Business context and reporting period
Spire Inc. is a natural gas utility and energy infrastructure company, with Gas Utility, Gas Marketing and Midstream segments. Its earnings are seasonal and typically concentrated in the November–April heating season. The unaudited combined Form 10-Q covers the quarter and six months ended March 31, 2024, and includes separate financial statements for Spire Inc., Spire Missouri and Spire Alabama. The request metadata says “2023 Q2,” but the filing is for fiscal 2024 Q2.
Financial performance and liquidity
| Spire consolidated | Three months ended March 31, 2024 | Year-over-year | Six months ended March 31, 2024 | Year-over-year |
|---|---|---|---|---|
| Operating revenue | $1,128.5 million | Up $5.1 million | $1,885.1 million | Down $52.3 million |
| Operating income | $298.6 million | Up $38.3 million | $437.8 million | Up $27.3 million |
| Net income | $204.3 million | Up $25.1 million | $289.4 million | Up $19.2 million |
| Diluted EPS | $3.58 | Versus $3.33 | $5.14 | Versus $4.99 |
| Net economic earnings, non-GAAP | $196.6 million | Down $2.6 million | $279.3 million | Down $5.0 million |
| Contribution margin, non-GAAP | $527.7 million | Up $51.0 million | $886.2 million | Up $45.1 million |
Second-quarter operating margin was approximately 26.5%, compared with 23.2% a year earlier. The operating-income increase reflected lower natural gas costs and improved contribution margin; the margin measure excludes gas costs and gross receipts taxes and is non-GAAP.
- Cash flow: Six-month operating cash flow was $559.4 million, versus $179.9 million. Investing used $583.9 million, including $409.3 million of capital expenditures and $177.4 million for acquisitions. Financing provided $45.1 million. Ending cash and cash equivalents were $25.6 million; cash, cash equivalents and restricted cash totaled $46.4 million.
- Debt and liquidity: At March 31, 2024, balance-sheet long-term debt was $3,421.4 million, current long-term debt $307.0 million and notes payable $786.0 million. The $1.3 billion revolving credit facility had no borrowings; $586.0 million of commercial paper was outstanding. The company reported debt below 65% of capitalization for each borrower, within the 70% covenant limit. Current assets were $1,005.7 million and current liabilities $1,650.3 million.
- Capital and distributions: Fiscal 2024 capital expenditures are planned at $800 million. Spire issued 4.49 million common shares during the six-month period, including settlement of equity units and ATM forward sales. Common dividends declared were $1.51 per share for the six months.
Material changes versus the prior comparable period
- Second-quarter GAAP net income increased, while non-GAAP net economic earnings declined. Gas Marketing recorded favorable after-tax mark-to-market activity of $27.0 million, more than offsetting weaker underlying market conditions; this helped GAAP results but was excluded from net economic earnings.
- For the six months, Gas Utility net income rose $17.4 million, while Gas Marketing net economic earnings fell $24.8 million. Prior-year Gas Marketing results benefited from more favorable market conditions and optimization opportunities.
- Spire Missouri’s second-quarter net income fell $6.9 million to $105.2 million, mainly as warmer weather reduced customer usage; its service-area degree days were 2.1% warmer than the prior-year quarter and 15.2% warmer than normal. Spire Alabama’s second-quarter net income rose $10.7 million to $70.7 million, supported by customer-charge and RSE rate changes.
- Interest expense increased $5.0 million in the quarter and $12.0 million for the six-month period, reflecting higher rates and, over six months, higher average debt balances. The weighted-average short-term rate was 5.8% in both current periods, versus 5.0% for the quarter and 4.7% for the six months a year earlier.
- Spire acquired MoGas Pipeline and the connected Omega system on January 19, 2024, for preliminary cash consideration of $177.6 million, subject to working-capital adjustments. The filing says their revenue and operating income were not material to the reported period.
Outlook, management commentary, risks and unusual items
- Management stated that the company and its utility subsidiaries expect adequate access to capital markets and sufficient internal and external resources for anticipated needs. Ratings remained investment grade, with negative outlooks other than Moody’s stable outlook for Spire Inc. and Spire Missouri.
- Regulated utilities recover purchased-gas costs through PGA or GSA mechanisms, subject to regulatory review. The filing reports the MoPSC’s April 2024 approval of an incremental $16.8 million annual Spire Missouri ISRS increase, for cumulative annual ISRS revenue of $36.9 million, tentatively effective in May 2024. Spire Alabama’s annual RSE filing provided for a $14.3 million annual revenue increase effective January 1, 2024.
- An $8.2 million interest-rate-swap gain was recognized in other income in the first quarter after management concluded the anticipated debt issuance was no longer probable and discontinued hedge accounting. In February 2024, the rate on $175 million of remarketed notes was reset to 5.300%, and Spire issued another $175 million of 5.300% notes due 2026.
- Key risks include weather and catastrophic events, natural-gas price and supply volatility, regulatory and rate decisions, access to financing, litigation, environmental obligations, cyber and operational disruption, and workforce costs. Winter Storm Uri-related commercial disputes remain subject to ongoing estimates and possible adjustment. The filing states that environmental remediation costs to date have not been material, but future costs are uncertain.
- Spire Missouri’s ACA proceedings include a proposed off-system-sale disallowance; an agreement in principle with MoPSC staff was reached in April 2024 and was not expected to affect historically reported results. Management says other litigation and claims are not expected to have a material financial effect, while noting uncertainty in outcomes.
- Management cautions that utility earnings are seasonal and interim results are not necessarily indicative of annual results. No material changes to risk factors or critical accounting estimates were reported; disclosure controls were assessed as effective.
Important facts for investors to verify
- Confirm the reporting-period mismatch: the supplied filing is for the quarter ended March 31, 2024, not 2023 Q2.
- Review the reconciliation of GAAP net income and EPS to non-GAAP net economic earnings, particularly the Gas Marketing mark-to-market effect and the $8.2 million swap gain.
- Assess the impact of weather, utility rate mechanisms and gas-cost pass-throughs on contribution margin and future earnings, especially at Spire Missouri.
- Check funding needs against the $800 million fiscal 2024 capital-spending plan, debt maturities, commercial-paper usage and the company’s access to capital markets.
- Track regulatory outcomes, including the Spire Missouri ISRS increase and the unresolved ACA off-system-sale matter, as well as Winter Storm Uri disputes and environmental contingencies.