0 - $675.6
$88.5
0.9%
$0.0 - $329.7
$28.3
1.6%
$0.0 - $102.5
$485.8
1.2%
$395.5 - $675.6
$477.3
1.5%
$—
—%
$—
—%
$477.3
1.5%
$42.7
1.6%
$0.0 - $82.0
$201.0
0.7%
$43.0 - $307.2
$30.2
1.4%
$0.0 - $82.0
$273.9
0.9%
$73.1 - $427.2
$73.0
1.8%
$243.7
0.8%
$82.0
1.5%
$398.7
1.1%
1 Spire Short-term Borrowings includes bank line borrowings of Spire Inc. (excluding its subsidiaries) and, since January 1,
2017, commercial paper. Of Spire’s $477.3 borrowings outstanding as of September 30, 2017, $440.0 was used to provide
funding to its subsidiaries, including Spire Missouri ($203.0), Spire Alabama ($169.9), Spire EnergySouth and subsidiaries
($12.9), Spire STL Pipeline LLC ($26.6), and others ($27.6).
2 The commercial paper program for Spire Missouri terminated February 2, 2017.
96
Spire Missouri
Information about Spire Missouri’s short-term borrowings is presented below. Based on average short-term
borrowings for the year ended September 30, 2017, an increase in the average interest rate of 100 basis points
would decrease Spire Missouri’s pre-tax earnings and cash flows by approximately $2.8 on an annual basis, portions
of which may be offset through the application of PGA carrying costs.
Year Ended September 30, 2017
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2017
Borrowings outstanding
Weighted average interest rate
Year Ended September 30, 2016
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2016
Borrowings outstanding
Weighted average interest rate
Spire Alabama
Commercial
Paper
Borrowings
Borrowings
from Spire
Total
Short-term
Borrowings
$88.5
0.9%
$195.5
1.3%
$284.0
1.2%
$0.0 - $329.7
$0.0 - $338.6
$168.3 - $358.9
$—
—%
$203.0
1.5%
$201.0
0.7%
$43.0 - $307.2
$14.7
0.8%
$0.0 - $114.2
$203.0
1.5%
$215.7
0.7%
$127.8 - $ 307.2
$243.7
0.8%
$—
—%
$243.7
0.8%
Information about Spire Alabama’s short-term borrowings is presented below. Based on average short-term
borrowings for the year ended September 30, 2017, an increase in the average interest rate of 100 basis points
would decrease Spire Alabama’s pre-tax earnings and cash flows by approximately $1.1 on an annual basis, portions
of which may be offset through the application of GSA carrying costs.
Year Ended September 30, 2017
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2017
Borrowings outstanding
Weighted average interest rate
Year Ended September 30, 2016
Weighted average borrowings outstanding
Weighted average interest rate
Range of borrowings outstanding
As of September 30, 2016
Borrowings outstanding
Weighted average interest rate
Bank Line
Borrowings
Borrowings
from Spire
Total
Short-term
Borrowings
$28.3
1.6%
$0.0 - $102.5
$78.6
1.4%
$0.0 - $171.0
$106.9
1.5%
$74.0 - $171.0
$—
—%
$169.9
1.5%
$169.9
1.5%
$30.2
1.4%
$0.0 - $82.0
$12.4
1.4%
$0.0 - $61.9
$42.6
1.4%
$19.0 - $82.0
$82.0
1.5%
$—
—%
$82.0
1.5%
97
8.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Spire
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring
basis for the Company are as follows:
As of September 30, 2017
Cash and cash equivalents
Short-term debt
Long-term debt, including current portion
Carrying
Amount
Fair
Value
$
7.4 $
7.4 $
477.3
2,095.0
477.3
2,210.3
As of September 30, 2016
Cash and cash equivalents
Short-term debt
Long-term debt, including current portion
$
5.2 $
5.2 $
398.7
2,070.7
398.7
2,257.1
Spire Missouri
Classification of Estimated Fair Value
Quoted Prices in
Active Markets
(Level 1)
Significant
Observable Inputs
(Level 2)
7.4 $
—
—
5.2 $
—
—
—
477.3
2,210.3
—
398.7
2,257.1
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring
basis for Spire Missouri are as follows:
Carrying
Amount
Fair
Value
$
2.5 $
2.5 $
203.0
973.9
203.0
1,056.9
$
2.1 $
2.1 $
243.7
804.1
243.7
900.4
Classification of Estimated Fair Value
Quoted Prices in
Active Markets
(Level 1)
Significant
Observable Inputs
(Level 2)
2.5 $
—
—
2.1 $
—
—
—
203.0
1,056.9
—
243.7
900.4
As of September 30, 2017
Cash and cash equivalents
Short-term debt
Long-term debt, including current portion
As of September 30, 2016
Cash and cash equivalents
Short-term debt
Long-term debt
Spire Alabama
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring
basis for Spire Alabama are as follows:
As of September 30, 2017
Cash and cash equivalents
Short-term debt
Long-term debt
Carrying
Amount
Fair
Value
$
0.1 $
0.1 $
169.9
247.8
169.9
269.4
As of September 30, 2016
Short-term debt
Long-term debt, including current portion
$
82.0 $
247.6
82.0 $
275.5
98
Classification of Estimated Fair Value
Quoted Prices in
Active Markets
(Level 1)
Significant
Observable Inputs
(Level 2)
0.1 $
—
—
— $
—
—
169.9
269.4
82.0
275.5
The carrying amounts for cash and cash equivalents and short-term debt approximate fair value due to the short
maturity of these instruments. The fair values of long-term debt are estimated based on market prices for similar
issues. Refer to Note 9, Fair Value Measurements, for information on financial instruments measured at fair value
on a recurring basis.
9.
FAIR VALUE MEASUREMENTS
Spire
The information presented below categorizes the assets and liabilities in the balance sheets that are accounted for at
fair value on a recurring basis in periods subsequent to initial recognition.
The mutual funds included in Level 1 are valued based on exchange-quoted market prices of individual securities.
The mutual funds included in Level 2 are valued based on the closing net asset value per unit.
Derivative instruments included in Level 1 are valued using quoted market prices on the NYMEX. Derivative
instruments classified as Level 2 include physical commodity derivatives that are valued using Over-the-Counter
Bulletin Board (OTCBB), broker, or dealer quotation services whose prices are derived principally from, or are
corroborated by, observable market inputs. Also included in Level 2 are certain derivative instruments that have
values that are similar to, and correlate with, quoted prices for exchange-traded instruments in active markets.
Derivative instruments included in Level 3 are valued using generally unobservable inputs that are based upon the
best information available and reflect management’s assumptions about how market participants would price the
asset or liability. There were no material Level 3 balances as of September 30, 2017 or 2016. The Company’s and the
Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of
the interim reporting period in which circumstances change or events occur to cause the transfer.
The mutual funds are included in “Other investments” on the Company’s balance sheets and in “Property and other
investments” on Spire Missouri’s balance sheets. Derivative assets and liabilities, including receivables and payables
associated with cash margin requirements, are presented net on the balance sheets when a legally enforceable
netting agreement exist between the Company or Spire Missouri and the counterparty to the derivative contract. For
additional information on derivative instruments, see Note 10, Derivative Instruments and Hedging Activities.
99
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Effects of
Netting and
Cash Margin
Receivables
/Payables
Total
As of September 30, 2017
ASSETS
Gas Utility:
US stock/bond mutual funds
NYMEX/ICE natural gas contracts
Gasoline and heating oil contracts
Gas Marketing:
NYMEX/ICE natural gas contracts
Natural gas commodity contracts
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 September 30, 2016
ASSETS
Gas Utility:
US stock/bond mutual funds
NYMEX/ICE natural gas contracts
Gasoline and heating oil contracts
Gas Marketing:
NYMEX/ICE natural gas contracts
Natural gas commodity contracts
Total
LIABILITIES
Gas Utility:
NYMEX/ICE natural gas contracts
OTCBB natural gas contracts
Gas Marketing:
NYMEX/ICE natural gas contracts
Natural gas commodity contracts
Other:
Interest rate swaps
Total
$
$
$
$
$
$
$
$
18.3 $
3.4
0.1
1.3
—
23.1 $
4.1 $
—
—
1.3
6.8
12.2 $
1.9 $
— $
0.3
8.4
0.9
9.6 $
4.1 $
—
—
3.4
8.7
16.2 $
— $
0.2
1.6
2.6
3.0
7.4 $
1.8
—
—
3.7 $
16.8 $
5.3
0.4
0.4
—
22.9 $
1.6 $
—
3.5
—
—
5.1 $
100
— $
—
—
—
0.1
0.1 $
— $
—
—
—
— $
— $
—
—
—
0.2
0.2 $
— $
—
—
—
—
— $
— $
(3.4 )
—
(2.1 )
(1.2 )
(6.7 ) $
(1.9 ) $
(2.1 )
(1.2 )
—
(5.2 ) $
— $
(0.4 )
(0.3 )
(3.4 )
(0.9 )
(5.0 ) $
(1.6 ) $
—
(5.1 )
(0.9 )
—
(7.6 ) $
22.4
—
0.1
0.5
5.7
28.7
—
—
7.2
0.9
8.1
20.9
4.9
0.1
0.4
8.0
34.3
—
0.2
—
1.7
3.0
4.9
Spire Missouri
As of September 30, 2017
ASSETS
US stock/bond mutual funds
NYMEX/ICE natural gas contracts
Gasoline and heating oil contracts
Total
LIABILITIES
NYMEX/ICE natural gas contracts
Total
As of September 30, 2016
ASSETS
US stock/bond mutual funds
NYMEX/ICE natural gas contracts
Gasoline and heating oil contracts
Total
LIABILITIES
NYMEX/ICE natural gas contracts
OTCBB natural gas contracts
Total
Spire Alabama
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Effects of
Netting and
Cash Margin
Receivables
/Payables
Total
$
$
$
$
$
$
$
$
18.3 $
3.4
0.1
21.8 $
1.9 $
1.9 $
16.8 $
5.3
0.3
22.4 $
1.6 $
—
1.6 $
4.1 $
—
—
4.1 $
— $
— $
4.1 $
—
—
4.1 $
— $
0.2
0.2 $
— $
—
—
— $
— $
— $
— $
—
—
— $
— $
—
— $
— $
(3.4)
—
(3.4 ) $
(1.9 ) $
(1.9 ) $
— $
(0.4)
(0.3)
(0.7 ) $
(1.6 ) $
—
(1.6 ) $
22.4
—
0.1
22.5
—
—
20.9
4.9
—
25.8
—
0.2
0.2
During the fiscal second quarter of 2016 Spire Alabama commenced a gasoline derivative program to stabilize the
cost of fuel used in operations. As of September 30, 2017, the fair value of related gasoline contracts was not
significant.
10.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Spire
Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-
traded options, and swaps for the explicit purpose of managing price risk associated with purchasing and delivering
natural gas on a regular basis to customers in accordance with its tariffs. The objective of this policy is to limit Spire
Missouri’s exposure to natural gas price volatility and to manage, hedge and mitigate substantial price risk. Further
discussion of this policy can be found in the Spire Missouri section.
From time to time Spire Missouri and Spire Alabama purchase NYMEX futures and options contracts to help
stabilize operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and
equipment used in the course of their business. Further information on these derivatives can be found in the Spire
Missouri and Spire Alabama sections, respectively.
101
In the course of its business, Spire’s gas marketing subsidiary, Spire Marketing, which includes its wholly owned
subsidiary Spire Storage Inc., enters into commitments associated with the purchase or sale of natural gas. Certain
of Spire Marketing’s derivative natural gas contracts are designated as normal purchases or normal sales and, as
such, are excluded from the scope of ASC Topic 815 and are accounted for as executory contracts on an accrual
basis. Any of Spire Marketing’s derivative natural gas contracts that are not designated as normal purchases or
normal sales are accounted for at fair value. At September 30, 2017, the fair values of 202.1 million MMBtu of non-
exchange traded natural gas commodity contracts were reflected in the Consolidated Balance Sheet. Of these
contracts, 156.8 million MMBtu will settle during fiscal 2018, and 34.3 million MMBtu, 5.9 million MMBtu, 4.1
million MMBtu, 0.9 million MMBtu, and 0.1 million MMBtu will settle during fiscal years 2019, 2020, 2021, 2022,
and 2023, respectively. These contracts have not been designated as hedges; therefore, changes in the fair value of
these contracts are reported in earnings each period.
Furthermore, Spire Marketing manages the price risk associated with its fixed-priced commitments by either closely
matching the offsetting physical purchase or sale of natural gas at fixed prices or through the use of NYMEX or ICE
futures, swap, and option contracts to lock in margins.
At September 30, 2017, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial
position or results of operations. Spire Marketing’s NYMEX and ICE natural gas futures, swap, and option contracts
used to lock in margins may be designated as cash flow hedges of forecasted transactions for financial reporting
purposes.
During fiscal 2015, Spire Alabama entered into interest rate swap transactions to protect itself against adverse
movement in interest rates in anticipation of its issuance of $115.0 of long-term debt. The notional amount of these
interest rate swaps was$104.5. These derivative instruments were designated as cash flow hedges of forecasted
transactions. These forward starting swaps involved the payment of a fixed interest rate and the receipt of the
London Interbank Offered Rate (LIBOR) over the terms specified in the contracts. Termination of these interest
rate swap agreements later in fiscal 2015 resulted in a $2.7 gain which was recorded as a regulatory liability. Of the
total issuance of long-term debt, $35.0 was issued on September 15, 2015 and $80.0 was issued on December 1,
2015, and the gain is being amortized to reduce interest expense over the hedged periods.
During fiscal 2016, Spire entered into interest rate swap agreements, with a notional amount of $85.0, to effectively
lock in interest rates on a portion of the long-term debt it anticipated issuing to finance its acquisition of Spire
EnergySouth. These derivative instruments were designated as cash flow hedges of forecasted transactions.
Termination of the interest rate swap agreements later in fiscal 2016 resulted in a $0.4 loss recorded in
accumulated other comprehensive loss to be amortized to interest expense over the life of the related debt
issuances.
Also during fiscal 2016, Spire entered into interest rate swap transactions with a notional amount of $225.0 to
protect itself against adverse movement in interest rates in anticipation of the issuance of long-term debt in fiscal
2017. These hedge positions were settled during fiscal 2017, resulting in a gain of $14.1 which will be amortized to
reduce interest expense over the hedged periods. Also during fiscal 2017, Spire entered into a ten-year interest rate
swap with a fixed interest rate of 2.658% and a notional amount of $60.0 to protect itself against adverse
movements in interest rates on future interest rate payments. The Company recorded a $0.9 mark-to-market loss
on these swaps as part of other comprehensive income for the year ended September 30, 2017.
102
The Company’s and Spire Missouri’s exchange-traded/cleared derivative instruments consist primarily of NYMEX
and ICE positions. The NYMEX is the primary national commodities exchange on which natural gas derivatives are
traded. Open NYMEX/ICE natural gas futures and swap positions at September 30, 2017 were as follows:
NYMEX/ICE open short futures positions/swap positions
Fiscal 2018
Fiscal 2019
NYMEX/ICE open long futures/swap positions
Fiscal 2018
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
ICE open short daily swap positions
Fiscal 2018
ICE open long daily swap positions
Fiscal 2018
ICE open short basis swap positions
Fiscal 2018
Fiscal 2019
Fiscal 2020
ICE open long basis swap positions
Fiscal 2018
Fiscal 2019
Fiscal 2020
Gas Utility
Gas Marketing
MMBtu
(millions)
Avg. Price
Per
MMBtu
MMBtu
(millions)
Avg. Price
Per
MMBtu
— $
—
14.18
1.68
—
—
—
—
—
—
—
—
—
—
—
—
—
2.98
2.89
—
—
—
—
—
—
—
—
—
—
—
8.66 $
2.07
3.78
1.84
0.66
0.28
0.22
1.32
0.78
14.04
3.35
0.31
11.12
4.51
0.62
3.34
3.13
3.16
3.02
2.91
2.90
3.00
2.87
2.79
0.10
0.27
0.36
0.38
0.45
0.45
At September 30, 2017, Spire Missouri also had 33.9 million MMBtu of other price mitigation in place through the
use of NYMEX natural gas option-based strategies while Spire Marketing had none.
Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance
sheets of the Company at fair value, and the change in fair value of the effective portion of these hedge instruments
is recorded, net of income tax, in other comprehensive income or loss (OCI). Accumulated other comprehensive
income or loss (AOCI) is a component of Total Common Stock Equity. Amounts are reclassified from AOCI into
earnings when the hedged items affect net income, using the same revenue or expense category that the hedged
item impacts. Based on market prices at September 30, 2017, it is expected that an immaterial amount of unrealized
gains will be reclassified into the Consolidated Statements of Income of the Company during the next twelve
months. Cash flows from hedging transactions are classified in the same category as the cash flows from the items
that are being hedged in the Consolidated Statements of Cash Flows.
103
Effect of Derivative Instruments on the Consolidated Statements of Income and Consolidated Statements of
Comprehensive Income
Location of Gain (Loss)
Recorded in Income
2017
2016
2015
Derivatives in Cash Flow Hedging Relationships
Effective portion of gain (loss) recognized in OCI on derivatives:
Gas Marketing natural gas contracts
Gas Utility gasoline and heating oil contracts
Interest rate swaps
Total
Effective portion of gain (loss) reclassified from AOCI to income:
Natural gas contracts
Subtotal
Gas Marketing Operating Revenues
Gas Marketing Operating Expenses
Gasoline and heating oil contracts
Gas Utility Other Operating Expenses
Interest rate swaps
Interest Expense
Total
Ineffective portion of gain (loss) on derivatives recognized in income:
Natural gas contracts
Subtotal
Gas Marketing Operating Revenues
Gas Marketing Operating Expenses
Gasoline and heating oil contracts
Gas Utility Other Operating Expenses
Interest rate swaps
Interest Expense
Total
Derivatives Not Designated as Hedging Instruments*
Gain (loss) recognized in income on derivatives:
Natural gas commodity contracts
Gas Marketing Operating Revenues
NYMEX / ICE natural gas contracts
Gas Marketing Operating Revenues
Gasoline and heating oil contracts
Other Income and (Income Deductions) - Net
Total
$
$
$
$
$
$
$
$
— $
0.1
11.4
11.5 $
(0.4 ) $
0.1
(0.3)
0.2
0.1
— $
— $
—
—
—
0.5
0.5 $
(0.6 ) $
—
(3.4)
(4.0 ) $
4.3 $
(4.9)
(0.6)
(0.5)
—
(1.1 ) $
0.1 $
0.1
0.2
0.1
—
0.3 $
(4.3 )
(1.2)
—
(5.5 )
1.7
(5.2)
(3.5)
(0.9)
—
(4.4 )
—
(0.5)
(0.5)
0.1
—
(0.4 )
0.7 $
(4.4)
—
(3.7 ) $
12.3 $
(1.7)
—
10.6 $
(1.3 )
(9.6)
(0.2)
(11.1 )
* Gains and losses on Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments
for financial reporting purposes, are deferred pursuant to the Missouri Utilities’ PGA clauses and initially recorded as
regulatory assets or regulatory liabilities. These gains and losses are excluded from the table above because they have no
direct impact on the statements of income. Such amounts are recognized in the statements of income as a component of
Regulated Gas Distribution Natural and Propane Gas operating expenses when they are recovered through the PGA clause
and reflected in customer billings.
104
Fair Value of Derivative Instruments in the Consolidated Balance Sheets
Asset Derivatives*
Liability Derivatives*
September 30, 2017
Balance Sheet Location
Derivatives designated as hedging instruments
Gas Utility:
Fair
Value
Balance Sheet Location
Fair
Value
Gasoline and heating oil contracts
Derivative Instrument Assets $
0.1 Derivative Instrument Assets $
Gas Marketing:
Natural gas contracts
Other:
Derivative Instrument Assets
Deferred Charges – Other
0.3 Derivative Instrument Assets
0.3 Deferred Charges – Other
Interest rate swaps
Current Liabilities - Other
Subtotal
Derivatives not designated as hedging instruments
Gas Utility:
— Current Liabilities - Other
0.7
Natural gas contracts
Accounts Receivable – Other
3.4 Accounts Receivable – Other
Gas Marketing:
NYMEX / ICE natural gas contracts Derivative Instrument Assets
Deferred Charges – Other
Derivative Instrument Assets
Other Deferred Charges
Current Liabilities – Other
Deferred Credits – Other
Natural gas commodity
Subtotal
Total derivatives
September 30, 2016
1.7 Derivative Instrument Assets
0.3 Deferred Charges – Other
5.3 Derivative Instrument Assets
0.4 Other Deferred Charges
0.8 Current Liabilities – Other
0.4 Deferred Credits – Other
12.3
13.0
$
$
Derivatives designated as hedging instruments
Gas Utility:
Gasoline and heating oil contracts
Derivative Instrument Assets $
0.3 Derivative Instrument Assets $
Gas Marketing:
Natural gas contracts
Other: Interest rate swaps
Subtotal
Derivative Instrument Assets
Deferred Charges - Other
Derivative Instrument Assets
2.5 Derivative Instrument Assets
0.4 Deferred Charges - Other
— Derivative Instrument Assets
3.2
Derivatives not designated as hedging instruments
Gas Utility:
Natural gas contracts
Gas Marketing:
Accounts Receivable – Other
Derivative Instrument Assets
5.4 Accounts Receivable – Other
— Derivative Instrument Assets
NYMEX / ICE natural gas contracts Derivative Instrument Assets
Natural gas commodity
Subtotal
Total derivatives
Deferred Charges – Other
Derivative Instrument Assets
Other Deferred Charges
Current Liabilities – Other
Deferred Credits – Other
0.8 Derivative Instrument Assets
— Deferred Charges – Other
6.5 Derivative Instrument Assets
2.1 Other Deferred Charges
0.2 Current Liabilities – Other
0.2 Deferred Credits – Other
15.2
18.4
$
$
—
0.2
—
0.9
1.1
1.9
1.4
0.5
0.1
—
5.0
3.3
12.2
13.3
—
0.8
0.1
3.0
3.9
1.6
0.2
4.1
0.1
0.2
0.3
2.0
0.1
8.6
12.5
* The fair values of Asset Derivatives and Liability Derivatives exclude the fair value of cash margin receivables or payables
with counterparties subject to netting arrangements. Fair value amounts of derivative contracts (including the fair value
amounts of cash margin receivables and payables) for which there is a legal right to set off are presented net on the balance
sheets. As such, the gross balances presented in the table above are not indicative of the Company’s net economic exposure.
Refer to Note 9, Fair Value Measurements, for information on the valuation of derivative instruments.
105
Following is a reconciliation of the amounts in the tables above to the amounts presented in the Consolidated
Balance Sheets:
Fair value of asset derivatives presented above
Fair value of cash margin (payable) receivable offset with derivatives
Netting of assets and liabilities with the same counterparty
Total
Derivative Instrument Assets, per Consolidated Balance Sheets:
Derivative instrument assets
Deferred Charges – Other
Total
Fair value of liability derivatives presented above
Netting of assets and liabilities with the same counterparty
Total
Derivative Instrument Liabilities, per Consolidated Balance Sheets:
Current Liabilities – Other
Deferred Credits – Other
Total
2017
2016
13.0 $
(1.5 )
(5.3 )
6.2 $
5.9 $
0.3
6.2 $
13.3 $
(5.3 )
8.0 $
4.9 $
3.1
8.0 $
18.4
2.5
(7.6 )
13.3
11.4
1.9
13.3
12.5
(7.6 )
4.9
4.8
0.1
4.9
$
$
$
$
$
$
$
$
Additionally, at September 30, 2017 and 2016, the Company had $4.0 and $2.9, respectively, in cash margin
receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
Spire Missouri
Spire Missouri has a risk management policy to utilize various derivatives, including futures contracts, exchange-
traded options, swaps and over-the-counter instruments for the explicit purpose of managing price risk associated
with purchasing and delivering natural gas on a regular basis to customers in accordance with its tariffs. The
objective of this policy is to limit Spire Missouri’s exposure to natural gas price volatility and to manage, hedge and
mitigate substantial price risk. This policy strictly prohibits speculation and permits Spire Missouri to hedge current
physical natural gas purchase commitments or forecasted or anticipated future peak (maximum) physical need for
natural gas delivered. Costs and cost reductions, including carrying costs, associated with Spire Missouri’s use of
natural gas derivative instruments are allowed to be passed on to Spire Missouri customers through the operation of
its PGA clause, through which the MoPSC allows Spire Missouri to recover gas supply costs, subject to prudence
review by the MoPSC. Accordingly, Spire Missouri does not expect any adverse earnings impact as a result of the use
of these derivative instruments.
Spire Missouri does not designate these instruments as hedging instruments for financial reporting purposes
because gains or losses associated with the use of these derivative instruments are deferred and recorded as
regulatory assets or regulatory liabilities pursuant to ASC Topic 980, “Regulated Operations,” and, as a result, have
no direct impact on the statements of income.
The timing of the operation of the PGA clause may cause interim variations in short-term cash flows, because Spire
Missouri is subject to cash margin requirements associated with changes in the values of these instruments.
Nevertheless, carrying costs associated with such requirements are recovered through the PGA clause.
From time to time, Spire Missouri purchases NYMEX futures and options contracts to help stabilize operating costs
associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and equipment used in the
course of its business. At September 30, 2017, Spire Missouri held 0.3 million gallons of gasoline futures contracts
at an average price of $1.27 per gallon. Most of these contracts, the longest of which extends to December 2017, are
designated as cash flow hedges of forecasted transactions pursuant to ASC Topic 815, “Derivatives and Hedging.”
The gains or losses on these derivative instruments are not subject to Spire Missouri’s PGA clause.
106
Derivative instruments designated as cash flow hedges of forecasted transactions are recognized on the balance
sheets at fair value and the change in the fair value of the effective portion of these hedge instruments is recorded,
net of income tax, in OCI. AOCI is a component of Total Common Stock Equity. Amounts are reclassified from AOCI
into earnings when the hedged items affect net income, using the same revenue or expense category that the hedged
item impacts. Based on market prices at September 30, 2017, it is expected that an immaterial amount of pre-tax
gains will be reclassified into the statements of income during fiscal 2018. Cash flows from hedging transactions are
classified in the same category as the cash flows from the items that are being hedged in the statements of cash
flows.
Spire Missouri’s derivative instruments consist primarily of NYMEX positions. The NYMEX is the primary national
commodities exchange on which natural gas derivatives are traded. Open NYMEX natural gas futures positions at
September 30, 2017 were as follows:
NYMEX/ICE open long futures/swap positions
Fiscal 2018
Fiscal 2019
MMBtu
(millions)
Avg. Price
Per MMBtu
14.18 $
1.68
2.98
2.89
At September 30, 2017, Spire Missouri also had 33.9 million MMBtu of other price mitigation in place through the
use of NYMEX natural gas option-based strategies.
Effect of Derivative Instruments on the Statements of Income and Statements of Comprehensive Income
Location of Gain (Loss)
Recorded in Income
2017 2016 2015
Derivatives in Cash Flow Hedging Relationships
Effective portion of gain (loss) recognized in OCI on derivatives:
Gasoline and heating oil contracts
Effective portion of gain (loss) reclassified from AOCI to income:
Gasoline and heating oil contracts
Gas Utility Other Operating Expenses
Ineffective portion of gain (loss) on derivatives recognized in income:
Gasoline and heating oil contracts
Gas Utility Other Operating Expenses
Derivatives Not Designated as Hedging Instruments*
Gain (loss) recognized in income on derivatives:
$
$
$
0.1 $
— $
(1.2 )
0.2 $
(0.5 ) $
(0.9 )
— $
0.1 $
0.1
Gasoline and heating oil contracts
Other Income and (Income Deductions) - Net $
— $
— $
(0.2 )
* Gains and losses on Spire Missouri’s natural gas derivative instruments, which are not designated as hedging instruments
for financial reporting purposes, are deferred pursuant to the Spire Missouri’s PGA clauses and initially recorded as
regulatory assets or regulatory liabilities. These gains and losses are excluded from the table above because they have no
direct impact on the Statements of Income. Such amounts are recognized in the Statements of Income as a component of
Regulated Gas Distribution Natural and Propane Gas operating expenses when they are recovered through the PGA clause
and reflected in customer billings.
107
Fair Value of Derivative Instruments in the Balance Sheets
Asset Derivatives*
Liability Derivatives*
September 30, 2017
Balance Sheet Location
Derivatives designated as hedging instruments
Fair
Value
Balance Sheet Location
Fair
Value
Gasoline and heating oil contracts Derivative Instrument Assets
$
0.1 Derivative Instrument Assets
$
Derivatives not designated as hedging instruments
Natural gas contracts
Accounts Receivable – Other
Total derivatives
September 30, 2016
3.4 Accounts Receivable – Other
3.5
$
Derivatives designated as hedging instruments
Gasoline and heating oil contracts Derivative Instrument Assets
$
Subtotal
Derivatives not designated as hedging instruments
Natural gas contracts
Accounts Receivable – Other
OTCBB natural gas contracts
Derivative Instrument Assets
Subtotal
Total derivatives
0.3 Derivative Instrument Assets
0.3
5.4 Accounts Receivable – Other
— Derivative Instrument Assets
5.4
5.7
$
$
$
$
—
1.9
1.9
—
—
1.6
0.2
1.8
1.8
* The fair values of Asset Derivatives and Liability Derivatives exclude the fair value of cash margin receivables or payables
with counterparties subject to netting arrangements. Fair value amounts of derivative contracts (including the fair value
amounts of cash margin receivables and payables) for which there is a legal right to set off are presented net on the Balance
Sheets. As such, the gross balances presented in the table above are not indicative of Spire Missouri’s net economic
exposure. Refer to Note 9, Fair Value Measurements, for information on the valuation of derivative instruments.
Following is a reconciliation of the amounts in the tables above to the amounts presented in Spire Missouri’s
Balance Sheets:
Fair value of asset derivatives presented above
Fair value of cash margin (payable) receivable offset with derivatives
Netting of assets and liabilities with the same counterparty
Total
Derivative Instrument Assets, per Balance Sheets:
Derivative instrument assets
Total
Fair value of liability derivatives presented above
Netting of assets and liabilities with the same counterparty
Total
Derivative Instrument Liabilities, per Balance Sheets:
Current Liabilities – Other
Total
2017
2016
3.5 $
(1.5 )
(1.9 )
0.1 $
0.1 $
0.1 $
1.9 $
(1.9 )
— $
— $
— $
5.7
0.8
(1.6 )
4.9
4.9
4.9
1.8
(1.6 )
0.2
0.2
0.2
$
$
$
$
$
$
$
$
Additionally, at September 30, 2017 and 2016, Spire Missouri had $4.0 and $0.5, respectively, in cash margin
receivables not offset with derivatives, which are presented in Accounts Receivable – Other.
108
Spire Alabama
In prior years, Spire Alabama entered into cash flow derivative commodity instruments to hedge its exposure to
price fluctuations on its gas supply. Spire Alabama recognizes all derivatives at fair value as either assets or
liabilities on the balance sheet. Any realized gains or losses are passed through to customers using the mechanisms
of the GSA rider in accordance with Spire Alabama’s APSC approved tariff.
During the second quarter of fiscal 2015, Spire Alabama entered into certain interest rate swap transactions to
protect itself against adverse movement in interest rates in anticipation of its issuance of $115.0 of long-term debt.
Spire Alabama received prior approval from the APSC to enter into these hedges. The notional amount of interest
rate swaps outstanding was $80.5 with stated maturities ranging from 2025 to 2045 and fixed interest rates ranging
between 2.18% and 2.85%. In April 2015, Spire Alabama entered into an additional hedge with a notional amount of
$24.0 and terms within the same range. These derivative instruments were designated as cash flow hedges of
forecasted transactions. These forward starting swaps involved the payment of a fixed interest rate and the receipt
of LIBOR over the terms specified in the contracts. On May 21, 2015, the interest rate swap agreements were
terminated and the settlement resulted in a $2.7 gain which was recorded as a regulatory liability. Of the total
issuance of long-term debt, $35.0 was issued on September 15, 2015 and the remaining $80.0 was issued on
December 1, 2015.
During the fiscal second quarter of 2016, Spire Alabama commenced a gasoline derivative program to help stabilize
operating costs associated with forecasted purchases of gasoline and diesel fuels used to power vehicles and
equipment used in the course of its business. At September 30, 2017, Spire Alabama held 0.1 million gallons of
gasoline futures contracts at an average price of $1.28 per gallon. Most of these contracts, the longest of which
extends to December 2017, are designated as cash flow hedges of forecasted transactions pursuant to ASC Topic
815, “Derivatives and Hedging.” The gains or losses on these derivative instruments are not subject to Spire
Alabama’s GSA rider. As of September 30, 2017 and 2016, the fair value of gasoline contracts was not significant.
11.
CONCENTRATIONS OF CREDIT RISK
Other than in Spire Marketing, Spire has no significant concentration of credit risk.
A significant portion of Spire Marketing’s transactions are with (or are associated with) energy producers, utility
companies, and pipelines. The concentration of transactions with these counterparties has the potential to affect the
Company’s overall exposure to credit risk, either positively or negatively, in that each of these three groups may be
affected similarly by changes in economic, industry, or other conditions. To manage this risk, as well as credit risk
from significant counterparties in these and other industries, Spire Marketing has established procedures to
determine the creditworthiness of its counterparties. These procedures include obtaining credit ratings and credit
reports, analyzing counterparty financial statements to assess financial condition, and considering the industry
environment in which the counterparty operates. This information is monitored on an ongoing basis. In some
instances, Spire Marketing may require credit assurances such as prepayments, letters of credit, or parental
guarantees. In addition, Spire Marketing may enter into netting arrangements to mitigate credit risk with
counterparties in the energy industry with whom it conducts both sales and purchases of natural gas. Sales are
typically made on an unsecured credit basis with payment due the month following delivery. Accounts receivable
amounts are closely monitored and provisions for uncollectible amounts are accrued when losses are probable.
Spire Marketing records accounts receivable, accounts payable, and prepayments for physical sales and purchases
of natural gas on a gross basis. The amount included in accounts receivable attributable to energy producers and
their marketing affiliates amounted to $17.9 at September 30, 2017 ($8.9 reflecting netting arrangements). Spire
Marketing’s accounts receivable attributable to utility companies and their marketing affiliates comprised $58.2 of
total accounts receivable at September 30, 2017 ($55.8 reflecting netting arrangements).
Spire Marketing also has concentrations of credit risk with certain individually significant counterparties and with
pipeline companies associated with its natural gas receivable amount. At September 30, 2017, the amounts included
in accounts receivable from Spire Marketing’s five largest counterparties (in terms of net accounts receivable
exposure) totaled $23.8 ($23.1 reflecting netting arrangements). Four of these five counterparties are investment-
grade rated companies. The fifth is not rated, but each of its owners is investment-grade.
109
12.
INCOME TAXES
Spire
The Company’s provision for income taxes charged during the fiscal years ended September 30, 2017, 2016, and
2015 are as follows:
Federal
Current
Deferred
Investment tax credits
State and local
Current
Deferred
Total income tax expense
2017
2016
2015
$
$
0.1 $
67.7
(0.2)
0.5
9.5
77.6 $
0.1 $
62.0
(0.2)
0.6
7.0
69.5 $
(3.3 )
58.8
(0.2)
—
6.9
62.2
The Company’s effective income tax rate varied from the federal statutory income tax rate for each year due to the
following:
Federal income tax statutory rate
State and local income taxes, net of federal income tax benefits
Certain expenses capitalized on books and deducted on tax return
Taxes related to prior years
Other items – net *
Effective income tax rate
* Other consists primarily of property adjustments.
2017
2016
2015
35.0%
2.8
(2.3)
(0.9)
(2.2)
32.4%
35.0%
2.8
(3.4)
(0.2)
(1.7)
32.5%
35.0%
3.0
(3.7)
(0.6)
(2.5)
31.2%
The Company’s significant items comprising the net deferred tax liability recorded in the Consolidated Balance
Sheets as of September 30 are as follows:
Deferred tax assets:
Reserves not currently deductible
Pension and other postretirement benefits
Operating losses
Other
Deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Relating to property
Regulatory pension and other postretirement benefits
Deferred gas costs
Other**
Total deferred tax liabilities
Net deferred tax liability
** Other consists primarily of Goodwill related liabilities.
110
2017
2016
$
$
31.5 $
58.6
169.6
26.0
285.7
0.5
285.2
728.3
108.0
30.6
125.8
992.7
707.5 $
21.3
68.3
102.3
—
191.9
0.9
191.0
623.1
106.8
20.0
48.4
798.3
607.3
In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. Management considers all significant
available positive and negative evidence, including the existence of losses in recent years, the timing of deferred tax
liability reversals, projected future taxable income, taxable income in carryback years, and tax planning strategies to
assess the need for a valuation allowance. Based upon this evidence, management believes it is more likely than not
the Company will realize the benefits of these deferred tax assets, except for the contribution carryforward valuation
allowance noted below.
The Company has federal and state loss carryforwards of approximately $478.6 at September 30, 2017. The
Company also has contribution carryforwards of approximately $12.1 at September 30, 2017. The loss carryforwards
begin to expire in fiscal 2030 for certain state purposes and fiscal 2035 for federal and other states purposes. The
contribution carryforwards begin to expire in fiscal 2018. The Company has a valuation allowance of $0.5 as a
portion of the contribution carryforward will not be realized prior to its expiration. The Company also has various
tax credit carryforwards of approximately $2.5 that begin to expire in 2020.
The Company recognizes the tax benefit from a tax position only if it is at least more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The Company records potential interest and penalties related to its uncertain tax positions as interest expense and
other income deductions, respectively. Unrecognized tax benefits are reported as a reduction of a deferred tax asset
for an operating loss carryforward.
The following table presents a reconciliation of the beginning and ending balances of the Company’s unrecognized
tax benefits:
Unrecognized tax benefits, beginning of year
Increases related to tax positions taken in current year
Reductions due to lapse of applicable statute of limitations
Unrecognized tax benefits, end of year
2017
2016
2015
$
$
10.0 $
2.4
(1.4)
11.0 $
7.1 $
3.4
(0.5)
10.0 $
4.6
2.9
(0.4)
7.1
The amount of unrecognized tax benefits which, if recognized, would affect the Company’s effective tax rate were
$5.1 and $3.3 as of September 30, 2017 and 2016, respectively. It is reasonably possible that events will occur in the
next 12 months that could increase or decrease the amount of the Company’s unrecognized tax benefits. The
Company does not expect that any such change will be significant to the Consolidated Balance Sheets.
As of September 30, 2017 and 2016, interest accrued associated with the Company’s uncertain tax positions was
de minimis, and no penalties were accrued as of September 30, 2017.
The Company is subject to US federal income tax as well as income tax in various state and local jurisdictions. The
Company is no longer subject to examination for fiscal years prior to 2014.
Regarding the Company’s recent Spire EnergySouth acquisition, tax returns for calendar years 2013 through 2015
remain open and subject to examination by the Internal Revenue Service and state taxing jurisdictions. These
returns cover periods during which Spire EnergySouth was owned by Sempra Global. The impact of any
adjustments made to these returns by the relevant taxing authorities would be addressed by the indemnification
provisions of the stock purchase agreement with Sempra Global.
Spire Missouri
Spire Missouri’s provision for income taxes charged during the fiscal years ended September 30, 2017, 2016, and
2015 are as follows:
Federal
Current
Deferred
Investment tax credits
State and local
Current
Deferred
Total income tax expense
2017
2016
2015
$
— $
— $
42.0
(0.2 )
—
5.7
47.5 $
37.5
(0.2 )
0.1
8.0
45.4 $
$
(2.1 )
40.9
(0.2 )
(0.1 )
4.7
43.2
111
Spire Missouri’s effective income tax rate varied from the federal statutory income tax rate for each year due to the
following:
Federal income tax statutory rate
State and local income taxes, net of federal income tax benefits
Certain expenses capitalized on books and deducted on tax return
Taxes related to prior years
Other items – net *
Effective income tax rate
* Other consists primarily of property adjustments.
2017
2016
2015
35.0%
2.8
(3.5)
(1.4)
(3.3)
29.6%
35.0%
2.8
(4.8)
(0.2)
(2.8)
30.0%
35.0%
2.8
(4.9)
(0.8)
(3.0)
29.1%
Spire Missouri’s significant items comprising the net deferred tax liability reported in the Balance Sheets as of
September 30 are as follows:
Deferred tax assets:
Reserves not currently deductible
Pension and other postretirement benefits
Operating losses
Deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Relating to utility property
Regulatory pension and other postretirement benefits
Deferred gas costs
Other
Total deferred tax liabilities
Net deferred tax liability
2017
2016
$
$
25.3 $
52.7
52.0
130.0
0.5
129.5
563.2
108.0
25.0
57.1
753.3
623.8 $
14.9
56.9
29.9
101.7
0.9
100.8
497.0
106.8
20.0
33.9
657.7
556.9
Spire files a consolidated federal return and various state income tax returns and allocates income taxes to Spire
Missouri and its other subsidiaries as if each entity were a separate taxpayer.
In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. Management considers all significant
available positive and negative evidence, including the existence of losses in recent years, the timing of deferred tax
liability reversals, projected future taxable income, taxable income in carryback years, and tax planning strategies to
assess the need for a valuation allowance. Based upon this evidence, management believes it is more likely than not
that Spire Missouri will realize the benefits of these deferred tax assets, except for the contribution carryforward
valuation allowance noted below.
Spire Missouri has federal and state loss carryforwards of approximately $166.0, at September 30, 2017, based on a
separate company basis. For federal tax purposes, these loss carryforwards may be utilized against income from
another member of the consolidated group. Spire Missouri also has contribution carryforwards of approximately
$11.2 at September 30, 2017. The loss carryforwards begin to expire in fiscal 2035 for federal and state purposes.
The contribution carryforwards begin to expire in fiscal 2018. Spire Missouri has a valuation allowance of $0.5 as a
portion of the contribution carryforward will not be realized prior to its expiration. Spire Missouri also has
approximately $2.0 of various tax credit carryforwards with expiration dates which begin to expire in 2020.
Spire Missouri recognizes the tax benefit from a tax position only if it is at least more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Spire Missouri records potential interest and penalties related to its uncertain tax positions as interest expense and
other income deductions, respectively. Unrecognized tax benefits are reported as a reduction of a deferred tax asset
for an operating loss carryforward.
112
The following table presents a reconciliation of the beginning and ending balances of Spire Missouri unrecognized
tax benefits:
Unrecognized tax benefits, beginning of year
Increases related to tax positions taken in current year
Reductions due to lapse of applicable statute of limitations
Unrecognized tax benefits, end of year
2017
2016
2015
$
$
9.7 $
2.4
(1.4)
10.7 $
6.9 $
3.3
(0.5)
9.7 $
4.2
2.9
(0.2)
6.9
The amount of unrecognized tax benefits, which, if recognized, would affect Spire Missouri’s effective tax rate were
$4.8 and $3.1 as of September 30, 2017 and 2016, respectively. It is reasonably possible that events will occur in the
next 12 months that could increase or decrease the amount of Spire Missouri’s unrecognized tax benefits. Spire
Missouri does not expect that any such change will be significant to Spire Missouri’s Balance Sheets.
As of September 30, 2017 and 2016, interest accrued associated with Spire Missouri’s uncertain tax positions was
de minimis, and no penalties were accrued.
Spire Missouri is subject to US federal income tax as well as income tax in various state and local jurisdictions, and
is no longer subject to examination for fiscal years prior to 2014.
Spire Alabama
Spire Alabama’s provision for income taxes charged during the fiscal years ended September 30, 2017, 2016, and
2015, are as follows:
Federal
Current
Deferred
State and local
Current
Deferred
Total income tax expense
2017
2016
2015
$
$
— $
31.6
—
4.2
35.8 $
(0.8 ) $
29.4
—
3.8
32.4 $
—
25.9
0.1
3.3
29.3
Spire Alabama’s effective income tax rate varied from the federal statutory income tax rate for each year due to the
following:
Federal income tax statutory rate
State and local income taxes, net of federal income tax benefits
Other items – net
Effective income tax rate
2017
2016
2015
35.0%
2.8
0.3
38.1%
35.0%
2.8
0.1
37.9%
35.0%
2.8
0.1
37.9%
113
Spire Alabama’s significant items comprising the net deferred tax asset reported in the Balance Sheets as of
September 30 are as follows:
Deferred tax assets:
Reserves not currently deductible
Pension and other postretirement benefits
Goodwill
Operating losses
Total deferred tax assets
Deferred tax liabilities:
Relating to utility property
Other
Total deferred tax liabilities
Net deferred tax asset
2017
2016
$
$
6.0 $
4.4
214.4
88.3
313.1
119.3
8.2
127.5
185.6 $
6.3
11.4
233.4
60.2
311.3
87.6
2.3
89.9
221.4
Spire files a consolidated federal return and various state income tax returns and allocates income taxes to Spire
Alabama and its other subsidiaries as if each entity were a separate taxpayer.
In assessing whether deferred tax assets are realizable, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. Management considers all significant
available positive and negative evidence, including the existence of losses in recent years, the timing of deferred tax
liability reversals, projected future taxable income, taxable income in carryback years, and tax planning strategies to
assess the need for a valuation allowance. Based upon this evidence, management believes it is more likely than not
that Spire Alabama will realize the benefits of these deferred tax assets.
On a separate company basis, Spire Alabama has federal and state loss carryforwards of approximately $233.5, at
September 30, 2017 generated since the acquisition. The loss carryforwards begin to expire in fiscal 2030 for state
purposes and fiscal 2035 for federal purposes. For federal tax purposes, these loss carryforwards may be utilized
against income from another member of the consolidated group.
Spire Alabama recognizes the tax benefit from a tax position only if it is at least more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
Spire Alabama records potential interest and penalties related to its uncertain tax positions as interest expense and
other income deductions, respectively. Spire Alabama has reported no unrecognized tax benefits for fiscal years
2017, 2016, and 2015.
Spire Alabama is subject to US federal income tax as well as income tax in various state and local jurisdictions. Spire
Alabama’s tax returns for the periods after 2013 remain open and subject to examination by the Internal Revenue
Service and state taxing jurisdictions. The returns covering 2014 include the period during which Spire Alabama
was owned by Energen. The impact of any adjustments made to those returns by the relevant taxing authorities
would be addressed by the indemnification provisions of the stock purchase agreement with Energen.
13.
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Spire information in this note reflects all plans of the Company, including information for plans of Spire
EnergySouth since September 12, 2016. The net pension and postretirement obligations were re-measured at that
acquisition date as well as at the fiscal year end.
Pension Plans
The pension plans of Spire consist of plans for employees at the Missouri Utilities, plans covering the employees of
Spire Alabama, and plans covering employees of the subsidiaries of Spire EnergySouth.
The Missouri Utilities have non-contributory, defined benefit, trusteed forms of pension plans covering the majority
of their employees. Plan assets consist primarily of corporate and US government obligations and a growth segment
consisting of exposure to equity markets, commodities, real estate and inflation-indexed securities, achieved
through derivative instruments.
Spire Alabama has non-contributory, defined benefit, trusteed forms of pension plans covering the majority of its
employees. Qualified plan assets are comprised of mutual and commingled funds consisting of US equities with
varying strategies, global equities, alternative investments, and fixed income investments.
114
The net periodic pension costs include the following components:
Service cost – benefits earned during the period
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Loss on lump-sum settlements and curtailments
Special termination benefits
Subtotal
Regulatory adjustment
Net pension cost
Spire
Spire Alabama
Spire Missouri
2017 2016 2015 2017 2016 2015 2017 2016 2015
$ 20.5 $ 15.3 $ 17.3 $ 12.7 $ 10.0 $ 11.5 $ 6.2 $ 5.3 $ 5.8
6.2
(8.2 )
—
—
1.6
—
5.4
3.1
$ 39.8 $ 39.5 $ 34.9 $ 25.2 $ 26.6 $ 26.4 $ 13.3 $ 12.9 $ 8.5
21.7
(26.7 )
0.4
7.9
—
1.6
14.9
11.7
27.9
(38.5)
1.0
12.5
17.9
0.9
42.2
(2.4)
19.5
(28.1)
1.0
10.7
13.5
—
29.3
(4.1)
28.0
(34.9 )
0.4
8.0
3.3
1.6
21.7
17.8
29.5
(37.4 )
0.5
7.5
19.6
—
37.0
(2.1 )
23.3
(29.2 )
0.5
7.5
18.0
—
31.6
(5.2 )
6.1
(7.2 )
—
1.8
4.6
—
11.5
1.8
6.3
(8.2 )
—
0.1
3.3
—
6.8
6.1
Other changes in plan assets and pension benefit obligations recognized in other comprehensive income or loss
include the following:
Current year actuarial loss
Amortization of actuarial loss
Acceleration of loss recognized due to settlement
Current year service cost
Current year prior year service cost
Amortization of prior service cost
Subtotal
Regulatory adjustment
Total recognized in OCI
Spire
Spire Alabama
Spire Missouri
2017 2016 2015 2017 2016 2015 2017 2016 2015
$ 14.1 $ 46.8 $ 48.3 $ 14.8 $ 21.6 $ 26.0 $ 3.3 $ 25.2 $ 22.3
—
(7.5 )
(18.0 )
(1.6 )
—
—
—
—
—
(0.5 )
20.7
—
(0.5 )
(20.7 )
(0.5 ) $ — $ — $ —
(8.0 )
(7.5 )
(3.3 )
(19.6 )
5.0
—
—
—
(0.4 )
(0.5 )
40.1
20.7
(39.8 )
(21.2 )
$ (0.3 ) $ 0.3 $ (0.5 ) $
(10.7 )
(13.5 )
—
—
(1.0 )
(10.4 )
10.1
(0.3 ) $ 0.3 $
(12.5)
(18.2)
—
(20.7)
(1.0)
(38.3)
38.0
(0.1 )
(3.3 )
—
—
—
21.8
(21.8 )
(7.9 )
—
5.0
—
(0.4 )
18.3
(18.0 )
(1.8 )
(4.5 )
—
(20.7 )
—
(23.7 )
23.7
Spire pension obligations are driven by separate plan and regulatory provisions governing Spire Missouri, Spire
Alabama and Spire EnergySouth pension plans.
Pursuant to the provisions of the Missouri Utilities’ and Spire Alabama’s pension plans, pension obligations may be
satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are
recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds 100% of
the sum of service and interest costs in a specific year. Special termination benefits, when offered, are also
recognized as settlements which can result in gains or losses. Two Spire Alabama plans and one Spire Missouri plan
met the criteria for settlement recognition in the fiscal year ended September 30, 2017, requiring re-measurement
of the obligation under those plans using updated census data and assumptions for discount rate and mortality.
Lump-sum payments recognized as settlements during fiscal years 2017, 2016, and 2015 were $62.2 ($43.5
attributable to Spire Missouri and $18.7 to Spire Alabama), $16.6 (attributable to Spire Alabama), and $71.1 ($58.2
attributable to Spire Missouri and $12.9 to Spire Alabama), respectively.
Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets
implemented prospectively over a four-year period. Gains or losses not yet includible in pension cost are amortized
only to the extent that such gain or loss exceeds 10% of the greater of the projected benefit obligation or the market-
related value of plan assets. Such excess is amortized over the average remaining service life of active participants.
The recovery in rates for Spire Missouri East’s qualified pension plan is based on an annual allowance of $15.5
effective January 1, 2011. The recovery in rates for Spire Missouri West’s qualified pension plan is based on an
annual allowance of approximately $10 effective February 20, 2010. The difference between these amounts and
pension expense as calculated pursuant to the above and that otherwise would be included in the statements of
income and statements of comprehensive income is deferred as a regulatory asset or regulatory liability.
115
The following table shows the reconciliation of the beginning and ending balances of the pension benefit obligation
at September 30:
Benefit obligation, beginning of year
$
Service cost
Interest cost
Actuarial (gain) loss
Plan amendments
Spire EnergySouth acquisition
Settlement loss
Special termination benefits
Settlement benefits paid
Regular benefits paid
Benefit obligation, end of year
Accumulated benefit obligation, end of year
$
$
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
794.7 $
20.5
27.9
(0.9 )
(20.7 )
—
14.6
0.9
(62.2 )
(26.0 )
748.8 $
701.4 $
652.3 $
15.3
28.0
85.8
5.1
60.4
1.1
1.6
(16.6 )
(38.3 )
794.7 $
724.5 $
560.0 $
12.7
19.5
(0.5 )
—
—
12.2
—
(43.5 )
(20.8 )
539.6 $
500.4 $
497.6 $
10.0
21.7
59.2
5.1
—
—
1.6
—
(35.2 )
560.0 $
517.7 $
174.3 $
6.2
6.1
1.6
(20.7 )
—
2.4
—
(18.7 )
(3.0 )
148.2 $
142.8 $
154.7
5.3
6.3
26.6
—
—
1.1
—
(16.6 )
(3.1 )
174.3
149.8
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets
at September 30:
Fair value of plan assets, beginning of year
Actual return on plan assets
Employer contributions
Spire EnergySouth acquisition
Settlement benefits paid
Regular benefits paid
Fair value of plan assets, end of year
Funded status of plans, end of year
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
$
$
$
540.5 $
38.0
41.3
—
(62.2 )
(26.0 )
531.6 $
(217.2 ) $
448.9 $
75.1
26.6
44.8
(16.6 )
(38.3 )
540.5 $
(254.2) $
395.7 $
25.1
29.4
—
(43.5 )
(20.8 )
385.9 $
(153.7 ) $
339.9 $
64.4
26.6
—
—
(35.2 )
395.7 $
(164.3) $
100.0 $
7.7
11.9
—
(18.7 )
(3.0 )
97.9 $
(50.3 ) $
109.0
10.7
—
—
(16.6 )
(3.1 )
100.0
(74.3)
The following table sets forth the amounts recognized in the balance sheets at September 30:
Current liabilities
Noncurrent liabilities
Total
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
$
$
(0.5 ) $
(0.6) $
(0.5 ) $
(0.6) $
(216.7 )
(217.2 ) $
(253.6 )
(254.2) $
(153.2 )
(153.7 ) $
(163.7 )
(164.3) $
— $
(50.3 )
(50.3 ) $
—
(74.3 )
(74.3)
Pre-tax amounts recognized in accumulated other comprehensive loss not yet recognized as components of net
periodic pension cost consist of:
Net actuarial loss
Prior service (credit) cost
Subtotal
Adjustments for amounts included in regulatory assets
Total
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
$
$
163.0 $
(13.4 )
149.6
(147.1 )
2.5 $
179.4 $
8.2
187.6
(184.8 )
2.8 $
126.2 $
7.3
133.5
(131.0 )
2.5 $
135.5 $
8.2
143.7
(140.9 )
2.8 $
40.9 $
(20.7 )
20.2
(20.2 )
— $
43.9
—
43.9
(43.9 )
—
116
At September 30, 2017, the following pre-tax amounts are expected to be amortized from accumulated other
comprehensive loss into net periodic pension cost during fiscal 2018:
Amortization of net actuarial loss
Amortization of prior service (credit) cost
Subtotal
Regulatory adjustment
Total
Spire
Spire
Missouri
Spire
Alabama
$
$
12.6 $
(0.9 )
11.7
(11.4 )
0.3 $
10.5 $
0.9
11.4
(11.1 )
0.3 $
2.1
(1.8)
0.3
(0.3)
—
The assumptions used to calculate net periodic pension costs for Spire Missouri are as follows:
Weighted average discount rate - Spire Missouri East plans
Weighted average discount rate - Spire Missouri West plans
Weighted average rate of future compensation increase
Expected long-term rate of return on plan assets
2017
3.50%
3.50%
3.00%
7.75%
2016
4.40%
4.50%
3.00%
7.75%
2015
4.30%
4.45%
3.00%
7.75%
The assumptions used to calculate net periodic pension costs for Spire Alabama are as follows:
2017
2016
2015
Weighted average discount rate
Weighted average rate of future compensation increase
Expected long-term rate of return on plan assets
3.45%/3.50% 4.25%/4.30% 4.15%/4.25%
3.00%
3.00%
2.92%
7.00%/7.25%
7.25%
7.50%
The weighted average discount rate is based on long-term, high quality bond indices at the measurement date. The
expected long-term rate of return on plan assets is based on historical and projected rates of return for current and
planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were
selected after analyzing historical experience and future expectations of the returns. The overall expected rate of
return for the portfolio was developed based on the target allocation for each class.
The assumptions used to calculate the benefit obligations are as follows:
Weighted average discount rate - Spire Missouri East plans
Weighted average discount rate - Spire Missouri West plans
Weighted average discount rate - Spire Alabama plans
Weighted average rate of future compensation increase
2017
3.75%
3.70%
2016
3.50%
3.50%
3.65%/3.70%
3.45%/3.50%
3.00%
3.00%
Following are the year-end projected benefit obligation, accumulated benefit obligation, and fair value of plan assets
for plans that have a projected benefit obligation and an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
$
748.8 $
701.4
531.6
794.7 $
724.5
540.5
539.6 $
500.4
385.9
560.0 $
517.7
395.7
148.2 $
142.8
97.9
174.3
149.8
100.0
117
Following are the targeted and actual plan assets by category as of September 30 of each year for Spire Missouri and
Spire Alabama:
Spire Missouri
Equity markets
Debt securities
Cash equivalents
Total
Spire Alabama
Equity markets
Debt securities
Other*
Total
2017
Target
2017
Actual
2016
Target
2016
Actual
56.4 %
43.6 %
— %
56.8 %
42.0 %
1.2 %
56.2 %
43.8 %
— %
56.9 %
43.1 %
— %
100.0 %
100.0 %
100.0 %
100.0 %
2017
Target
2017
Actual
2016
Target
2016
Actual
60.0 %
29.0 %
11.0 %
100.0 %
58.5 %
28.7 %
12.8 %
100.0 %
60.0 %
29.0 %
11.0 %
100.0 %
59.2 %
28.8 %
12.0 %
100.0 %
* Includes cash and funds invested in real estate, commodities, natural resources and inflation-protected securities.
Spire Missouri’s investment policies are designed to maximize, to the extent possible, the funded status of the plans
over time, and minimize volatility of funding and costs. The policy seeks to maximize investment returns consistent
with these objectives and Spire Missouri’s tolerance for risk. The duration of plan liabilities and the impact of
potential changes in asset values on the funded status are fundamental considerations in the selection of plan
assets. Outside investment management specialists are utilized in each asset class. Such specialists are provided
with guidelines, where appropriate, designed to ensure that the investment portfolio is managed in accordance with
the policy. The policy seeks to avoid significant concentrations of risk by investing in a diversified portfolio of assets,
currently including a growth (equity) component and a liability-driven (debt) component. Investments in corporate,
US government and agencies, and, to a lesser extent, international debt securities seek to provide duration matching
with plan liabilities, and typically have investment grade ratings and reflect allocations across various entities and
industries. There are also exposures to additional asset types in the target portfolio: commodities, real estate and
inflation-indexed securities. For the Missouri East plan, the investment policy permits the use of derivative
instruments, which may be used to achieve the desired market exposure of an index, adjust portfolio duration, or
rebalance the total portfolio to the target asset allocation. The growth strategy utilizes a combination of derivative
instruments and debt securities to achieve diversified exposure to equity and other markets while generating
returns from the fixed-income investments and providing further duration matching with the liabilities.
Performance and compliance with the guidelines is regularly monitored. The policy calls for increased allocations to
debt securities as the funded status improves.
Spire Alabama employs a total return investment approach whereby a mix of equities and fixed income investments
are used to maximize the long-term return of plan assets with a prudent level of risk. Risk tolerance is established
through consideration of plan liabilities, plan funded status, corporate financial condition and market conditions.
Spire Alabama has developed an investment strategy that focuses on asset allocation, diversification and quality
guidelines. The investment goals are to obtain an adequate level of return to meet future obligations of the plans by
providing above average risk-adjusted returns with a risk exposure in the mid-range of comparable funds.
Investment managers are retained by Spire Alabama to manage separate pools of assets. Funds are allocated to such
managers in order to achieve an appropriate, diversified, and balanced asset mix. Comparative market and peer
group benchmarks are utilized to ensure that investment managers are performing satisfactorily. Spire Alabama
seeks to maintain an appropriate level of diversification to minimize the risk of large losses in a single asset class.
Accordingly, plan assets for the pension plans do not have a concentration of assets in a single entity, industry,
country, commodity or class of investment fund.
Following are expected pension benefit payments for the succeeding five fiscal years, and in aggregate for the five
fiscal years thereafter, for Spire, Spire Missouri, and Spire Alabama:
Spire
Spire Missouri
Spire Alabama
$
63.5 $
50.7
10.3
63.2 $
49.5
11.1
63.2 $
49.1
11.5
58.1 $
43.5
11.9
118
2018 2019 2020 2021 2022
2023-
2027
57.9 $ 281.1
198.1
42.1
67.8
13.0
The funding policy of Spire Missouri and Spire Alabama is to contribute an amount not less than the minimum
required by government funding standards, nor more than the maximum deductible amount for federal income tax
purposes. Spire Missouri contributions to the pension plans in fiscal 2018 are anticipated to be $35.5 into the
qualified trusts, and $0.5 into the non-qualified plans. Spire Alabama had no required contributions to the qualified
pension plans during 2017. Additionally, it is not anticipated that the funded status of the qualified pension plans
will fall below statutory thresholds requiring accelerated funding or constraints on benefit levels or plan
administration. During fiscal 2017, Spire Alabama made discretionary contributions to the qualified pension plans
totaling $11.9; none are expected in fiscal 2018.
Postretirement Benefits
The Utilities provide certain life insurance benefits at retirement. Spire Missouri plans provide for medical
insurance after early retirement until age 65. For retirements prior to January 1, 2015, the Spire Missouri West
plans provided medical insurance after retirement until death. For retirements after January 1, 2015, the Spire
Missouri West plans provide medical insurance after early retirement until age 65. Under the Spire Alabama plans,
medical insurance is currently available upon retirement until death for certain retirees depending on the type of
employee and the date the employee was originally hired.
Net periodic postretirement benefit costs consist of the following components:
Service cost – benefits earned during the period
Interest cost on accumulated postretirement
benefit obligation
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of actuarial loss (gain)
Special termination benefits
Subtotal
Regulatory adjustment
Net postretirement benefit cost
Spire
Spire Missouri
2017 2016 2015 2017 2016 2015 2017 2016 2015
$ 11.0 $ 10.9 $ 12.8 $ 10.4 $ 10.6 $ 12.3 $ 0.3 $ 0.3 $ 0.5
Spire Alabama
8.6
(13.6)
—
2.5
—
8.5
(3.2)
10.2
(13.5 )
0.3
3.6
2.6
14.1
(6.6 )
11.2
(13.2 )
0.8
5.1
—
16.7
(11.0 )
6.8
(9.0)
0.2
2.6
—
11.0
(1.5)
8.1
(8.5 )
0.3
3.8
2.6
16.9
(4.8 )
8.6
(8.1 )
0.8
5.1
—
18.7
(9.2 )
$ 5.3 $ 7.5 $ 5.7 $ 9.5 $ 12.1 $ 9.5 $
1.6
(4.4 )
(0.2 )
(0.1 )
—
(2.8 )
(1.8 )
(4.6 ) $
2.1
(5.0 )
—
(0.2 )
—
(2.8 )
(1.8 )
(4.6 ) $
2.6
(5.1 )
—
—
—
(2.0 )
(1.8 )
(3.8 )
Other changes in plan assets and postretirement benefit obligations recognized in OCI include the following:
Current year actuarial (gain) loss
Amortization of actuarial (loss) gain
Current year prior service credit
Amortization of prior service (cost) credit
Subtotal
Regulatory adjustment
Total recognized in OCI
Spire
Spire Alabama
Spire Missouri
2017 2016 2015 2017 2016 2015 2017 2016 2015
$ (34.1 ) $ 0.8 $ (8.5 ) $ (28.5 ) $ 1.4 $
(6.1 )
—
(5.1 )
—
(4.9 )
—
(0.8 )
(19.3 )
(6.1 )
6.1
19.3
$ — $ — $ — $ — $ — $ — $ — $ — $ —
(2.4 ) $
(5.1 )
(4.9 )
(0.8 )
(13.2 )
13.2
(4.5 ) $
0.1
(1.4 )
0.2
(5.6 )
5.6
(0.6 ) $
0.2
(1.8 )
—
(2.2 )
2.2
(2.5)
(1.4)
—
(38.0)
38.0
(2.6 )
—
(0.2 )
(31.3 )
31.3
(3.8 )
—
(0.3 )
(2.7 )
2.7
(3.6 )
(1.8 )
(0.3 )
(4.9 )
4.9
Pursuant to a MoPSC Order, the return on plan assets is based on the market-related value of plan assets
implemented prospectively over a four-year period. Gains and losses not yet includible in postretirement benefit
cost are amortized only to the extent that such gain or loss exceeds 10% of the greater of the accumulated
postretirement benefit obligation or the market-related value of plan assets. Such excess is amortized over the
average remaining service life of active participants. The recovery in rates for Spire Missouri’s postretirement
benefit plans is based on an annual allowance of $9.5 effective January 1, 2011. The difference between these
amounts and postretirement benefit cost based on the above and that otherwise would be included in the
statements of income and statements of comprehensive income is deferred as a regulatory asset or regulatory
liability.
119
The following table sets forth the reconciliation of the beginning and ending balances of the postretirement benefit
obligation at September 30:
Benefit obligation, beginning of year
$
Service cost
Interest cost
Actuarial (gain) loss
Plan amendments
Spire EnergySouth acquisition
Special termination benefits
Curtailments
Retiree drug subsidy program
Gross benefits paid
Benefit obligation, end of year
$
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
259.2 $
11.0
8.6
(22.1 )
(1.4 )
—
—
0.4
0.3
(17.5 )
238.5 $
239.2 $
10.9
10.2
7.1
(1.8 )
5.9
2.6
—
0.2
(15.1 )
259.2 $
207.9 $
10.4
6.8
(20.9 )
—
—
—
—
0.3
(12.0 )
192.5 $
191.9 $
10.6
8.1
6.7
—
—
2.6
—
—
(12.0 )
207.9 $
45.4 $
0.3
1.6
—
(1.4)
—
—
—
—
(5.3)
40.6 $
47.3
0.3
2.1
0.4
(1.8)
—
—
—
0.2
(3.1)
45.4
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets
at September 30:
Fair value of plan assets at beginning of year $
Actual return on plan assets
Employer contributions
Spire EnergySouth acquisition
Gross benefits paid
Fair value of plan assets, end of year
Funded status of plans, end of year
$
$
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
246.4 $
26.2
10.4
—
(17.5 )
265.5 $
27.0 $
223.3 $
19.9
14.3
4.0
(15.1 )
246.4 $
(12.8 ) $
159.7 $
16.8
10.4
—
(12.0 )
174.9 $
(17.6 ) $
143.6 $
13.8
14.3
—
(12.0 )
159.7 $
(48.2 ) $
82.8 $
8.9
—
—
(5.3)
86.4 $
45.8 $
79.7
6.2
—
—
(3.1)
82.8
37.4
The following table sets forth the amounts recognized in the balance sheets at September 30:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Total
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
$
$
1.4 $
47.0
(0.4 )
(21.0 )
27.0 $
0.3 $
37.4
(0.4 )
(50.1 )
(12.8 ) $
1.4 $
1.2
(0.4 )
(19.8 )
(17.6 ) $
0.3 $
—
(0.4 )
(48.1 )
(48.2 ) $
— $
45.8
—
—
45.8 $
—
37.4
—
—
37.4
Pre-tax amounts recognized in accumulated other comprehensive loss not yet recognized as components of net
periodic postretirement benefit cost consist of:
Net actuarial loss (gain)
Prior service credit
Subtotal
Adjustments for amounts included in regulatory assets
Total
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
$
$
1.5 $
(6.6 )
(5.1 )
5.1
— $
38.0 $
(5.2 )
32.8
(32.8 )
— $
12.3 $
(3.7 )
8.6
(8.6 )
— $
43.4 $
(3.4 )
40.0
(40.0 )
— $
(9.7 ) $
(2.9 )
(12.6 )
12.6
— $
(5.4 )
(1.8 )
(7.2 )
7.2
—
120
At September 30, 2017, the following pre-tax amounts are expected to be amortized from accumulated other
comprehensive loss into net periodic postretirement benefit cost during fiscal 2018:
Amortization of net actuarial loss
Amortization of prior service (credit) cost
Subtotal
Regulatory adjustment
Total
Spire
Spire
Missouri
Spire
Alabama
0.9 $
(0.1 )
0.8
(0.8 )
— $
0.9 $
0.3
1.2
(1.2 )
— $
—
(0.4 )
(0.4 )
0.4
—
$
$
The assumptions used to calculate net periodic postretirement benefit costs for Spire Missouri are as follows:
Weighted average discount rate - Spire Missouri East plans
Weighted average discount rate - Spire Missouri West plans
Weighted average rate of future compensation increase
Expected long-term rate of return on plan assets - Spire Missouri East plans
Expected long-term rate of return on plan assets - Spire Missouri West plans
2017
3.15%
3.45%
2016
4.00%
4.30%
3.00%
5.75%/7.75%
5.50%
3.00%
6.00%/7.75%
4.75%
2015
4.15%
4.40%
3.00%
6.25%/7.75%
5.00%
The assumptions used to calculate net periodic postretirement benefit costs for Spire Alabama are as follows:
Weighted average discount rate
Expected long-term rate of return on plan assets
2017
2016
2015
3.60%
4.00%/6.25%
4.50%
4.50%/7.25%
4.40%
4.75%/7.50%
The weighted average discount rate is based on long-term, high quality bond indices at the measurement date. The
expected long-term rate of return on plan assets is based on historical and projected rates of return for current and
planned asset classes in the investment portfolio. Assumed projected rates of return for each asset class were
selected after analyzing historical experience and future expectations of the returns. The overall expected rate of
return for the portfolio was developed based on the target allocation for each class.
The assumptions used to calculate the accumulated postretirement benefit obligations are as follows:
Weighted average discount rate - Spire Alabama plans
Weighted average discount rate - Spire Missouri East plans
Weighted average discount rate - Spire Missouri West plans
Weighted average rate of future compensation increase - Spire Missouri East plans
The assumed medical cost trend rates at September 30 are as follows:
Medical cost trend assumed for next year - Spire Missouri
Medical cost trend assumed for next year - Spire Alabama
Rate to which the medical cost trend rate is assumed to decline (the ultimate medical cost trend rate)
Year the rate reaches the ultimate trend
2017
3.80%
3.60%
3.60%
3.00%
2017
7.25%
7.25%
5.00%
2023
2016
3.60%
3.15%
3.45%
3.00%
2016
7.50%
7.50%
5.00%
2023
The following table presents the effects of an assumed 1% change in the assumed medical cost trend rate:
Spire
Spire Missouri
Spire Alabama
Net periodic postretirement benefit cost
Accumulated postretirement benefit obligation
1%
Increase
$
1.7 $
10.0
1%
Decrease
1%
Increase
1%
Decrease
1%
Increase
1%
Decrease
(1.4 ) $
(9.2 )
1.6 $
8.0
(1.3 ) $
(7.4 )
0.1 $
1.4
(0.1 )
(1.3)
121
Following are the targeted and actual plan assets by category as of September 30 of each year for Spire Missouri and
Spire Alabama:
Spire Missouri
Equity securities
Debt securities
Other (cash and cash equivalents held to make benefit payments)
Total
Spire Alabama
Equity securities
Debt securities
Total
Target
2017
Actual
2016
Actual
60.0 %
40.0 %
— %
59.0 %
39.4 %
1.6 %
59.1 %
39.4 %
1.5 %
100.0 %
100.0 %
100.0 %
Target
60.0 %
40.0 %
2017
Actual
2016
Actual
60.1 %
39.9 %
60.5 %
39.5 %
100.0 %
100.0 %
100.0 %
Missouri and Alabama state laws provide for the recovery in rates of costs accrued pursuant to GAAP provided that
such costs are funded through an independent, external funding mechanism. Spire Missouri and Spire Alabama
have established Voluntary Employees’ Beneficiary Association and Rabbi Trusts as external funding mechanisms.
Their investment policies seek to maximize investment returns consistent with their tolerance for risk. Outside
investment management specialists are utilized in each asset class. Such specialists are provided with guidelines,
where appropriate, designed to ensure that the investment portfolio is managed in accordance with policy.
Performance and compliance with the guidelines is regularly monitored. Spire Missouri and Spire Alabama
currently invest in mutual funds which are rebalanced periodically to the target allocation. The mutual funds are
diversified across US stock and bond markets, and for Spire Alabama, international stock markets.
Following are expected postretirement benefit payments for the succeeding five fiscal years, and in aggregate for the
five fiscal years thereafter for Spire, Spire Missouri, and Spire Alabama:
Spire
Spire Missouri
Spire Alabama
$
15.0 $
11.8
2.8
16.0 $
12.8
2.8
17.1 $
14.0
2.8
18.3 $
15.2
2.8
2018 2019 2020 2021 2022
2023-
2027
18.9 $ 101.3
86.5
15.9
13.0
2.7
Spire Missouri’s and Spire Alabama’s funding policy is to contribute amounts to the trusts equal to the periodic
benefit cost calculated pursuant to GAAP as recovered in rates. For Spire Missouri, contributions to the
postretirement plans in fiscal 2018 are anticipated to be $7.2 to the qualified trusts and $0.2 paid directly to
participants from Spire Missouri funds. It is not anticipated that contributions will be made to the Spire Alabama
postretirement plans in fiscal 2018.
Other Plans
Spire Missouri and Spire Alabama sponsor 401(k) plans that cover substantially all employees. The plans allow
employees to contribute a portion of their base pay in accordance with specific guidelines. Spire Missouri provides a
match of such contributions within specific limits. The cost of the defined contribution plans of Spire Missouri
amounted to $8.4, $8.2, and $8.0 for fiscal years 2017, 2016, and 2015, respectively. Spire Alabama also provides a
match of employee contributions within specific limits. The cost of the defined contribution plans of Spire Alabama
amounted to $2.7, $2.3, and $3.0 for fiscal years 2017, 2016, and 2015, respectively.
122
Fair Value Measurements of Pension and Other Postretirement Plan Assets
Spire
The table below categorizes the fair value measurements of the Spire pension plan assets:
As of September 30, 2017
Cash and cash equivalents
Equity mutual funds - domestic
Equity mutual funds - international
Debt securities:
US bond mutual funds
US government
US corporate
US municipal
International
Derivatives and margin (payable)
Total
As of September 30, 2016
Cash and cash equivalents
Stock/bond mutual funds
Debt securities:
US bond mutual funds
US government
US corporate
US municipal
International
Derivatives and margin (payable)
Total
Quoted Prices
in Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
37.3 $
42.1
37.4
34.4
33.2
183.7
4.2
45.1
(2.6 )
414.8 $
51.2 $
99.3
23.0
42.1
137.4
6.3
25.3
(1.0 )
383.6 $
— $
25.4
11.2
68.5
4.5
—
—
7.2
—
116.8 $
— $
26.7
126.0
3.0
—
—
—
1.1
156.8 $
— $
—
—
—
—
—
—
—
—
— $
37.3
67.5
48.6
102.9
37.7
183.7
4.2
52.3
(2.6 )
531.6
— $
0.1
51.2
126.1
—
—
—
—
—
—
0.1 $
149.0
45.1
137.4
6.3
25.3
0.1
540.5
The table below categorizes the fair value measurements of Spire’s postretirement plan assets:
As of September 30, 2017
Cash and cash equivalents
US stock/bond mutual funds
International fund
Total
As of September 30, 2016
Cash and cash equivalents
US stock/bond mutual funds
International fund
Total
Quoted Prices
in Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
4.0 $
174.1
1.0
179.1 $
4.8 $
157.9
0.9
163.6 $
— $
71.7
14.7
86.4 $
— $
68.5
14.3
82.8 $
— $
—
—
— $
— $
—
—
— $
4.0
245.8
15.7
265.5
4.8
226.4
15.2
246.4
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values
of derivative instruments are calculated by investment managers who use valuation models that incorporate
observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable
market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
123
Spire Missouri
The table below categorizes the fair value measurements of Spire Missouri’s pension plan assets:
Quoted Prices
in Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
As of September 30, 2017
Cash and cash equivalents
Equity mutual funds - domestic
Equity mutual funds - international
Debt securities:
US bond mutual funds
US government
US corporate
US municipal
International
Derivatives and margin (payable)
Total
As of September 30, 2016
Cash and cash equivalents
Stock/bond mutual funds
Debt securities:
US bond mutual funds
US government
US corporate
US municipal
International
Derivatives and margin (payable)
Total
$
$
$
$
31.7 $
—
—
—
33.2
183.7
4.2
45.1
(2.6 )
295.3 $
46.5 $
—
—
42.1
137.4
6.3
25.2
(1.0 )
256.5 $
— $
11.9
5.7
68.5
4.5
—
—
—
—
90.6 $
— $
14.8
120.2
3.0
—
—
—
1.1
139.1 $
— $
—
—
—
—
—
—
—
—
— $
31.7
11.9
5.7
68.5
37.7
183.7
4.2
45.1
(2.6 )
385.9
— $
0.1
46.5
14.9
—
—
—
—
—
—
0.1 $
120.2
45.1
137.4
6.3
25.2
0.1
395.7
The table below categorizes the fair value measurements of Spire Missouri’s postretirement plan assets:
As of September 30, 2017
Cash and cash equivalents
US stock/bond mutual funds
Total
As of September 30, 2016
Cash and cash equivalents
US stock/bond mutual funds
Total
Quoted Prices
in Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
3.9 $
171.0
174.9 $
4.6 $
155.1
159.7 $
— $
—
— $
— $
—
— $
— $
—
— $
— $
—
— $
3.9
171.0
174.9
4.6
155.1
159.7
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values
of derivative instruments are calculated by investment managers who use valuation models that incorporate
observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable
market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
124
Spire Alabama
The table below categorizes the fair value measurements of Spire Alabama’s pension plan assets:
As of September 30, 2017
Cash and cash equivalents
Equity mutual funds - domestic
Equity mutual funds - international
Debt securities:
US bond mutual funds
International
Total
As of September 30, 2016
Cash and cash equivalents
Stock/bond mutual funds
Debt securities:
US bond mutual funds
Total
Quoted Prices
in Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
3.4 $
28.4
25.2
23.2
—
80.2 $
0.4 $
59.0
23.0
82.4 $
— $
9.1
3.7
—
4.9
17.7 $
— $
11.9
5.7
17.6 $
— $
—
—
—
—
— $
— $
—
3.4
37.5
28.9
23.2
4.9
97.9
0.4
70.9
—
— $
28.7
100.0
The table below categorizes the fair value measurements of Spire Alabama’s postretirement plan assets:
As of September 30, 2017
US stock/bond mutual funds
International fund
Total
As of September 30, 2016
US stock/bond mutual funds
International fund
Total
Quoted Prices
in Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
— $
—
— $
— $
—
— $
71.7 $
14.7
86.4 $
68.5 $
14.3
82.8 $
— $
—
— $
— $
—
— $
71.7
14.7
86.4
68.5
14.3
82.8
Cash and cash equivalents include money market mutual funds valued based on quoted market prices. Fair values
of derivative instruments are calculated by investment managers who use valuation models that incorporate
observable market inputs. Debt securities are valued based on broker/dealer quotations or by using observable
market inputs. The stock and bond mutual funds are valued at the quoted market price of the identical securities.
14.
INFORMATION BY OPERATING SEGMENT
Spire
The Company has two reportable segments: Gas Utility and Gas Marketing. The Gas Utility segment is the
aggregation of the operations of the Utilities. The Gas Marketing segment includes the results of Spire Marketing, a
subsidiary engaged in the non-regulated marketing of natural gas and related activities, and Spire Storage Inc.,
which utilizes natural gas storage contracts for providing natural gas sales. Other includes:
• unallocated corporate items, including certain debt and associated interest costs;
• Spire STL Pipeline, a subsidiary of Spire planning construction and operation of a proposed 65-mile FERC
regulated pipeline to deliver natural gas into eastern Missouri; and
• Spire’s subsidiaries engaged in the operation of a propane pipeline, compression of natural gas and risk
management, among other activities.
125
Accounting policies are described in Note 1, Summary of Significant Accounting Policies. Intersegment transactions
include sales of natural gas from Spire Marketing to Spire Missouri, sales of natural gas from Spire Missouri to Spire
Marketing, propane transportation services provided by Spire NGL Inc. (formerly Laclede Pipeline Company) to
Spire Missouri, and propane storage services provided by Spire Missouri to Spire NGL Inc.
Management evaluates the performance of the operating segments based on the computation of net economic
earnings. Net economic earnings exclude from reported net income the after-tax impacts of net unrealized gains and
losses and other timing differences associated with energy-related transactions. Net economic earnings also exclude
the after-tax impacts related to acquisition, divestiture, and restructuring activities.
2017
Revenues from external customers
Intersegment revenues
Total Operating Revenues
Operating Expenses
Gas Utility
Natural and propane gas
Other operation and maintenance
Depreciation and amortization
Taxes, other than income taxes
Total Gas Utility Operating Expenses
Gas Marketing and Other *
Total Operating Expenses
Operating Income (Loss)
Net Economic Earnings (Loss)
Capital Expenditures
2016
Revenues from external customers
Intersegment revenues
Total Operating Revenues
Operating Expenses
Gas Utility
Natural and propane gas
Other operation and maintenance
Depreciation and amortization
Taxes, other than income taxes
Total Gas Utility Operating Expenses
Gas Marketing and Other *
Total Operating Expenses
Operating Income (Loss)
Net Economic Earnings (Loss)
Capital Expenditures
$
$
$
$
$
$
$
Gas
Utility
Gas
Marketing
Other
Eliminations
$
$
1,660.0
7.9
1,667.9
79.3 $
—
79.3
1.4 $
6.3
7.7
— $
Consolidated
1,740.7
—
1,740.7
645.9
409.1
153.5
137.8
1,346.3
—
1,346.3
321.6
181.5
412.6
$
$
$
—
—
—
—
—
74.1
74.1
5.2 $
6.8 $
— $
—
—
—
—
—
12.8
12.8
(5.1 ) $
(20.7 ) $
25.5 $
(14.2 )
(14.2 )
(75.4 )
(4.1 )
—
—
(79.5 )
65.3
(14.2 )
— $
— $
— $
570.5
405.0
153.5
137.8
1,266.8
152.2
1,419.0
321.7
167.6
438.1
Gas
Utility
Gas
Marketing
Other
$
1,457.2
2.2
1,459.4
78.5 $
—
78.5
Eliminations
—
(5.4 )
(5.4 )
1.6 $
3.2
4.8
$
Consolidated
1,537.3
—
1,537.3
539.7
379.3
136.9
125.2
1,181.1
—
1,181.1
278.3
160.3
291.7
$
$
$
—
—
—
—
—
66.7
66.7
11.8 $
6.4 $
— $
—
—
—
—
—
12.6
12.6
(7.8 ) $
(17.6 ) $
1.6 $
(47.5 )
(1.8 )
—
—
(49.3 )
43.9
(5.4 )
—
—
—
$
$
$
492.2
377.5
136.9
125.2
1,131.8
123.2
1,255.0
282.3
149.1
293.3
126
2015
Revenues from external customers
$
Intersegment revenues
Total Operating Revenues
Operating Expenses
Gas Utility
Natural and propane gas
Other operation and maintenance
Depreciation and amortization
Taxes, other than income taxes
Total Gas Utility Operating Expenses
Gas Marketing and Other *
Total Operating Expenses
Operating Income (Loss)
Net Economic Earnings (Loss)
Capital Expenditures
Gas
Utility
Gas
Marketing
Other
$
1,891.8
4.0
1,895.8
82.9 $
70.5
153.4
Eliminations
—
(76.5 )
(76.5 )
1.7 $
2.0
3.7
$
Consolidated
1,976.4
—
1,976.4
957.6
391.6
129.9
142.1
1,621.2
—
1,621.2
274.6
150.4
284.4
$
$
$
—
—
—
—
—
146.6
146.6
$
$
$
6.8 $
4.2 $
— $
—
—
—
—
—
12.6
12.6
(8.9 ) $
(16.3 ) $
5.4 $
(75.2 )
(1.0 )
—
—
(76.2 )
(0.3 )
(76.5 )
—
—
—
$
$
$
882.4
390.6
129.9
142.1
1,545.0
158.9
1,703.9
272.5
138.3
289.8
* Operating Expenses for “Gas Marketing and Other” include depreciation and amortization for Gas Marketing ($0.1 for 2017,
$0.1 for 2016, and $0.3 for 2015) and for Other ($0.5 for 2017, $0.5 for 2016, and $0.6 for 2015).
Total Assets at End of Year
Gas Utility
Gas Marketing
Other
Eliminations
Total Assets
Reconciliation of Consolidated Net Income
to Consolidated Net Economic Earnings
Net Income
Adjustments, pre-tax:
Unrealized loss (gain) on energy-related derivatives
Lower of cost or market inventory adjustments
Realized (gain) loss on economic hedges prior
to the sale of the physical commodity
Acquisition, divestiture and restructuring activities
Gain on sale of property
Income tax effect of adjustments
Net Economic Earnings
15.
REGULATORY MATTERS
2017
5,551.2 $
246.2
2,239.5
(1,490.2 )
6,546.7 $
2016
5,184.7 $
205.0
1,836.6
(1,161.9 )
6,064.4 $
2015
4,679.3
160.6
1,554.5
(1,116.8 )
5,277.6
$
$
2017
2016
2015
$
161.6 $
144.2 $
136.9
6.0
—
(0.3 )
4.0
—
(3.7 )
167.6 $
(0.1 )
0.2
(1.6 )
9.2
—
(2.8 )
149.1 $
(2.8 )
0.4
2.4
9.8
(7.6 )
(0.8 )
138.3
$
The Utilities account for regulated operations in accordance with 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. Also, regulators can impose liabilities upon a regulated
company for amounts previously collected from customers and for recovery of costs that are expected to be incurred
in the future (regulatory liabilities).
127
The following regulatory assets and regulatory liabilities were reflected in the Balance Sheets as of September 30,
2017 and 2016. Unamortized Purchased Gas Adjustments are also included below, which are reported separately in
the current assets and liabilities sections of each balance sheet.
$
$
$
September 30
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
Unamortized purchased gas adjustments
Energy efficiency
Other
Total Noncurrent Regulatory Assets
Total Regulatory Assets
Regulatory Liabilities:
Current:
RSE adjustment
Unbilled service margin
Refundable negative salvage
Unamortized purchased gas adjustments
Other
Total Current Regulatory Liabilities
Noncurrent:
Pension and postretirement benefit costs
Refundable negative salvage
Accrued cost of removal
Other
Total Noncurrent Regulatory Liabilities
Total Regulatory Liabilities
$
Spire
Spire Missouri
Spire Alabama
2017
2016
2017
2016
2017
2016
42.2 $
102.6
30.7
175.5
170.5
404.7
123.3
9.9
29.0
53.7
791.1
966.6 $
1.4 $
—
8.2
1.0
12.0
22.6
32.2
4.1
83.8
37.1
157.2
179.8 $
27.0 $
49.7
17.2
93.9
151.3
487.9
130.6
12.6
25.5
30.1
838.0
931.9 $
7.5 $
5.9
9.3
1.7
6.2
30.6
28.9
9.4
74.8
17.6
130.7
161.3 $
34.9 $
57.4
3.3
95.6
170.5
322.7
—
9.9
29.0
25.7
557.8
653.4 $
— $
—
—
—
2.7
2.7
—
—
54.5
26.7
81.2
83.9 $
20.2 $
43.1
3.7
67.0
151.3
375.7
—
12.6
25.5
24.7
589.8
656.8 $
— $
—
—
—
1.3
1.3
—
—
55.1
12.2
67.3
68.6 $
7.2 $
45.2
12.2
64.6
—
72.6
123.3
—
—
1.1
197.0
261.6 $
1.4 $
—
8.2
—
2.4
12.0
32.2
4.1
—
3.3
39.6
51.6 $
6.8
5.6
8.1
20.5
—
98.9
130.6
—
—
1.2
230.7
251.2
5.0
5.9
9.3
—
2.5
22.7
28.9
9.4
—
3.4
41.7
64.4
A portion of the Company’s regulatory assets are not earning a return and are shown in the schedule below:
September 30
Future income taxes due from customers
Pension and postretirement benefit costs
Other
Total Regulatory Assets Not Earning a Return
Spire
Spire Missouri
2017
2016
2017
2016
$
$
170.5 $
198.5
11.3
380.3 $
151.3 $
240.6
12.9
404.8 $
170.5 $
198.5
11.3
380.3 $
151.3
240.6
12.9
404.8
Like all the Company’s regulatory assets, these regulatory assets are expected to be recovered from customers in
future rates. The recovery period for the future income taxes due from customers and pension and postretirement
benefit costs could be as long as 20 years, based on current Internal Revenue Service guidelines and average
remaining service life of active participants, respectively. The other items not earning a return are expected to be
recovered over a period not to exceed 15 years, consistent with precedent set by the MoPSC. Spire Alabama does not
have any regulatory assets that are not earning a return.
Spire Missouri
On September 30, 2016 Spire Missouri filed to increase its Infrastructure System Replacement Surcharge (ISRS)
revenues by $5.0 for Spire Missouri East and $3.4 for Spire Missouri West, related to ISRS investments from March
128
2016 through October 2016. On November 29, 2016, MoPSC staff recommended $4.5 and $3.4 for Spire Missouri
East and Spire Missouri West, respectively, based on updated filings. On January 3, 2017, the MoPSC held a hearing
to decide two issues raised by the Missouri Office of the Public Counsel (OPC) pertaining to the ISRS eligibility of
hydrostatic testing done by Spire Missouri West and of the replacement of cast iron main interspersed with portions
of plastic pipe. On January 18, 2017, the MoPSC found in favor of the Missouri Utilities on the interspersed plastics
issue, but against Spire Missouri West on hydrostatic testing, and issued an order setting the ISRS increases at $4.5
and $3.2 for Spire Missouri East and Spire Missouri West, respectively, bringing total annualized ISRS revenue to
$29.5 and $13.4, respectively. Rates were effective January 28, 2017. On March 3, 2017, the OPC filed an appeal to
Missouri’s Western District Court of Appeals of the MoPSC’s decision permitting Spire Missouri to include in the
ISRS the replacement of cast iron main interspersed with plastic pipe. The appeal will be heard in November 2017.
On February 3, 2017, Spire Missouri filed to increase its ISRS revenues, by $3.3 for Spire Missouri East and $2.9 for
Spire Missouri West, related to ISRS investments from November 2016 through February 2017. Following the
submission of updated information, on April 4, 2017, MoPSC staff submitted its recommendation for an increase in
rates of approximately $3.0 each, for a cumulative total of $32.6 and $16.4 for Spire Missouri East and Spire
Missouri West, respectively. On that same date, the OPC again raised an objection to the ISRS eligibility of replacing
cast iron main interspersed with portions of plastic. On April 18, 2017, the parties filed with the MoPSC a
unanimous stipulation and agreement proposing to apply the judicial outcome of the OPC’s March 3, 2017 appeal
on the plastics issue to both the ISRS cases on appeal and the current ISRS cases. The agreement was approved by
the MoPSC on April 26, 2017. ISRS rates for each of the two service territories were increased by the MoPSC staff-
recommended amounts, effective June 1, 2017.
On April 15, 2015, Spire Missouri applied to the MoPSC for a new authorization of long-term financing in the
amount of $550.0. On February 10, 2016, the MoPSC issued an order, by a 3-2 vote, authorizing Spire Missouri
financing authority of $300.0 for long-term financings placed any time before September 30, 2018. Spire Missouri
filed an application for rehearing, which was denied on March 9, 2016. On March 31, 2016, Spire Missouri filed an
appeal with Missouri’s Western District Court of Appeals concerning this matter. The parties filed briefs and oral
arguments were heard on November 17, 2016. On May 30, 2017, Missouri’s Western District Court of Appeals
issued a decision upholding the MoPSC’s February 10, 2016 Order granting Spire Missouri $300.0 in long-term
financing authority. On July 5, 2017, the Court denied Spire Missouri’s request to transfer the case to the Missouri
Supreme Court, and on October 5, 2017, the Missouri Supreme Court declined to hear Spire Missouri’s direct
appeal. On March 20, 2017, Spire Missouri entered into a bond purchase agreement for $170.0 that was funded on
September 15, 2017, and applied against the $300.0 authorization.
On April 11, 2017, both Spire Missouri East and Spire Missouri West filed for a general rate case, and did so
concurrently as agreed to in GM-2013-0254, as part of the acquisition of Spire Missouri West by Spire Missouri in
fiscal 2013. The request for Spire Missouri East represents a net rate increase of $25.5. With the $32.6 already being
billed in ISRS, the total base rate increase request was $58.1. Spire Missouri West’s request represents a net rate
increase of $34.0. With the $16.4 already being billed in ISRS, the total base rate increase request was $50.4. The
rates were premised upon a 10.35% return on equity and the details of the filing can be found in GR-2017-0215 and
GR-2017-0216 for Spire Missouri East and Spire Missouri West, respectively. An evidentiary hearing has been set
for December 4 through 15, 2017, with a MoPSC decision expected by February 2018. Missouri statutes require new
rates to be effective within 11 months of the filing, or by March 8, 2018.
Spire Alabama
Spire Alabama is subject to regulation by the APSC which established the Rate Stabilization and Equalization (RSE)
rate-setting process in 1983. Spire Alabama’s current RSE order has a term extending beyond September 30, 2018,
unless the APSC enters an order to the contrary in a manner consistent with law. In the event of unforeseen
circumstances, whether physical or economic, of the nature of force majeure and including a change in control, the
APSC and Spire Alabama will consult in good faith with respect to modifications, if any. Effective January 1, 2014,
Spire Alabama’s allowed range of return on average common equity is 10.5% to 10.95% with an adjusting point of
10.8%. Spire Alabama is eligible to receive a performance-based adjustment of 5 basis points to the return on equity
adjusting point, based on meeting certain customer satisfaction criteria. Under RSE, the APSC conducts quarterly
reviews to determine whether Spire Alabama’s return on average common equity at the end of the rate year will be
within the allowed range of return. Reductions in rates can be made quarterly to bring the projected return within
the allowed range; increases, however, are allowed only once each rate year, effective December 1, and cannot
exceed 4% of prior-year revenues. The RSE reduction for the July 31, 2016 quarterly point of test was $4.8 and went
into effect October 1, 2016, and for the quarterly point of test at September 30, 2016, Spire Alabama recorded a $2.7
RSE reduction effective December 1, 2016. As part of the annual update for RSE, on November 30, 2016, Spire
Alabama filed a reduction for rate year 2017 of $2.5 that also became effective December 1, 2016. There was no RSE
129
reduction for the January 31, 2017, April 30, 2017 and July 31, 2017 points of test. As of September 30, 2017, Spire
Alabama recorded a $2.7 RSE reduction to operating revenues to bring the expected rate of return on average
common equity at the end of the year to within the allowed range of return.
The inflation-based Cost Control Measure (CCM), established by the APSC, allows for annual increases to operation
and maintenance (O&M) expense. The CCM range is Spire Alabama’s 2007 actual rate year O&M expense inflation-
adjusted using the June Consumer Price Index For All Urban Consumers each rate year plus or minus 1.75% (Index
Range). If rate year O&M expense falls within the Index Range, no adjustment is required. If rate year O&M expense
exceeds the Index Range, three-quarters of the difference is returned to customers through future rate adjustments.
To the extent rate year O&M is less than the Index Range, Spire Alabama benefits by one-half of the difference
through future rate adjustments. Certain items that fluctuate based on situations demonstrated to be beyond Spire
Alabama’s control may be excluded from the CCM calculation. As of September 30, 2017, Spire Alabama recorded a
CCM benefit of $10.7 for rate year 2017, which will be reflected in rates effective December 1, 2017. The CCM benefit
was $7.8 for rate year 2016 and $4.7 for rate year 2015.
On June 28, 2010, the APSC approved a reduction in depreciation rates, effective June 1, 2010, and a regulatory
liability recorded for Spire Alabama. Refunds from such negative salvage liability will be passed back to eligible
customers on a declining basis through lower tariff rates through rate year 2019 pursuant to the terms of the
Negative Salvage Rebalancing (NSR) rider. The total amount refundable to customers is subject to adjustments over
the remaining period for charges made to the Enhanced Stability Reserve (ESR) and other APSC-approved charges.
The refunds are due to a re-estimation of future removal costs provided for through the prior depreciation rates. For
fiscal 2017, approximately $6.3 of the customer refund was returned to customers. As of September 30, 2017, $12.3
is remaining to be refunded to customers. The NSR pass back for fiscal 2018 is $8.2 and will be reflected in rates
effective December 1, 2017 through March 31, 2018.
Spire Alabama has APSC approval for an intercompany revolving credit agreement allowing Spire Alabama to
borrow from Spire in a principal amount not to exceed $200.0 at any time outstanding in combination with its bank
line of credit, and to loan to Spire in a principal amount not to exceed $25.0 at any time outstanding. Borrowings
may be used for the following purposes: (a) meeting increased working capital requirements; (b) financing
construction requirements related to additions, extensions, and replacements of the distribution systems; and (c)
financing other expenditures that may arise from time to time in the normal course of business.
On September 18, 2017, Spire Alabama filed an application with the APSC for authorization to issue and sell $75.0
principal amount of debt and to purchase interest rate derivative instruments for the purpose of locking in favorable
interest rates and to include the associated interest charges, issuance costs, fees and any gain or loss resulting from
the settlement of such interest rate derivative instruments through rates. The application was approved by the APSC
October 3, 2017.
16.
COMMITMENTS AND CONTINGENCIES
Commitments
The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through
2031, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in
place at September 30, 2017 are estimated at $1,281.8, $563.9 and $285.6 for the Company, Spire Missouri and
Spire Alabama, respectively. Additional contracts are generally entered into prior to or during the heating season of
November through April. The Utilities recover their costs from customers in accordance with their PGA clauses or
GSA riders.
Spire NGL Inc. is providing liquid propane transportation service to Spire Missouri pursuant to an approved FERC
tariff and a contractual arrangement with Spire Missouri. In accordance with the terms of that agreement, Spire
Missouri is obligated to pay Spire NGL Inc. approximately $1.0 annually, at current rates. The agreement renews at
the end of each contract year, unless terminated by either party upon provision of at least six months’ notice.
A consolidated subsidiary is a general partner in an unconsolidated partnership that invests in real estate
partnerships. The subsidiary and third parties are jointly and severally liable for the payment of mortgage loans in
the aggregate outstanding amount of approximately $1.3 incurred in connection with various real estate ventures.
Spire has no reason to believe that the other principal liable parties will not be able to meet their proportionate
share of these obligations. Spire further believes that the asset values of the real estate properties are sufficient to
support these mortgage loans.
130
Leases
Aggregate rental expense and annual minimum rental commitments under all leases having an initial or remaining
non-cancelable term of more than one year are shown below:
Aggregate Rental Expense
2017
2016
2015
2018
2019
Spire
$
Spire Missouri
Spire Alabama
9.7 $
4.8
4.6
11.9 $
4.3
3.7
14.1 $
7.6
4.0
10.1 $
2.1
4.0
Minimum Rental Commitments
2022
2020 2021
7.8 $
0.2
3.8
9.3 $
1.3
4.1
6.1 $
0.2
2.1
Later Total
83.7
44.4 $
3.8
—
18.9
2.8
6.0 $
—
2.1
The lease agreement covering the Company’s primary office space in Missouri extends through January 2035. The
lease agreement covering the primary office space of Spire Alabama extends through February 2020. Spire Alabama
has an operating lease for additional office space that extends to January 31, 2024. Spire Alabama has subleased all
of this additional office space to Energen pursuant to a sublease that expires on December 31, 2019 with an option
to extend through January 31, 2024. Amounts in the table above have not been reduced for sublease rentals. For
Spire Alabama and Spire, sublease rentals were $2.1, $2.1, and $2.1 for fiscal years 2017, 2016, and 2015, and
minimum future rentals to be received in fiscal years 2018, 2019, and 2020 are $2.1, $2.1, and $0.5, respectively.
Spire Missouri, Spire Alabama and Spire Marketing have other relatively minor rental arrangements that provide
for minimum rental payments.
Contingencies
The Company and Utilities account for environmental liabilities and other contingencies in accordance with
accounting standards under the loss contingency guidance of ASC Topic 450, “Contingencies,” when it is probable
that a liability has been incurred and the amount of the loss can be reasonably estimated.
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 addition to matters noted below, the Company, Spire Missouri, and Spire Alabama are involved in other
litigation, claims, and investigations arising in the normal course of business. Management, after discussion with
counsel, believes that the final outcome will not have a material effect on the statements of income, balance sheets,
and statements of cash flows of the Company, Spire Missouri, or Spire Alabama. However, there is uncertainty in
the valuation of pending claims and prediction of litigation results.
In the natural gas industry, many gas distribution companies have incurred environmental liabilities associated
with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took
place. The Utilities each have former manufactured gas plant (MGP) operations in their respective service
territories.
Spire
On June 14, 2017, Spire filed a lawsuit against Cellular South, Inc. d/b/a C-Spire in federal district court for the
Southern District of Alabama, Civil Action 17-00266-KD-N, seeking a declaratory order that Spire’s SPIRE
trademarks do not infringe upon Cellular South’s C-SPIRE trademarks, and that Spire is entitled to federal
registration of its trademarks. In prior proceedings before the United States Patent and Trademark Office, Cellular
South filed oppositions to Spire’s attempts to register the SPIRE name, the SPIRE logo and the SPIRE LOGO +
HANDSHAKE trademarks. In answer to Spire’s lawsuit, Cellular South filed counterclaims alleging infringement
and unfair business practices, and seeking a declaration of infringement and that SPIRE marks are not registrable
by Spire. On September 11, 2017, a federal district court judge denied Cellular South’s motion for a temporary
restraining order and an injunction that would have prohibited Spire from using the SPIRE trademarks in Alabama
and Mississippi. After consultation with counsel, the Company does not believe that the final resolution of this
matter will have a detrimental impact on the Company’s financial condition or results of operations.
131
Spire Gulf is in the chain of title of one former MGP site which it still owns in Mobile, Alabama. On September 15,
2010, Spire Gulf filed an application to enroll the site into the Alabama Department of Environmental
Management’s (ADEM) Voluntary Cleanup Program. This application was accepted by ADEM on November 16,
2010. Investigation and testing have been completed. Spire Gulf received an approved remediation plan from
ADEM and the remedial actions under the plan were completed in fiscal 2017. Spire Gulf and the Company do not
expect potential liabilities that may arise from remediating this site to have a material impact on their future
financial condition or results of operations.
Since April 2012, a total of 14 lawsuits have been filed against Spire Gulf in Mobile County Circuit Court alleging
that in the first half of 2008, Spire Gulf spilled tert-butyl mercaptan, an odorant added to natural gas for safety
reasons, in Eight Mile, Alabama. Eleven of the lawsuits have been settled. The remaining three lawsuits, which
include approximately 270 individual plaintiffs, allege nuisance, fraud and negligence causes of actions, and seek
unspecified compensatory and punitive damages. The Company has resolved all coverage disputes with its
insurance carriers relating to this matter. The Company does not expect potential liabilities that may arise from
these lawsuits to have a material impact on its future financial condition or results of operations.
Spire Missouri
Spire Missouri has identified four former MGP sites in eastern Missouri where costs have been incurred and claims
have been asserted: one in Shrewsbury, Missouri and three in the city of St. Louis, Missouri (City). Spire Missouri
has enrolled two of the sites in the City in the Missouri Department of Natural Resources Brownfields/Voluntary
Cleanup Program (BVCP). The third site in the City is the result of a more recent claim assertion by the United
States Environmental Protection Agency (EPA), and such claim is currently being investigated.
With regard to the former MGP site located in Shrewsbury, Missouri, Spire Missouri and state and federal
environmental regulators agreed upon certain remedial actions to a portion of the site in a 1999 Administrative
Order on Consent (AOC), which actions have been completed. On September 22, 2008, EPA Region 7 issued a letter
of Termination and Satisfaction terminating the AOC. However, if after this termination of the AOC, regulators
require additional remedial actions, or additional claims are asserted, Spire Missouri may incur additional costs.
In conjunction with redevelopment of one of the sites located in the City, Spire Missouri and another former owner
of the site entered into an agreement (Remediation Agreement) with the City development agencies, the developer,
and an environmental consultant that obligates one of the City agencies and the environmental consultant to
remediate the site and obtain a No Further Action letter from the Missouri Department of Natural Resources
(MDNR). The Remediation Agreement also provides for a release of Spire Missouri and the other former site owner
from certain liabilities related to the past and current environmental condition of the site and requires the developer
and the environmental consultant to maintain certain insurance coverage, including remediation cost containment,
premises pollution liability, and professional liability. The operative provisions of the Remediation Agreement were
triggered on December 20, 2010, on which date Spire Missouri and the other former site owner, as full
consideration under the Remediation Agreement, paid a small percentage of the cost of remediation of the site. The
amount paid by Spire Missouri did not materially impact the financial condition, results of operations, or cash flows
of the Company.
Spire Missouri has not owned the second site located in the City for many years. In a letter dated June 29, 2011, the
Attorney General for the state of Missouri informed Spire Missouri that the MDNR had completed an investigation
of the site. The Attorney General requested that Spire Missouri participate in the follow up investigations of the site.
In a letter dated January 10, 2012, Spire Missouri stated that it would participate in future environmental response
activities at the site in conjunction with other potentially responsible parties (PRPs) that are willing to contribute to
such efforts in a meaningful and equitable fashion. Accordingly, Spire Missouri entered into a cost sharing
agreement for remedial investigation with other PRPs. Pending MDNR approval, which has not occurred to date,
the remedial investigation of the site will begin.
Additionally, in correspondence dated November 30, 2016, Region 7 of the EPA has asserted that Spire Missouri is
liable under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA) for alleged coal gas waste contamination at a third site in the northern portion of the City on which
Spire Missouri operated a MGP. Spire Missouri has not owned or operated the site (also known as Station “B”) for
over 70 years. Spire Missouri and the site owner have met with the EPA and reviewed its assertions. Both Spire
Missouri and the site owner have notified the EPA that the information and data provided by the EPA to date does
not rise to the level of documenting a threat to the public health or environment. As such, Spire Missouri is
requesting more information from the EPA, some of which will also be utilized to identify other former owners and
operators of the site that could be added as PRPs. To date, Spire Missouri has not received a response from the EPA.
132
Spire Missouri has notified its insurers that it seeks reimbursement for costs incurred in the past and future
potential liabilities associated with the MGP sites. While some of the insurers have denied coverage and reserved
their rights, Spire Missouri continues to discuss potential reimbursements with them.
On March 10, 2015, Spire Missouri received a Section 104(e) information request from EPA Region 7 regarding the
former Thompson Chemical/Superior Solvents site in the City. In turn, Spire Missouri issued a Freedom of
Information Act (FOIA) request to the EPA on April 3, 2015, in an effort to identify the basis of the inquiry. The
FOIA response from the EPA was received on July 15, 2015 and a response was provided to the EPA on August 15,
2015. Spire Missouri has received no further inquiry from the EPA regarding this matter.
In its western service area, Spire Missouri has seven owned MGP sites enrolled in the BVCP: Joplin MGP #1, St.
Joseph MGP #1, Kansas City Coal Gas Station B, Kansas City Station A Railroad area, Kansas City Coal Gas Station
A North, Kansas City Coal Gas Station A South, and Independence MGP #2. Source removal has been conducted at
all of the owned sites since 2003 with the exception of Joplin. On September 15, 2016, a request was made with the
MDNR for a restrictive covenant use limitation with respect to Joplin. Remediation efforts at the seven sites are at
various stages of completion, ranging from groundwater monitoring and sampling following source removal
activities to the aforementioned request in respect to Joplin. As part of its participation in the BVCP, Spire Missouri
communicates regularly with the MDNR with respect to its remediation efforts and monitoring activities at these
sites. On May 11, 2015, MDNR approved the next phase of investigation at the Kansas City Station A North and
Railroad areas.
To date, costs incurred for all Spire Missouri MGP sites for investigation, remediation and monitoring these sites
have not been material. However, the amount of costs relative to future remedial actions at these and other sites is
unknown and may be material. The actual future costs that Spire Missouri may incur could be materially higher or
lower depending upon several factors, including whether remediation actions will be required, final selection and
regulatory approval of any remedial actions, changing technologies and government regulations, the ultimate ability
of other PRPs to pay, the successful completion of remediation efforts required by the Remediation Agreement
described above, and any insurance recoveries.
In 2013, Spire Missouri retained an outside consultant to conduct probabilistic cost modeling of 19 former MGP
sites owned or operated by Spire Missouri. The purpose of this analysis was to develop an estimated range of
probabilistic future liability for each site. That analysis, completed in August 2014, provided a range of
demonstrated possible future expenditures to investigate, monitor and remediate all 19 MGP sites. Spire Missouri
has recorded its best estimate of the probable expenditures that relate to these matters. The amount is not material.
Costs associated with environmental remediation activities are accrued when such costs are probable and
reasonably estimable. To the extent such costs (less any amounts received from insurance proceeds or as
contributions from other PRPs) are incurred prior to a rate case, Spire Missouri would request from the MoPSC
authority to defer such costs and collect them in the next rate case. Spire Missouri and the Company do not expect
potential liabilities that may arise from remediating these sites to have a material impact on their future financial
condition or results of operations.
Spire Alabama
Spire Alabama is in the chain of title of nine former MGP sites, four of which it still owns, and five former
manufactured gas distribution sites, one of which it still owns. Spire Alabama does not foresee a probable or
reasonably estimable loss associated with these nine sites. Spire Alabama and the Company do not expect potential
liabilities that may arise from remediating these sites to have a material impact on their future financial conditions
or results of operations.
In 2012, Spire Alabama responded to an EPA Request for Information Pursuant to Section 104 of CERCLA relating
to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama was
identified as a PRP under CERCLA for the cleanup of the site or costs the EPA incurs in cleaning up the site. At this
point, Spire Alabama has not been provided information that would allow it to determine the extent, if any, of its
potential liability with respect to the 35th Avenue Superfund Site and vigorously denies its inclusion as a PRP.
On December 17, 2013, an incident occurred at a Housing Authority apartment complex in Birmingham, Alabama
that resulted in one fatality, personal injuries and property damage. Spire Alabama cooperated with the National
Transportation Safety Board (NTSB) which investigated the incident. The NTSB report of findings was issued on
March 30, 2016 and no safety recommendations, fines, or penalties were contained therein. Spire Alabama has been
named as a defendant in several lawsuits arising from the incident, and additional lawsuits and claims may be filed
against Spire Alabama.
133
17.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
Spire
In the opinion of Spire, the quarterly information presented below for fiscal years 2017 and 2016 includes all
adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of operations
for such periods. Variations in consolidated operations reported on a quarterly basis primarily reflect the seasonal
nature of the business of the Utilities.
Three Months Ended
Fiscal Year 2017
Total Operating Revenues
Operating Income
Net Income (Loss)
Basic Earnings (Loss) Per Share of Common Stock
Diluted Earnings (Loss) Per Share of Common Stock
Fiscal Year 2016
Total Operating Revenues
Operating Income (Loss)
Net Income (Loss)
Basic Earnings (Loss) Per Share of Common Stock
Diluted Earnings (Loss) Per Share of Common Stock
Spire Missouri
Dec. 31
March 31 June 30
Sept. 30
$
$
$
$
$
$
495.1 $
89.1
45.2
0.99 $
0.99 $
399.4 $
87.0
46.9
1.08 $
1.08 $
663.4 $
180.4
108.0
2.36 $
2.36 $
609.3 $
167.7
100.8
2.32 $
2.31 $
323.5 $
50.3
21.7
0.45 $
0.45 $
249.3 $
35.3
10.7
0.24 $
0.24 $
258.7
1.9
(13.3 )
(0.28)
(0.28)
279.3
(7.7 )
(14.2 )
(0.31)
(0.31)
In the opinion of Spire Missouri, the quarterly information presented below for fiscal years 2017 and 2016 includes
all adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of
operations for such periods. Variations in operations reported on a quarterly basis primarily reflect their seasonal
nature.
Three Months Ended
Fiscal Year 2017
Total Operating Revenues
Operating Income
Net Income
Fiscal Year 2016
Total Operating Revenues
Operating Income
Net Income (Loss)
Spire Alabama
Dec. 31
March 31 June 30
Sept. 30
$
$
363.6 $
64.5
38.0
317.2 $
65.1
39.4
447.2 $
90.2
57.0
446.7 $
87.0
54.3
198.5 $
30.5
15.5
179.3 $
29.4
13.9
162.6
11.7
2.5
144.3
5.4
(1.7 )
In the opinion of Spire Alabama, the quarterly information presented below for fiscal years 2017 and 2016 includes
all adjustments (consisting of only normal recurring accruals) necessary for a fair statement of the results of
operations for such periods. Variations in operations reported on a quarterly basis primarily reflect their seasonal
nature.
Three Months Ended
Fiscal Year 2017
Total Operating Revenues
Operating Income (Loss)
Net Income (Loss)
Fiscal Year 2016
Total Operating Revenues
Operating Income (Loss)
Net Income (Loss)
Dec. 31
March 31 June 30
Sept. 30
$
$
86.7 $
19.8
10.3
82.3 $
18.9
9.9
158.8 $
78.9
47.6
166.0 $
80.4
48.1
90.5 $
15.5
7.4
74.0 $
9.3
4.0
64.5
(8.4 )
(7.2 )
46.2
(17.1 )
(8.8 )
134
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
There have been no changes in or disagreements on accounting and financial disclosure with Spire’s, Spire
Missouri’s, or Spire Alabama’s outside auditors that are required to be disclosed.
Item 9A. Controls and Procedures
Spire
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and
Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon such evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Change in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter
that have materially affected, or are reasonable likely to materially affect, our internal control over financial
reporting.
Spire Missouri
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and
Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter
that have materially affected, or are reasonable likely to materially affect, our internal control over financial
reporting.
Spire Alabama
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with
participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the disclosure controls and procedures pursuant to Rule 13a-15(e) and
Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our fourth fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
The Management Reports on Internal Control Over Financial Reporting and the Reports of Independent Registered
Public Accounting Firm are included under Item 8, Financial Statements and Supplementary Data.
135
Item 9B. Other Information
Amendment to the 2015 Equity Incentive Plan
On November 9, 2017, the Spire Inc. (“Spire” or “the Company”) Board of Directors (“Board”), upon the
recommendation of the Compensation Committee (“Compensation Committee”), adopted and approved an
amendment to The Laclede Group 2015 Equity Incentive Plan (“EIP”), which becomes effective January 1, 2018.
The purpose of the EIP is to encourage directors, officers, and employees of Spire and its subsidiaries to contribute
to the Company’s success and align their interests with that of shareholders. To accomplish this purpose, the
Compensation Committee may grant awards under the EIP that may be earned by achieving performance objectives
and/or other criteria as determined by the Compensation Committee. Under the terms of the EIP, officers and
employees of Spire and its subsidiaries, as determined by the Compensation Committee, are eligible to be selected
for awards.
The amendment to the EIP updates the current plan, which was approved by shareholders on January 29, 2015, to
reflect the corporate name change of “The Laclede Group, Inc.” to “Spire Inc.,” including changing the plan name to
“Spire 2015 Equity Incentive Plan.” The amendment to the EIP also makes certain revisions to the EIP’s definition
of “change in control” to align the definition to be consistent with other compensation plans sponsored by Spire,
specifically by increasing the triggering percentage from 20% to 30% for an acquisition of the Company’s
outstanding shares of common stock or combined voting power of outstanding voting securities, and by specifying
that at least 80% of the Company’s assets must be acquired in order for a change in control to occur.
The foregoing description of the amendment to the EIP is qualified in its entirety by reference to the provisions,
including defined terms, of the amendment to the EIP, which is filed herewith as Exhibit 10.54 to this Annual
Report on Form 10-K and incorporated herein by reference.
Amendment to the Executive Severance Plan
On November 9, 2017, the Spire Board, upon the recommendation of the Compensation Committee, adopted and
approved an amendment to Spire Inc. Executive Severance Plan (“2017 Executive Severance Plan”), which becomes
effective January 1, 2018. The purpose of the 2017 Executive Severance Plan is to enable Spire, together with its
subsidiaries, to offer certain protections to selected participants if their employment with Spire or its subsidiaries is
terminated by Spire without cause or by the participant for good reason, with or without a change in control.
The amendment to the 2017 Executive Severance Plan updates the current plan, which was effective June 1, 2017, to
change the name of the plan to the “Spire Executive Severance Plan.” The amendment to the 2017 Executive
Severance Plan also makes certain revisions to the plan’s definition of “change in control” to align the definition to
be consistent with other compensation plans sponsored by Spire, specifically by specifying that at least 80% of the
Company’s assets must be acquired in order for a change in control to occur.
The foregoing description of the amendment to the 2017 Executive Severance Plan is qualified in its entirety by
reference to the provisions, including defined terms, of the amendment to the 2017 Executive Severance Plan, which
is filed herewith as Exhibit 10.55 to this Annual Report on Form 10-K and incorporated herein by reference.
Amendment to the Annual Incentive Plan
On November 9, 2017, the Spire Board, upon the recommendation of the Compensation Committee, adopted and
approved an amendment to The Laclede Group Annual Incentive Plan (“AIP”), which becomes effective January 1,
2018. The purpose of the AIP is to provide an incentive to executive officers and other selected key executives of
Spire and its subsidiaries to contribute to the growth, profitability and increased shareholder value of the Company
and to retain such executives.
The amendment to the AIP updates the current plan, which was approved by shareholders on January 28, 2016, to
reflect the corporate name change of “The Laclede Group, Inc.” to “Spire Inc.,” including changing the plan name to
“Spire Annual Incentive Plan.” The amendment to the AIP also makes certain revisions to the AIP’s definition of
“change in control” to align the definition to be consistent with other compensation plans sponsored by Spire,
specifically by increasing the triggering percentage from 20% to 30% for an acquisition of the Company’s
outstanding shares of common stock or combined voting power of outstanding voting securities, and by specifying
that at least 80% of the Company’s assets must be acquired in order for a change in control to occur.
The foregoing description of the amendment to the AIP is qualified in its entirety by reference to the provisions,
including defined terms, of the amendment to the AIP, which is filed herewith as Exhibit 10.53 to this Annual
Report on Form 10-K and incorporated herein by reference.
136
Amendment to the 2011 Management Continuity Protection Plan
On November 8, 2017, the Spire Board, upon the recommendation of the Compensation Committee, adopted and
approved an amendment to The Laclede Group 2011 Management Continuity Protection Plan (“2011 MCPP”), which
becomes effective January 1, 2018. The 2011 MCPP provides severance benefits to eligible employees of Spire and its
designated subsidiaries hired after 2011 in the event an employee is terminated by Spire without cause or by the
participant for good reason following a change in control. The 2011 MCPP is closed to new participants.
The amendment to the 2011 MCPP updates the current plan, which was effective January 1, 2011, to reflect the
corporate name change of “The Laclede Group, Inc.” to “Spire Inc.,” including changing the plan name to “Spire
2011 Management Continuity Protection Plan.” The amendment to the 2011 MCPP also makes certain revisions to
the plan’s definition of “change in control” to align the definition to be consistent with other compensation plans
sponsored by Spire. Specifically, the new definition provides that a change in control occurs upon any of the
following: acquisition of 30% of the Company’s outstanding shares of common stock or combined voting power of
outstanding voting securities is acquired; a change in the majority of the members of the Board without the
approval of a majority of the members of the Board; a merger or reorganization after which the shareholders
immediately prior to the transaction do not own more than 50% of the surviving entity’s then outstanding shares of
common stock or combined voting power; or the acquisition of least 80% of the Company’s assets.
The foregoing description of the amendment to the 2011 MCPP is qualified in its entirety by reference to the
provisions, including defined terms, of the amendment to the 2011 MCPP, which is filed herewith as Exhibit 10.56
to this Annual Report on Form 10-K and incorporated herein by reference.
Amendment to the Deferred Income Plan
On November 9, 2017, the Spire Board, upon the recommendation of the Compensation Committee, adopted and
approved an amendment to the Spire Inc. Deferred Income Plan (“DIP”), which becomes effective January 1, 2018.
The DIP affords eligible directors and officers of Spire (including its named executive officers) and its designated
subsidiaries the ability to defer the receipt of a portion of their compensation, which will accrue earnings, with such
deferrals forming the basis for benefits upon termination, death, or disability.
The amendment to the DIP updates the current plan, which was last amended and restated effective January 1,
2016, with the following features:
• Changes mid-year enrollments to quarterly instead of monthly.
• Changes definition of “Change in Control” to align the definition to be consistent with other compensation
plans, by providing that a change in control occurs upon any of the following: acquisition of 30% of the
Company’s outstanding shares of common stock or combined voting power of outstanding voting securities is
acquired; a change in the majority of the members of the Board without the approval of a majority of the
members of the Board; a merger or reorganization after which the shareholders immediately prior to the
transaction do not own more than 50% of the surviving entity’s then outstanding shares of common stock or
combined voting power; or the acquisition of least 80% of the Company’s assets.
• Removes annual minimum deferral requirement.
• Changes plan name to “Spire Deferred Income Plan.”
• Allows daily investment election changes.
• Adds “Flexible Distribution Account” and “Separation Distribution Account” options to plan.
• Closes “Retirement Distribution Account” and “In-Service Distribution Account” options to new participants.
• Adds hardship withdrawal option to plan.
• Requires lump sum distribution of small balances not exceeding the limit imposed by Section 402(g) of the
Internal Revenue Code.
• Allows changes to form of payment in accordance with Section 409A of the Internal Revenue Code.
The foregoing description of the amendment to the DIP is qualified in its entirety by reference to the provisions,
including defined terms, of the amendment to the DIP, which is filed herewith as Exhibit 10.57 to this Annual
Report on Form 10-K and incorporated herein by reference.
137
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information about:
• our directors is incorporated by reference from the discussion under Proposal 1 of our proxy statement to be
filed on or about December 13, 2017 (2017 proxy statement);
• our executive officers is reported in Part I of this Form 10-K;
• compliance with Section 16(a) of the Exchange Act is incorporated by reference from the discussion in our
2017 proxy statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance”;
• our Financial Code of Ethics is posted on our website, www.SpireEnergy.com, under
Investors/Governance/Governance documents (http://investors.spireenergy.com/governance/governance-
documents); and
• our Audit Committee, our Audit Committee financial experts, and submitting nominations to the Corporate
Governance Committee is incorporated by reference from the discussion in our 2017 proxy statement under
the heading “Corporate Governance.”
In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters for our Audit,
Compensation and Corporate Governance Committees are available under “Governance documents” on our website,
as indicated above, and a copy will be sent to any shareholder upon written request.
Item 11. Executive Compensation
Information about director and executive compensation is incorporated by reference from the discussion in our
2017 proxy statement under the headings: “Directors’ Compensation,” “Compensation Discussion and Analysis,”
and “Executive Compensation.” The 2017 proxy statement also includes the “Compensation Committee Report,”
which is deemed furnished and not filed.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Information about security ownership of certain beneficial owners and management is incorporated by reference
from the discussion in our 2017 proxy statement under “Beneficial Ownership of Spire Common Stock.”
The following table sets forth aggregate information regarding the Company’s equity compensation plans as of
September 30, 2017:
Plan category
Equity compensation plans
approved by security holders (1)
Equity compensation plans not
approved by security holders
Total
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
Weighted average
exercise price of
outstanding options,
warrants and rights
(a)
674,970
—
674,970
(b)
$—
—
$—
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
505,545
—
505,545
(1) Reflects the Company’s 2015 and 2006 Equity Incentive Plans.
Information regarding the above referenced plans is set forth in Note 3, Stock-Based Compensation, of the Notes to
Financial Statements in Item 8 of this report.
138
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information about:
• our policy and procedures for related party transactions and
• the independence of our directors
is included in our 2017 proxy statement under “Corporate Governance” and is incorporated by reference. There
were no related party transactions in fiscal 2017.
Item 14. Principal Accounting Fees and Services
Information about fees paid to our independent registered public accountant and our policy for pre-approval of
services provided by our independent registered public accountant is incorporated by reference from our 2017 proxy
statement under “Fees of Independent Registered Public Accountant” and “Corporate Governance,” respectively.
139
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) (1) Financial Statements
See Item 8, Financial Statements and Supplementary Data, filed herewith, for a list of financial
statements.
(2) Financial Statement Schedules
Schedules have been omitted because they are not applicable, related significance tests were not met, or
the required data has been included in the financial statements or notes to financial statements.
(3) Exhibits
Exhibit
Number
2.01*
Description
Agreement and Plan of Merger and Reorganization; filed as Appendix A to proxy
statement/prospectus contained in the Company’s Registration Statement on Form S-4 filed October
27, 2000, No. 333-48794.
3.01*
Articles of Incorporation of Spire Inc., as amended, effective as of April 28, 2016; filed as Exhibit 3.1
to the Company’s Current Report on Form 8-K filed May 3, 2016.
3.02*
Bylaws of Spire Inc., as amended, effective as of April 28, 2016; filed as Exhibit 3.2 to the Company’s
Current Report on Form 8-K filed May 3, 2016.
3.03*3
Spire Missouri Inc.’s Amended Articles of Incorporation, as amended, effective August 30, 2017;
filed as Exhibit 3.1 to Spire Missouri’s Current Report on Form 8-K filed September 1, 2017.
3.04*3
Amended Bylaws of Spire Missouri Inc. effective as of August 30, 2017; filed as Exhibit 3.2 to Spire
Missouri’s Current Report on Form 8-K filed September 1, 2017.
3.05*2
Articles of Amendment of the Articles of Incorporation of Spire Alabama Inc., dated September 1,
2017; which was filed as Exhibit 3.3 to Spire Alabama’s Current Report on Form 8-K filed September
1, 2017.
3.06*2
Amended Bylaws of Spire Alabama Inc. effective September 1, 2017; filed as Exhibit 3.4 to Spire
Alabama’s Current Report on Form 8-K filed September 1, 2017.
4.01*
Mortgage and Deed of Trust, dated as of February 1, 1945; filed as Exhibit 7-A to registration
statement No. 2-5586.
4.02*
Fourteenth Supplemental Indenture, dated as of October 26, 1976; filed as Exhibit b-4 to registration
statement No. 2-64857 filed June 26, 1979.
4.03*3
4.04*3
4.05*3
4.06*3
4.07*3
4.08*3
4.09*3
Twenty-Fourth Supplemental Indenture dated as of June 1, 1999, between Laclede Gas and State
Street Bank and Trust Company of Missouri, N.A., as trustee; filed as Exhibit 4.01 to Laclede Gas’
Current Report on Form 8-K filed June 4, 1999.
Twenty-Fifth Supplemental Indenture dated as of September 15, 2000, between Laclede Gas and
State Street Bank and Trust Company of Missouri, as trustee; filed as Exhibit 4.01 to Laclede Gas’
Current Report on Form 8-K filed September 29, 2000.
Twenty-Seventh Supplemental Indenture dated as of April 15, 2004, between Laclede Gas and UMB
Bank & Trust, N.A., as trustee; filed as Exhibit 4.01 to Laclede Gas’ Current Report on Form 8-K filed
April 28, 2004.
Twenty-Eighth Supplemental Indenture dated as of April 15, 2004, between Laclede Gas and UMB
Bank & Trust, N.A., as trustee; filed as Exhibit 4.02 to Laclede Gas’ Current Report on Form 8-K
filed April 28, 2004.
Twenty-Ninth Supplemental Indenture dated as of June 1, 2006, between Laclede Gas and UMB
Bank and Trust, N.A., as trustee; filed as Exhibit 4.1 to Laclede Gas’ Current Report on Form 8-K
filed June 9, 2006.
Thirty-First Supplemental Indenture, dated as of March 15, 2013, between Laclede Gas and UMB
Bank & Trust, N.A., as trustee; filed as Exhibit 4.1 to the Company’s Form 10-Q for the fiscal quarter
ended March 31, 2013.
Thirty-Second Supplemental indenture, dated as of August 13, 2013, between Laclede Gas and UMB
Bank & Trust, N.A., as trustee; filed as Exhibit 4.1 to Laclede Gas’ Current Report on Form 8-K filed
August 13, 2013.
140
Exhibit
Number
4.10*3
4.11*3
Description
Laclede Gas Board of Directors’ Resolution dated August 28, 1986 which generally provides that the
Board may delegate its authority in the adoption of certain employee benefit plan amendments to
certain designated Executive Officers; filed as Exhibit 4.12 to Laclede Gas’ Annual Report on Form
10-K for the fiscal year ended September 30, 1991.
Laclede Gas’ Board of Directors’ Resolutions dated March 27, 2003, updating authority delegated
pursuant to August 28, 1986 Laclede Gas resolutions; filed as Exhibit 4.19(a) to the Company’s
Annual Report on Form 10-K for the fiscal year ended September 30, 2003.
4.12*
Junior Subordinated Indenture, dated as of June 11, 2014, between the Company and U.S. Bank
National Association, as trustee; filed as Exhibit 4.1 to Spire’s Current Report on Form 8-K filed June
11, 2014.
4.13*
4.14*
4.15*2
4.16*2
Indenture, dated as of August 19, 2014, between the Company and UMB Bank & Trust, N.A., as
trustee; filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed August 19, 2014.
First Supplemental Indenture, dated as of August 19, 2014, between the Company and UMB Bank &
Trust, N.A., as trustee (including Form of Floating Rate Senior Notes due 2017, Form of 2.55%
Senior Notes due 2019 and Form of 4.70% Senior Notes due 2044); filed as Exhibit 4.2 to the
Company’s Current Report on Form 8-K filed August 19, 2014.
Indenture dated as of November 1, 1993, between Alagasco and NationsBank of Georgia, National
Association, Trustee, (“Alagasco 1993 Indenture”), which was filed as Exhibit 4(k) to Alagasco’s
Registration Statement on Form S-3 (Registration No. 33-70466).
Officers’ Certificate, dated January 14, 2005, pursuant to Section 301 of the Alagasco 1993 Indenture
setting forth the terms of the 5.20 percent Notes due January 15, 2020, which was filed as Exhibit
4.4 to Alagasco’s Current Report on Form 8-K filed January 14, 2005.
4.17*2
Officers’ Certificate, dated November 17, 2005, pursuant to Section 301 of the Alagasco 1993
Indenture setting forth the terms of the 5.368 percent Notes due December 1, 2015, which was filed
as Exhibit 4.2 to Alagasco’s Current Report on Form 8-K filed November 17, 2005.
4.18*2
4.19*
4.20*
4.21*
Officers’ Certificate, dated January 16, 2007, pursuant to Section 301 of the Alagasco 1993 Indenture
setting forth the terms of the 5.90 percent Notes due January 15, 2037, which was filed as Exhibit 4.2
to Alagasco’s Current Report on Form 8-K filed January 16, 2007.
Second Supplemental Indenture, dated as of February 27, 2017, between Spire Inc. and UMB Bank &
Trust, N.A., as Trustee (including Form of 3.543% Senior Notes due 2024); filed as Exhibit 4.2 to the
Company’s Current Report on Form 8-K filed February 27, 2017.
Master Note Purchase Agreement dated June 20, 2016, among Spire Inc. and certain institutional
purchasers party thereto; filed as Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 2017.
First Supplement to Master Note Purchase Agreement dated as of March 15, 2017, among Spire Inc.
and certain institutional purchasers party thereto; filed as Exhibit 4.3 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2017.
4.22*3
Bond Purchase Agreement dated March 20, 2017, among Laclede Gas Company and certain
institutional purchasers party thereto (including Form of Thirty-Third Supplemental Indenture);
filed as Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2017.
10.01*†3
Automated Meter Reading Services Agreement, dated as of March 11, 2005, between Cellnet
Technology, Inc. and Laclede Gas; filed as Exhibit 10.1 to Laclede Gas’ Quarterly Report on Form 10-
Q for the fiscal quarter ended March 31, 2005. Confidential portions of this exhibit have been
omitted and filed separately with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
Restated Laclede Gas Supplemental Retirement Benefit Plan, as amended and restated
as of January 1, 2005; filed as Exhibit 10.06 to Laclede Gas’ Quarterly Report on Form
10-Q for the fiscal quarter ended December 31, 2008.
Laclede Gas Supplemental Retirement Benefit Plan II, effective as of January 1, 2005;
filed as Exhibit 10.7 to Laclede Gas’ Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2008.
Amendment and Restatement of Retirement Plan for Non-Employee Directors of
Laclede Gas as of November 1, 2002; filed as Exhibit 10.08c to Laclede Gas’ Annual
Report on Form 10-K for the fiscal year ended September 30, 2002.
Amendment to Terms of Retirement Plan for Non-Employee Directors of Laclede Gas
as of October 1, 2004; filed as Exhibit 10.2 to Laclede Gas’ Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2004.
10.02*3
10.03*3
10.04*3
10.05*3
141
Exhibit
Number
10.06*3
Description
Salient Features of Laclede Gas’ Deferred Income Plan for Directors and Selected
Executives, including amendments adopted by the Board of Directors on
July 26, 1990; filed as Exhibit 10.12 to Laclede Gas’ Annual Report on Form 10-K for
the fiscal year ended September 30, 1991.
10.07*3
Amendment to Laclede Gas’ Deferred Income Plan for Directors and Selected
Executives, adopted by the Board of Directors on August 27, 1992; filed as Exhibit
10.12a to Laclede Gas’ Annual Report on Form 10-K for the fiscal year ended
September 30, 1992.
10.08*3
10.09*
10.10*
10.11*3
10.12*3
Salient Features of Laclede Gas’ Deferred Income Plan II for Directors and Selected
Executives (as amended and restated effective as of January 1, 2005); filed as Exhibit
10.1 to Laclede Gas’ Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2008.
Salient Features of the Company’s Deferred Income Plan for Directors and Selected
Executives (effective as of January 1, 2005); filed as Exhibit 10.2 to the Company’s
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008.
The Company’s Deferred Income Plan for Directors and Selected Executives, as
Amended and Restated as of January 1, 2015; filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed November 4, 2014.
Form of Indemnification Agreement between Laclede Gas and its Directors and
Officers; filed as Exhibit 10.13 to Laclede Gas’ Annual Report on Form 10-K for the
fiscal year ended September 30, 1990.
The Laclede Group Management Continuity Protection Plan, effective as of January 1,
2005; filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 2008.
10.13*
Form of Management Continuity Protection Agreement; filed as Exhibit 10.5a to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
2008.
10.14*3
The Laclede Group 2011 Management Continuity Protection Plan; filed as Exhibit
10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2010.
10.15*
Form of Agreement under the Company’s 2011 Management Continuity Protection
Plan; filed as Exhibit 10.25a to the Company’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2010.
10.16*
Restricted Stock Plan for Non-Employee Directors as amended and effective January
29, 2009; filed as Appendix A to the Company’s Definitive Proxy Statement on
Schedule 14A filed December 22, 2008.
10.17*
10.18*
Amendment to Restricted Stock Plan for Non-Employee Directors; filed as Exhibit 10.6
to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2011.
Form of Non-Qualified Stock Option Award Agreement with Mandatory Retirement
Provisions; filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
November 5, 2004.
10.19*
Form of Non-Qualified Stock Option Award Agreement without Mandatory
Retirement Provisions; filed as Exhibit 10.2 to the Company’s Current Report on Form
8-K filed November 5, 2004.
10.20*1
The Laclede Group 2006 Equity Incentive Plan, as amended effective February 1, 2012;
filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2012.
10.21*1
The Laclede Group 2015 Equity Incentive Plan; filed as the Appendix to the Company’s
Definitive Proxy Statement on Form DEF 14A filed December 19, 2014.
10.22*
10.23*
The Company’s Form of Restricted Stock Award Agreement; filed as Exhibit 10.8 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
2008.
The Company’s Form of Performance Contingent Restricted Stock Award Agreement;
filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2009.
142
Exhibit
Number
10.24*
Description
The Company’s Form of Performance Contingent Restricted Stock Unit Award
Agreement; filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 2011.
10.25*
The Company’s Form of Performance Contingent Restricted Stock Unit Award
Agreement; filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 2012.
10.26*
10.27*3
10.28*3
Note Purchase Agreement, dated August 3, 2012, by and among the Company and the Purchasers
listed in Schedule A thereto; filed as Exhibit 10.28 to the Company’s Annual Report on Form 10-K
for the fiscal year ended September 30, 2012.
Laclede Gas Cash Balance Supplemental Retirement Benefit Plan, effective as of
January 1, 2009; filed as Exhibit 10.19 to Laclede Gas’ Annual Report on Form 10-K for
the fiscal year ended September 30, 2012.
Amended and Restated Firm (Rate Schedule FT) Transportation Service Agreement between Laclede
Energy Resources, Inc. and CenterPoint Energy Gas Transmission Company TSA #1006667; filed as
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2012.
10.29*3
Amended and Restated Storage Service Agreement For Rate Schedule FSS, Contract #3147, dated
July 30, 2013, between CenterPoint Energy-Mississippi River Transmission Corporation and Laclede
Gas; filed as Exhibit 10.1 to Laclede Gas’ Current Report on Form 8-K filed August 2, 2013.
10.30*3
10.31*3
10.32*
Amended and Restated Transportation Service Agreement for Rate Schedule FTS, Contract #3310,
dated July 30, 2013, between CenterPoint Energy-Mississippi River Transmission Corporation and
Laclede Gas; filed as Exhibit 10.2 to Laclede Gas’ Current Report on Form 8-K filed August 2, 2013.
Amended and Restated Transportation Service Agreement for Rate Schedule FTS, Contract #3311,
dated July 30, 2013, between CenterPoint Energy-Mississippi River Transmission Corporation and
Laclede Gas; filed as Exhibit 10.3 to Laclede Gas’ Current Report on Form 8-K filed August 2, 2013.
Lease Agreement, dated January 21, 2014, between the Company, as Tenant, and Market 700, LLC,
as Landlord; filed as Exhibit 10.1 to Spire Inc.’s Current Report on Form 8-K filed January 27, 2014.
10.33*2
Master Note Purchase Agreement, dated as of June 5, 2015, among Alagasco and certain
institutional purchasers; filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2015.
10.34*2
10.35*2
10.36*2
10.37*2
Note Purchase Agreement, dated December 22, 2011, among Alagasco and the Purchasers thereto
(the AIG purchasers) with respect to $25 million 3.86 percent Senior Notes due December 22, 2021,
which was filed as Exhibit 10.1 to Alagasco’s Current Report on Form 8-K filed December 22, 2011.
Note Purchase Agreement, dated December 22, 2011, among Alagasco and the Purchasers thereto
(the Prudential purchasers) with respect to $25 million 3.86 percent Senior Notes due December 22,
2021, which was filed as Exhibit 10.2 to Alagasco’s Current Report on Form 8-K filed December 22,
2011.
Service Agreement Under Rate Schedule CSS (No. SSNG1), between Southern Natural Gas Company
and Alagasco, dated as of September 1, 2005, which was filed as Exhibit 10(a) to Alagasco’s Annual
Report on Form 10-K for the year ended December 31, 2005.
Amended Exhibit A, effective January 15, 2014, to Service Agreement Under Rate Schedule CSS (No.
SSNG1) between Southern Natural Gas Company and Alagasco dated September 1, 2005 which was
filed as Exhibit 10(g) to Alagasco’s Annual Report on Form 10-K for the year ended December 31,
2013.
10.38*2
Firm Transportation Service Agreement Under Rate Schedule FT and/or FT-NN (No. FSNG1),
between Southern Natural Gas Company and Alagasco dated as of September 1, 2005, which was
filed as Exhibit 10(b) to Alagasco’s Annual Report on Form 10-K for the year ended December 31,
2005.
10.39*2
Amended Exhibit A, effective October 1, 2013, to Firm Transportation Service Agreement (No.
FSNG1) between Southern Natural Gas Company and Alagasco, which was filed as Exhibit 10(i) to
Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2013.
10.40*2
10.41*2
Amended Exhibit B, effective November 1, 2013, to Firm Transportation Service Agreement (No.
FSNG1) between Southern Natural Gas Company and Alagasco, which was filed as Exhibit 10(j) to
Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2013.
Form of Service Agreement Under Rate Schedule IT (No. 790420), between Southern Natural Gas
Company and Alagasco, which was filed as Exhibit 10(b) to Alagasco’s Annual Report on Form 10-K
for the year ended September 30, 1993.
143
Exhibit
Number
10.42*2
Description
Service Agreement between Transcontinental Gas Pipeline Corporation and Transco Energy
Marketing Company as Agent for Alagasco, dated August 1, 1991 which was filed as Exhibit 10(e) to
Alagasco’s Annual Report on Form 10-K for the year ended December 31, 2003.
10.43*2
Amendment to Service Agreement between Transcontinental Gas Pipeline Corporation and
Alagasco, dated December 2, 2005, which was filed as Exhibit 10(e) to Alagasco’s Annual Report on
Form 10-K for the year ended December 31, 2005.
10.44*1
The Laclede Group, Inc. Annual Incentive Plan, as Amended, filed as Appendix to the
Company’s Definitive Proxy Statement on Schedule 14A filed December 18, 2015.
10.45*1
The Laclede Group, Inc. Deferred Income Plan, as Amended and Restated as of
January 1, 2016, which was filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed November 24, 2015.
10.46*2 3
Loan Agreement, dated December 14, 2016, by and among Spire Inc., Alabama Gas Corporation,
Laclede Gas Company, and the several banks party thereto, including Wells Fargo Bank, National
Association, as Administrative Agent; JPMorgan Chase Bank, N.A. and U.S. Bank National
Association, as Co-Syndication Agents; Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A.,
and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners; and Bank of
America, N.A., Credit Suisse AG, Cayman Islands Branch, Morgan Stanley Bank, N.A., Regions Bank,
Royal Bank of Canada, and TD Bank, N.A., as Documentation Agents; filed as Exhibit 99.1 to the
Company’s Current Report on Form 8-K filed December 16, 2016.
10.47*
Commercial Paper Dealer Agreement, dated December 21, 2016, between Spire Inc. and Wells Fargo
Securities, LLC; filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 2016.
10.48*
Commercial Paper Dealer Agreement, dated December 21, 2016, between Spire Inc. and Credit
Suisse Securities (USA) LLC; filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2016.
10.49*
Engagement Agreement, dated December 21, 2016, between Spire Inc. and L. Craig Dowdy; filed as
Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 2016.
10.50*†3
10.51*3
Precedent Agreement dated as of January 25, 2017, between Laclede Gas Company and Spire STL
Pipeline LLC; filed as Exhibit 10.1 to Laclede Gas’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2017.
Amendment to Precedent Agreement dated as of April 17, 2017, between Laclede Gas Company and
Spire STL Pipeline LLC; filed as Exhibit 10.2 to Laclede Gas’s Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2017.
10.52*
Spire Inc. Executive Severance Plan, filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed May 2, 2017.
10.531
10.541
10.55
10.561
10.57
12.1
12.2
21
23.1
23.23
23.32
31.1
31.23
31.32
32.1
32.23
Amendment 1 to The Laclede Group Annual Incentive Plan effective January 1, 2018.
Amendment 1 to The Laclede Group 2015 Equity Incentive Plan effective January 1,
2018.
Amendment 1 to Spire Inc. Executive Severance Plan effective January 1, 2018.
Amendment 1 to The Laclede Group 2011 Management Continuity Protection Plan
effective January 18, 2018.
Amendment 2 to Spire Inc. Deferred Income Plan effective January 1, 2018.
Computation of Ratio of Earnings to Fixed Charges of the Company.
Computation of Ratio of Earnings to Fixed Charges of Spire Missouri Inc.
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm of the Company.
Consent of Independent Registered Public Accounting Firm of Spire Missouri Inc.
Consent of Independent Registered Public Accounting Firm of Spire Alabama Inc.
Certifications under Rule 13a-14(a) of the CEO and CFO of the Company.
Certifications under Rule 13a-14(a) of the CEO and CFO of Spire Missouri Inc.
Certifications under Rule 13a-14(a) of the CEO and CFO of Spire Alabama Inc.
Section 1350 Certifications under Rule 13a-14(b) of the CEO and CFO of the Company.
Section 1350 Certifications under Rule 13a-14(b) of the CEO and CFO of Spire Missouri Inc.
144
Exhibit
Number
32.32
101.INS(×)
101.SCH(×)
101.CAL(×)
101.DEF(×)
101.LAB(×)
101.PRE(×)
(×) Attached as Exhibit 101 to this Annual Report are the following documents formatted in extensible business reporting
Description
Section 1350 Certifications under Rule 13a-14(b) of the CEO and CFO of Spire Alabama Inc.
XBRL Instance Document.
XBRL Taxonomy Extension Schema.
XBRL Taxonomy Extension Calculation Linkbase.
XBRL Taxonomy Definition Linkbase.
XBRL Taxonomy Extension Labels Linkbase.
XBRL Taxonomy Extension Presentation Linkbase.
language (XBRL): (i) Document and Entity Information; (ii) Consolidated Statements of Income and Statements of Income
for the years ended September 30, 2017, 2016, and 2015; (iii) Consolidated Statements of Comprehensive Income and
Statements of Comprehensive Income for the years ended September 30, 2017, 2016, and 2015; (iv) Consolidated Statements
of Common Shareholders’ Equity and Statements of Common Shareholder’s Equity for the years ended September 30, 2017,
2016, and 2015; (v) Consolidated Statements of Cash Flows and Statements of Cash Flows for the years ended September 30,
2017, 2016, and 2015; (vi) Consolidated Balance Sheets and Balance Sheets at September 30, 2017 and 2016; (vii)
Consolidated Statements of Capitalization and Statements of Capitalization at September 30, 2017 and 2016; and (viii) Notes
to Financial Statements. We also make available on our website the Interactive Data Files submitted as Exhibit 101 to this
Annual Report.
*
Incorporated herein by reference and made a part hereof. Spire Inc. File No. 1-16681. Spire Missouri Inc. File No. 1-1822.
Spire Alabama Inc. File No. 2-38960.
† Portions of this exhibit were omitted pursuant to a confidential treatment request submitted pursuant to Rule 24b-2 of the
Exchange Act.
1 The Laclede Group, Inc. changed its name to Spire Inc. effective April 28, 2016.
2 Alabama Gas Corporation (Alagasco) changed its name to Spire Alabama Inc. effective September 1, 2017.
3 Laclede Gas Company changed its name to Spire Missouri Inc. effective August 30, 2017.
4 Laclede Energy Resources, Inc. changed its name to Spire Marketing Inc. effective December 12, 2016.
Bold items reflect management, contract or compensatory plan or arrangement.
145
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date November 15, 2017
By /s/ Steven P. Rasche
SPIRE INC.
Steven P. Rasche
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
Signature
Title
November 15, 2017
/s/ Suzanne Sitherwood
Director, President and Chief Executive Officer
Suzanne Sitherwood
(Principal Executive Officer)
November 15, 2017
/s/ Steven P. Rasche
Executive Vice President and Chief Financial Officer
Steven P. Rasche
(Principal Financial and Accounting Officer)
November 15, 2017
/s/ Edward L. Glotzbach
Chairman of the Board
Edward L. Glotzbach
November 15, 2017
/s/ Mark A. Borer
Director
Mark A. Borer
November 15, 2017
/s/ Maria V. Fogarty
Director
Maria V. Fogarty
November 15, 2017
/s/ Rob L. Jones
Director
Rob L. Jones
November 15, 2017
/s/ Brenda D. Newberry
Director
Brenda D. Newberry
November 15, 2017
/s/ John P. Stupp, Jr.
Director
John P. Stupp, Jr.
November 15, 2017
/s/ Mary Ann Van Lokeren
Director
Mary Ann Van Lokeren
146
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date November 15, 2017
SPIRE MISSOURI INC.
By /s/ Steven P. Rasche
Steven P. Rasche
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
Signature
Title
November 15, 2017
/s/ Suzanne Sitherwood
Chairman of the Board
Suzanne Sitherwood
November 15, 2017
/s/ Steven P. Rasche
Director and Chief Financial Officer
Steven P. Rasche
(Principal Financial and Accounting Officer)
November 15, 2017
/s/ Steven L. Lindsey
Director, President and Chief Executive Officer
Steven L. Lindsey
(Principal Executive Officer)
November 15, 2017
/s/ Mark C. Darrell
Director
Mark C. Darrell
November 15, 2017
/s/ Scott B. Carter
Director
Scott B. Carter
147
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date November 15, 2017
By /s/ Steven P. Rasche
Steven P. Rasche
Chief Financial Officer
SPIRE ALABAMA INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date
Signature
Title
November 15, 2017
/s/ Suzanne Sitherwood
Chairman of the Board
Suzanne Sitherwood
November 15, 2017
/s/ Steven P. Rasche
Director and Chief Financial Officer
Steven P. Rasche
(Principal Financial and Accounting Officer)
November 15, 2017
/s/ Steven L. Lindsey
Director and Chief Executive Officer
Steven L. Lindsey
(Principal Executive Officer)
November 15, 2017
/s/ Mark C. Darrell
Director
November 15, 2017
Mark C. Darrell
/s/ Scott B. Carter
Scott B. Carter
Director
148
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Information for
our shareholders
Annual meeting
The annual meeting of shareholders of Spire Inc. will
be held at 10 a.m. Central Standard Time on Thursday,
January 25, 2018, at Spire’s primary business office,
700 Market Street, St. Louis, MO 63101. The formal notice
of the meeting, proxy statement, form of proxy and this
annual report were made available to shareholders on
December 13, 2017. The proxy statement and annual report
may be found on our website by visiting SpireEnergy.com.
Transfer agent and registrar
Spire’s shareholder records are maintained by its transfer
agent, Computershare Trust Company, N.A. Inquiries relating
to stockholder records, stock transfers, address changes,
dividend payments, lost certificates and other administrative
matters should be addressed to:
Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233-5000
800-884-4225
Primary business office
Spire Inc.
700 Market Street
St. Louis, MO 63101
314-342-0500
SpireEnergy.com
Dividend reinvestment and stock purchase plan
Spire’s dividend reinvestment and stock purchase plan
provides common shareholders the opportunity to purchase
additional common stock by automatically reinvesting dividends
or by making additional cash payments. Shareholders who are
interested in obtaining more information, including an
enrollment card, may contact:
Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233-5000
800-884-4225
Stock and dividends
Spire Inc. common stock is listed on the New York Stock Exchange
(NYSE) under the symbol SR. There were 48,263,243 shares
outstanding as of September 30, 2017. Spire has paid a cash
dividend continuously since 1946. Dividends are typically paid
on the second business day of January, April, July and October.
The current annualized dividend is $2.25 per share, effective
with the quarterly payment on January 3, 2018.
The high and low trading prices and dividends declared on
common stock for the past two years were:
Fiscal 2017
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Fiscal 2016
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$66.65
68.30
72.83
78.00
High
$61.04
68.79
70.87
71.21
Low
$59.54
62.33
63.84
68.30
Low
$53.86
57.10
61.00
61.96
Dividends
declared
$.525
.525
.525
.525
Dividends
declared
$.49
.49
.49
.49
Inquiries
Copies of Spire’s Forms 10-K, 10-Q and 8-K filed with the Securities
and Exchange Commission, quarterly updates, news releases and
other investor information are available at no charge by visiting
SpireEnergy.com or by contacting Investor Relations:
Scott W. Dudley Jr.
Managing Director, Investor Relations
Scott.Dudley@SpireEnergy.com
314-342-0878
For media inquiries, contact Corporate Communications:
Jessica B. Willingham
Vice President, Communications and Marketing
Jessica.Willingham@SpireEnergy.com
314-342-3300
Spire Inc.
700 Market Street
St. Louis, MO 63101
SpireEnergy.com