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. (the “Company”), Spire Missouri Inc., and Spire Alabama Inc. Spire Missouri, Spire Alabama and Spire EnergySouth are wholly owned subsidiaries of the Company. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth are collectively referred to as the “Utilities.” The subsidiaries of Spire EnergySouth are Spire Gulf and Spire Mississippi. This section includes management’s view of factors that affect the respective businesses of the Company, Spire Missouri and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods, and the effects of such factors on the Company’s, Spire Missouri’s and Spire Alabama’s overall financial condition and liquidity. Unless otherwise indicated, references to years herein are references to the fiscal years ending September 30 for the Company and its subsidiaries.

Reference is made to “Item 1A. Risk Factors” and “Forward-Looking Statements,” which describe important factors that could cause actual results to differ from expectations and non-historical information contained herein. In addition, the following discussion should be read in conjunction with the audited financial statements and accompanying notes thereto of Spire, Spire Missouri and Spire Alabama included in “Item 8. Financial Statements and Supplementary Data.”

OVERVIEW

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

Gas Utility - Spire Missouri

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

Gas Utility - Spire Alabama

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

Gas Utility - Spire EnergySouth

Spire Gulf and Spire Mississippi are utilities engaged in the purchase, retail distribution and sale of natural gas to approximately 100,000 customers in southern Alabama and south-central Mississippi. Spire Gulf is regulated by the APSC, and Spire Mississippi is regulated by the MSPSC.

Gas Marketing

Spire Marketing is engaged in the marketing of natural gas and related activities on a non-regulated basis and is reported in the Gas Marketing segment. Spire Marketing markets natural gas across the central and southern U.S. It holds firm transportation and storage contracts in order to effectively manage its transactions with counterparties, which primarily include producers, municipalities, electric and gas utility companies, and large commercial and industrial customers.

Other

Other components of the Company’s consolidated information include:

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 several key variables in evaluating the financial condition and results of operations and managing the business.

For the Gas Utility segment, these include:

• the effect of natural gas price volatility on the business; and

In the Gas Marketing segment, these include:

• the risks of competition;

• fluctuations in natural gas prices;

• the changing flow and availability of natural gas;

• new national infrastructure projects;

• credit and/or capital market access;

• counterparty risks; and

• the effect of natural gas price volatility on the business.

Further information regarding how management seeks to manage these key variables is discussed below.

Gas Utility

The Utilities seek to provide reliable natural gas services at a reasonable cost, while maintaining and building secure and dependable infrastructures. The Utilities’ strategies focus on improving both performance and the ability to recover their authorized distribution costs and rates of return. The Utilities’ distribution costs are the essential, primarily fixed, expenditures they must incur to operate and maintain more than 60,900 miles of mains and services comprising their natural gas distribution systems and related storage facilities.

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. Spire Gulf and Spire Mississippi have tariff rates that are approved by the APSC and MSPSC, respectively.

Spire Missouri and Spire Alabama also have off-system sales and capacity release income streams that are regulated by tariff but remain subject to fluctuations in market conditions. Some of the factors impacting the level of off-system sales include the availability and cost of Spire’s natural gas supply, the weather in its service areas and the weather in other markets. When Spire’s service areas experience warmer-than-normal weather while other markets experience colder weather or supply constraints, some of Spire’s natural gas supply is available for sale to third parties not on Spire’s system.

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 the Gas Supply Adjustment (GSA) rider of Spire Alabama allow the Utilities to flow through to customers, subject to prudence review by the public service commissions, the cost of purchased gas supplies, including costs, cost reductions and related carrying costs associated with the use of derivative instruments to mitigate volatility in the cost of natural gas. As of September 30, 2020, Spire Missouri had active derivative positions, but Spire Alabama has had no gas supply derivative instrument activity since 2010. The Utilities believe they will continue to be able to obtain sufficient gas supply. The price of natural gas supplies and other economic conditions may affect sales volumes, due to the conservation efforts of customers, and cash flows associated with the timing of collection of gas costs and related accounts receivable from customers.

The Utilities rely on short-term credit and long-term capital markets, as well as cash flows from operations, to satisfy their seasonal cash requirements and fund their capital expenditures. The Utilities access the commercial paper market through a program administered by the holding company, which then loans borrowed funds to the Utilities. The Utilities directly access the long-term bond market. Access to debt markets is dependent on current conditions in the credit and capital markets. Management focuses on maintaining a strong balance sheet and believes the Utilities currently have adequate access to credit and capital markets and will have sufficient capital resources to meet their foreseeable obligations. See the “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.

In addition to its operating cash flows, Spire Marketing relies on Spire’s parental guaranties to secure its purchase and sales obligations of natural gas, and it also has access to Spire’s liquidity resources. A large portion of Spire Marketing’s receivables are from customers in the energy industry. It also enters into netting arrangements with many of its energy counterparties to reduce overall credit and collateral exposure. On a net dollar exposure basis, the majority of Spire Marketing’s customers are utilities or utility affiliates. Although Spire Marketing’s uncollectible amounts are closely monitored and have not been significant, increases in uncollectible amounts from customers are possible and could adversely affect Spire 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 guaranties 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 Spire 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 U.S. GAAP, some of its purchase and sale transactions are not recognized in earnings until the natural gas is physically delivered, while other energy-related transactions, including those designated as trading activities, are required to be accounted for as derivatives with the changes in their fair value (representing unrealized gains or losses) recorded in earnings in periods prior to settlement. Because related transactions of a purchase and sale strategy may be accounted for differently, there may be timing differences in the recognition of earnings under GAAP and economic earnings realized upon settlement. The Company reports both GAAP and net economic earnings (non-GAAP), as discussed in the section “Non-GAAP Measures”.

COVID-19

The outbreak of the novel coronavirus (COVID-19) has adversely impacted economic activity and conditions worldwide. We are continuing to assess the developments involving our workforce, customers and suppliers, as well as the response of federal and state authorities, our regulators and other business and community leaders. The Company has implemented what we believe to be appropriate procedures and protocols to ensure the safety of our customers, suppliers and employees. These actions include activating incident management procedures, work-from-home for our office-based employees, limiting direct contact with our customers, and, through June, suspending disconnections and late payment fees for our utility customers.

We have experienced impacts on our results of operations from COVID-19. Based upon our analysis, the effects through September 30, 2020, included:

Spire Missouri received an Accounting Authority Order from the MoPSC to defer certain costs and has recorded a related regulatory asset of $3.8 as of September 30, 2020. Even with the cost increases and lost revenues, Spire Alabama exceeded the allowed return and recorded a Rate Stabilization and Equalization giveback in September 2020, so there was no bottom-line impact of these COVID-19 effects.

An extended slowdown of the United States' economy, changes in commodity costs and/or significant changes in policy and regulation could result in lower demand for natural gas as well as negatively impact the ability of our customers, contractors, suppliers and other business partners to remain in business or return to operating health. These could have a material adverse effect on our results of operations, financial condition, liquidity and prospects.

The Company is participating in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provisions allowing for a payroll tax deferral which will not have an impact on our results of operations but will defer the payment of the Company’s portion of certain payroll taxes until fiscal 2021 and 2022. Although the Company does not currently expect to seek relief under any other CARES Act provisions, we will continue to monitor all pending and future federal, state and local efforts related to the COVID-19 health crisis and assess our need and, as applicable, eligibility for any such relief.

NON-GAAP MEASURES

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

Net Economic Earnings and Net Economic Earnings Per Share

Net economic earnings and net economic earnings per share are non-GAAP measures that exclude from net income the impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, and the largely non-cash impacts of impairments and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In fiscal 2018, these other items included the revaluation of deferred tax assets and liabilities due to the federal Tax Cuts and Jobs Act and the write-off of certain long-standing assets as a result of disallowances in Spire Missouri’s rate proceedings. In fiscal 2019, other items included a provision for refunds to customers of amounts previously collected under MoPSC approved orders as a result of the November 2019 ISRS rulings against Spire Missouri. In fiscal 2020, adjustments for ISRS revenues reflect the regulatory settlement reached in the third quarter, such that the related GAAP provision for customer credit for fiscal 2020 is reflected in net economic earnings. In addition, net economic earnings per share excludes the impact, in the fiscal year of issuance, of shares issued to finance acquisitions that have yet to be included in net economic earnings.

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

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

EARNINGS

This section contains discussion and analysis of the results for the year ended September 30, 2020 compared to the results for the year ended September 30, 2019 and discussion and analysis of the results for the year ended September 30, 2019 compared to the results for the year ended September 30, 2018.

Spire

Net Income (Loss) and Net Economic Earnings (Loss)

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

Gas Utility Gas Marketing Other Consol- idated Per Diluted Share**

Adjustments, pre-tax:

Fair value and timing adjustments (0.3 ) 2.8 — 2.5 0.05

Income tax effect of adjustments* 0.1 (0.7 ) (31.3 ) (31.9 ) (0.62 )

Adjustments, pre-tax:

Fair value and timing adjustments — 1.2 — 1.2 0.03

Acquisition, divestiture and restructuring activities — — 0.4 0.4 0.01

Income tax effect of adjustments* (2.9 ) (0.3 ) (0.1 ) (3.3 ) (0.06 )

Adjustments, pre-tax:

Missouri regulatory adjustments 30.6 — — 30.6 $ 0.62

Fair value and timing adjustments — (4.3 ) — (4.3 ) (0.09 )

Acquisition, divestiture and restructuring activities 0.2 — 13.4 13.6 0.28

Income tax effect of adjustments* (9.1 ) 1.2 (2.4 ) (10.3 ) (0.21 )

2020 vs. 2019

Consolidated

Spire’s net income was $88.6 in fiscal 2020, compared with $184.6 in fiscal 2019. Basic and diluted earnings per share were $1.44 for fiscal 2020 compared with basic and diluted earnings per share of $3.53 and $3.52, respectively, for fiscal 2019. The decrease in net income of $96.0 reflects a $148.6 pre-tax ($117.3 after-tax) reduction in the current year due to impairment charges recorded in the third quarter of this year. The impairment charges are further described under “Impairment of Long-lived Assets” in Note 1, Summary of Significant Accounting Policies. These impairment charges were only partly offset by the $12.2 pre-tax ($9.3 after-tax) reduction in the prior year results due to ISRS rulings against Spire Missouri.

Excluding these amounts, net income growth was $12.0, driven by higher operating results of the Gas Utility segment primarily attributable to Spire Missouri’s higher ISRS charges, and RSE adjustment impacts at Spire Alabama.

The Gas Marketing segment’s net income for fiscal 2020 was $7.0, an $11.5 reduction versus the comparable prior-year period, reflecting primarily the cost of storage positions as noted below.

Net economic earnings were $207.8 ($3.76 per diluted share) for the twelve months ended September 30, 2020, up from $195.1 ($3.73 per diluted share) for the same period last year. Earnings reflect a $13.6 increase for Gas Utility, and by a $9.4 lower net economic loss in Other, partly offset by a $10.3 net economic earnings decrease experienced by Gas Marketing. These fluctuations are described in more detail below. Earnings per share and net economic earnings per share reflect the impact of preferred and common stock issued over the last twelve months.

Gas Utility

Gas Utility net income increased by $23.1, while net economic earnings increased $13.6 in fiscal 2020 compared to fiscal 2019. Both measures benefited from a $20.2 increase in run rate ISRS revenues in the current year, combined with a $1.1 pre-tax increase in all other factors, including modest customer growth. These positive drivers of income growth were only partly offset by a $5.4 contribution margin reduction in the current year relating to lower volumes, and a COVID-19-related $2.3 reduction in late payment charges. Net income was also impacted by the $10.0 year-over-year favorable impact relating to the provision for and settlement of the ISRS Rulings that occurred in late fiscal 2019 and were resolved in fiscal 2020.

Gas Marketing

The Gas Marketing segment reported net income totaling $7.0 for the twelve months ended September 30, 2020, versus net income of $18.5 during the same period last year. Net economic earnings for the twelve months ended September 30, 2020, was $9.1, a decrease of $10.3 from the same period last year. Both net income and net economic earnings reflect the costs incurred in 2020 for incremental storage capacity (whose value will not be realized until 2021), as well as less favorable market conditions.

Other

The Company’s other non-utility activities generated a net loss of $132.0 for fiscal 2020, compared to a net loss of $24.4 for the same period last year. Fiscal 2020 reflects the $117.3 after-tax impairment charge previously mentioned. Net economic loss was $14.7 for fiscal 2020, a decrease of $9.4 compared to fiscal 2019. The improvement was driven by a smaller loss from Spire Storage and an increase in earnings from Spire STL Pipeline.

Operating Revenues and Operating Expenses

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

Gas Utility Gas Marketing Other Eliminations Consolidated

Less: Gross receipts tax expense (91.1 ) (0.4 ) — — (91.5 )

Gross receipts tax expense 91.1 0.4 — — 91.5

Gas Utility Gas Marketing Other Eliminations Consolidated

Less: Gross receipts tax expense (99.1 ) (0.2 ) — — (99.3 )

Gross receipts tax expense 99.1 0.2 — — 99.3

Gas Utility Gas Marketing Other Eliminations Consolidated

Less: Gross receipts tax expense (98.3 ) (0.1 ) — — (98.4 )

Gross receipts tax expense 98.3 0.1 — — 98.4

Consolidated

Spire’s operating revenues for the twelve months ended September 30, 2020 were $97.0 lower than the same period in the prior year. Operating revenues decreased by $108.8 at the Gas Utility segment and were $4.2 and $36.3 higher in the Gas Marketing segment and Other, respectively. Intercompany eliminations increased $28.7 year-over-year, principally related to STL Pipeline. The Gas Utility decrease was due principally to lower gas cost recoveries, weather/volumetric impacts (net of weather mitigation), lower gross-receipts tax, and lower off-system sales that were only partly offset by higher ISRS, and Spire Alabama RSE adjustment impacts. The Gas Marketing increase was primarily due to higher volumes that offset the impact of slightly lower pricing. The increase in intercompany eliminations was driven by the STL Pipeline transportation services to Spire Missouri.

Spire’s contribution margin increased $55.0 compared with the same twelve-month period last year. The growth in contribution margin was primarily attributable to the Gas Utility segment, up $33.6, with Spire Missouri up $23.4 and Spire Alabama up $6.5, with remaining growth from the utilities of Spire EnergySouth. Gas Marketing’s contribution margin was down $13.2, reflecting the costs of incremental storage and transportation capacity that will benefit the upcoming winter heating season. Depreciation and amortization expenses were higher in the Gas Utility segment, driven principally by continued infrastructure investment in both Spire Missouri and Spire Alabama. Gas Utility operation and maintenance (“O&M”) expenses were lower in the current year driven primarily by lower bad debt expense, operations and employee-related costs. These fluctuations are described in more detail below.

Gas Utility

Operating Revenues – Gas Utility operating revenues for fiscal 2020 decreased $108.8 compared to fiscal 2019, and was attributable to the following factors:

Spire Missouri and Spire Alabama – Lower PGA/GSA gas cost recoveries $ (96.8 )

Spire Missouri and Spire Alabama – Volumetric usage (35.8 )

Spire Missouri and Spire Alabama – Gross Receipt Taxes (7.8 )

Spire Missouri – Off-system sales and capacity release (7.1 )

Spire Missouri – Higher ISRS 20.2

Spire Missouri – Smaller ISRS Rulings Provision versus prior year 10.0

Spire Alabama – RSE: net adjustments 4.9

All other factors 3.6

Total Variation $ (108.8 )

As shown in the table above, the decrease in revenues was driven primarily by a $96.8 reduction in gas cost recoveries, $35.8 attributable to volumetric usage, lower gross receipt taxes of $7.8, and a $7.1 impact due to lower Spire Missouri off-system sales. These impacts were only partly offset by an increase of $30.2 in ISRS ($20.2 of the increase relating to run rate, with the remaining $10.0 increase attributable to the favorable year-over-year impact of the ISRS Rulings provision and subsequent settlement), a $4.9 increase relating to Spire Alabama’s RSE adjustments, and $3.6 attributable to all other factors.

Contribution Margin – Gas Utility contribution margin was $1,000.7 for fiscal 2020, a $33.6 increase over the same period last year. The increase was attributable to the following factors:

Spire Missouri – Higher ISRS $ 20.2

Spire Missouri – Smaller ISRS Rulings Provision versus prior year 10.0

Spire Alabama – RSE: net adjustments 3.8

Spire Missouri and Spire Alabama – Volumetric usage (5.4 )

Spire Missouri – Late Payments (2.3 )

All other factors 7.3

Total Variation $ 33.6

The increase was primarily attributable to the $30.2 increase in Spire Missouri ISRS ($20.2 of the increase relating to run rate, with the remaining $10.0 increase attributable to the favorable year-over-year impact of the ISRS Rulings provision and subsequent settlement). Contribution margin also benefited from a $3.8 increase relating to Spire Alabama’s RSE net adjustments, and $7.3 attributable to multiple smaller factors, including modest customer growth. These positive impacts were only partly offset by a $5.4 volumetric/weather reduction (net of weather mitigation) and a $2.3 COVID-19-related reduction in late payment fee revenue in Spire Missouri.

Operating Expenses– O&M expenses in fiscal 2020 decreased by $20.4 million compared to the prior-year period. Current year expenses reflect a $9.1 million year-over-year reclassification of certain postretirement benefit costs to other income and expense (no impact on net income). Excluding this adjustment, O&M expenses decreased by $11.3 million due to lower bad debt expense, operations and employee-related costs. Depreciation and amortization expenses for the twelve months ended September 30, 2020 increased $10.3 from the same period last year,principally the result of continued infrastructure capital spending, with $6.5 of the increase attributable to Spire Missouri and $3.1 attributable to Spire Alabama.

Gas Marketing

Operating Revenues –Gas Marketing operating revenue for the year ended September 30, 2020 increased $4.2 from the prior year. The variance in revenues reflects higher total volumes, partly offset by the impact of marginally lower general pricing levels and slightly unfavorable derivative mark-to-market activity.

Contribution Margin – Gas Marketing contribution margin was $22.4 for fiscal 2020, a $13.2 decrease compared to the same period last year. Excluding the net impact of fair value adjustments in both periods totaling $1.6, the net year-over-year decline was $11.6. This reflects the costs associated with storage positions entered into in the second half of 2020 whose value will not be realized until the upcoming winter heating season in fiscal 2021, as well as less favorable market conditions.

Other

Other operating revenue increased $36.3 for the year ended September 30, 2020 compared to 2019, driven principally by STL Pipeline that was placed in service in November of 2019. Other operating expenses were $6.6 higher than the prior year reflecting STL Pipeline, combined with higher activity levels at Spire Storage.

Interest Charges

Consolidated interest charges during the year ended September 30, 2020 increased $1.1 versus the prior year. The increase was primarily driven by net long-term debt issuances in the current year and the prior year benefiting from Allowance for Funds Used in Construction (AFUDC) non-cash income at STL Pipeline. The current year also benefited from lower interest rates and stable levels of average short-term borrowings. Short-term rates averaged 1.7% in the current year versus 2.7% for the prior year and, for the years ended September 30, 2020 and 2019, average short-term borrowings were $576.2 and $574.5, respectively.

Income Taxes

Consolidated income tax expense during the year ended September 30, 2020 was $12.4, compared to $34.5 for fiscal 2019. This decrease of $22.1 is primarily the result of the $31.3 tax benefit relating to the impairment loss recorded in the third quarter of fiscal 2020. This benefit was only partly offset by the effects of higher pre-tax book income (excluding the restructuring charge) in the current year.

Spire Missouri

Summary Operating Results

Year ended September 30,

Operation and maintenance expenses 251.0 268.1

Depreciation and amortization 118.0 111.5

Taxes, other than income taxes 103.2 107.6

Less: Gross receipts tax expense (63.5 ) (71.1 )

Contribution Margin [Non-GAAP] 614.3 590.9

Gross receipts tax expense 63.5 71.1

Operating revenues during the year ended September 30, 2020 decreased $98.2 from the same period last year. The decrease in revenues was driven primarily by a $92.6 reduction in gas cost recoveries, $22.0 attributable to lower volumetric usage, lower gross receipt taxes of $7.4, and a $7.1 impact due to lower off-system sales. These impacts were only partly offset by an increase of $30.2 in ISRS ($20.2 of the increase relating to run rate, with the remaining $10.0 increase attributable to the favorable year-over-year impact of the ISRS Rulings provision and subsequent settlement), and $2.9 attributable to customer growth primarily due to a lower level of disconnections related to COVID-19.

Contribution margin for the year ended September 30, 2020 increased $23.4 from the prior year. The increase was primarily attributable to the $32.2 increase in Spire Missouri ISRS, as previously identified above. These positive impacts were only partly offset by a $7.4 volumetric/weather reduction (net of weather mitigation) and a $2.3 COVID-19-related reduction in late payment fee revenue in Spire Missouri.

O&M expenses for the year ended September 30, 2020 were $17.1 lower than the prior year. Removing the $8.6 net year-over-year impact due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M decreased $8.5 due to lower operations and employee-related costs. Depreciation and amortization increased $6.5, reflecting continued infrastructure investments throughout Missouri. Income taxes were $4.0 higher for the year ended September 30, 2020 versus the prior year. This increase is primarily the result of higher pre-tax book income, partly offset by a favorable return to provision in the current year.

Temperatures experienced in Spire Missouri’s service area during fiscal 2020 were 9% warmer than the prior year and 2% warmer than normal. Total system therms sold and transported were 1,684.0 million for fiscal 2020 compared with 1,805.7 million for fiscal 2019, a decrease of 7%. Total off-system therms sold and transported outside of Spire Missouri’s service area decreased 21% to 30.6 million for fiscal 2020 compared with 38.5 million for fiscal 2019.

Spire Alabama

Summary Operating Results

Year ended September 30,

Operation and maintenance expenses 139.1 142.6

Depreciation and amortization 59.3 56.2

Taxes, other than income taxes 34.8 35.7

Less: Gross receipts tax expense (23.3 ) (23.7 )

Contribution Margin [Non-GAAP] 312.8 306.3

Gross receipts tax expense 23.3 23.7

Operating revenues for the year ended September 30, 2020 decreased $10.5 versus the comparable period ended September 30, 2019. Of the decrease, $13.8 was the result of weather and usage impacts, and $4.2 related to lower gas cost recoveries. Partly offsetting these negative impacts was a $4.9 increase relating to the impacts of RSE adjustments, and $2.5 relating to off-system sales that commenced in fiscal 2020.

Contribution margin increased $6.5 versus the prior year, primarily the result of RSE adjustments of approximately $3.8, a $2.0 increase due to weather/volumetric impacts (net of weather mitigation), and $0.8 relating to off-system sales.

O&M expenses for the year ended September 30, 2020 decreased $3.5 versus the year ended September 30, 2019. Removing the $0.8 net year-over-year impact due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M was down $2.7 from the prior year. The O&M decrease was due to due to lower operations and employee-related costs, and a benefit associated with a bad debt charge in fiscal 2019 that did not repeat and was partially recovered. Depreciation and amortization was $3.1 higher versus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory.

Interest expense decreased $1.1. The decrease was primarily driven by net long-term debt issuances with lower rates, and lower rates and levels of short-term borrowings. Income tax expense is $1.5 higher than the prior year, primarily the result of higher pre-tax book income.

Temperatures in Spire Alabama’s service area during the year ended September 30, 2020 were 13% warmer than last year, and approximately 17% warmer than historical norms. Spire Alabama’s total therms sold and transported were 1,034.8 million for the year ended September 30, 2020, compared with 1,083.1 million last year, a 4% decrease. In fiscal 2020 Spire Alabama commenced off-system sales and achieved total sales of 54.3 therms in the current year.

2019 vs. 2018

Consolidated

Spire’s net income was $184.6 in fiscal 2019, compared with $214.2 in fiscal 2018. Basic and diluted earnings per share were $3.53 and $3.52, respectively, for fiscal 2019 compared with basic and diluted earnings per share of $4.35 and $4.33, respectively, for fiscal 2018. The decrease in net income of $29.6 reflects a $12.2 pre-tax ($9.3 after-tax) reduction in the current year due to ISRS rulings against Spire Missouri, and a $60.1 prior year income benefit relating to the implementation of the Tax Cuts and Jobs Act (TCJA), partly offset by $38.4 in pre-tax ($23.6 after-tax) expense for Missouri rate case write-offs recorded in the prior year.

Excluding these amounts, net income growth was $16.2, driven by higher operating results of the Gas Utility segment primarily attributable to Spire Missouri’s new rate design, higher ISRS charges, higher volumes, and customer growth.

The Gas Marketing segment also experienced strong operating results, as the benefits of geographic expansion have mostly offset the return of more normal market conditions and higher operating expenses.

Net economic earnings were $195.1 ($3.73 per diluted share) for the twelve months ended September 30, 2019, up from $183.7 ($3.72 per diluted share) for the twelve months ended September 30, 2018. Earnings reflect a $16.7 increase for Gas Utility, partly offset by a $3.5 net economic earnings decrease experienced by Gas Marketing and by a $1.8 higher net economic loss in Other. These fluctuations are described in more detail below. Earnings per share and net economic earnings per share were further impacted by the issuance of 2.3 million common shares in May 2018, and the dividends earned from the $250.0 in preferred shares issued in May 2019. Dividends earned on cumulative preferred shares are deducted from net income in the calculation of earnings per share.

Gas Utility

Gas Utility net income increased by $46.1, while net economic earnings increased $16.7 in fiscal 2019 compared to fiscal 2018. Both measures benefited from the 2018 rate case redesign at Spire Missouri, and from weather patterns that were favorable compared to the prior year. Fiscal 2019 net income was negatively impacted by $9.3 in after-tax impacts relating to ISRS rulings against Spire Missouri. Fiscal 2018 net income was negatively impacted by the $23.6 after-tax expense related to Missouri rate case write-offs and by a $17.0 one-time tax expense related to the implementation of the TCJA.

Gas Marketing

The Gas Marketing segment reported net income totaling $18.5 for fiscal 2019, versus net income of $24.9 during fiscal 2018, with 2018 benefitting from favorable fair value mark-to-market valuations and unusually favorable market conditions. Net economic earnings for the twelve months ended September 30, 2019, was $19.4, a decrease of $3.5 from the twelve months ended September 30, 2018 as the benefits of geographic expansion were more than offset by a return of more normal market conditions and higher operating expenses.

Other

The Company’s other non-utility activities generated a net loss of $24.4 for fiscal 2019, compared to net income of $44.9 for fiscal 2018. Fiscal 2018 reflects a $78.2 tax benefit resulting from the implementation of the TCJA, partly offset by higher acquisition and restructuring activities. Net economic loss was $24.1 for fiscal 2019, an increase of $1.8 compared to fiscal 2018. The increased loss reflects higher corporate interest costs and a $15.4 loss from Spire Storage, partially offset by increased allowance for funds used during construction (AFUDC) income for Spire STL Pipeline.

Operating Revenues and Operating Expenses

Consolidated

Spire’s operating revenues for the twelve months ended September 30, 2019 were $12.6 lower than for the twelve months ending September 30, 2018. Operating revenues decreased by $27.6 at the Gas Utility segment and were $12.1 higher in the Gas Marketing segment. The Gas Utility decrease was due principally to lower gas cost recoveries, rate case TCJA customer givebacks, impacts at Spire Missouri relating to ISRS rulings, and weather/volumetric impacts (net of volume mitigation) that were only partly offset by Missouri rate design changes, higher ISRS, and favorable Spire Alabama Rate Stabilization and Equalization (RSE) renewal and giveback. The Gas Marketing increase was primarily due to higher volumes that offset the impact of slightly lower pricing.

Spire’s contribution margin increased $17.9 compared with the same twelve-month period last year. The growth in contribution margin was primarily attributable to the Gas Utility segment, up $19.6, with Spire Missouri up $11.0 and Spire Alabama up $7.0, with remaining growth from the utilities of Spire EnergySouth. Gas Marketing’s contribution margin was down $5.7, reflecting a decline in basis differentials that was only partly offset by higher volumes combined with geographic expansion. Depreciation and amortization expenses were higher in the Gas Utility segment, driven principally by continued infrastructure investment in both Spire Missouri and Spire Alabama. Gas Utility operation and maintenance (“O&M”) expenses were lower in the current year driven primarily by the Missouri rate case write-offs in the prior year. These fluctuations are described in more detail below.

Gas Utility

Operating Revenues – Gas Utility operating revenues for fiscal 2019 decreased $27.6 compared to fiscal 2018, and was attributable to the following factors:

Spire Missouri and Spire Alabama – Lower PGA/GSA gas cost recoveries $ (30.2 )

Spire Missouri and Spire Alabama – Rate case TCJA customer giveback (24.3 )

Spire Missouri and Spire Alabama – Volumetric usage (12.4 )

Spire Missouri – Provision for ISRS rulings (12.2 )

Spire Missouri – 2018 rate case resets 32.2

Spire Missouri – Higher ISRS 8.7

Spire Alabama – RSE: net renewal and giveback 4.6

Customer growth 2.7

All other factors 3.3

Total Variation $ (27.6 )

As shown in the table above, the decrease in revenues was driven primarily by a $30.2 reduction in gas cost recoveries, rate case TCJA customer givebacks totaling $24.3, $12.4 attributable to volumetric usage, and a $12.2 impact due to ISRS rulings. These impacts were only partly offset by an increase of $32.2 relating to the rate design changes at Spire Missouri, an increase in ISRS of $8.7, a $4.6 increase relating to Spire Alabama’s RSE renewal and giveback, and $2.7 attributable to customer growth.

Contribution Margin –– Gas Utility contribution margin was $967.1 for fiscal 2019, a $19.6 increase over the same period last year. The increase was attributable to the following factors:

Spire Missouri – 2018 rate case resets $ 32.2

Spire Missouri – Higher ISRS 8.7

Spire Missouri and Spire Alabama – Volumetric usage 5.1

Spire Alabama – RSE: net renewal and giveback 4.6

Customer growth 2.7

Spire Missouri and Spire Alabama – Rate case TCJA customer giveback (24.3 )

Spire Missouri – Provision for ISRS rulings (12.2 )

All other factors 2.8

Total Variation $ 19.6

The increase was primarily attributable to the $32.2 increase resulting from the 2018 Missouri rate cases resets. Contribution margin also benefited from $8.7 higher ISRS charges, $5.1 due to volumes and colder weather in the current year (net of weather mitigation), a $4.6 increase relating to Spire Alabama’s RSE renewal and giveback, and $2.7 attributable to customer growth. These positive impacts were only partly offset by rate case TCJA customer givebacks totaling $24.3 from both Spire Missouri and Spire Alabama, and $12.2 relating to ISRS rulings against Spire Missouri.

Operating Expenses – Gas Utility O&M expenses for the twelve months ended September 30, 2019 decreased $8.0 from last year. Removing last year’s $38.4 of Missouri rate case write-offs,and the $19.6 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $10.8. Of this increase, $9.0 relates to higher employee benefits and energy efficiency costs that resulted from the 2018 Missouri rate cases. Depreciation and amortization expenses for the twelve months ended September 30, 2019 increased $12.4 from the same period last year principally the result of continued infrastructure capital spending, with $8.7of the increase attributable to Spire Missouri and $3.0 attributable to Spire Alabama.

Gas Marketing

Operating Revenues –Gas Marketing operating revenue for the year ended September 30, 2019 increased $12.1 from the prior year. The variance in revenues reflects the effect of a $9.3 favorable mark-to-market adjustment on derivatives combined with higher total volumes, partly offset by the impact of marginally lower general pricing levels. Average commodity pricing for the year ended September 30, 2019 was approximately $2.670/MMBtu versus approximately $2.681/MMBtu for fiscal 2018, a decrease of $0.011/MMBtu.

Contribution Margin – Gas Marketing contribution margin was $35.6 for fiscal 2019, a $5.7 decrease compared to the same period last year. This reflects geographic expansion that created additional opportunities to optimize the segment’s supply, transportation and storage portfolio that was more than offset by a return to more normal market conditions, reflected in the narrowed basis differentials in the current year.

Other

Other operating revenue increased $5.0 for the year ended September 30, 2019 compared to 2018, driven principally by gas storage revenues and slightly higher reinsurance premiums. Other operating expenses were $1.3 higher than the prior year primarily due to gas storage operations.

Interest Charges

Consolidated interest charges during the year ended September 30, 2019 increased $6.0 versus the prior year. The increase was primarily driven by net long-term debt issuances and higher rates and levels of short-term borrowings. Short-term rates averaged 2.7% in the current year versus 2.0% for the prior year and, for the years ended September 30, 2019 and 2018, average short-term borrowings were $574.5 and $408.6, respectively. Partly offsetting these factors was an increase in the non-cash AFUDC income for Spire STL Pipeline compared to the prior year.

Income Taxes

Consolidated income tax expense during the year ended September 30, 2019 was $34.5, compared to a $26.5 tax benefit for fiscal 2018. This increase of $61.0 is primarily the result of the $60.1 fiscal 2018 revaluation benefit of deferred tax assets and liabilities on the balance sheet that were not reflected in net economic earnings. The remaining increase in income tax is primarily the result of the effects of higher pre-tax book income in the current year, partly offset by an increase in amortization of excess deferred income taxes.

Spire Missouri

Summary Operating Results

Year ended September 30,

Operation and maintenance expenses 268.1 279.1

Depreciation and amortization 111.5 102.8

Taxes, other than income taxes 107.6 108.4

Less: Gross receipts tax expense (71.1 ) (68.9 )

Contribution Margin [Non-GAAP] 590.9 579.9

Gross receipts tax expense 71.1 68.9

Operating revenues during the year ended September 30, 2019 increased $6.2 from the same period last year. Revenues were impacted primarily by the $9.4 increase attributable to the new rate design (net of TCJA giveback), combined with higher ISRS charges of $8.7, and customer growth of $2.7. These positive impacts on the revenue growth were partly offset by $12.2 in impacts relating to ISRS rulings and volume impacts (net of weather mitigation) of $3.6.

Contribution margin for the year ended September 30, 2019 increased $11.0 from the prior year. Contribution margin benefited from the $9.4 increase attributable to the new rate design (net of TCJA giveback), combined with higher ISRS charges of $8.7, customer growth of $2.7, and the $2.8 increase due to the combined impacts of volumetric usage and higher off-system sales. These positive impacts were only partly offset by the $12.2 in adjustments relating to the ISRS rulings.

O&M expenses for the year ended September 30, 2019 were $11.0 lower than the prior year. Removing last year’s $38.4 of Missouri rate case write-offs, and the $16.9 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $10.5. Of this increase, $9.0 relates to higher employee benefits and energy efficiency costs that resulted from the 2018 Missouri rate cases. Depreciation and amortization increased $8.7, reflecting continued infrastructure investments throughout Missouri. Interest expense in the current year was $2.8 greater than prior year, the result of higher short-term borrowings and higher average effective interest rates. Income taxes were $45.9 higher for the year ended September 30, 2019 versus the prior year. This increase is primarily the result of the $45.2 fiscal 2018 revaluation benefit of deferred tax assets and liabilities on the balance sheet.

Temperatures experienced in Spire Missouri’s service area during fiscal 2019 were 5% colder than the prior year and 8% colder than normal. Total system therms sold and transported were 1,805.7 million for fiscal 2019 compared with 1,759.8 million for fiscal 2018, an increase of 3%. Total off-system therms sold and transported outside of Spire Missouri’s service area decreased 44% to 38.5 million for fiscal 2019 compared with 68.6 million for fiscal 2018. The decrease in off-system therms was the direct result of the increase in demand experienced for system therms.

Spire Alabama

Summary Operating Results

Year ended September 30,

Operation and maintenance expenses 142.6 138.8

Depreciation and amortization 56.2 53.2

Taxes, other than income taxes 35.7 36.1

Less: Gross receipts tax expense (23.7 ) (25.4 )

Contribution Margin [Non-GAAP] 306.3 299.3

Gross receipts tax expense 23.7 25.4

Operating revenues for the year ended September 30, 2019 decreased $35.2 versus the comparable period ended September 30, 2018. Of the decrease, $27.8 related to lower gas cost recoveries, $8.8 was the result of weather and usage impacts, $1.7 was attributable to lower gross receipt taxes, along with approximately $1.5 associated with rate reductions to customers due to tax savings from the TCJA. Partly offsetting these negative impacts was a $4.6 increase relating to favorable RSE renewal and giveback.

Contribution margin increased $7.0 versus the prior year, as a favorable RSE adjustment of approximately $4.6 and a $3.9 increase due to weather/volumetric impacts (net of weather mitigation) were only slightly offset by the $1.5 impact of the customer rate reduction resulting from the TCJA.

O&M expenses for the year ended September 30, 2019 increased $3.8 versus the year ended September 30, 2018. Removing the $2.4 net year-over-year increase due to the transfer of mix of service and non-service postretirement benefits costs to other income and expense, O&M increased $1.4. Depreciation and amortization was $3.0 higher versus the same period last year, the result of continued infrastructure investment throughout Spire Alabama’s service territory.

Interest expense increased $4.4. The increase was primarily driven by net long-term debt issuances and higher rates and levels of short-term borrowings. Income tax expense is $61.1 lower than the prior year, primarily the result of 2018 being burdened with the $60.7 deferred tax revaluation impact resulting from the implementation of the TCJA.

Temperatures in Spire Alabama’s service area during the year ended September 30, 2019 were 6% warmer than last year, and approximately 6% warmer than historical norms. Spire Alabama’s total therms sold and transported were 1,083.1 million for the year ended September 30, 2019, compared with 1,020.8 million last year, a 6% increase.

REGULATORY MATTERS

For discussions of regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 15, Regulatory Matters, of the Notes to Financial Statements in Item 8.

ACCOUNTING PRONOUNCEMENTS

The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the impact that recently issued accounting standards will have on their financial position or results of operations upon adoption. For disclosures related to the adoption of new accounting standards, see the New Accounting Pronouncements section of Note 1 of the Notes to Financial Statements in Item 8.

INFLATION

The accompanying financial statements reflect the historical costs of events and transactions, regardless of the purchasing power of the dollar at the time. Due to the capital-intensive nature of the businesses of the Company, Spire Missouri and Spire Alabama, the most significant impact of inflation is on the depreciation of utility plant. Rate regulation, to which the Utilities are subject, allows recovery through its rates of only the historical cost of utility plant as depreciation. The Utilities expect to incur significant capital expenditures in future years, primarily related to the planned increased replacements of distribution plant. The Utilities believe any higher costs experienced upon replacement of existing facilities will be recovered through the normal regulatory process.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following represent the more significant items requiring the use of judgment and estimates in preparing our financial statements:

Regulatory Accounting – The Utilities account for their regulated operations in accordance with FASB Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). 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 it 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 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.

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.

ISRS –The ISRS allows Spire Missouri expedited recovery for its investment to upgrade its infrastructure and enhance its safety and reliability without the necessity of a formal rate case. Spire Missouri records ISRS revenues as authorized by the MoPSC and estimates the probability and amount of any refunds based on commission precedent, current legal rulings, the opinion of legal counsel, and other considerations.

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:

Expected Return on Plan Assets 0.25 % — (1.2 )

Rate of Future Compensation Increase 0.25 % 3.4 0.3

Expected Return on Plan Assets 0.25 % — (0.7 )

Annual Medical Cost Trend 1.00 % 9.7 0.8

Impairment of Long-lived Assets – Long-lived assets classified as held and used are evaluated for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Whether impairment has occurred is determined by comparing the estimated undiscounted cash flows attributable to the assets with the carrying value of the assets. If the carrying value exceeds the undiscounted cash flows, the Company recognizes an impairment charge equal to the amount of the carrying value that exceeds the estimated fair value of the assets. In the period in which the Company determines an asset meets held-for-sale criteria, an impairment charge is recorded to the extent the book value exceeds its fair value less cost to sell.

On July 1, 2020, Spire’s Board of Directors, based upon the recommendation of senior management, revised the development plan for Spire Storage, resulting in an impairment charge of $140.8 related to Spire Storage assets in the quarter ended June 30, 2020. The revision was driven by the realization that a longer time horizon will be required for optimization and positioning of the storage facility to serve energy markets in the western United States. Among other factors, evaluations of the continuing evolution of market dynamics in the region led management to update models of various development alternatives. Separately in the quarter ended June 30, 2020, Spire recorded impairment charges totaling $7.8 related to two commercial compressed natural gas fueling stations as a result of revised projections reflecting lower diesel prices and slower conversions of Class 8 vehicles. The fair values used in measuring the impairment charges were determined with an expected present value technique using a discounted cash flow method under an income approach. Our impairment loss calculations required management to make assumptions and to apply judgment in order to estimate fair values of the assets. This involved estimating cash flows, useful lives, and current market value for similar assets and selecting a discount rate that reflects the risk inherent in future cash flows. Cash flow projections were based on assumptions about future market demand and achievement of certain operational capabilities. Assumptions were selected from a range of reasonably possible amounts and were supported by relevant and reliable data. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to additional impairments that could be material. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate asset impairment losses.

Income Taxes – Income tax calculations require estimates due to book-tax differences, estimates with respect to regulatory treatment of certain items, and uncertainty in the interpretation of tax laws and regulations. Critical assumptions and judgments also include projections of future taxable income to determine the ability to utilize net operating losses and credit carryforwards prior to their expiration. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Management regularly assesses financial statement tax provisions to identify any change in regulatory treatment or tax related estimates and assumptions that could have a material impact on cash flows, financial position and/or results of operations.

For further discussion of significant accounting policies, see Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements in Item 8.

LIQUIDITY

The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when they purchase natural gas and when their customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with Spire Missouri’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utilities’ PGA clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of storage gas inventories cause short-term cash requirements to vary during the year and from year to year, and may cause significant variations in the Company’s cash provided by or used in operating activities.

Net cash provided by operating activities $ 469.9 $ 450.9 $ 456.6

Net cash used in investing activities (631.6 ) (838.3 ) (531.7 )

Net cash provided by financing activities 160.0 371.8 89.1

Net cash provided by operating activities increased $19.0 from 2019 to 2020 and decreased $5.7 from 2018 to 2019, primarily as a result of fluctuations in working capital items.

In fiscal 2020, the Company used $206.7 less cash in investing activities than in fiscal 2019. The major driver of the reduction was lower capital expenditures, down $184.9 versus the prior year. Spire STL Pipeline, which was placed into service in the first fiscal quarter of 2020, accounted for $97.4 of the reduction, and expenditures at Spire Storage were $59.6 below prior year levels. Capital expenditures at the Utilities were down $29.1, while remaining focused on infrastructure upgrades and new business development. Utility capital expenditures resume growth in fiscal 2021 and beyond, while total Company capital expenditures are planned to be $590.o for fiscal 2021.

In fiscal 2019, the Company used $306.6 more cash in investing activities than in 2018. Capital expenditures increased $323.9 from fiscal 2018 to 2019, primarily as a result of $110.5 higher expenditures for the Spire STL Pipeline project and a $118.9 increase in infrastructure upgrades, new business development and investment to support customer growth across Missouri and Alabama. A further $89.9 in expenditures related to the development of Spire Storage.

Net cash provided by financing activities declined $211.8 in fiscal 2020 versus fiscal 2019, the major driver being the prior year issuance of preferred stock that generated $242.0 in proceeds. Year-over-year net debt issuance increased by $32.3, and the issuance of common stock generated $21.6 more cash in fiscal 2020 than in fiscal 2019. These increases in cash were only partly offset by a $20.4 increase in common and preferred stock dividends in fiscal 2020 versus fiscal 2019.

Net cash provided by financing activities increased $282.7 from 2018 to 2019. The increase in 2019 versus 2018 was primarily due to the issuance of preferred shares for $242.0 and an increase in net debt issuance of $189.2. These increases were only partly offset by the $135.2 reduction in funds received from common stock issuances in 2019 versus 2018.

CAPITAL RESOURCES

The Company’s, Spire Missouri’s and Spire Alabama’s access to capital markets, including the commercial paper market, and their respective financing costs, may depend on the credit rating of the entity that is accessing the capital markets. Their debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of September 30, 2020, the debt ratings of the Company, Spire Missouri and Spire Alabama, shown in the following table, remain at investment grade with a stable outlook.

S&P Moody’s

Spire Inc. senior unsecured long-term debt BBB+ Baa2

Spire Inc. preferred stock BBB Ba1

Spire Inc. short-term debt A-2 P-2

Spire Missouri senior secured long-term debt A A1

Spire Alabama senior unsecured long-term debt A- A2

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

The effects of COVID-19 on the U.S. capital markets may significantly impact Spire. We rely on access to the capital markets to fund our capital requirements. These uncertain economic conditions may also result in the inability of our customers to pay for services and could have an impact on our liquidity. Still, considering our financing as described in Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8, we believe we have sufficient access to cash to meet our needs.

Cash and Cash Equivalents

Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of September 30, 2020 or 2019. Due to lower yields available to Spire on short-term investments, the Company elected to provide all of Spire Missouri’s and 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 most of the Company’s other needs are less seasonal. These short-term cash requirements can be met through the sale of commercial paper or through the use of a revolving credit facility. For information about these resources, see Note 7, Notes Payable and Credit Agreements, of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.

Long-term Debt and Equity

At September 30, 2020, including the current portion but excluding unamortized discounts and debt issuance costs, Spire had long-term debt totaling $2,500.0, of which $1,098.0 was issued by Spire Missouri, $475.0 was issued by Spire Alabama, and $237.0 was issued by other subsidiaries. For more information about long-term debt, see Note 6 of the Notes to Financial Statements in Item 8 and “Interest Rate Risk” under “Market Risk” below.

On November 12, 2019, Spire Missouri issued and sold to certain institutional purchasers in a private placement $275.0 of 2.84% first mortgage bonds due November 15, 2029. Interest is payable semi-annually. The bonds are secured by a mortgage and deed of trust and rank equal in right to payment with all Spire Missouri’s other first mortgage bonds. Spire Missouri used the proceeds to repay its $100.0 floating-rate note and for other general corporate purposes.

On December 2, 2019, Spire Alabama issued and sold to certain institutional investors in a private placement $100.0 of 2.88% Series 2019B Senior Notes due December 1, 2029. Interest is payable semi-annually. The notes are senior unsecured obligations of Spire Alabama and rank equal in right to payment with all its other senior unsecured indebtedness. Spire Alabama used the proceeds to repay short-term debt and for general corporate purposes.

On December 23, 2019, Spire STL Pipeline issued and sold notes to certain institutional investors in a $135.0 private placement. Interest is payable semi-annually at 2.95%, and principal repayment is scheduled annually in accordance with a 15-year amortization schedule with an average life of 9.2 years. Proceeds were used to repay short-term debt.

On June 16, 2020, Spire Missouri purchased and cancelled a portion of its outstanding first mortgage bonds, including $5.7 of its 7% bonds due 2029, $0.8 of its 6% bonds due 2034, $0.5 of its 6.15% bonds due 2036, and $0.1 of its 4.625% bonds due 2043.

Spire Missouri was authorized by the MoPSC to issue registered securities (first mortgage bonds, unsecured debt and preferred stock), common stock, and private placement debt in an aggregate amount of up to $500.0 for financings placed any time before September 30, 2021. As of September 30, 2020, $125.0 remained available under this authorization. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance. On March 24, 2020, the APSC approved an application for up to $150.0 of additional long-term debt financing.

Spire has a shelf registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (SEC) for the issuance and sale of up to 250,000 shares of common stock under its Dividend Reinvestment and Direct Stock Purchase Plan. There were 207,254 and 201,148 shares at September 30, 2020 and November 16, 2020, respectively, remaining available for issuance under this Form S-3. Spire and Spire Missouri also have a universal shelf registration statement on Form S-3 on file with the SEC for the issuance of various equity and debt securities, which expires on May 14, 2022.

On February 6, 2019, Spire entered into an “at-the-market” equity distribution agreement, supplemented as of May 14, 2019, pursuant to which the Company may offer and sell, from time to time, shares of its common stock having an aggregate offering price of up to $150.0. Those shares are issued pursuant to Spire’s universal shelf registration statement referenced above and a prospectus supplement dated May 14, 2019. Under this program, in the year ended September 30, 2020, Spire issued 446,619 shares, generating $32.0 of proceeds net of issuance costs, and in the year ended September 30, 2019, Spire issued 179,630 shares, generating $14.4 of proceeds net of issuance costs.

On May 21, 2019, Spire issued 5.90% Series A Cumulative Redeemable Perpetual Preferred Stock, resulting in $242.0 of proceeds net of issuance costs.

Including the current portion of long-term debt, the Company’s long-term consolidated capitalization at September 30, 2020, consisted of 50% equity, compared to 55% equity at September 30, 2019. For more information about equity, see Note 5 of the Notes to Financial Statements in Item 8.

CONTRACTUAL OBLIGATIONS

As of September 30, 2020, Spire had contractual obligations with payments due as summarized below:

Payments due by period

ENVIRONMENTAL MATTERS

The Utilities and other Spire subsidiaries own and operate natural gas distribution, transmission and storage facilities, the operations of which are subject to various environmental laws, regulations and interpretations. While environmental issues resulting from such operations arise in the ordinary course of business, such issues have not materially affected the Company’s, Spire Missouri’s or Spire Alabama’s financial position and results of operations. As environmental laws, regulations and their interpretations change, however, the Company and the Utilities may be required to incur additional costs. For information relative to environmental matters, see Contingencies in Note 16 of the Notes to Financial Statements in Item 8.

OFF-BALANCE SHEET ARRANGEMENTS

At September 30, 2020, the Company had no off-balance sheet financing arrangements, other than surety bonds, and letters of credit entered into in the ordinary course of business. The Company does not expect to engage in any significant off-balance sheet financing arrangements in the near future.

MARKET RISK

Commodity Price Risk

Gas Utility

The Utilities’ commodity price risk, which arises from market fluctuations in the price of natural gas, is primarily managed through the operation of Spire Missouri’s PGA clauses and Spire Alabama’s GSA rider. The PGA clauses and GSA rider allows the Utilities to flow through to customers, subject to prudence review by the MoPSC and APSC, the cost of purchased gas supplies. 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, 2020, Spire Missouri had active natural gas derivative positions, but Spire Alabama did not. Costs and cost reduction, including carrying costs, associated with the use of natural gas derivative instruments are allowed to be passed on to customers through the operation of the PGA clauses or GSA rider. Accordingly, the Utilities do not expect any adverse earnings impact as a result of the use of these derivative instruments. However, the timing of recovery for cash payments related to margin requirements may cause short-term cash requirements to vary. For more information about the Utilities’ natural gas derivative instruments, see Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8.

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, 2020 and 2019, Spire Marketing’s unmatched fixed-price positions were not material to Spire’s financial position or results of operations.

As mentioned above, Spire Marketing uses natural gas futures, options and swap contracts traded on or cleared through the NYMEX and ICE to manage the commodity price risk associated with its fixed-price natural gas purchase and sale commitments. These derivative instruments may be designated as cash flow hedges of forecasted purchases or sales. Such accounting treatment, if elected, generally permits a substantial portion of the gain or loss to be deferred from recognition in earnings until the period that the associated forecasted purchase or sale is recognized in earnings. To the extent a hedge is effective, gains or losses on the derivatives will be offset by changes in the value of the hedged forecasted transactions. Information about the fair values of Spire Marketing’s exchange-traded/cleared natural gas derivative instruments is presented below:

Derivative Fair Values Cash Margin Derivatives and Cash Margin

Net balance of derivative assets at September 30, 2019 $ (1.4 ) $ 4.8 $ 3.4

Changes in fair value 11.8 — 11.8

Settlements/purchases - net (4.7 ) — (4.7 )

Changes in cash margin — (5.2 ) (5.2 )

Net balance of derivative assets at September 30, 2020 $ 5.7 $ (0.4 ) $ 5.3

Fair values of puts and calls - net (0.7 ) (0.8 ) 0.1 — —

Position volumes:

MMBtu - net (short) long basis swap positions (1.0 ) (1.0 ) — — —

MMBtu - net (short) puts and calls positions (0.8 ) (0.8 ) — — —

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 2022:

Net balance of derivative liabilities at September 30, 2019 $ 3.0

Changes in fair value (7.6 )

Settlements (2.8 )

Net balance of derivative liabilities at September 30, 2020 $ (7.4 )

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 in Item 8.

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 and other concentrations of credit risk, including how Spire Marketing manages these risks, seeNote 11,Concentrations of Credit Risk, of the Notes to Financial Statements in Item 8.

Interest Rate Risk

The Company is subject to interest rate risk associated with its short-term debt issuances. Based on average short-term borrowings during fiscal 2020, an increase of 100 basis points in the underlying average interest rate for short-term debt would have caused an increase in interest expense (and a decrease in pre-tax earnings and cash flows) of approximately $5.8 on an annual basis. Portions of such an increase may be offset through the Utilities’ application of PGA and GSA carrying costs. At September 30, 2020, Spire had fixed-rate long-term debt totaling $2,500.0. Spire Missouri had fixed-rate long-term debt totaling $1,098 and Spire Alabama had fixed-rate long-term debt of $475.0, all included in Spire’s total long-term debt. While the long-term debt issues are fixed-rate, they are subject to changes in fair value as market interest rates change. However, increases or decreases in fair value would impact earnings and cash flows only if the Company were to reacquire any of these issues in the open market prior to maturity. Under GAAP applicable to the Utilities’ regulated operations, losses or gains on early redemptions of long-term debt would typically be deferred as regulatory assets or regulatory liabilities and amortized over a future period.

During the first quarter of fiscal 2019, the Company entered into a three-year interest rate swap with a fixed interest rate of 3.250% and a notional amount of $100.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $53.7 mark-to-market loss to comprehensive income on this swap for twelve months ended September 30, 2020. In the second quarter of 2020, the Company entered into multiple interest rate swaps with fixed interest rates ranging from 0.921% to 1.3105% for a total notional amount of $150.0 to protect itself against adverse movements in interest rates on future interest rate payments. The Company recorded a $0.5 mark-to-market loss to comprehensive income for these swaps for the twelve months ended September 30, 2020.

Refer to Note 10, Derivative Instruments and Hedging Activities, of the Notes to Financial Statements in Item 8 for additional details on the Company’s interest rate swap transactions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

For this discussion, see “Market Risk” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 8. Financial Statements and Supplementary Data

Page

Management Reports on Internal Control over Financial Reporting 56

Reports of Independent Registered Public Accounting Firm 57

Financial Statements (for years ended September 30, 2020, 2019, and 2018):

Spire Inc.

Consolidated Statements of Income 65

Consolidated Statements of Comprehensive Income 66

Consolidated Balance Sheets 67

Consolidated Statements of Shareholders’ Equity 69

Consolidated Statements of Cash Flows 70

Spire Missouri Inc.

Statements of Comprehensive Income 71

Balance Sheets 72

Statements of Shareholder’s Equity 74

Statements of Cash Flows 75

Spire Alabama Inc.

Statements of Income 76

Balance Sheets 77

Statements of Shareholder’s Equity 79

Statements of Cash Flows 80

Notes to Financial Statements

Note 1. Summary of Significant Accounting Policies 81

Note 2. Revenue 89

Note 3. Stock-Based Compensation 91

Note 4. Earnings Per Common Share 94

Note 5. Shareholders’ Equity 94

Note 6. Long-Term Debt 97

Note 7. Notes Payable and Credit Agreements 99

Note 8. Fair Value of Financial Instruments 100

Note 9. Fair Value Measurements 100

Note 10. Derivative Instruments and Hedging Activities 102

Note 11. Concentrations of Credit Risk 108

Note 13. Pension Plans and Other Postretirement Benefits 112

Note 14. Information by Operating Segment 124

Note 15. Regulatory Matters 126

Note 16. Commitments and Contingencies 133

Note 18. Interim Financial Information (Unaudited) 137

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 its 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, 2020. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Inc.’s internal control over financial reporting was effective as of September 30, 2020. 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 its 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, 2020. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Missouri Inc.’s internal control over financial reporting was effective as of September 30, 2020.

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 its 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, 2020. In making this assessment, management used the criteria in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that Spire Alabama Inc.’s internal control over financial reporting was effective as of September 30, 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Spire Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended September 30, 2020, of the Company and our report dated November 18, 2020, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for their assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

St. Louis, Missouri

November 18, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Spire Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Spire Inc. and subsidiaries (the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 18, 2020, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements

Critical Audit Matter Description

The Company accounts for their regulated operations in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 980, Regulated Operations. The provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. These actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. Also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities).

The Company is subject to rate regulation by the Missouri, Alabama, and Mississippi Public Service Commissions (the “Commissions”), which have jurisdiction with respect to the rates of natural gas companies within their respective geographies. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.

Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2020, and the judgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:

Evaluation of Spire Storage Asset Impairment – Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company evaluates for impairment long-lived assets classified as held and used when events or changes in circumstance indicate that the carrying value of the respective asset (asset group) may not be recoverable. The carrying value of the asset is not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value of the asset is not recoverable, the Company recognizes an impairment charge equal to the amount of the carrying value of the asset that exceeds the fair value of the asset.

During the year ended September 30, 2020, the Company recorded an impairment loss of $140.8 million related to their Spire Storage West LLC (“Storage”) long-lived assets (the “asset group”) after it was determined that their carrying value was not recoverable due to a revision in future business development plans. The Company measured the impairment loss by estimating the fair value of the asset group using a discounted cash flow model (the “model”). The estimation of fair value required management to make assumptions and apply judgment regarding future cash flows expected to result from the use and eventual disposition of the asset group under various business development plans, future market demand, operational capabilities, and the selection of a discount rate. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period.

We identified the estimation of the fair value of the Storage asset group as a critical audit matter due to the high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions in determining the fair value, including those related to revenue forecasts and the “terminal value” used to determine estimated future cash flows under various business development plans, and the selection of a discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimation of the fair value of the Storage asset group included the following, among others:

o Executed storage contracts,

o Testing the mathematical accuracy of the model, and

/s/ Deloitte & Touche LLP

St. Louis, Missouri

November 18, 2020

We have served as the Company’s auditor since 1953.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Spire Missouri Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Spire Missouri Inc. (a wholly owned subsidiary of Spire Inc.) (the "Company") as of September 30, 2020 and 2019, the related statements of comprehensive income, shareholder’s equity, and cash flows, for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements

Critical Audit Matter Description

The Company is subject to rate regulation by the Missouri Public Service Commission (the “Commission”), which has jurisdiction with respect to the rates of natural gas companies within their geography. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.

Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commission will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2020, and the judgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commission included the following, among others:

/s/ Deloitte & Touche LLP

St. Louis, Missouri

November 18, 2020

We have served as the Company’s auditor since 1953.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholder and the Board of Directors of Spire Alabama Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Spire Alabama Inc. (a wholly owned subsidiary of Spire Inc.) (the "Company") as of September 30, 2020 and 2019, the related statements of income, shareholder’s equity, and cash flows, for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting 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.

Critical Audit Matter

Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Note 15 to the financial statements

Critical Audit Matter Description

The Company is subject to rate regulation by the Alabama Public Service Commission (the “Commission”), which has jurisdiction with respect to the rates of natural gas companies within their geography. The Company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process.

Accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the Company’s financial statements. There is a risk that the Commission will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. As a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of September 30, 2020, and the judgments made by management to support their assertions about impacted account balances and disclosures. Management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commission included the following, among others:

/s/ Deloitte & Touche LLP

St. Louis, Missouri

November 18, 2020

We have served as the Company’s auditor since 2014.

SPIRE INC.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended September 30

Operating Expenses:

Impairments 148.6 — —

Other Income (Expense), Net 0.1 21.2 (8.0 )

Income Tax Expense (Benefit) 12.4 34.5 (26.5 )

Provision for preferred dividends 14.8 5.3 -

Income allocated to participating securities 0.1 0.4 0.5

Net Income Available to Common Shareholders $ 73.7 $ 178.9 $ 213.7

Weighted Average Number of Common Shares Outstanding:

Basic Earnings Per Share of Common Stock $ 1.44 $ 3.53 $ 4.35

Diluted Earnings Per Share of Common Stock $ 1.44 $ 3.52 $ 4.33

See the accompanying Notes to Financial Statements.

SPIRE INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended September 30

Other Comprehensive (Loss) Income, Before Tax:

Cash flow hedging derivative instruments:

Net hedging (loss) gain arising during the period (8.9 ) (46.4 ) 3.9

Amounts reclassified into net income (3.2 ) (1.3 ) (1.5 )

Net (loss) gain on cash flow hedging derivative instruments (12.1 ) (47.7 ) 2.4

Defined benefit pension and other postretirement benefit plans:

Net unrealized gain on available-for-sale debt securities — 0.1 0.3

Other Comprehensive (Loss) Income, Before Tax (12.6 ) (48.5 ) 3.1

Other Comprehensive (Loss) Income, Net of Tax (9.9 ) (37.7 ) 2.5

See the accompanying Notes to Financial Statements.

SPIRE INC.

CONSOLIDATED BALANCE SHEETS

September 30

ASSETS

Less: Accumulated depreciation and amortization 2,086.2 1,794.5

Total Other Property and Investments 504.0 550.1

Current Assets:

Cash and cash equivalents 4.1 5.8

Accounts receivable:

Allowance for doubtful accounts (24.9 ) (23.0 )

Delayed customer billings 10.0 4.3

Inventories:

Materials and supplies 26.5 23.3

Deferred Charges and Other Assets:

Total Deferred Charges and Other Assets 2,466.5 2,102.6

SPIRE INC.

CONSOLIDATED BALANCE SHEETS (Continued)

September 30

CAPITALIZATION AND LIABILITIES

Capitalization:

Accumulated other comprehensive loss (41.2 ) (31.3 )

Temporary equity 3.4 3.4

Long-term debt (less current portion) 2,423.7 2,082.6

Current Liabilities:

Current portion of long-term debt 60.4 40.0

Advance customer billings 45.3 32.6

Wages and compensation accrued 46.3 45.7

Deferred Credits and Other Liabilities:

Pension and postretirement benefit costs 309.0 264.8

Total Deferred Credits and Other Liabilities 1,842.6 1,521.4

Commitments and Contingencies (Note 16)

Total Capitalization and Liabilities $ 8,241.2 $ 7,619.2

See the accompanying Notes to Financial Statements.

SPIRE INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in millions, Common Stock Preferred Paid-in Retained

except per share amounts) Shares Par Stock Capital Earnings AOCI* Total

Dividend reinvestment plan 23,023 — — 1.6 — — 1.6

Stock-based compensation costs — — — 7.7 — — 7.7

Stock issued under stock-based compensation plans 119,592 0.1 — (0.1 ) — — —

Dividends declared:

Common stock ($2.25 per share) — — — — (112.1 ) — (112.1 )

Other comprehensive income, net of tax — — — — — 2.5 2.5

Reclassification of certain income tax effects — — — — (0.7 ) 0.7 —

Dividend reinvestment plan 62,735 — — 5.1 — — 5.1

Stock-based compensation costs — — — 6.2 — — 6.2

Stock issued under stock-based compensation plans 87,978 0.1 — (0.1 ) — — —

Temporary equity adjustment to redemption value — — — — (0.8 ) — (0.8 )

Preferred stock issued — — 242.0 — — — 242.0

Dividends declared:

Common stock ($2.37 per share) — — — — (120.5 ) — (120.5 )

Preferred stock ($0.344 per depositary share) — — — — (3.4 ) — (3.4 )

Other comprehensive loss, net of tax — — — — — (37.7 ) (37.7 )

Stock-based compensation costs — — — 6.0 — — 6.0

Stock issued under stock-based compensation plans 110,463 0.1 — (0.1 ) — — —

Temporary equity adjustment to redemption value — — — — 3.4 — 3.4

Dividends declared:

Common stock ($2.49 per share) — — — — (128.4 ) — (128.4 )

Preferred stock ($1.84375 per depositary share) — — — — (18.4 ) — (18.4 )

Other comprehensive loss, net of tax — — — — — (9.9 ) (9.9 )

*Accumulated other comprehensive income (loss)

See the accompanying Notes to Financial Statements.

SPIRE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended September 30

SR US Equity

SR · 10-K · period ended 2020-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

SR US Equity☆

SR · 10-K · period ended 2020-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

SR US Equity