Spire Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended March 31, 2023 (fiscal Q2 and first half of fiscal 2023). The filing is a combined, unaudited report for Spire Inc., Spire Missouri Inc. and Spire Alabama Inc.; figures below are consolidated Spire unless identified otherwise. Amounts are in millions except per-share data.
Business context and results
Spire operates regulated natural gas utilities, a non-regulated gas marketing business and midstream storage and pipeline operations. Earnings are seasonal and typically concentrated in the November–April heating season. The company changed its reportable segments in fiscal Q1 2023, reporting Midstream separately; historical segment information was recast.
| Consolidated metric | Three months ended March 31, 2023 | Three months ended March 31, 2022 | Six months ended March 31, 2023 | Six months ended March 31, 2022 |
|---|---|---|---|---|
| Operating revenue | $1,123.4 | $880.9 | $1,937.4 | $1,436.3 |
| Operating income | $260.3 | $245.2 | $410.5 | $340.5 |
| Net income | $179.2 | $173.6 | $270.2 | $229.3 |
| Net income available to common shareholders | $175.1 | $169.7 | $262.3 | $221.6 |
| Diluted EPS | $3.33 | $3.27 | $4.99 | $4.28 |
| Net economic earnings (non-GAAP) | $199.2 | $181.0 | $284.3 | $243.6 |
Financial position, cash flow and liquidity
- Cash flow, first half: Operating cash flow was $179.9, versus $155.1 a year earlier. Investing used $340.7, including $307.8 of capital expenditures and a $37.1 advance payment for an acquisition. Financing provided $161.5. Cash, cash equivalents and restricted cash ended at $21.2; balance-sheet cash and equivalents were $6.9.
- Debt: At March 31, long-term debt was $3,702.5 excluding the $256.6 current portion; notes payable were $561.0. Spire issued $400.0 of Spire Missouri first mortgage bonds and $150.0 of Spire senior notes during the quarter. Interest expense rose to $47.2 for the quarter and $90.8 for the half year.
- Liquidity: The three borrowers share a $1.3 billion revolving credit facility, with no borrowings against it at quarter-end, and Spire has a commercial-paper program with a $1.3 billion limit. Management said it expects adequate access to capital; ratings were investment grade, though Moody’s outlook for Spire Missouri was negative. Debt covenants were reported in compliance.
- Capital and dividends: Fiscal 2023 capital expenditures are planned at $700. Common dividends declared were $0.72 per share for the quarter. Spire had $152.8 of remaining ATM authorization at March 31; forward sales covered 228,690 shares and had not yet settled.
Material changes and management commentary
- Quarterly revenue rose $242.5 year over year, primarily reflecting higher gas-cost recoveries passed through to customers. These recoveries increased revenue but generally do not directly increase operating income. Gas Utility contribution margin, a non-GAAP measure, rose $41.7 for the quarter, led by Spire Missouri rate-case effects.
- For the quarter, consolidated net income increased $5.6 and net economic earnings increased $18.2. Gas Utility and Midstream improved; Gas Marketing GAAP net income was lower, partly due to unfavorable mark-to-market activity, while its net economic earnings improved with favorable market conditions and regional basis differentials.
- For the half year, net income increased $40.9 and net economic earnings increased $40.7. Gas Marketing contributed significantly to the improvement. Spire Alabama’s net income declined $5.4 for the half year, as warmer weather and higher interest costs more than offset modest contribution-margin growth.
- Interest costs rose with higher short-term rates and debt balances. Management cited a 5.03% weighted-average short-term borrowing rate in the current-year quarter versus 0.56% a year earlier.
- Management reported no significant changes to critical accounting estimates and no material changes to disclosed risk factors. Disclosure controls were deemed effective.
Outlook, regulatory matters and risks
- Spire Missouri’s new base rates became effective December 26, 2022, following a rate case authorizing $78.0 of annual base-rate revenue, including amounts previously collected through the infrastructure surcharge. The MoPSC approved an additional $7.7 annual infrastructure surcharge increase effective May 6, 2023.
- Spire Alabama’s new rates designed to provide $15.0 of annual revenue became effective January 1, 2023. Spire Gulf and Spire Mississippi also had rate increases effective in January 2023.
- The company acquired the Salt Plains natural gas storage facility on April 1, 2023, after paying a refundable $37.1 preliminary purchase price on March 31. The acquisition will be recorded in the quarter ending June 30, 2023.
- Spire Missouri’s recovery of Spire STL Pipeline costs remains contested in an ACA proceeding. Environmental Defense Fund advocated a $27.7 disallowance; MoPSC staff testimony supported the prudence and compliance of the transaction. The FERC reissued permanent pipeline certificates, but an appeal remained possible as of the filing.
- Spire Marketing continues to face commercial disputes tied to Winter Storm Uri. The company has estimated potential liabilities, but final settlements may materially differ. The filing also describes former manufactured-gas-site and other environmental matters; management said recorded estimates were immaterial, while future remediation costs remain uncertain.
- Key risks include weather and severe events, natural-gas price volatility and supply access, regulatory and litigation outcomes, financing and interest-rate conditions, customer collections, environmental and safety requirements, and operational or cybersecurity disruptions.
Investor facts to verify
- How much of revenue and earnings growth reflects durable rate or margin improvement versus pass-through gas-cost recoveries and seasonal effects.
- Debt maturities, borrowing costs, and funding needs relative to planned $700 fiscal-year capital spending, dividends and the April storage acquisition.
- Resolution and potential customer or financial effects of the Spire Missouri pipeline-cost ACA dispute and any appeal of the FERC certificate.
- Actual liability and settlement outcomes for Spire Marketing’s Winter Storm Uri disputes and any environmental remediation obligations.
- Performance of the Salt Plains facility after acquisition, including purchase-price allocation and expected contribution.