Business context and reporting period
Spire Inc. filed this unaudited combined Form 10-Q for the quarter ended March 31, 2022 (fiscal 2022 second quarter), with comparative results for 2021. The filing covers Spire Inc. and separate statements for Spire Missouri and Spire Alabama. Spire’s principal business is regulated natural gas distribution; it also operates a non-regulated gas marketing segment. Earnings are seasonal and generally concentrated in the November–April heating season. Although the request metadata says “2021 Q2,” the filing itself reports fiscal 2022 Q2.
Financial performance and liquidity
Amounts below are in millions, except per-share data. Consolidated quarter and six-month results:
| Metric | Three months ended Mar. 31, 2022 | 2021 comparison | Six months ended Mar. 31, 2022 | 2021 comparison |
|---|---|---|---|---|
| Operating revenue | $880.9 | $1,104.9 | $1,436.3 | $1,617.5 |
| Operating income | $245.2 | $257.4 | $340.5 | $390.3 |
| Net income | $173.6 | $187.4 | $229.3 | $276.3 |
| Diluted EPS | $3.27 | $3.55 | $4.28 | $5.20 |
| Net economic earnings, non-GAAP | $181.0 | $195.6 | $243.6 | $272.5 |
| Net economic earnings per diluted share, non-GAAP | $3.42 | $3.71 | $4.56 | $5.12 |
- Quarterly contribution margin, a non-GAAP measure, was $437.0 versus $443.6; six-month contribution margin was $721.3 versus $753.3.
- For the quarter, Gas Utility net economic earnings rose to $169.2 from $159.7, while Gas Marketing fell to $14.4 from $39.8. For the six months, Gas Marketing net income was $4.7 versus $40.1.
- Six-month operating cash flow was $155.1, compared with $159.2; capital expenditures were $275.9 versus $303.5. Investing cash use was $273.2 and financing cash provided was $122.0. Cash, cash equivalents and restricted cash ended at $15.2.
- At March 31, Spire reported $3,207.3 of long-term debt excluding current maturities, $31.2 of current long-term debt, and $607.1 of notes payable. Total shareholders’ equity was $2,841.2. Cash and cash equivalents were $8.3 on the balance sheet.
- Management stated that capital resources and access to capital markets were adequate. The company had a $975 million commercial-paper program/revolving credit facility; $607.1 million of commercial paper was outstanding at quarter-end. Debt ratings remained investment grade, with Moody’s negative outlook for Spire Missouri.
Material changes versus the prior comparable period
- Quarterly revenue declined $224.0 and six-month revenue declined $181.2. Management attributed much of the comparison to unusually high prior-year revenue from Winter Storm Uri, including Spire Missouri’s $195.8 of Operational Flow Order charges and elevated off-system gas sales.
- Quarterly net income fell $13.8; six-month net income fell $47.0. Lower Gas Marketing results were the main driver, reflecting less favorable conditions than during the prior-year storm period. Six-month results also included unfavorable derivative mark-to-market effects.
- Spire Missouri’s 2021 rate-case tariffs took effect December 23, 2021 and were designed to increase annual gross base revenues by $72.2, including $24.9 incremental to amounts already collected through the infrastructure surcharge. Rate increases supported utility contribution margin, partly offsetting lower usage and off-system sales.
- Spire Missouri reduced revenue, accounts receivable, gas costs and regulatory liabilities by approximately $150 million in Q2 under a settlement in principle concerning Winter Storm Uri marketer charges. The settlement requires MoPSC approval; the filing expected resolution in Q3 FY2022.
- Long-term debt increased from $2,939.1 at September 30, 2021 to $3,207.3 at March 31, 2022. Spire Missouri issued $300 million of floating-rate first mortgage bonds due December 2024.
Outlook, commentary, risks and unusual items
- Spire planned fiscal 2022 capital expenditures of approximately $540 million. The filing does not provide a specific earnings or EPS guidance range.
- Spire Missouri filed a new general rate case on April 1, 2022, proposing an annual net gas revenue increase of approximately $151.9; the MoPSC had not set a procedural schedule. A separate ISRS settlement approved in April 2022 provides $8.5 million in incremental annual revenue effective May 2022.
- Spire STL Pipeline was operating under temporary FERC certificates after a court vacated its permanent certificate and remanded the matter. A permanent certificate process and related litigation remained pending. The pipeline’s assets were carried at more than $270 million; removal from service could adversely affect results and asset values, and could constrain Spire Missouri’s ability to meet demand.
- Spire Marketing recorded an estimate for potential Winter Storm Uri-related commercial and regulatory liabilities. Management cautioned that the estimate may change and final settlements could materially differ.
- Other risks include gas-price volatility, weather and supply disruptions, regulatory and rate-case outcomes, litigation, access to financing, cyber and operational-system disruption, and environmental remediation. The filing says environmental matters had not materially affected results to date, but future costs are uncertain.
- Spire deferred $17.5 million of Spire Missouri non-operational overhead costs as a regulatory asset through March 31, 2022, subject to future regulatory review. Management believes regulatory assets and liabilities are recoverable or refundable through regulation.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the Winter Storm Uri marketer settlement receives MoPSC approval, the final recovery amount, and the status of the related lawsuits and receivables.
- Progress and outcome of Spire Missouri’s proposed $151.9 million annual rate increase and the recoverability of deferred overhead costs.
- FERC and court decisions affecting Spire STL Pipeline authorization, continued operation, and the potential exposure of its more-than-$270 million asset base.
- Gas Marketing’s performance, including the resolution of Uri-related claims and volatility in derivative valuations and commodity-market spreads.
- Debt and liquidity trends, floating-rate borrowing costs, planned capital spending, and the company’s ability to fund investment and dividends.