SPIRE INC. (Dollars in millions, except per share amounts)
This section analyzes the financial condition and results of operations ofSpire Inc. (the "Company"),Spire Missouri Inc. , andSpire Alabama Inc. SpireMissouri , Spire Alabama andSpire EnergySouth are wholly owned subsidiaries of the Company. SpireMissouri , Spire Alabama and the subsidiaries ofSpire EnergySouth (Spire Gulf and Spire Mississippi) are collectively referred to as the "Utilities." This section includes management's view of factors that affect the respective businesses of the Company, Spire Missouri and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods, and the effects of such factors on the Company's, SpireMissouri's and Spire Alabama's overall financial condition and liquidity. Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as "may," "anticipate," "believe," "estimate," "expect," "intend," "plan," "seek," "target," and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results or outcomes to differ materially from those contemplated in any forward-looking statement are:
• Weather conditions and catastrophic events, particularly severe weather in
• Impacts related to the COVID-19 pandemic and uncertainties as to their
continuing duration and severity;
• Volatility in gas prices, particularly sudden and sustained changes in natural
gas prices, including the related impact on margin deposits associated with
the use of natural gas derivative instruments, and the impact on our
competitive position in relation to suppliers of alternative heating sources,
such as electricity;
• Changes in gas supply and pipeline availability, including as a result of
decisions by natural gas producers to reduce production or shut in producing
natural gas wells and expiration or termination of existing supply and
transportation arrangements that are not replaced with contracts with similar
terms and pricing (including as a result of a failure of the Spire STL
Pipeline to secure permanent authorization from the
changes that impact supply for and access to the markets in which our
subsidiaries transact business;
• Acquisitions may not achieve their intended results;
• Legislative, regulatory and judicial mandates and decisions, some of which may
be retroactive, including those affecting:
? allowed rates of return and recovery of prudent costs,
? incentive regulation,
? industry structure,
? purchased gas adjustment provisions,
? rate design structure and implementation,
? capital structures established for rate-setting purposes,
? regulatory assets,
? non-regulated and affiliate transactions,
? franchise renewals,
? authorization to operate facilities,
? environmental or safety matters, including the potential impact oflegislative and regulatory actions related to climate change and pipeline
safety and security,
? taxes,
? pension and other postretirement benefit liabilities and funding
obligations, or
? accounting standards;
• The results of litigation;
• The availability of and access to, in general, funds to meet our debtobligations 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;
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• Our ability to comply with all covenants in our indentures and credit
facilities, any violations of which, if not cured in a timely manner, could
trigger a default of our obligation;
• Energy commodity market conditions;
• Discovery of material weakness in internal controls;
• The disruption, failure or malfunction of our operational and information
technology systems, including due to cyberattacks; and
• Employee workforce issues, including but not limited to labor disputes, the
inability to attract and retain key talent, and future wage and employee
benefit costs, including costs resulting from changes in discount rates and
returns on benefit plan assets.
Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements, Spire Missouri's and Spire Alabama's Condensed Financial Statements, and the notes thereto.
OVERVIEW
The Company has two reportable segments: Gas Utility and Gas Marketing. Nearly all of Spire's earnings are derived from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the Utilities' business and the Spire Missouri rate design, earnings of Spire and each of the Utilities are typically concentrated during the heating season of November through April each fiscal year.
Gas Utility - Spire Missouri
SpireMissouri isMissouri's largest natural gas distribution utility and is regulated by the MoPSC. SpireMissouri servesSt. Louis ,Kansas City , and other areas throughout the state. SpireMissouri purchases natural gas in the wholesale market from producers and marketers and ships the gas through interstate pipelines into its own distribution facilities for sale to residential, commercial and industrial customers. SpireMissouri also transports gas through its distribution system for certain larger customers who buy their own gas on the wholesale market. SpireMissouri delivers natural gas to customers at rates and in accordance with tariffs authorized by the MoPSC. The earnings of Spire Missouri are primarily generated by the sale of heating energy.
Gas Utility - Spire Alabama
SpireAlabama is the largest natural gas distribution utility in the state ofAlabama and is regulated by the APSC. SpireAlabama's service territory is located in central and northernAlabama . Among the cities served by SpireAlabama areBirmingham , the center of the largest metropolitan area in the state, andMontgomery , the state capital. SpireAlabama 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. SpireAlabama also transports gas through its distribution system for certain large commercial and industrial customers for a transportation fee. EffectiveDecember 1, 2020 , for most of these transportation service customers, Spire Alabama also purchases gas on the wholesale market for sale to the customer upon delivery to the SpireAlabama distribution system. All Spire Alabama services are provided to customers at rates and in accordance with tariffs authorized by the APSC.
Gas Utility -
Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas to approximately 100,000 customers in southernAlabama and south-centralMississippi . Spire Gulf is regulated by the APSC, and Spire Mississippi is regulated by the MSPSC. 44 --------------------------------------------------------------------------------
Gas Marketing
Spire Marketing is engaged in the marketing of natural gas and related activities on a non-regulated basis and is reported in the Gas Marketing segment. Spire Marketing markets natural gas throughout theU.S. It holds firm transportation and storage contracts in order to effectively manage its transactions with counterparties, which primarily include producers, municipalities, electric and gas utility companies, and large commercial and industrial customers. Other
Other components of the Company's consolidated information include:
• unallocated corporate items, including certain debt and associated interest
costs;
•
("Spire Storage"), described below; and
• Spire's subsidiaries engaged in the operation of a propane pipeline and risk
management, among other activities.
Spire STL Pipeline is a wholly owned subsidiary of Spire which owns and operates a 65-mile pipeline connecting theRockies Express Pipeline inScott County, Illinois , to delivery points inSt. Louis County, Missouri , including SpireMissouri's storage facility. The pipeline is under the jurisdiction of theFERC and is currently permitted to deliver natural gas supply into easternMissouri under a temporary certificate authorization. Spire STL Pipeline's operating revenue is derived primarily from Spire Missouri as its foundation shipper. Spire Storage is engaged in the storage of natural gas in the western region ofthe United States . The facility consists of two storage fields operating under oneFERC market-based rate tariff.
COVID-19
The outbreak of coronavirus disease 2019 (COVID-19) has adversely impacted economic activity and conditions worldwide. We are continuing to assess the developments involving our workforce, customers and suppliers, as well as the response of federal and state authorities, our regulators and other business and community leaders. The Company has implemented what we believe to be appropriate procedures and protocols to ensure the safety of our customers, suppliers and employees. Impacts on our results of operations from COVID-19 have been minimal, partly as a result of regulatory recovery mechanisms and approvals. The Company is participating in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provisions allowing for a payroll tax deferral which did not have an impact on our results of operations but deferred the payment of the Company's portion of certain payroll taxes until late in fiscal 2021 and 2022. Although the Company does not currently expect to seek relief under any other CARES Act provisions, we will continue to monitor all pending and future federal, state and local efforts related to the COVID-19 health crisis and assess our need and, as applicable, eligibility for any such relief.
NON-GAAP MEASURES
Net income, earnings per share and operating income reported by Spire, SpireMissouri and Spire Alabama are determined in accordance with accounting principles generally accepted inthe United States of America (GAAP). Spire, Spire Missouri and Spire Alabama also provide the non-GAAP financial measures of net economic earnings, net economic earnings per share and contribution margin. Management and the Board of Directors use non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting, to determine incentive compensation and to evaluate financial performance. These non-GAAP operating metrics should not be considered as alternatives to, or more meaningful than, the related GAAP measures. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are provided on the following pages. 45 --------------------------------------------------------------------------------
Net Economic Earnings and Net Economic Earnings Per Share
Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income the impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In addition, net economic earnings per share would exclude the impact, in the fiscal year of issuance, of any shares issued to finance acquisitions that have yet to be included in net economic earnings. The fair value and timing adjustments are made in instances where the accounting treatment differs from what management considers the economic substance of the underlying transaction, including the following:
• Net unrealized gains and losses on energy-related derivatives that are
required by GAAP fair value accounting associated with current changes in
the fair value of financial and physical transactions prior to their
completion and settlement. These unrealized gains and losses result
primarily from two sources:
1) changes in the fair values of physical and/or financial derivatives
prior to the period of settlement; and
2) ineffective portions of accounting hedges, required to be recorded in
earnings prior to settlement, due to differences in commodity price
changes between the locations of the forecasted physical purchase or
sale transactions and the locations of the underlying hedge
instruments;
• Lower of cost or market adjustments to the carrying value of commodity
inventories resulting when the net realizable value of the commodity falls
below its original cost, to the extent that those commodities are
economically hedged; and
• Realized gains and losses resulting from the settlement of economic hedges
prior to the sale of the physical commodity.
These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transactions occur. Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement and other timing differences associated with related purchase and sale transactions provides a useful representation of the economic effects of only the actual settled transactions and their effects on results of operations. While management uses these non-GAAP measures to evaluate all of its businesses, the net effect of these fair value and timing adjustments on the Utilities' earnings is minimal because gains or losses on their natural gas derivative instruments are deferred pursuant to state regulation.
Contribution Margin
In addition to operating revenues and operating expenses, management also uses
the non-GAAP measure of contribution margin when evaluating results of
operations. Contribution margin is defined as operating revenues less natural
gas costs and gross receipts tax expense. The Utilities pass to their customers
(subject to prudence review by, as applicable, the MoPSC, APSC or MSPSC)
increases and decreases in the wholesale cost of natural gas in accordance with
their PGA clauses or GSA riders. The volatility of the wholesale natural gas
market results in fluctuations from period to period in the recorded levels of,
among other items, revenues and natural gas cost expense. Nevertheless,
increases and decreases in the cost of gas associated with system gas sales
volumes and gross receipts tax expense (which are calculated as a percentage of
revenues), with the same amount (excluding immaterial timing differences)
included in revenues, have no direct effect on operating income. Therefore,
management believes that contribution margin is a useful supplemental measure,
along with the remaining operating expenses, for assessing the Company's and the
Utilities' performance.
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EARNINGS - THREE MONTHS ENDED
Spire
Net Income and Net Economic Earnings
The following tables reconcile the Company's net economic earnings to the most comparable GAAP number, net income.
Per Diluted
Common
Gas Utility Gas Marketing Other Total Share**
Three Months Ended December 31, 2021
Net Income (Loss) [GAAP] $ 63.1 $ (2.3 ) $ (5.1 ) $ 55.7 $ 1.01
Adjustments, pre-tax:
Fair value and timing adjustments - 3.7 - 3.7 0.07
Income tax adjustments* 4.1 (0.9 ) - 3.2 0.06
Net Economic Earnings (Loss) [Non-GAAP] $ 67.2 $ 0.5 Three Months EndedDecember 31, 2020 Net Income (Loss) [GAAP]$ 76.5 $ 15.2$ (2.8 ) $ 88.9 $ 1.65 Adjustments, pre-tax: Fair value and timing adjustments (0.1 ) (15.9 ) - (16.0 ) (0.31 ) Income tax adjustments* - 4.0 - 4.0 0.08 Net Economic Earnings (Loss) [Non-GAAP]$ 76.4 $ 3.3$ (2.8 ) $ 76.9 $ 1.42
* Income tax adjustments include amounts calculated by applying federal, state,
and local income tax rates applicable to ordinary income to the amounts of the
pre-tax reconciling items, and for fiscal 2022, include a Spire Missouri
regulatory adjustment.
** Net economic earnings per share is calculated by replacing consolidated net
income with consolidated net economic earnings in the GAAP diluted earnings
per share calculation, which includes reductions for cumulative preferred
dividends and participating shares.
Note: In the following discussion, all references to earnings (loss) per share and net economic earnings per share refer to earnings (loss) per common share and net economic earnings (loss) per common share.
Consolidated
Spire had net income of$55.7 for the three months endedDecember 31, 2021 , compared with net income of$88.9 for the three months endedDecember 31, 2020 . Income per diluted share was$1.01 for the current quarter compared to income of$1.65 per diluted share for the prior year quarter. The net income decline of$33.2 was primarily driven by a$17.5 reduction in the Gas Marketing segment and$13.4 lower performance in the Gas Utility segment. Spire's net economic earnings for the first quarter were$62.6 ($1.14 per diluted share), compared to$76.9 ($1.42 per diluted share) in the prior year, reflecting lower earnings at Gas Utility, combined with lower Gas Marketing results and a decline in Other, as reflected in the above table. These impacts are described in further detail below.
Gas Utility
Net economic earnings for the Gas Utility segment decreased$9.2 from the first quarter of the prior fiscal year, as all Utilities reported decreases versus prior year performance. SpireMissouri declined by$7.1 , Spire Alabama decreased$1.5 , and the subsidiaries of EnergySouth reported a$0.6 decrease versus the prior year quarter. This decline was primarily the result of unseasonably warm weather in the Utility territories and higher depreciation and amortization costs. These impacts are discussed in further detail below. 47 --------------------------------------------------------------------------------
Gas Marketing
First quarter net economic earnings for the Gas Marketing segment was
Other
For the three months ended
Operating Revenues and Expenses and Contribution Margin
Reconciliations of the Company's contribution margin to the most directly comparable GAAP measure are shown below.
Gas Utility Gas Marketing Other Eliminations Consolidated
Three Months Ended December
31, 2021
Operating Income (Loss) [GAAP] $ 94.4 $ (3.1 ) $ 4.0 $ - $ 95.3
Operation and maintenance
expenses 107.3 2.7 10.0 (3.6 ) 116.4
Depreciation and amortization 54.6 0.3 2.0 - 56.9
Taxes, other than income taxes 37.0 - 0.6 - 37.6
Less: Gross receipts tax
expense (21.7 ) (0.2 ) - - (21.9 )
Contribution Margin [Non-GAAP] 271.6 (0.3 ) 16.6 (3.6 ) 284.3
Natural gas costs 210.2 48.0 - (9.0 ) 249.2
Gross receipts tax expense 21.7 0.2 - - 21.9
Operating Revenues $ 503.5 $ 47.9 $
16.6
Three Months EndedDecember 31, 2020 Operating Income [GAAP]$ 106.8 $ 20.3$ 5.8 $ -$ 132.9 Operation and maintenance expenses 103.0 3.3 8.6 (3.3 ) 111.6 Depreciation and amortization 48.6 0.3 1.9 - 50.8 Taxes, other than income taxes 35.5 0.2 0.4 - 36.1 Less: Gross receipts tax expense (21.7 ) - - - (21.7 ) Contribution Margin [Non-GAAP] 272.2 24.1 16.7 (3.3 ) 309.7 Natural gas costs 204.3 0.7 - (23.8 ) 181.2 Gross receipts tax expense 21.7 - - - 21.7 Operating Revenues$ 498.2 $ 24.8$ 16.7 $ (27.1 ) $ 512.6 Consolidated Spire reported operating revenue of$555.4 for the three monthsDecember 31, 2021 , a$42.8 increase versus the prior year quarter. Both the Gas Utility and Gas Marketing segments experienced year-over-year increases in operating revenues. Spire's contribution margin decreased$25.4 compared with last year, with decreases of$24.4 in the Gas Marketing segment combined with marginal decreases for both the Gas Utility segment and Other (STL Pipeline and Spire Storage). Depreciation and amortization expenses were up$6.1 , reflecting higher Gas Utility expenses. Gas Utility operation and maintenance (O&M) expenses of$107.3 for the quarter were$1.6 higher than last year, after removing the$1.7 transfer of year-over-year nonservice postretirement benefit costs to other expense below the operating income line (the "Nonservice Cost Transfer") and$1.0 of non-operational overheads charged to O&M as a result of the MoPSC amended report and order effectiveDecember 23, 2021 for Spire Missouri (discussed in Note 4 , Regulatory Matters, of the Notes to Financial Statements in Item 1). These impacts are described in further detail below. 48 --------------------------------------------------------------------------------
Gas Utility
Operating Revenues - Gas Utility operating revenues for the three months endedDecember 31, 2021 , were$503.5 , or$5.3 higher than the same period in the prior year. The increase in Gas Utility operating revenues was attributable to the following factors:
Spire
$ 12.1
SpireAlabama - RSE adjustments, net
3.4
SpireMissouri - ISRS
0.9
Spire
(5.5 )
Spire Missouri and Spire Alabama - Off-system sales and capacity
release (4.3 )
All other factors (1.3 )
Total Variation $ 5.3
The Gas Utility segment benefited $12.1 through higher gas cost recoveries, $3.4
in net rate adjustments under the RSE mechanism at Spire Alabama, and a $0.9
increase in ISRS revenues. These positive impacts were mostly offset by a $5.5
reduction attributable to volumetric usage and a $4.3 reduction related to lower
off-system sales. Weather in the current year quarter across our Utility
footprint was 19% warmer than prior year and 26% warmer than normal.
Contribution Margin - Gas Utility contribution margin was
SpireAlabama - Rate adjustment under RSE mechanism, net $
3.2
SpireMissouri - ISRS
0.9
Spire
(1.8 )
Spire Missouri and Spire Alabama - Off-system sales and capacity
release (0.8 )
All other factors (2.1 )
Total Variation $ (0.6 )
As previously noted, warmer weather impacted commercial and industrial sales
although weather mitigation lessened the impact on residential sales. This
decrease was partially offset by $3.2 net favorable rate adjustments under the
RSE mechanism at Spire Alabama and Spire Missouri's $0.9 ISRS increase.
Operating Expenses - O&M expenses for the three months ended December 31, 2021 ,
were $4.3 higher than the prior year. After removing the $1.7 impact of the
Nonservice Cost Transfer and $1.0 of non-operational overheads mentioned
earlier, expenses increased $1.6 . The increase was largely due to modestly
higher costs in operations, and employee-related expenses, partly offset by
lower bad debt expense. Depreciation and amortization expenses for the quarter
were $6.0 higher than the same period in the prior year primarily driven by
continued infrastructure capital expenditures across all the Utilities.
Gas Marketing
Operating Revenues - Operating revenues increased
Contribution Margin - Gas Marketing contribution margin during the quarter endedDecember 31, 2021 , decreased$24.4 from the same period in the prior year, due principally to a$19.6 unfavorable change in derivative activity and fair value measurements. The remaining decrease of$4.8 reflects both less favorable market conditions and lower storage margins.
Interest Charges
Consolidated interest charges increased by$2.9 , principally due to higherGas Utilities long-term debt and higher average short term borrowings in the current year. For the three months endedDecember 31, 2021 and 2020, average short-term borrowings were$808.6 and$734.7 , respectively, and the average interest rate on these borrowings was 0.4% in both periods. 49 --------------------------------------------------------------------------------
Income Taxes
Consolidated income tax for the three months endedDecember 31, 2021 , decreased$4.2 versus the same period in the prior year. The variance is due principally to the lower pre-tax book income, offset partly by a$4.1 Spire Missouri regulatory adjustment. SpireMissouri Three Months Ended December 31, 2021 2020 Operating Income [GAAP] $ 65.4 $ 75.5 Operation and maintenance expenses 66.3
62.9
Depreciation and amortization 34.2
30.4
Taxes, other than income taxes 25.7
25.1
Less: Gross receipts tax expense (14.9 ) (15.2 ) Contribution Margin [Non-GAAP] 176.7 178.7 Natural gas costs 156.3 161.6 Gross receipts tax expense 14.9 15.2 Operating Revenues $ 347.9 $ 355.5 Net Income $ 45.3 $ 56.6 Operating revenues for the three months endedDecember 31, 2021 , decreased$7.6 from the same period in the prior year primarily due to$14.7 in unfavorable volumetric impacts (including weather mitigation), and a$2.8 decrease related to lower off-system sales, primarily due to warmer weather. Contribution margin for the three months endedDecember 31, 2021 , decreased$2.0 from the same period in the prior year, largely the result of a$1.0 decrease due volumetric impacts (including weather mitigation) and$0.6 lower off-system sales. O&M expenses increased$3.4 versus the prior year. After removing the$1.7 year-over-year impact of the Nonservice Cost Transfer and$1.0 of non-operational overheads mentioned earlier, the increase was$0.7 . The increase was largely due to modestly higher costs in administrative and employee-related expenses. Depreciation and amortization increased$3.8 versus the prior-year quarter due to ongoing capital investments.
Other income was up
Resulting net income for the quarter ended
Degree days in Spire Missouri's service areas during the three months endedDecember 31, 2021 , were 25.9% warmer than normal, and 19.5% warmer than the same period last year, resulting in lower usage on a year-over-year comparative basis. SpireMissouri's total system therms sold and transported were 439.6 million for the quarter, compared with 522.8 million for the same period in the prior year. Total off-system therms sold and transported were 2.1 million for the quarter, compared with 8.5 million a year ago. 50 --------------------------------------------------------------------------------
SpireAlabama Three Months Ended December 31, 2021 2020 Operating Income [GAAP] $ 21.1 $ 22.5 Operation and maintenance expenses 34.5
32.8
Depreciation and amortization 16.5
15.0
Taxes, other than income taxes 9.0
8.2
Less: Gross receipts tax expense (5.7 ) (5.3 ) Contribution Margin [Non-GAAP] 75.4 73.2 Natural gas costs 45.5 35.1 Gross receipts tax expense 5.7 5.3 Operating Revenues $ 126.6 $ 113.6 Net Income $ 12.2 $ 13.7 Operating revenues for the three months endedDecember 31, 2021 , increased$13.0 from the same period in the prior year. The change in operating revenue was principally due to$9.2 attributable to favorable weather usage impacts, net favorable rate adjustments under the RSE mechanism of$3.4 , higher gas cost recoveries of$1.5 , slightly offset by a decrease in off-system sales totaling$1.5 . Contribution margin was$2.2 higher versus the prior-year quarter, primarily driven by the favorable net rate adjustments under the RSE mechanism of$3.2 , partly offset by$0.8 weather/usage impacts and$0.2 lower off-system sales. O&M expenses for the three months endedDecember 31, 2021 , increased$1.7 versus the prior-year quarter, primarily due to higher employee-based costs that were only partly offset by lower bad debt expense. Depreciation and amortization expenses were up$1.5 , the result of continued investment in infrastructure upgrades.
For the quarter ended
As measured in degree days, temperatures in Spire Alabama's service area during the three months endedDecember 31, 2021 , were 10.5% warmer than normal but 6.1% colder than a year ago. SpireAlabama's total system therms sold and transported were 257.8 million for the three months endedDecember 31, 2021 , compared with 244.4 million for the same period in the prior year. Total off-system therms sold and transported were 0.1 million for the quarter, compared with 13.6 million a year ago.
LIQUIDITY AND CAPITAL RESOURCES
Recent Cash Flows
Three Months Ended
December 31,
Cash Flow Summary 2021 2020
Net cash (used in) provided by operating activities
(143.1 ) (163.6 )
Net cash provided by financing activities 376.9 155.4
For the three months ended December 31, 2021 , net cash from operating activities
decreased $237.5 from the corresponding period of fiscal 2021. In addition to
the decline in net income of $33.2 , the change was due principally to regulatory
timing and fluctuations in working capital items, as discussed below in the
Future Cash Requirements section. Those typical variance drivers have been
impacted by Spire Missouri's Operational Flow Order and Filing Adjustment Factor
put into place last year, as discussed in Note 4 , Regulatory Matters, of the
Notes to Financial Statements in Item 1.
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For the three months ended December 31, 2021 , net cash used in investing
activities was $20.5 less than for the same period in the prior year, primarily
driven by a $17.9 decrease in capital expenditures. The primary drivers of the
lower capital expenditures were a $9.0 decline related to Spire Storage and
Spire STL Pipeline, and a $8.2 spending decline at Gas Utility.
Lastly, for the three months ended December 31, 2021 , net cash provided by
financing activities was up $221.5 versus net cash provided for the three months
ended December 31, 2020 . Current year long-term debt issuances were $300.0 , or
$150.0 higher than a year ago, and net short-term debt issuances rose $125.9 in
the current period. Partially offsetting these fluctuations was a $50.4 increase
in long-term debt repayments during the first quarter of fiscal 2022 versus the
same prior year period.
Future Cash Requirements
The Company's short-term borrowing requirements typically peak during colder
months when the Utilities borrow money to cover the lag between when they
purchase natural gas and when their customers pay for that gas. Changes in the
wholesale cost of natural gas (including cash payments for margin deposits
associated with Spire Missouri's use of natural gas derivative instruments),
variations in the timing of collections of gas cost under the Utilities' PGA
clauses and GSA riders, the seasonality of accounts receivable balances, and the
utilization of storage gas inventories cause short-term cash requirements to
vary during the year and from year to year, and may cause significant variations
in the Company's cash provided by or used in operating activities.
Spire's material cash requirements as of December 31, 2021 , are related to
capital expenditures, principal and interest payments on long-term debt, natural
gas purchase obligations, and dividends. Except for Spire Missouri's December
2021 issuance of $300.0 of floating rate bonds due in December 2024 , there were
no material changes outside the ordinary course of business from the future cash
requirements discussed in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2021 . Total Company capital expenditures are
planned to be $570 for fiscal 2022.
Source of Funds
It is management's view that the Company, Spire Missouri and Spire Alabama have
adequate access to capital markets and will have sufficient capital resources,
both internal and external, to meet anticipated requirements. Their debt is
rated by two rating agencies: Standard & Poor's Corporation ("S&P") and Moody's
Investors Service ("Moody's"). As of December 31, 2021 , the debt ratings of the
Company, Spire Missouri and Spire Alabama (shown in the following table) remain
at investment grade with a stable outlook (other than Moody's negative outlook
for Spire Missouri debt).
S&P Moody's
BBB Ba1
Spire Inc. short-term debt A-2 P-2
Spire
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire
had no temporary cash investments as of
Short-term Debt
The Company's short-term cash requirements can be met through the sale of up to$975.0 of commercial paper or through the use of Spire's$975.0 revolving credit facility. For information about short-term borrowings, see Note 5 of the Notes to Financial Statements in Item 1. 52 --------------------------------------------------------------------------------
Long-term Debt and Equity
AtDecember 31, 2021 , including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling$3,258.9 , of which$1,648.0 was issued by Spire Missouri,$575.0 was issued by SpireAlabama , and$205.9 was issued by other subsidiaries. For information about long-term debt issued this fiscal year, see Note 5 of the Notes to Financial Statements in Item 1. SpireMissouri was authorized by the MoPSC to issue registered securities (first mortgage bonds, unsecured debt and preferred stock), common stock, and private placement debt in an aggregate amount of up to$660.0 for financings placed any time beforeSeptember 30, 2023 . As ofDecember 31, 2021 ,$55.0 remained available under this authorization, and Spire Missouri has applied for a new$800.0 authorization over three years. SpireAlabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance. Spire has a shelf registration statement on Form S-3 on file with theU.S. Securities and Exchange Commission (SEC) for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 176,456 and 170,904 shares atDecember 31, 2021 andJanuary 28, 2022 , respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with theSEC for the issuance of various equity and debt securities, which expires onMay 14, 2022 . OnFebruary 6, 2019 , Spire entered into an "at-the-market" equity distribution agreement, supplemented as ofMay 14, 2019 , pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to$150.0 . Those shares are issued pursuant to Spire's universal shelf registration statement referenced above and a prospectus supplement datedMay 14, 2019 . Under this program, a total of 626,249 shares were issued in fiscal 2019 and 2020, and as ofDecember 31, 2021 , Spire can still issue shares having an aggregate offering price of up to$102.2 .
Including the current portion of long-term debt, the Company's long-term
consolidated capitalization consisted of 45% equity at
ENVIRONMENTAL MATTERS
The Utilities and other Spire subsidiaries own and operate natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations, and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company's, SpireMissouri's , or Spire Alabama's financial position and results of operations. As environmental laws, regulations, and interpretations change, however, the Company and the Utilities may be required to incur additional costs. For information relative to environmental matters, see Contingencies in Note 10 of the Notes to Financial Statements in Item 1.
REGULATORY MATTERS
For discussions of regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 4 , Regulatory Matters, of the Notes to Financial Statements in Item 1.
ACCOUNTING PRONOUNCEMENTS
The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the effects that recently issued accounting standards will have on the companies' financial position or results of operations upon adoption, but none are currently expected to have a significant impact.
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--------------------------------------------------------------------------------CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting estimates used in the preparation of our financial statements are described in Item 7 of Spire, Spire Missouri, and Spire Alabama's combined Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2021 , and include regulatory accounting, employee benefits and postretirement obligations, impairment of long-lived assets, and income taxes. There were no significant changes to critical accounting estimates during the three months endedDecember 31, 2021 . For discussion of other significant accounting policies, see Note 1 of the Notes to Financial Statements included in this Form 10-Q as well as Note 1 of the Notes to Financial Statements included in Spire, Spire Missouri, and SpireAlabama's combined Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2021 .
MARKET RISK
There were no material changes in the Company's commodity price risk or counterparty credit risk as ofDecember 31, 2021 , relative to the corresponding information provided in the Company's Annual Report on Form 10-K as ofSeptember 30, 2021 . In the second fiscal quarter of 2020, the Company entered into multiple ten-year interest rate swaps with fixed interest rates ranging from 0.934% to 1.2975% for a total notional amount of$75.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a$1.2 mark-to-market loss in accumulated other comprehensive income on these swaps for the three months endedDecember 31, 2021 . In the third quarter of 2021 the Company entered into multiple ten-year interest rate swaps with fixed interest rates ranging from 2.008% to 2.1075% for a total notional amount of$150.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a$2.1 mark-to-market loss in accumulated other comprehensive income on these swaps for the three months endedDecember 31, 2021 . In the fourth quarter of 2021, the Company entered into two swap contracts. Both contracts are ten-year interest rate swaps; the first swap has a notional amount of$50.0 with a fixed interest rate of 1.597%, while the second swap has a notional amount of$50.0 with a fixed interest rate of 1.821%. The Company recorded a$1.9 mark-to-market loss to accumulated other comprehensive income on these swaps for the three months endedDecember 31, 2021 . In the first quarter of fiscal 2022, the Company entered into a ten-year interest rate swap contract with a notional amount of$50.0 with a fixed interest rate of 1.4918%. The Company recorded a$0.3 mark-to-market gain to accumulated other comprehensive income on this swap for the three months endedDecember 31, 2021 .
As of
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