UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| or | ||
| | TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
| Commission File Number | Name of Registrant, Address of Principal Executive Offices and Telephone Number | State of Incorporation | I.R.S. Employer Identification Number | |||
| | | | | |||
| | | | | |||
| | | | |
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (only applicable for Spire Inc.):
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | | ||
| | | |
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days.
| Spire Inc. | | No ☐ | ||
| Spire Missouri Inc. | | No ☐ | ||
| Spire Alabama Inc. | | No ☐ |
Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Spire Inc. | | No ☐ | ||
| Spire Missouri Inc. | | No ☐ | ||
| Spire Alabama Inc. | | No ☐ |
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| Accelerated |
| Smaller | Emerging growth company | ||||||
| Spire Inc. | X | |||||||||
| Spire Missouri Inc. | X | |||||||||
| Spire Alabama Inc. | X |
If an emerging growth company, indicate by check mark if each registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Spire Inc. | ☐ | |||
| Spire Missouri Inc. | ☐ | |||
| Spire Alabama Inc. | ☐ |
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Spire Inc. | Yes | No ☒ | ||
| Spire Missouri Inc. | Yes | No ☒ | ||
| Spire Alabama Inc. | Yes | No ☒ |
The number of shares outstanding of each registrant’s common stock as of January 29, 2024, was as follows:
| Spire Inc. | Common Stock, par value $1.00 per share | | |||
| Spire Missouri Inc. | Common Stock, par value $1.00 per share (all owned by Spire Inc.) | | |||
| Spire Alabama Inc. | Common Stock, par value $0.01 per share (all owned by Spire Inc.) | |
Spire Missouri Inc. and Spire Alabama Inc. meet the conditions set forth in General Instructions H(1)(a) and (b) to Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instructions H(2) to Form 10-Q.
This combined Form 10-Q represents separate filings by Spire Inc., Spire Missouri Inc., and Spire Alabama Inc. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Each registrant makes no representation as to information relating to the other registrants, except that information relating to Spire Missouri Inc. and Spire Alabama Inc. are also attributed to Spire Inc.
| Page No. |
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| 2 | |||
| Item 1 |
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| Spire Inc. |
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| Spire Missouri Inc. |
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| Spire Alabama Inc. |
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| Note 4. Shareholders’ Equity | 25 | ||
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3 |
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| Item 4 |
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| Item 1 |
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| Item 1A |
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| Item 2 |
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| Item 3 |
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| Item 4 |
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| Item 5 |
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| Item 6 |
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GLOSSARY OF KEY TERMS AND ABBREVIATIONS
| APSC |
Alabama Public Service Commission |
PGA |
Purchased Gas Adjustment |
|
| ASC |
Accounting Standards Codification |
RSE |
Rate Stabilization and Equalization |
|
| Company |
Spire and its subsidiaries unless the context suggests otherwise |
SEC |
U.S. Securities and Exchange Commission |
|
| Degree days |
The average of a day’s high and low temperature below 65, subtracted from 65, multiplied by the number of days impacted |
Spire |
Spire Inc. |
|
| FASB |
Financial Accounting Standards Board |
Spire Alabama |
Spire Alabama Inc. |
|
| FERC |
Federal Energy Regulatory Commission |
Spire EnergySouth |
Spire EnergySouth Inc., the parent of Spire Gulf and Spire Mississippi |
|
| GAAP |
Accounting principles generally accepted in the United States of America |
Spire Gulf |
Spire Gulf Inc. |
|
| Gas Marketing |
Segment including Spire Marketing, which provides natural gas marketing services |
Spire Marketing |
Spire Marketing Inc. |
|
| Gas Utility |
Segment including the operations of the Utilities |
Spire Mississippi |
Spire Mississippi Inc. |
|
| GSA |
Gas Supply Adjustment |
Spire Missouri |
Spire Missouri Inc. |
|
| ISRS |
Infrastructure System Replacement Surcharge |
Spire STL Pipeline |
Spire STL Pipeline LLC, or the 65-mile FERC-regulated pipeline it constructed and operates to deliver natural gas into eastern Missouri |
|
| Midstream |
Segment including Spire Storage and Spire STL Pipeline |
Spire Storage |
The physical natural gas storage operations of Spire Storage West LLC and Spire Storage Salt Plains LLC |
|
| MoPSC |
Missouri Public Service Commission |
U.S. |
United States |
|
| MSPSC |
Mississippi Public Service Commission |
Utilities |
Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth |
|
| O&M | Operation and maintenance expense |
The interim financial statements included herein have been prepared by three separate registrants — Spire Inc. (“Spire” or the “Company”), Spire Missouri Inc. (“Spire Missouri”) and Spire Alabama Inc. (“Spire Alabama”) — without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). These financial statements should be read in conjunction with the financial statements and the notes thereto included in the registrants’ combined Form 10-K for the fiscal year ended September 30, 2023.
The Financial Information in this Part I includes separate financial statements (i.e., statements of income and comprehensive income, balance sheets, statements of shareholders’ equity and statements of cash flows) for Spire, Spire Missouri and Spire Alabama. The Notes to Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations are also included and presented herein on a combined basis for Spire, Spire Missouri and Spire Alabama.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions, except per share amounts) |
2023 |
2022 |
||||||
| Operating Revenues |
$ | $ | ||||||
| Operating Expenses: |
||||||||
| Natural gas |
||||||||
| Operation and maintenance |
||||||||
| Depreciation and amortization |
||||||||
| Taxes, other than income taxes |
||||||||
| Total Operating Expenses |
||||||||
| Operating Income |
||||||||
| Interest Expense, Net |
||||||||
| Other Income, Net |
||||||||
| Income Before Income Taxes |
||||||||
| Income Tax Expense |
||||||||
| Net Income |
||||||||
| Provision for preferred dividends |
||||||||
| Income allocated to participating securities |
||||||||
| Net Income Available to Common Shareholders |
$ | $ | ||||||
| Weighted Average Number of Common Shares Outstanding: |
||||||||
| Basic |
||||||||
| Diluted |
||||||||
| Basic Earnings Per Common Share |
$ | $ | ||||||
| Diluted Earnings Per Common Share |
$ | $ | ||||||
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions) |
2023 |
2022 |
||||||
| Net Income |
$ | $ | ||||||
| Other Comprehensive Loss, Before Tax: |
||||||||
| Cash flow hedging derivative instruments: |
||||||||
| Net hedging loss arising during the period |
( |
) | ( |
) | ||||
| Amounts reclassified into net income |
( |
) | ( |
) | ||||
| Net loss on cash flow hedging derivative instruments |
( |
) | ( |
) | ||||
| Net gain on defined benefit pension and other postretirement plans |
||||||||
| Net unrealized gain on available for sale securities |
||||||||
| Other Comprehensive Loss, Before Tax |
( |
) | ( |
) | ||||
| Income Tax Benefit Related to Items of Other Comprehensive Loss |
( |
) | ( |
) | ||||
| Other Comprehensive Loss, Net of Tax |
( |
) | ( |
) | ||||
| Comprehensive Income |
$ | $ | ||||||
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, | September 30, | December 31, | ||||||||||
| (Dollars in millions, except per share amounts) | 2023 | 2023 | 2022 | |||||||||
| ASSETS | ||||||||||||
| Utility Plant | $ | $ | $ | |||||||||
| Less: Accumulated depreciation and amortization | ||||||||||||
| Net Utility Plant | ||||||||||||
| Non-utility Property (net of accumulated depreciation and amortization of $, $ and $ at December 31, 2023, September 30, 2023, and December 31, 2022, respectively) | ||||||||||||
| Other Investments | ||||||||||||
| Total Other Property and Investments | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable: | ||||||||||||
| Utility | ||||||||||||
| Other | ||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Delayed customer billings | ||||||||||||
| Inventories: | ||||||||||||
| Natural gas | ||||||||||||
| Propane gas | ||||||||||||
| Materials and supplies | ||||||||||||
| Regulatory assets | ||||||||||||
| Prepayments | ||||||||||||
| Other | ||||||||||||
| Total Current Assets | ||||||||||||
| Deferred Charges and Other Assets: | ||||||||||||
| Goodwill | ||||||||||||
| Regulatory assets | ||||||||||||
| Other | ||||||||||||
| Total Deferred Charges and Other Assets | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
SPIRE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(UNAUDITED)
| December 31, | September 30, | December 31, | ||||||||||
| 2023 | 2023 | 2022 | ||||||||||
| CAPITALIZATION AND LIABILITIES | ||||||||||||
| Capitalization: | ||||||||||||
| Preferred stock ($ par value per share; million depositary shares authorized, issued and outstanding at December 31, 2023, September 30, 2023, and December 31, 2022) | $ | $ | $ | |||||||||
| Common stock (par value $ per share; million shares authorized; million, million, and million shares issued and outstanding at December 31, 2023, September 30, 2023, and December 31, 2022, respectively) | ||||||||||||
| Paid-in capital | ||||||||||||
| Retained earnings | ||||||||||||
| Accumulated other comprehensive income | ||||||||||||
| Total Shareholders' Equity | ||||||||||||
| Temporary equity | ||||||||||||
| Long-term debt (less current portion) | ||||||||||||
| Total Capitalization | ||||||||||||
| Current Liabilities: | ||||||||||||
| Current portion of long-term debt | ||||||||||||
| Notes payable | ||||||||||||
| Accounts payable | ||||||||||||
| Advance customer billings | ||||||||||||
| Wages and compensation accrued | ||||||||||||
| Customer deposits | ||||||||||||
| Taxes accrued | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Deferred Credits and Other Liabilities: | ||||||||||||
| Deferred income taxes | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Deferred Credits and Other Liabilities | ||||||||||||
| Commitments and Contingencies (Note 11) | ||||||||||||
| Total Capitalization and Liabilities | $ | $ | $ | |||||||||
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
| Common Stock | Preferred | Paid-in | Retained | |||||||||||||||||||||||||
| (Dollars in millions) | Shares | Par | Stock | Capital | Earnings | AOCI* | Total | |||||||||||||||||||||
| Three Months Ended December 31, 2023: | ||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Common stock issued | ||||||||||||||||||||||||||||
| Dividend reinvestment plan | ||||||||||||||||||||||||||||
| Stock-based compensation costs | — | — | ||||||||||||||||||||||||||
| Stock activity under stock-based compensation plans | ( | ) | ||||||||||||||||||||||||||
| Employees’ tax withholding for stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Temporary equity adjustment to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Dividends declared: | — | |||||||||||||||||||||||||||
| Common stock ($ per share) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred stock ($ per depositary share) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
SPIRE INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
(UNAUDITED)
| Common Stock | Preferred | Paid-in | Retained | |||||||||||||||||||||||||
| Shares | Par | Stock | Capital | Earnings | AOCI* | Total | ||||||||||||||||||||||
| Three Months Ended December 31, 2022: | ||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Dividend reinvestment plan | ||||||||||||||||||||||||||||
| Stock-based compensation costs | — | — | ||||||||||||||||||||||||||
| Stock activity under stock-based compensation plans | ||||||||||||||||||||||||||||
| Employees’ tax withholding for stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Temporary equity adjustment to redemption value | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Dividends declared: | ||||||||||||||||||||||||||||
| Common stock ($ per share) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Preferred stock ($ per depositary share) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
* Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions) |
2023 |
2022 |
||||||
| Operating Activities: |
||||||||
| Net Income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Deferred income taxes and investment tax credits |
||||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventories |
||||||||
| Regulatory assets and liabilities |
( |
) | ||||||
| Accounts payable |
( |
) | ||||||
| Delayed/advance customer billings, net |
( |
) | ||||||
| Taxes accrued |
( |
) | ( |
) | ||||
| Other assets and liabilities |
( |
) | ||||||
| Other |
||||||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Investing Activities: |
||||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| Other |
||||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Financing Activities: |
||||||||
| Issuance of long-term debt |
||||||||
| Repayment of long-term debt |
( |
) | ( |
) | ||||
| Issuance of short-term debt, net |
||||||||
| Issuance of common stock |
||||||||
| Dividends paid on common stock |
( |
) | ( |
) | ||||
| Dividends paid on preferred stock |
( |
) | ( |
) | ||||
| Other |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
||||||||
| Net Decrease in Cash, Cash Equivalents, and Restricted Cash |
( |
) | ( |
) | ||||
| Cash, Cash Equivalents, and Restricted Cash at Beginning of Period |
||||||||
| Cash, Cash Equivalents, and Restricted Cash at End of Period |
$ | $ | ||||||
| Supplemental disclosure of cash paid for: |
||||||||
| Interest, net of amounts capitalized |
$ | ( |
) | $ | ( |
) | ||
| Income taxes |
( |
) | ( |
) | ||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions) |
2023 |
2022 |
||||||
| Operating Revenues |
$ | $ | ||||||
| Operating Expenses: |
||||||||
| Natural gas |
||||||||
| Operation and maintenance |
||||||||
| Depreciation and amortization |
||||||||
| Taxes, other than income taxes |
||||||||
| Total Operating Expenses |
||||||||
| Operating Income |
||||||||
| Interest Expense, Net |
||||||||
| Other Income, Net |
||||||||
| Income Before Income Taxes |
||||||||
| Income Tax Expense |
||||||||
| Net Income |
||||||||
| Other Comprehensive Income, Net of Tax |
||||||||
| Comprehensive Income |
$ | $ | ||||||
See the accompanying Notes to Financial Statements.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| December 31, | September 30, | December 31, | ||||||||||
| (Dollars in millions, except per share amounts) | 2023 | 2023 | 2022 | |||||||||
| ASSETS | ||||||||||||
| Utility Plant | $ | $ | $ | |||||||||
| Less: Accumulated depreciation and amortization | ||||||||||||
| Net Utility Plant | ||||||||||||
| Other Property and Investments | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | ||||||||||||
| Accounts receivable: | ||||||||||||
| Utility | ||||||||||||
| Associated companies | ||||||||||||
| Other | ||||||||||||
| Allowance for credit losses | ( | ) | ( | ) | ( | ) | ||||||
| Delayed customer billings | ||||||||||||
| Inventories: | ||||||||||||
| Natural gas | ||||||||||||
| Propane gas | ||||||||||||
| Materials and supplies | ||||||||||||
| Regulatory assets | ||||||||||||
| Prepayments | ||||||||||||
| Total Current Assets | ||||||||||||
| Deferred Charges and Other Assets: | ||||||||||||
| Goodwill | ||||||||||||
| Regulatory assets | ||||||||||||
| Other | ||||||||||||
| Total Deferred Charges and Other Assets | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
SPIRE MISSOURI INC.
CONDENSED BALANCE SHEETS (Continued)
(UNAUDITED)
| December 31, | September 30, | December 31, | ||||||||||
| 2023 | 2023 | 2022 | ||||||||||
| CAPITALIZATION AND LIABILITIES | ||||||||||||
| Capitalization: | ||||||||||||
| Paid-in capital and common stock (par value $ per share; million shares authorized; , , and shares issued and outstanding at December 31, 2023, September 30, 2023, and December 31, 2022, respectively) | $ | $ | $ | |||||||||
| Retained earnings | ||||||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ( | ) | ||||||
| Total Shareholder's Equity | ||||||||||||
| Long-term debt (less current portion) | ||||||||||||
| Total Capitalization | ||||||||||||
| Current Liabilities: | ||||||||||||
| Current portion of long-term debt | ||||||||||||
| Notes payable – associated companies | ||||||||||||
| Accounts payable | ||||||||||||
| Accounts payable – associated companies | ||||||||||||
| Advance customer billings | ||||||||||||
| Wages and compensation accrued | ||||||||||||
| Customer deposits | ||||||||||||
| Taxes accrued | ||||||||||||
| Other | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Deferred Credits and Other Liabilities: | ||||||||||||
| Deferred income taxes | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Deferred Credits and Other Liabilities | ||||||||||||
| Commitments and Contingencies (Note 11) | ||||||||||||
| Total Capitalization and Liabilities | $ | $ | $ | |||||||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF SHAREHOLDER’S EQUITY
(UNAUDITED)
| Common Stock |
Paid-in |
Retained |
||||||||||||||||||||||
| (Dollars in millions) |
Shares |
Par |
Capital |
Earnings |
AOCI* |
Total |
||||||||||||||||||
| Three Months Ended December 31, 2023: |
||||||||||||||||||||||||
| Balance at September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
— | |||||||||||||||||||||||
| Other comprehensive income, net of tax |
— | |||||||||||||||||||||||
| Balance at December 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Three Months Ended December 31, 2022: |
||||||||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Net income |
— | |||||||||||||||||||||||
| Other comprehensive income, net of tax |
— | |||||||||||||||||||||||
| Balance at December 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
* Accumulated other comprehensive income (loss)
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions) |
2023 |
2022 |
||||||
| Operating Activities: |
||||||||
| Net Income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Deferred income taxes and investment tax credits |
||||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventories |
( |
) | ||||||
| Regulatory assets and liabilities |
( |
) | ||||||
| Accounts payable |
||||||||
| Delayed/advance customer billings, net |
( |
) | ||||||
| Taxes accrued |
( |
) | ( |
) | ||||
| Other assets and liabilities |
||||||||
| Other |
||||||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Investing Activities: |
||||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| Other |
||||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Financing Activities: |
||||||||
| Borrowings from Spire, net |
||||||||
| Net cash provided by financing activities |
||||||||
| Net Decrease in Cash and Cash Equivalents |
( |
) | ||||||
| Cash and Cash Equivalents at Beginning of Period |
||||||||
| Cash and Cash Equivalents at End of Period |
$ | $ | ||||||
| Supplemental disclosure of cash paid for: |
||||||||
| Interest, net of amounts capitalized |
$ | ( |
) | $ | ( |
) | ||
| Income taxes |
||||||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions) |
2023 |
2022 |
||||||
| Operating Revenues |
$ | $ | ||||||
| Operating Expenses: |
||||||||
| Natural gas |
||||||||
| Operation and maintenance |
||||||||
| Depreciation and amortization |
||||||||
| Taxes, other than income taxes |
||||||||
| Total Operating Expenses |
||||||||
| Operating Income |
||||||||
| Interest Expense, Net |
||||||||
| Other Income, Net |
||||||||
| Income Before Income Taxes |
||||||||
| Income Tax Expense |
||||||||
| Net Income |
$ | $ | ||||||
See the accompanying Notes to Financial Statements.
CONDENSED BALANCE SHEETS
(UNAUDITED)
| December 31, |
September 30, |
December 31, |
||||||||||
| (Dollars in millions, except per share amounts) |
2023 |
2023 |
2022 |
|||||||||
| ASSETS |
||||||||||||
| Utility Plant |
$ | $ | $ | |||||||||
| Less: Accumulated depreciation and amortization |
||||||||||||
| Net Utility Plant |
||||||||||||
| Current Assets: |
||||||||||||
| Cash and cash equivalents |
||||||||||||
| Accounts receivable: |
||||||||||||
| Utility |
||||||||||||
| Associated companies |
||||||||||||
| Other |
||||||||||||
| Allowance for credit losses |
( |
) | ( |
) | ( |
) | ||||||
| Delayed customer billings |
||||||||||||
| Inventories: |
||||||||||||
| Natural gas |
||||||||||||
| Materials and supplies |
||||||||||||
| Regulatory assets |
||||||||||||
| Prepayments |
||||||||||||
| Total Current Assets |
||||||||||||
| Deferred Charges and Other Assets: |
||||||||||||
| Regulatory assets |
||||||||||||
| Deferred income taxes |
||||||||||||
| Other |
||||||||||||
| Total Deferred Charges and Other Assets |
||||||||||||
| Total Assets |
$ | $ | $ | |||||||||
SPIRE ALABAMA INC.
CONDENSED BALANCE SHEETS (Continued)
(UNAUDITED)
| December 31, | September 30, | December 31, | ||||||||||
| 2023 | 2023 | 2022 | ||||||||||
| CAPITALIZATION AND LIABILITIES | ||||||||||||
| Capitalization: | ||||||||||||
| Paid-in capital and common stock (par value $ per share; million shares authorized; million shares issued and outstanding) | $ | $ | $ | |||||||||
| Retained earnings | ||||||||||||
| Total Shareholder's Equity | ||||||||||||
| Long-term debt | ||||||||||||
| Total Capitalization | ||||||||||||
| Current Liabilities: | ||||||||||||
| Notes payable – associated companies | ||||||||||||
| Accounts payable | ||||||||||||
| Accounts payable – associated companies | ||||||||||||
| Advance customer billings | ||||||||||||
| Wages and compensation accrued | ||||||||||||
| Customer deposits | | |||||||||||
| Taxes accrued | ||||||||||||
| Other | ||||||||||||
| Total Current Liabilities | ||||||||||||
| Deferred Credits and Other Liabilities: | ||||||||||||
| Deferred income taxes | ||||||||||||
| Pension and postretirement benefit costs | ||||||||||||
| Asset retirement obligations | ||||||||||||
| Regulatory liabilities | ||||||||||||
| Other | ||||||||||||
| Total Deferred Credits and Other Liabilities | ||||||||||||
| Commitments and Contingencies (Note 11) | ||||||||||||
| Total Capitalization and Liabilities | $ | $ | $ | |||||||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF SHAREHOLDER’S EQUITY
(UNAUDITED)
| Common Stock |
Paid-in |
Retained |
||||||||||||||||||
| (Dollars in millions) |
Shares |
Par |
Capital |
Earnings |
Total |
|||||||||||||||
| Three Months Ended December 31, 2023: |
||||||||||||||||||||
| Balance at September 30, 2023 |
$ | $ | $ | $ | ||||||||||||||||
| Net income |
— | |||||||||||||||||||
| Return of capital to Spire |
— | ( |
) | ( |
) | |||||||||||||||
| Dividends declared |
— | ( |
) | ( |
) | |||||||||||||||
| Balance at December 31, 2023 |
$ | $ | $ | $ | ||||||||||||||||
| Three Months Ended December 31, 2022: |
||||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | $ | ||||||||||||||||
| Net income |
— | |||||||||||||||||||
| Return of capital to Spire |
— | ( |
) | ( |
) | |||||||||||||||
| Dividends declared |
— | ( |
) | ( |
) | |||||||||||||||
| Balance at December 31, 2022 |
$ | $ | $ | $ | ||||||||||||||||
See the accompanying Notes to Financial Statements.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended December 31, |
||||||||
| (In millions) |
2023 |
2022 |
||||||
| Operating Activities: |
||||||||
| Net Income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
||||||||
| Deferred income taxes and investment tax credits |
||||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventories |
||||||||
| Regulatory assets and liabilities |
( |
) | ||||||
| Accounts payable |
||||||||
| Delayed/advance customer billings |
( |
) | ( |
) | ||||
| Taxes accrued |
( |
) | ( |
) | ||||
| Other assets and liabilities |
||||||||
| Other |
||||||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| Investing Activities: |
||||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| Other |
||||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Financing Activities: |
||||||||
| Issuance of long-term debt |
||||||||
| Borrowings from (Repayments to) Spire, net |
( |
) | ||||||
| Return of capital to Spire |
( |
) | ( |
) | ||||
| Dividends paid |
( |
) | ( |
) | ||||
| Other |
( |
) | ||||||
| Net cash (used in) provided by financing activities |
( |
) | ||||||
| Net Decrease in Cash and Cash Equivalents |
( |
) | ( |
) | ||||
| Cash and Cash Equivalents at Beginning of Period |
||||||||
| Cash and Cash Equivalents at End of Period |
$ | $ | ||||||
| Supplemental disclosure of cash paid for: |
||||||||
| Interest, net of amounts capitalized |
$ | ( |
) | $ | ( |
) | ||
| Income taxes |
||||||||
See the accompanying Notes to Financial Statements.
SPIRE INC., SPIRE MISSOURI INC. AND SPIRE ALABAMA INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in millions, except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION – These notes are an integral part of the accompanying unaudited financial statements of Spire Inc. (“Spire” or the “Company”) presented on a consolidated basis, Spire Missouri Inc. (“Spire Missouri”) and Spire Alabama Inc. (“Spire Alabama”). Spire Missouri, Spire Alabama and Spire EnergySouth Inc. (“Spire EnergySouth”) are wholly owned subsidiaries of Spire. Spire Missouri, Spire Alabama and the subsidiaries of Spire EnergySouth (Spire Gulf Inc. and Spire Mississippi Inc.) are collectively referred to as the “Utilities.”
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information with the instructions to Form 10-Q and Rule 10-01 of Regulation S‑X. Accordingly, they do not include all the disclosures required for complete financial statements. In the opinion of management, the accompanying unaudited financial statements include all adjustments necessary for the fair presentation of the results of operations for the periods presented. This Form 10-Q should be read in conjunction with the Notes to Financial Statements contained in Spire, Spire Missouri and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
The consolidated financial position, results of operations, and cash flows of Spire include the accounts of the Company and all its subsidiaries. Transactions and balances between consolidated entities have been eliminated from the consolidated financial statements of Spire. In compliance with GAAP, transactions between Spire Missouri and Spire Alabama and their affiliates, as well as intercompany balances on their balance sheets, have not been eliminated from their separate financial statements.
NATURE OF OPERATIONS – Spire has
The Company’s earnings are derived primarily from its Gas Utility segment. Due to the seasonal nature of the Utilities’ business and the volumetric Spire Missouri rate design, earnings are typically concentrated during the heating season of November through April each fiscal year. As a result, the interim statements of income for Spire, Spire Missouri and Spire Alabama are not necessarily indicative of annual results or representative of succeeding quarters of the fiscal year.
REGULATED OPERATIONS – The Utilities account for their regulated operations in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 980, Regulated Operations. This topic sets forth the application of GAAP for those companies whose rates are established by or are subject to approval by an independent third-party regulator. The provisions of this accounting guidance require, among other things, that financial statements of a 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-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. In addition, 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.
As authorized by the Missouri Public Service Commission (MoPSC), the Mississippi Public Service Commission (MSPSC) and the Alabama Public Service Commission (APSC), the Purchased Gas Adjustment (PGA) clauses and Gas Supply Adjustment (GSA) riders allow the Utilities to pass through to customers the cost of purchased gas supplies. Regulatory assets and liabilities related to the PGA clauses and the GSA riders are both labeled Unamortized Purchased Gas Adjustments herein. See additional information about regulatory assets and liabilities in Note 5, Regulatory Matters.
DERIVATIVES – In the course of their business, certain subsidiaries of Spire enter into commitments associated with the purchase or sale of natural gas. Certain of their derivative natural gas contracts are designated as normal purchases or normal sales and, as such, are excluded from the scope of FASB ASC Topic 815, Derivatives and Hedging. Those contracts are accounted for as executory contracts and recorded on an accrual basis. Revenues and expenses from such contracts are recorded gross. Contracts not designated as normal purchases or normal sales are recorded as derivatives with changes in fair value recognized in earnings in the periods prior to physical delivery. Certain of Spire Marketing’s wholesale purchase and sale transactions are classified as trading activities for financial reporting purposes, with income and expenses presented on a net basis in natural gas expenses in the Condensed Consolidated Statements of Income. Spire also enters into cash flow hedges through execution of interest rate swap contracts to protect itself against adverse movements in interest rates. In the first quarter of fiscal 2024, Spire management determined it was probable the anticipated issuance of certain debt, and therefore the hedged forecasted interest payments, would not occur. The related swap was settled, hedge accounting was discontinued, and amounts previously deferred in “Accumulated other comprehensive income” were reclassified to earnings, such that the entire realized gain of $
TRANSACTIONS WITH AFFILIATES – Transactions between affiliates of the Company have been eliminated from the consolidated financial statements of Spire. As reflected in their separate financial statements, Spire Missouri and Spire Alabama borrowed funds from the Company and incurred related interest. Spire Missouri and Spire Alabama also participated in normal intercompany shared services transactions. Spire Missouri’s and Spire Alabama’s other transactions with affiliates are presented below:
| Three Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Spire Missouri | ||||||||
| Purchases of natural gas from Spire Marketing | $ | $ | ||||||
| Transportation services received from Spire STL Pipeline | ||||||||
| Natural gas storage services from Spire Storage Salt Plains LLC | ||||||||
| Spire Alabama | ||||||||
| Purchases of natural gas from Spire Marketing | $ | $ | ||||||
RESTRICTED CASH AND OTHER INVESTMENTS – In Spire’s statement of cash flows for the period ended December 31, 2023, total Cash, Cash Equivalents, and Restricted Cash included $
BUSINESS COMBINATIONS – After the date of these financial statements, a subsidiary in Spire’s Midstream segment acquired MoGas Pipeline, an interstate natural gas pipeline, and Omega Pipeline, a connected gas distribution system in Missouri, effective January 20, 2024. The $
ACCRUED CAPITAL EXPENDITURES – Accrued capital expenditures, shown in the following table, are excluded from capital expenditures in the statements of cash flows until paid.
| December 31, | September 30, | December 31, | ||||||||||
| 2023 | 2023 | 2022 | ||||||||||
| Spire | $ | $ | $ | |||||||||
| Spire Missouri | ||||||||||||
| Spire Alabama | ||||||||||||
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES – Trade accounts receivable are recorded at the amounts due from customers, including unbilled amounts. Accounts receivable are written off when they are deemed to be uncollectible. An allowance for expected credit losses is estimated and updated based on relevant data and trends such as accounts receivable aging, historical write-off experience, current write-off trends, economic conditions, and the impact of weather and availability of customer payment assistance on collection trends. For the Utilities, net write-offs as a percentage of revenue has historically been the best predictor of base net write-off experience over time. Management judgment is applied in the development of the allowance due to the complexity of variables and subjective nature of certain relevant factors. The accounts receivable of Spire’s non-utility businesses are evaluated separately from those of the Utilities. The allowance for credit losses for those other businesses is based on a continuous evaluation of the individual counterparty risk and is not significant for the periods presented. Activity in the allowance for credit losses is shown in the following table.
| Spire | Spire Missouri | Spire Alabama | ||||||||||||||||||||||
| Three Months Ended December 31, | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||
| Allowance at beginning of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Provision for expected credit losses | ||||||||||||||||||||||||
| Write-offs, net of recoveries | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Allowance at end of period | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following tables show revenue disaggregated by source and customer type.
| Three Months Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| Spire |
||||||||
| Gas Utility: |
||||||||
| Residential |
$ | $ | ||||||
| Commercial and industrial |
||||||||
| Transportation |
||||||||
| Off-system and other incentive |
||||||||
| Other customer revenue |
||||||||
| Total revenue from contracts with customers |
||||||||
| Changes in accrued revenue under alternative revenue programs |
||||||||
| Total Gas Utility operating revenues |
||||||||
| Gas Marketing |
||||||||
| Midstream |
||||||||
| Other |
||||||||
| Total before eliminations |
||||||||
| Intersegment eliminations (see Note 10, Information by Operating Segment) |
( |
) | ( |
) | ||||
| Total Operating Revenues |
$ | $ | ||||||
| Spire Missouri |
||||||||
| Residential |
$ | $ | ||||||
| Commercial and industrial |
||||||||
| Transportation |
||||||||
| Off-system and other incentive |
||||||||
| Other customer revenue |
||||||||
| Total revenue from contracts with customers |
||||||||
| Changes in accrued revenue under alternative revenue programs |
||||||||
| Total Operating Revenues |
$ | $ |
| Spire Alabama |
||||||||
| Residential |
$ | $ | ||||||
| Commercial and industrial |
||||||||
| Transportation |
||||||||
| Off-system and other incentive |
||||||||
| Other customer revenue |
||||||||
| Total revenue from contracts with customers |
||||||||
| Changes in accrued revenue under alternative revenue programs |
( |
) | ( |
) | ||||
| Total Operating Revenues |
$ | $ |
Gross receipts taxes associated with the Company’s natural gas utility services are imposed on the Company, Spire Missouri, and Spire Alabama and billed to its customers. The expense amounts (shown in the table below) are reported gross in the “Taxes, other than income taxes” line in the statements of income, and corresponding revenues are reported in “Operating Revenues.”
| Three Months Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| Spire |
$ | $ | ||||||
| Spire Missouri |
||||||||
| Spire Alabama |
||||||||
| Three Months Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| Basic Earnings Per Common Share: |
||||||||
| Net Income |
$ | $ | ||||||
| Less: Provision for preferred dividends |
||||||||
| Income allocated to participating securities |
||||||||
| Income Available to Common Shareholders |
$ | $ | ||||||
| Weighted Average Common Shares Outstanding (in millions) |
||||||||
| Basic Earnings Per Common Share |
$ | $ | ||||||
| Diluted Earnings Per Common Share: |
||||||||
| Net Income |
$ | $ | ||||||
| Less: Provision for preferred dividends |
||||||||
| Income allocated to participating securities |
||||||||
| Income Available to Common Shareholders |
$ | $ | ||||||
| Weighted Average Common Shares Outstanding (in millions) |
||||||||
| Dilutive Effect of forward sales of common stock, restricted stock and restricted stock units (in millions)* |
||||||||
| Weighted Average Diluted Common Shares (in millions) |
||||||||
| Diluted Earnings Per Common Share |
$ | $ | ||||||
| * Calculation excludes certain outstanding or potential common shares (shown in millions by period at the right) attributable to (1) stock units subject to performance or market conditions and (2) restricted stock, which could have a dilutive effect in the future |
||||||||
ATM Program
Under Spire’s “at-the-market” (ATM) equity distribution agreement and as authorized by its board of directors, the Company may offer and sell, from time to time, shares of its common stock (including shares of common stock that may be sold pursuant to forward sale agreements entered into in connection with the ATM equity distribution agreement). Settled sales under this ATM program are included in “Common stock issued” in the Condensed Consolidated Statements of Shareholders’ Equity. Specifically in the first quarter of fiscal 2024, on December 11, 2023,
As explained in Note 1, Summary of Significant Accounting Policies, the Utilities account for regulated operations in accordance with FASB ASC Topic 980, Regulated Operations. The following regulatory assets and regulatory liabilities were reflected in the balance sheets of the Company, Spire Missouri and Spire Alabama as of December 31, 2023, September 30, 2023, and December 31, 2022.
| December 31, |
September 30, |
December 31, |
||||||||||
| Spire |
2023 |
2023 |
2022 |
|||||||||
| Regulatory Assets: |
||||||||||||
| Current: |
||||||||||||
| Unamortized purchased gas adjustments |
$ | $ | $ | |||||||||
| Other |
||||||||||||
| Total Current Regulatory Assets |
||||||||||||
| Noncurrent: |
||||||||||||
| Pension and postretirement benefit costs |
||||||||||||
| Cost of removal |
||||||||||||
| Future income taxes due from customers |
||||||||||||
| Energy efficiency |
||||||||||||
| Unamortized purchased gas adjustments |
||||||||||||
| Other |
||||||||||||
| Total Noncurrent Regulatory Assets |
||||||||||||
| Total Regulatory Assets |
$ | $ | $ | |||||||||
| Regulatory Liabilities: |
||||||||||||
| Current: |
||||||||||||
| Other |
$ | $ | $ | |||||||||
| Total Current Regulatory Liabilities |
||||||||||||
| Noncurrent: |
||||||||||||
| Deferred taxes due to customers |
||||||||||||
| Pension and postretirement benefit costs |
||||||||||||
| Accrued cost of removal |
||||||||||||
| Unamortized purchased gas adjustments |
||||||||||||
| Other |
||||||||||||
| Total Noncurrent Regulatory Liabilities |
||||||||||||
| Total Regulatory Liabilities |
$ | $ | $ | |||||||||
| December 31, |
September 30, |
December 31, |
||||||||||
| Spire Missouri |
2023 |
2023 |
2022 |
|||||||||
| Regulatory Assets: |
||||||||||||
| Current: |
||||||||||||
| Unamortized purchased gas adjustments |
$ | $ | $ | |||||||||
| Other |
||||||||||||
| Total Current Regulatory Assets |
||||||||||||
| Noncurrent: |
||||||||||||
| Future income taxes due from customers |
||||||||||||
| Pension and postretirement benefit costs |
||||||||||||
| Energy efficiency |
||||||||||||
| Unamortized purchased gas adjustments |
||||||||||||
| Cost of removal |
||||||||||||
| Other |
||||||||||||
| Total Noncurrent Regulatory Assets |
||||||||||||
| Total Regulatory Assets |
$ | $ | $ | |||||||||
| Regulatory Liabilities: |
||||||||||||
| Noncurrent: |
||||||||||||
| Deferred taxes due to customers |
$ | $ | $ | |||||||||
| Pension and postretirement benefit costs |
||||||||||||
| Accrued cost of removal |
||||||||||||
| Unamortized purchased gas adjustments |
||||||||||||
| Other |
||||||||||||
| Total Noncurrent Regulatory Liabilities |
||||||||||||
| Total Regulatory Liabilities |
$ | $ | $ | |||||||||
| December 31, |
September 30, |
December 31, |
||||||||||
| Spire Alabama |
2023 |
2023 |
2022 |
|||||||||
| Regulatory Assets: |
||||||||||||
| Current: |
||||||||||||
| Unamortized purchased gas adjustments |
$ | $ | $ | |||||||||
| Other |
||||||||||||
| Total Current Regulatory Assets |
||||||||||||
| Noncurrent: |
||||||||||||
| Future income taxes due from customers |
||||||||||||
| Pension and postretirement benefit costs |
||||||||||||
| Cost of removal |
||||||||||||
| Other |
||||||||||||
| Total Noncurrent Regulatory Assets |
||||||||||||
| Total Regulatory Assets |
$ | $ | $ | |||||||||
| Regulatory Liabilities: |
||||||||||||
| Noncurrent: |
||||||||||||
| Pension and postretirement benefit costs |
$ | $ | $ | |||||||||
| Other |
||||||||||||
| Total Noncurrent Regulatory Liabilities |
||||||||||||
| Total Regulatory Liabilities |
$ | $ | $ |
|
||||||||
A portion of the Company’s and Spire Missouri’s regulatory assets are not earning a return, as shown in the table below:
| December 31, |
September 30, |
December 31, |
||||||||||
| 2023 |
2023 |
2022 |
||||||||||
| Spire |
||||||||||||
| Pension and postretirement benefit costs |
$ | $ | $ | |||||||||
| Future income taxes due from customers |
||||||||||||
| Unamortized purchased gas adjustments |
||||||||||||
| Other |
||||||||||||
| Total Regulatory Assets Not Earning a Return |
$ | $ | $ | |||||||||
| Spire Missouri |
||||||||||||
| Pension and postretirement benefit costs |
$ | $ | $ | |||||||||
| Future income taxes due from customers |
||||||||||||
| Unamortized purchased gas adjustments |
||||||||||||
| Other |
||||||||||||
| Total Regulatory Assets Not Earning a Return |
$ | $ | $ | |||||||||
Like all the Company’s regulatory assets, these regulatory assets as of December 31, 2023 are expected to be recovered from customers in future rates. The recovery period for the future income taxes due from customers and pension and other postretirement benefit costs could be
Spire Missouri
In 2022, the MoPSC initiated their annual ACA dockets (GR-2022-0135 and GR-2022-0136) to audit gas commodity and transportation costs for the 2020-2021 heating season, which included the impact of a period of unusually severe cold weather in mid- February 2021 (“Winter Storm Uri”) on Spire Missouri’s natural gas portfolio. On December 15, 2022, the MoPSC staff filed its Reports and Recommendations in these cases proposing various disallowances relating to imbalance cash-outs and an off-system sale. On January 19, 2023, Spire Missouri filed its response to this proposal setting forth its position that there is no basis in law or fact for either disallowance. On July 12, 2023, the MoPSC entered a scheduling order in this matter which includes several rounds of pre-filed testimony prior to an evidentiary hearing to be held in early May 2024. On November 2, 2023, Spire Missouri filed an unopposed settlement stipulation by which the MoPSC Staff agreed to withdraw its recommendation of a proposed disallowance relating to imbalance cash-outs. The proposed disallowance relating to an off-system sale remains pending in the case. Management believes the likelihood of an unfavorable outcome is remote.
The Infrastructure System Replacement Surcharge (ISRS) allows Spire Missouri expedited recovery for its investment to replace qualifying components of its infrastructure without the necessity of a formal rate case. All prior ISRS revenues were reset to zero as of December 26, 2022 as a result of Spire Missouri’s most recent base rate case. On April 20, 2023, the MoPSC approved an annual ISRS revenue increase of $
In fiscal 2023, the MoPSC approved increases in the PGA in Spire Missouri’s tariff effective in November 2022 and January 2023. In fiscal 2024, the MoPSC approved a slight decrease in the PGA in Spire Missouri’s tariff effective in November 2023. These modifications reflect changes in natural gas commodity prices. Deferred gas balances remaining from prior periods were also reflected in the recently approved tariff rates and are expected to be substantially recovered by the end of the current heating season and fully recovered during fiscal 2024.
Spire Alabama
In the first quarter of fiscal 2023, Spire Alabama made its annual Rate Stabilization and Equalization (RSE) rate filing with the APSC, presenting the utility’s budget for the fiscal year ended September 30, 2023, and new rates designed to provide an annual revenue increase of $
Spire Alabama’s rate schedules for natural gas distribution charges contain a GSA rider which permits the pass-through to customers of changes in the cost of gas supply. In fiscal 2023, GSA rate increases were effective December 1, 2022 and January 1, 2023, and in fiscal 2024, GSA rate decreases were effective October 1, 2023 and January 1, 2024, primarily attributable to changes in natural gas commodity prices.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is affected by the following regulatory matters.
On October 26, 2022, Spire Gulf made its annual RSE filing (based on its budget for fiscal 2023), which was reviewed by the APSC and the Alabama Attorney General’s Office (AGO) resulting in an amended RSE filing made on December 21, 2022 reflecting an increase in annual revenues of $
On September 14, 2022, Spire Mississippi filed its Rate Stabilization Adjustment Rider (RSA) with the Mississippi Public Service Commission (MSPSC) for the rate year ended June 30, 2022, and the MSPSC, by its order dated December 6, 2022, approved a stipulation agreement between the Mississippi Public Utility Staff and Spire Mississippi that provides for a $
Short-term
Spire, Spire Missouri and Spire Alabama have a syndicated revolving credit facility pursuant to a loan agreement with 12 banks through July 22, 2027. The agreement has an aggregate credit commitment of $
Spire has a commercial paper program (“CP Program”) pursuant to which it may issue short-term, unsecured commercial paper notes. Amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount of the notes outstanding under the CP Program at any time not to exceed $
After quarter end, on January 3, 2024, Spire Missouri entered into a loan agreement with several banks for a $
Information about short-term borrowings, including Spire Missouri’s and Spire Alabama’s borrowings from Spire, is presented in the following table. As of December 31, 2023, $
| Spire (Parent Only) | Spire Missouri | Spire Alabama | Spire | |||||||||||||||||
| CP | Term | Spire | Spire | Consol- | ||||||||||||||||
| Program | Loan | Note | Note | idated | ||||||||||||||||
| Three Months Ended December 31, 2023 | ||||||||||||||||||||
| Highest borrowings outstanding | $ | $ | — | $ | $ | $ | ||||||||||||||
| Lowest borrowings outstanding | — | |||||||||||||||||||
| Weighted average borrowings | — | |||||||||||||||||||
| Weighted average interest rate | % | n/a | % | % | % | |||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||
| Borrowings outstanding | $ | $ | — | $ | $ | $ | ||||||||||||||
| Weighted average interest rate | % | n/a | % | % | % | |||||||||||||||
| As of September 30, 2023 | ||||||||||||||||||||
| Borrowings outstanding | $ | $ | — | $ | $ | $ | ||||||||||||||
| Weighted average interest rate | % | n/a | % | % | % | |||||||||||||||
| As of December 31, 2022 | ||||||||||||||||||||
| Borrowings outstanding | $ | $ | — | $ | $ | $ | ||||||||||||||
| Weighted average interest rate | % | n/a | % | % | % | |||||||||||||||
Long-term
The long-term debt agreements of Spire, Spire Missouri and Spire Alabama contain customary financial covenants and default provisions. As of December 31, 2023, there were no events of default under these financial covenants.
Interest expense shown on the statements of income is net of the capitalized interest amounts shown in the following table.
| Three Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Spire | $ | $ | ||||||
| Spire Missouri | ||||||||
| Spire Alabama | ||||||||
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, notes receivable, and short-term debt approximate fair value due to the short maturity of these instruments. The fair values of long-term debt are estimated based on market prices for similar issues. Refer to Note 8, Fair Value Measurements, for information on financial instruments measured at fair value on a recurring basis.
The carrying amounts and estimated fair values of financial instruments not measured at fair value on a recurring basis are shown in the following tables, classified according to the fair value hierarchy. There were no such instruments classified as Level 3 (significant unobservable inputs) as of December 31, 2023, September 30, 2023, and December 31, 2022.
| Classification of Estimated Fair Value |
||||||||||||||||
| Carrying Amount |
Fair Value |
Quoted Prices in Active Markets (Level 1) |
Significant Observable Inputs (Level 2) |
|||||||||||||
| Spire |
||||||||||||||||
| As of December 31, 2023 |
||||||||||||||||
| Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
| Notes payable |
||||||||||||||||
| Long-term debt, including current portion |
||||||||||||||||
| As of September 30, 2023 |
||||||||||||||||
| Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
| Notes payable |
||||||||||||||||
| Long-term debt, including current portion |
||||||||||||||||
| As of December 31, 2022 |
||||||||||||||||
| Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
| Notes payable |
||||||||||||||||
| Long-term debt, including current portion |
||||||||||||||||
| Spire Missouri |
||||||||||||||||
| As of December 31, 2023 |
||||||||||||||||
| Notes payable – associated companies |
$ | $ | $ | $ | ||||||||||||
| Long-term debt, including current portion |
||||||||||||||||
| As of September 30, 2023 |
||||||||||||||||
| Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
| Notes payable – associated companies |
||||||||||||||||
| Long-term debt |
||||||||||||||||
| As of December 31, 2022 |
||||||||||||||||
| Notes payable – associated companies |
$ | $ | $ | $ | ||||||||||||
| Long-term debt, including current portion |
||||||||||||||||
| Spire Alabama |
||||||||||||||||
| As of December 31, 2023 |
||||||||||||||||
| Notes payable – associated companies |
$ | $ | $ | $ | ||||||||||||
| Long-term debt |
||||||||||||||||
| As of September 30, 2023 |
||||||||||||||||
| Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
| Notes payable – associated companies |
||||||||||||||||
| Long-term debt |
||||||||||||||||
| As of December 31, 2022 |
||||||||||||||||
| Notes payable – associated companies |
$ | $ | $ | $ | ||||||||||||
| Long-term debt |
||||||||||||||||
The information presented in the following tables categorizes the assets and liabilities in the balance sheets that are accounted for at fair value on a recurring basis in periods subsequent to initial recognition.
The mutual funds included in Level 1 are valued based on exchange-quoted market prices of individual securities.
Derivative instruments included in Level 1 are valued using quoted market prices on the New York Mercantile Exchange (NYMEX) or the Intercontinental Exchange (ICE), and also certain natural gas commodity contracts. Derivative instruments classified in Level 2 include derivatives that are valued using broker or dealer quotation services or published benchmarks whose prices are derived principally from, or are corroborated by, observable market inputs. Also included in Level 2 are certain derivative instruments that have values that are similar to, and correlate with, quoted prices for exchange-traded instruments or in active markets. Derivative instruments included in Level 3 are valued using generally unobservable inputs that are based upon the best information available and reflect management’s assumptions about how market participants would price the asset or liability. There were no Level 3 balances as of December 31, 2023, September 30, 2023, and December 31, 2022. The Company’s and the Utilities’ policy is to recognize transfers between the levels of the fair value hierarchy, if any, as of the beginning of the interim reporting period in which circumstances change or events occur to cause the transfer.
The mutual funds are included in “Other Investments” on the Company’s balance sheets and in “Other Property and Investments” on Spire Missouri’s balance sheets. Changes in their recurring valuations are recorded as unrealized gains or losses in the corresponding income statement. Derivative assets and liabilities, including receivables and payables associated with cash margin requirements, are presented net in the balance sheets when a legally enforceable netting agreement exists between the Company, Spire Missouri, or Spire Alabama and the counterparty to a derivative contract.
Spire
| Quoted Prices in Active Markets (Level 1) |
Significant Observable Inputs (Level 2) |
Effects of Netting and Cash Margin Receivables /Payables |
Total |
|||||||||||||
| As of December 31, 2023 |
||||||||||||||||
| ASSETS |
||||||||||||||||
| Gas Utility: |
||||||||||||||||
| U.S. stock/bond mutual funds |
$ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Gas Marketing: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Natural gas commodity contracts |
( |
) | ||||||||||||||
| Other: |
||||||||||||||||
| U.S. stock/bond mutual funds |
||||||||||||||||
| U.S. bonds |
||||||||||||||||
| Global bonds |
||||||||||||||||
| Interest rate swaps |
||||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| LIABILITIES |
||||||||||||||||
| Gas Utility: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
$ | $ | $ | ( |
) | $ | ||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Gas Marketing: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Natural gas commodity contracts |
( |
) | ||||||||||||||
| Other: |
||||||||||||||||
| Interest rate swaps |
||||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| Quoted Prices in Active Markets (Level 1) |
Significant Observable Inputs (Level 2) |
Effects of Netting and Cash Margin Receivables /Payables |
Total |
|||||||||||||
| As of September 30, 2023 |
||||||||||||||||
| ASSETS |
||||||||||||||||
| Gas Utility: |
||||||||||||||||
| U.S. stock/bond mutual funds |
$ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Gas Marketing: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Natural gas commodity contracts |
( |
) | ||||||||||||||
| Other: |
||||||||||||||||
| U.S. stock/bond mutual funds |
||||||||||||||||
| Interest rate swaps |
||||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| LIABILITIES |
||||||||||||||||
| Gas Utility: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
$ | $ | $ | ( |
) | $ | ||||||||||
| Gas Marketing: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Natural gas commodity contracts |
( |
) | ||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| As of December 31, 2022 |
||||||||||||||||
| ASSETS |
||||||||||||||||
| Gas Utility: |
||||||||||||||||
| U.S. stock/bond mutual funds |
$ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Gas Marketing: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Natural gas commodity contracts * |
( |
) | ||||||||||||||
| Other: |
||||||||||||||||
| U.S. stock/bond mutual funds |
||||||||||||||||
| Interest rate swaps * |
||||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| LIABILITIES |
||||||||||||||||
| Gas Utility: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
$ | $ | $ | ( |
) | $ | ||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Gas Marketing: |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Natural gas commodity contracts * |
( |
) | ||||||||||||||
| Other: |
||||||||||||||||
| Interest rate swaps * |
||||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| * | Subsequent to the issuance of its consolidated financial statements for the quarter ended December 31, 2022, during the fourth quarter of fiscal 2023, the Company identified an error in the fair value level presentation for certain line items in the Fair Value Measurements table. The presentation has been corrected to reflect the impacted line items in Level 2 rather than Level 1 as of December 31, 2022. This immaterial correction did not impact the reported fair values or the consolidated financial statements. |
Spire Missouri
| Quoted Prices in Active Markets (Level 1) |
Significant Observable Inputs (Level 2) |
Effects of Netting and Cash Margin Receivables /Payables |
Total |
|||||||||||||
| As of December 31, 2023 |
||||||||||||||||
| ASSETS |
||||||||||||||||
| U.S. stock/bond mutual funds |
$ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| LIABILITIES |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
$ | $ | $ | ( |
) | $ | ||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| As of September 30, 2023 |
||||||||||||||||
| ASSETS |
||||||||||||||||
| U.S. stock/bond mutual funds |
$ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| LIABILITIES |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
$ | $ | $ | ( |
) | $ | ||||||||||
| As of December 31, 2022 |
||||||||||||||||
| ASSETS |
||||||||||||||||
| U.S. stock/bond mutual funds |
$ | $ | $ | $ | ||||||||||||
| NYMEX/ICE natural gas contracts |
( |
) | ||||||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
| LIABILITIES |
||||||||||||||||
| NYMEX/ICE natural gas contracts |
$ | $ | $ | ( |
) | $ | ||||||||||
| Gasoline and heating oil contracts |
( |
) | ||||||||||||||
| Total |
$ | $ | $ | ( |
) | $ | ||||||||||
9. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
Spire and the Utilities maintain pension plans for their employees.
Spire Missouri and Spire Alabama have non-contributory, defined benefit, trusteed forms of pension plans covering the majority of their employees. Qualified plan assets are comprised of mutual and commingled funds consisting of U.S. equities with varying strategies, global equities, alternative investments, and fixed income investments.
The net periodic pension cost includes components shown in the following tables. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except for Spire Alabama’s losses on lump-sum settlements. Such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”
| Three Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Spire | ||||||||
| Service cost – benefits earned during the period | $ | $ | ||||||
| Interest cost on projected benefit obligation | ||||||||
| Expected return on plan assets | ( | ) | ( | ) | ||||
| Amortization of prior service credit | ( | ) | ( | ) | ||||
| Amortization of actuarial loss | ||||||||
| Loss on lump-sum settlements | ||||||||
| Subtotal | ||||||||
| Regulatory adjustment | ||||||||
| Net pension cost | $ | $ | ||||||
| Spire Missouri | ||||||||
| Service cost – benefits earned during the period | $ | $ | ||||||
| Interest cost on projected benefit obligation | ||||||||
| Expected return on plan assets | ( | ) | ( | ) | ||||
| Amortization of prior service credit | ( | ) | ( | ) | ||||
| Amortization of actuarial loss | ||||||||
| Subtotal | ||||||||
| Regulatory adjustment | ||||||||
| Net pension cost | $ | $ | ||||||
| Spire Alabama | ||||||||
| Service cost – benefits earned during the period | $ | $ | ||||||
| Interest cost on projected benefit obligation | ||||||||
| Expected return on plan assets | ( | ) | ( | ) | ||||
| Amortization of prior service credit | ( | ) | ( | ) | ||||
| Amortization of actuarial loss | ||||||||
| Loss on lump-sum settlements | ||||||||
| Subtotal | ||||||||
| Regulatory adjustment | ( | ) | ||||||
| Net pension cost | $ | $ | ||||||
Pursuant to the provisions of Spire Missouri’s and Spire Alabama’s pension plans, pension obligations may be satisfied by monthly annuities, lump-sum cash payments, or special termination benefits. Lump-sum payments are recognized as settlements (which can result in gains or losses) only if the total of such payments exceeds the sum of service and interest costs in a specific year. Special termination benefits, when offered, are also recognized as settlements which can result in gains or losses. For the three months ended December 31, 2023,
For the three months ended December 31, 2022, two Spire Alabama plans met the criteria for settlement recognition. The lump-sum payments recognized as settlements for the remeasurement were $
Effective December 23, 2021, the pension cost for Spire Missouri’s western territory (Missouri West) included in customer rates was reduced from $
Also effective December 23, 2021, Missouri East prepaid pension assets and other postretirement benefits that were previously being included in rates at $
The funding policy of the Utilities is to contribute an amount not less than the minimum required by government funding standards, nor more than the maximum deductible amount for federal income tax purposes. Fiscal 2024 contributions to Spire Missouri’s pension plans through December 31, 2023 were $
Other Postretirement Benefits
Spire and the Utilities provide certain life insurance benefits at retirement. Spire Missouri plans provide for medical insurance after early retirement until age 65. For retirements prior to January 1, 2015, certain Spire Missouri plans provided medical insurance after retirement until death. The Spire Alabama plans provide medical insurance upon retirement until death for certain retirees depending on the type of employee and the date the employee was originally hired.
The net periodic postretirement benefit cost includes components shown in the following tables. The components other than the service costs and regulatory adjustment are presented in “Other Income, Net” in the income statement, except in the event Spire Alabama incurs losses on lump-sum settlements. Any such losses are capitalized in regulatory balances and amortized over the remaining actuarial life of individuals in the plan, and that amortization is presented in “Other Income, Net.”
| Three Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Spire | ||||||||
| Service cost – benefits earned during the period | $ | $ | ||||||
| Interest cost on accumulated postretirement benefit obligation | ||||||||
| Expected return on plan assets | ( | ) | ( | ) | ||||
| Amortization of prior service cost | ||||||||
| Amortization of actuarial gain | ( | ) | ( | ) | ||||
| Subtotal | ( | ) | ( | ) | ||||
| Regulatory adjustment | ||||||||
| Net postretirement benefit income | $ | ( | ) | $ | ( | ) | ||
| Spire Missouri | ||||||||
| Service cost – benefits earned during the period | $ | $ | ||||||
| Interest cost on accumulated postretirement benefit obligation | ||||||||
| Expected return on plan assets | ( | ) | ( | ) | ||||
| Amortization of prior service cost | ||||||||
| Amortization of actuarial gain | ( | ) | ( | ) | ||||
| Subtotal | ( | ) | ( | ) | ||||
| Regulatory adjustment | ||||||||
| Net postretirement benefit income | $ | ( | ) | $ | ||||
| Spire Alabama | ||||||||
| Service cost – benefits earned during the period | $ | $ | ||||||
| Interest cost on accumulated postretirement benefit obligation | ||||||||
| Expected return on plan assets | ( | ) | ( | ) | ||||
| Amortization of prior service credit | ( | ) | ( | ) | ||||
| Amortization of actuarial gain | ( | ) | ||||||
| Subtotal | ( | ) | ( | ) | ||||
| Regulatory adjustment | ( | ) | ( | ) | ||||
| Net postretirement benefit income | $ | ( | ) | $ | ( | ) | ||
The Utilities’ funding policy is to contribute amounts to the trusts equal to the periodic benefit cost calculated pursuant to GAAP as recovered in rates. There have been no contributions to the postretirement plans through December 31, 2023 for Spire Missouri or Spire Alabama, and
10. INFORMATION BY OPERATING SEGMENT
The Company has reportable segments: Gas Utility, Gas Marketing, and Midstream. The Gas Utility segment is the aggregation of the operations of the Utilities. The Gas Marketing segment includes the results of Spire Marketing, a subsidiary engaged in the non-regulated marketing of natural gas and related activities, including utilizing natural gas storage contracts for providing natural gas sales. The Midstream segment includes Spire STL Pipeline, a subsidiary of Spire providing interstate natural gas pipeline transportation services, and Spire Storage, subsidiaries of Spire providing interstate and intrastate natural gas storage services. Other components of the Company’s consolidated information include Spire’s subsidiaries engaged in the operation of a propane pipeline and risk management, among other activities, and unallocated corporate items, including certain debt and associated interest costs.
Accounting policies are described in Note 1, Summary of Significant Accounting Policies. Intersegment transactions include sales of natural gas from Spire Marketing to Spire Missouri, Spire Alabama and Spire Storage, storage services from Spire Storage to Spire Missouri and Spire Marketing, and natural gas transportation services provided by Spire STL Pipeline to Spire Missouri and Spire Marketing.
Management evaluates the performance of the operating segments based on the computation of net economic earnings. Net economic earnings exclude from reported net income the after-tax 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.
| Gas Utility |
Gas Marketing |
Midstream |
Other |
Eliminations |
Consolidated |
|||||||||||||||||||
| Three Months Ended December 31, 2023 |
||||||||||||||||||||||||
| Revenues from external customers |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Intersegment revenues |
( |
) | ||||||||||||||||||||||
| Total Operating Revenues |
( |
) | ||||||||||||||||||||||
| Depreciation and amortization expense |
||||||||||||||||||||||||
| Interest expense |
( |
) | ||||||||||||||||||||||
| Income tax expense |
||||||||||||||||||||||||
| Net economic earnings (loss) |
( |
) | ||||||||||||||||||||||
| Capital expenditures |
( |
) | ||||||||||||||||||||||
| Gas Utility |
Gas Marketing |
Midstream |
Other |
Eliminations |
Consolidated |
|||||||||||||||||||
| Three Months Ended December 31, 2022 |
||||||||||||||||||||||||
| Revenues from external customers |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Intersegment revenues |
( |
) | ||||||||||||||||||||||
| Total Operating Revenues |
( |
) | ||||||||||||||||||||||
| Depreciation and amortization expense |
||||||||||||||||||||||||
| Interest expense |
( |
) | ||||||||||||||||||||||
| Income tax expense (benefit) |
( |
) | ||||||||||||||||||||||
| Net economic earnings (loss) |
( |
) | ||||||||||||||||||||||
| Capital expenditures |
||||||||||||||||||||||||
The following table reconciles the Company’s net economic earnings (loss) to net income (loss).
| Three Months Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| Net Income |
$ | $ | ||||||
| Adjustments, pre-tax: |
||||||||
| Fair value and timing adjustments |
( |
) | ( |
) | ||||
| Acquisition activities |
||||||||
| Income tax adjustments |
||||||||
| Net Economic Earnings |
$ | $ | ||||||
The Company’s total assets by segment were as follows:
| December 31, |
September 30, |
December 31, |
||||||||||
| 2023 |
2023 |
2022 |
||||||||||
| Total Assets: |
||||||||||||
| Gas Utility |
$ | $ | $ | |||||||||
| Gas Marketing |
||||||||||||
| Midstream |
||||||||||||
| Other |
||||||||||||
| Eliminations |
( |
) | ( |
) | ( |
) | ||||||
| Total Assets |
$ | $ | $ | |||||||||
11. COMMITMENTS AND CONTINGENCIES
Commitments
The Company and the Utilities have entered into contracts with various counterparties, expiring on dates through calendar 2039, for the storage, transportation, and supply of natural gas. Minimum payments required under the contracts in place at December 31, 2023, are estimated at $
A consolidated subsidiary of Spire is a limited partner in Inter-Atlantic Energy Capital Ventures, L.P., an unconsolidated partnership focusing on sustainability initiatives largely tied to the natural gas utility sector. Spire committed to contribute a total of $
Contingencies
The Company and the Utilities account for contingencies, including environmental liabilities, in accordance with accounting standards under the loss contingency guidance of ASC Topic 450, Contingencies, when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
In addition to matters noted below, the Company and the Utilities are involved in other litigation, claims, and investigations arising in the normal course of business. Management, after discussion with counsel, believes the final outcome will not have a material effect on the statements of income, balance sheets, and statements of cash flows of the Company, Spire Missouri, or Spire Alabama. However, there is uncertainty in the valuation of pending claims and prediction of litigation results.
The Company and the Utilities 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 or Utilities’ financial position and results of operations. As environmental laws, regulations, and their interpretations change, the Company or the Utilities may incur additional environmental liabilities that may result in additional costs, which may be material.
In the natural gas industry, many gas distribution companies have incurred environmental liabilities associated with sites they or their predecessor companies formerly owned or operated where manufactured gas operations took place. The Utilities each have former manufactured gas plant (MGP) operations in their respective service territories, some of which are discussed under the Spire Missouri and Spire Alabama headings below. To the extent costs are incurred associated with environmental remediation activities, the Utilities would request authority from their respective regulators to defer such costs (less any amounts received from insurance proceeds or as contributions from other potentially responsible parties (PRPs)) and collect them through future rates.
To date, costs incurred for all Spire MGP sites for investigation, remediation and monitoring have not been material. However, the amount of costs relative to future remedial actions at these and other sites is unknown and may be material. The actual future costs that Spire Missouri and Spire Alabama may incur could be materially higher or lower depending upon several factors, including whether remediation will be required, final selection and regulatory approval of any remedial actions, changing technologies and government regulations, the ultimate ability of other PRPs to pay, and any insurance recoveries.
In 2020, Spire retained an outside consultant to conduct probabilistic cost modeling of its former MGP sites in Missouri and Alabama. The purpose of this analysis was to develop an estimated range of probabilistic future liability for each of their MGP sites. That analysis, completed in March 2021, provided a range of demonstrated possible future expenditures to investigate, monitor and remediate the former MGP sites. Spire Missouri and Spire Alabama have recorded their best estimates of the probable expenditures that relate to these matters. The amount remains immaterial, and Spire Missouri, Spire Alabama and the Company do not expect potential liabilities that may arise from remediating these sites to have a material impact on their future financial condition or results of operations.
Spire Missouri
Spire Missouri has identified three former MGP sites in the city of St. Louis, Missouri (the “City”) where costs have been incurred and claims have been asserted. Spire Missouri has enrolled two of the sites in the Missouri Department of Natural Resources (MoDNR) Brownfields/Voluntary Cleanup Program (BVCP). The third site is the result of an assertion by the United States Environmental Protection Agency (EPA).
In conjunction with redevelopment of the Carondelet Coke site, Spire Missouri and another former owner of the site entered into an agreement (the “Remediation Agreement”) with the City development agencies, the developer, and an environmental consultant that obligates one of the City agencies and the environmental consultant to remediate the site and obtain a No Further Action (NFA) letter from the MoDNR. The Remediation Agreement also provides for a release of Spire Missouri and the other former site owner from certain liabilities related to the past and current environmental condition of the site and requires the developer and the environmental consultant to maintain certain insurance coverage, including remediation cost containment, premises pollution liability, and professional liability. The operative provisions of the Remediation Agreement were triggered on December 20, 2010, on which date Spire Missouri and the other former site owner, as full consideration under the Remediation Agreement, paid a small percentage of the cost of remediation of the site. The property was divided into seven parcels, and MoDNR NFA letters have been received for six of the parcels. Remediation is ongoing on the last parcel.
In a letter dated June 29, 2011, the Attorney General for the State of Missouri informed Spire Missouri that the MoDNR had completed an investigation of the second site, Station A. The Attorney General requested that Spire Missouri participate in the follow up investigations of the site. In a letter dated January 10, 2012, Spire Missouri stated that it would participate in future environmental response activities at the site in conjunction with other PRPs. Accordingly, Spire Missouri entered into a cost sharing agreement for remedial investigation with other PRPs. MoDNR never approved the agreement, so no remedial investigation took place. Recently, Spire Missouri was approached by a real estate developer interested in purchasing the northern half of the Station A site and developing the same for industrial purposes. Consequently, Spire Missouri is now in discussions with the developer, other PRPs and MoDNR to develop a new remedial investigation plan for the site.
Additionally, in correspondence dated November 30, 2016, Region 7 of the EPA has asserted that Spire Missouri is liable under Section 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for alleged coal gas waste contamination at a third site, Station B. Spire Missouri and the site owner notified the EPA that information and data provided by the EPA to date does not rise to the level of documenting a threat to the public health or environment. As such, in March 2017 Spire Missouri requested more information from the EPA. Spire Missouri never received a response from the EPA.
Spire Missouri has notified its insurers that it seeks reimbursement for costs incurred in the past and future potential liabilities associated with these MGP sites. While some of the insurers have denied coverage and reserved their rights, Spire Missouri retains the right to seek potential reimbursements from them.
On March 10, 2015, Spire Missouri received a Section 104(e) information request under CERCLA from EPA Region 7 regarding the former Thompson Chemical/Superior Solvents site in the City. In turn, Spire Missouri issued a Freedom of Information Act (FOIA) request to the EPA on April 3, 2015, to identify the basis of the inquiry. The FOIA response from the EPA was received on July 15, 2015, and a response was provided to the EPA on August 15, 2015. Spire Missouri has received no further inquiry from the EPA regarding this matter.
In its western service area, Spire Missouri has six owned MGP sites enrolled in the BVCP, including Joplin MGP #1, St. Joseph MGP #1, Kansas City Coal Gas Station B, Kansas City Station A Railroad area, Kansas City Coal Gas Station A, and Independence MGP #2. Source removal has been conducted at all the owned sites since 2003 with the exception of Joplin. On September 15, 2016, a request was made with the MoDNR for a restrictive covenant use limitation with respect to Joplin. Remediation efforts at the six sites are at various stages of completion, ranging from groundwater monitoring and sampling following source removal activities to the aforementioned request for the Joplin site. As part of its participation in the BVCP, Spire Missouri communicates regularly with the MoDNR with respect to its remediation efforts and monitoring activities at these sites. On May 11, 2015, MoDNR approved the next phase of investigation at the Kansas City Station A Railroad area.
Spire Alabama
Spire Alabama is in the chain of title of nine former MGP sites, four of which it still owns, and five former manufactured gas distribution sites, one of which it still owns. All are located in the state of Alabama.
In 2011, a removal action was completed and an NFA letter was received at the Huntsville MGP site pursuant to an Administrative Settlement Agreement and Order on Consent among the EPA, Spire Alabama and the current site owner.
In 2012, Spire Alabama responded to an EPA Request for Information Pursuant to Section 104 of CERCLA relating to the 35th Avenue Superfund Site located in North Birmingham, Jefferson County, Alabama. Spire Alabama was identified as a PRP under CERCLA for the cleanup of the site or costs the EPA incurs in cleaning up the site. At this point, Spire Alabama has not been provided information that would allow it to determine the extent, if any, of its potential liability with respect to the 35th Avenue Superfund Site and vigorously denies its inclusion as a PRP.
Assessments were performed by the EPA of the former MGP sites in Gadsden and Anniston, and NFA letters were received after each assessment.
Spire
In addition to those discussed above for Spire Missouri and Spire Alabama, Spire is aware of the following contingent matters.
Spire Marketing, along with many natural gas industry participants, faced the unprecedented effects of Winter Storm Uri in February 2021. Numerous natural gas producers and midstream operators were unable to deliver natural gas to market as they experienced wellhead freeze-offs, power outages and equipment failure due to the extreme weather. These events resulted in supply curtailments, and related notices of force majeure to excuse performance, from and to certain counterparties. Further, these events have made Spire Marketing subject to various commercial disputes (including regarding force majeure). As such, Spire Marketing has recorded an estimate of potential liabilities for damages based on communications with counterparties and the facts and circumstances surrounding each transaction. These estimates are adjusted as new facts emerge or settlement agreements are reached.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in millions, except per share amounts)
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 (Spire Gulf and Spire Mississippi) are collectively referred to as the “Utilities.” This section includes management’s view of factors that affect the respective businesses of the Company, Spire Missouri and Spire Alabama, explanations of financial results including changes in earnings and costs from the prior periods, and the effects of such factors on the Company’s, Spire Missouri’s and Spire Alabama’s overall financial condition and liquidity.
Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as “may,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” “target,” and similar words and expressions identify forward-looking statements that involve uncertainties and risks. Future developments may not be in accordance with our current expectations or beliefs and the effect of future developments may not be those anticipated. Among the factors that may cause results or outcomes to differ materially from those contemplated in any forward-looking statement are:
| • |
Weather conditions and catastrophic events, particularly severe weather in U.S. natural gas producing areas; |
| • |
Volatility in gas prices, particularly sudden and sustained changes in natural gas prices, including the related impact on margin deposits associated with the use of natural gas derivative instruments, and the impact on our competitive position in relation to suppliers of alternative heating sources, such as electricity; |
| • |
Changes in gas supply and pipeline availability, including as a result of decisions by natural gas producers to reduce production or shut in producing natural gas wells and expiration or termination of existing supply and transportation arrangements that are not replaced with contracts with similar terms and pricing, as well as other changes that impact supply for and access to the markets in which our subsidiaries transact business; |
| • |
Acquisitions may not achieve their intended results; |
| • |
Legislative, regulatory and judicial mandates and decisions, some of which may be retroactive, including those affecting: |
| ▪ |
allowed rates of return and recovery of prudent costs, |
| ▪ |
incentive regulation, |
| ▪ |
industry structure, |
| ▪ |
purchased gas adjustment provisions, |
| ▪ |
rate design structure and implementation, |
| ▪ |
capital structures established for rate-setting purposes, |
| ▪ |
regulatory assets, |
| ▪ |
non-regulated and affiliate transactions, |
| ▪ |
franchise renewals, |
| ▪ |
authorization to operate facilities, |
| ▪ |
environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change and pipeline safety and security, |
| ▪ |
taxes, |
| ▪ |
pension and other postretirement benefit liabilities and funding obligations, or |
| ▪ |
accounting standards; |
| • |
The results of litigation; |
| • |
The availability of and access to, in general, funds to meet our debt obligations prior to or when they become due and to fund our operations and necessary capital expenditures, either through (i) cash on hand, (ii) operating cash flow, or (iii) access to the capital markets; |
| • |
Retention of, ability to attract, ability to collect from, and conservation efforts of, customers; |
| • |
Our ability to comply with all covenants in our indentures and credit facilities, any violations of which, if not cured in a timely manner, could trigger a default of our obligation; |
| • |
Energy commodity market conditions; |
| • |
Discovery of material weakness in internal controls; |
| • |
The disruption, failure or malfunction of our operational and information technology systems, including due to cyberattacks; and |
| • |
Employee workforce issues, including but not limited to labor disputes, the inability to attract and retain key talent, and future wage and employee benefit costs, including costs resulting from changes in discount rates and returns on benefit plan assets. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements, Spire Missouri’s and Spire Alabama’s Condensed Financial Statements, and the notes thereto.
OVERVIEW
Certain information is presented by reportable segment, as described below. Effective during the first quarter of fiscal 2023, the Company changed its reportable segments to reflect changes in the way its chief operating decision maker evaluates the performance of its operations, develops strategy and allocates capital resources. Specifically, Midstream, which was formerly included in Other, is now reported separately. The Company’s historical segment disclosures have been recast to be consistent with the current presentation.
The Company has three reportable segments: Gas Utility, Gas Marketing, and Midstream. Spire’s earnings are derived primarily from its Gas Utility segment, which reflects the regulated activities of the Utilities. Due to the seasonal nature of the Utilities’ business and the volumetric 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 also purchases 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 to customers across the U.S. (and into Canada), including customers inside and outside of the Utilities’ service areas. 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.
Midstream
Spire’s midstream operations consist of Spire Storage West LLC, Spire Storage Salt Plains LLC (jointly, “Spire Storage”) and Spire STL Pipeline LLC (“Spire STL Pipeline”). Spire STL Pipeline is a wholly owned subsidiary of Spire which owns and operates a FERC-regulated 65-mile pipeline connecting the Rockies Express Pipeline in Scott County, Illinois, to delivery points in St. Louis County, Missouri, including Spire Missouri’s storage facility. Spire STL Pipeline’s operating revenue is derived primarily from Spire Missouri as its foundation shipper. Spire Storage is engaged in the storage of natural gas in both the western and midcontinent regions of the United States. Spire Storage West, located in Wyoming, consists of two storage fields operating under one FERC market-based rate tariff, while Spire Storage Salt Plains, acquired on April 1, 2023 and located in Oklahoma, operates under intrastate jurisdiction with authorizations from FERC under Section 311 of the Natural Gas Policy Act to provide certain interstate storage, transportation, and hub services.
Other
Other components of the Company’s consolidated information include Spire’s subsidiaries engaged in the operation of a propane pipeline and risk management, among other activities, and unallocated corporate items, including certain debt and associated interest costs.
NON-GAAP MEASURES
Net income, earnings per share and operating income reported by Spire, Spire Missouri and Spire Alabama are determined in accordance with accounting principles generally accepted in the United States of America (GAAP). Spire, Spire Missouri and Spire Alabama also provide the non-GAAP financial measures of net economic earnings, net economic earnings per share and contribution margin. Management and the Board of Directors use non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting, to determine incentive compensation and to evaluate financial performance. These non-GAAP operating metrics should not be considered as alternatives to, or more meaningful than, the related GAAP measures. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are provided on the following pages.
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, as applicable, the impacts of fair value accounting and timing adjustments associated with energy-related transactions, the impacts of acquisition, divestiture and restructuring activities, the largely non-cash impacts of impairments, and other non-recurring or unusual items such as certain regulatory, legislative or GAAP standard-setting actions. In addition, net economic earnings per share would exclude the impact, in the fiscal year of issuance, of any shares issued to finance such activities that have yet to be included in net economic earnings.
The fair value and timing adjustments are made in instances where the accounting treatment differs from what management considers the economic substance of the underlying transaction, including the following:
| • |
Net unrealized gains and losses on energy-related derivatives that are required by GAAP fair value accounting associated with current changes in the fair value of financial and physical transactions prior to their completion and settlement. These unrealized gains and losses result primarily from two sources: |
| 1) |
changes in the fair values of physical and/or financial derivatives prior to the period of settlement; and |
| 2) |
ineffective portions of accounting hedges, required to be recorded in earnings prior to settlement, due to differences in commodity price changes between the locations of the forecasted physical purchase or sale transactions and the locations of the underlying hedge instruments; |
| • |
Lower of cost or market adjustments to the carrying value of commodity inventories resulting when the net realizable value of the commodity falls below its original cost, to the extent that those commodities are economically hedged; and |
| • |
Realized gains and losses resulting from the settlement of economic hedges prior to the sale of the physical commodity. |
These adjustments eliminate the impact of timing differences and the impact of current changes in the fair value of financial and physical transactions prior to their completion and settlement. Unrealized gains or losses are recorded in each period until being replaced with the actual gains or losses realized when the associated physical transactions occur. Management believes that excluding the earnings volatility caused by recognizing changes in fair value prior to settlement and other timing differences associated with related purchase and sale transactions provides a useful representation of the economic effects of only the actual settled transactions and their effects on results of operations. While management uses these non-GAAP measures to evaluate all of its businesses, the net effect of these fair value and timing adjustments on the Utilities’ earnings is minimal because gains or losses on their natural gas derivative instruments are deferred pursuant to state regulation.
Contribution Margin
In addition to operating revenues and operating expenses, management also uses the non-GAAP measure of contribution margin when evaluating results of operations. Contribution margin is defined as operating revenues less natural gas costs and gross receipts tax expense. The Utilities pass to their customers (subject to prudence review by, as applicable, the MoPSC, APSC or MSPSC) increases and decreases in the wholesale cost of natural gas in accordance with their PGA clauses or GSA riders. The volatility of the wholesale natural gas market results in fluctuations from period to period in the recorded levels of, among other items, revenues and natural gas cost expense. Nevertheless, increases and decreases in the cost of gas associated with system gas sales volumes and gross receipts tax expense (which are calculated as a percentage of revenues), with the same amount (excluding immaterial timing differences) included in revenues, have no direct effect on operating income. Therefore, management believes that contribution margin is a useful supplemental measure, along with the remaining operating expenses, for assessing the Company’s and the Utilities’ performance.
EARNINGS – THREE MONTHS ENDED December 31, 2023
Spire
Net Income and Net Economic Earnings
The following tables reconcile the Company’s net economic earnings to the most comparable GAAP number, net income.
| Gas Utility |
Gas Marketing |
Midstream |
Other |
Total |
Per Diluted Common Share** |
|||||||||||||||||||
| Three Months Ended December 31, 2023 |
||||||||||||||||||||||||
| Net Income (Loss) [GAAP] |
$ | 75.5 | $ | 11.4 | $ | 0.9 | $ | (2.7 | ) | $ | 85.1 | $ | 1.52 | |||||||||||
| Adjustments, pre-tax: |
||||||||||||||||||||||||
| Fair value and timing adjustments |
0.4 | (5.6 | ) | — | — | (5.2 | ) | (0.10 | ) | |||||||||||||||
| Acquisition activities |
— | — | 1.9 | — | 1.9 | 0.03 | ||||||||||||||||||
| Income tax adjustments* |
(0.1 | ) | 1.4 | (0.4 | ) | — | 0.9 | 0.02 | ||||||||||||||||
| Net Economic Earnings (Loss) [Non-GAAP] |
$ | 75.8 | $ | 7.2 | $ | 2.4 | $ | (2.7 | ) | $ | 82.7 | $ | 1.47 | |||||||||||
| Three Months Ended December 31, 2022 |
||||||||||||||||||||||||
| Net Income (Loss) [GAAP] |
$ | 62.9 | $ | 31.6 | $ | 3.8 | $ | (7.3 | ) | $ | 91.0 | $ | 1.66 | |||||||||||
| Adjustments, pre-tax: |
||||||||||||||||||||||||
| Fair value and timing adjustments |
— | (7.8 | ) | — | — | (7.8 | ) | (0.15 | ) | |||||||||||||||
| Income tax adjustments* |
— | 1.9 | — | — | 1.9 | 0.04 | ||||||||||||||||||
| Net Economic Earnings (Loss) [Non-GAAP] |
$ | 62.9 | $ | 25.7 | $ | 3.8 | $ | (7.3 | ) | $ | 85.1 | $ | 1.55 | |||||||||||
* Income tax adjustments include amounts calculated by applying federal, state, and local income tax rates applicable to ordinary income to the amounts of the pre-tax reconciling items.
** Net economic earnings per share is calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share calculation, which includes reductions for cumulative preferred dividends and participating shares.
Reconciliations of contribution margin to the most directly comparable GAAP measure are shown below.
| Gas Utility |
Gas Marketing |
Midstream |
Other |
Eliminations |
Consolidated |
|||||||||||||||||||
| Three Months Ended December 31, 2023 |
||||||||||||||||||||||||
| Operating Income (Loss) [GAAP] |
$ | 122.3 | $ | 14.7 | $ | 3.3 | $ | (1.1 | ) | $ | — | $ | 139.2 | |||||||||||
| Operation and maintenance expenses |
116.7 | 4.4 | 8.6 | 5.0 | (4.0 | ) | 130.7 | |||||||||||||||||
| Depreciation and amortization |
64.2 | 0.4 | 2.3 | 0.1 | — | 67.0 | ||||||||||||||||||
| Taxes, other than income taxes |
51.6 | 0.3 | 0.7 | 0.1 | — | 52.7 | ||||||||||||||||||
| Less: Gross receipts tax expense |
(31.0 | ) | (0.1 | ) | — | — | — | (31.1 | ) | |||||||||||||||
| Contribution Margin [Non-GAAP] |
323.8 | 19.7 | 14.9 | 4.1 | (4.0 | ) | 358.5 | |||||||||||||||||
| Natural gas costs |
360.4 | 16.5 | — | — | (9.9 | ) | 367.0 | |||||||||||||||||
| Gross receipts tax expense |
31.0 | 0.1 | — | — | — | 31.1 | ||||||||||||||||||
| Operating Revenues |
$ | 715.2 | $ | 36.3 | $ | 14.9 | $ | 4.1 | $ | (13.9 | ) | $ | 756.6 | |||||||||||
| Three Months Ended December 31, 2022 |
||||||||||||||||||||||||
| Operating Income (Loss) [GAAP] |
$ | 101.9 | $ | 41.4 | $ | 7.1 | $ | (0.2 | ) | $ | — | $ | 150.2 | |||||||||||
| Operation and maintenance expenses |
119.9 | 6.3 | 5.8 | 4.0 | (3.9 | ) | 132.1 | |||||||||||||||||
| Depreciation and amortization |
59.7 | 0.3 | 1.9 | 0.2 | — | 62.1 | ||||||||||||||||||
| Taxes, other than income taxes |
49.9 | 0.1 | 0.4 | — | — | 50.4 | ||||||||||||||||||
| Less: Gross receipts tax expense |
(30.4 | ) | — | — | — | — | (30.4 | ) | ||||||||||||||||
| Contribution Margin [Non-GAAP] |
301.0 | 48.1 | 15.2 | 4.0 | (3.9 | ) | 364.4 | |||||||||||||||||
| Natural gas costs |
401.6 | 26.0 | — | — | (8.4 | ) | 419.2 | |||||||||||||||||
| Gross receipts tax expense |
30.4 | — | — | — | — | 30.4 | ||||||||||||||||||
| Operating Revenues |
$ | 733.0 | $ | 74.1 | $ | 15.2 | $ | 4.0 | $ | (12.3 | ) | $ | 814.0 | |||||||||||
Select variances for the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022 are summarized in the following table and discussed below.
| Gas |
Gas |
Other, Net of |
||||||||||||||||||
| Variances: Fiscal 2024 Versus Fiscal 2023 |
Utility |
Marketing |
Midstream |
Eliminations |
Consolidated |
|||||||||||||||
| Net Income |
$ | 12.6 | $ | (20.2 | ) | $ | (2.9 | ) | $ | 4.6 | $ | (5.9 | ) | |||||||
| Net Economic Earnings [Non-GAAP] |
12.9 | (18.5 | ) | (1.4 | ) | 4.6 | (2.4 | ) | ||||||||||||
| Operating Revenues |
(17.8 | ) | (37.8 | ) | (0.3 | ) | (1.5 | ) | (57.4 | ) | ||||||||||
| Contribution Margin [Non-GAAP] |
22.8 | (28.4 | ) | (0.3 | ) | — | (5.9 | ) | ||||||||||||
| Operation and Maintenance Expenses |
(3.2 | ) | (1.9 | ) | 2.8 | 0.9 | (1.4 | ) | ||||||||||||
| Interest Expense |
7.0 | |||||||||||||||||||
| Other Income |
11.5 | |||||||||||||||||||
| Income Tax |
(0.6 | ) | ||||||||||||||||||
The increase in interest expense reflects the significant increase in short-term interest rates and higher long-term debt levels versus the prior year. Current year weighted-average short-term debt levels decreased slightly versus the comparative prior year amount, but weighted-average short-term interest rates were 5.7% in the current-year quarter, versus 4.4% in the prior-year quarter.
After removing the impact of the Non-Service Cost Postretirement Benefit Transfer (“NSC Transfer”) of $0.1, other income increased $11.4. Of this increase, $8.2 was the result of a gain realized on an interest rate swap contract after management determined the anticipated issuance of certain debt was no longer probable of occurring, resulting in the discontinuation of hedge accounting. The remaining variance was primarily attributable to inventory carrying cost credits at Spire Missouri, combined with favorable mark-to-market valuations on unqualified retirement trusts.
The change in income taxes is consistent with the change in pre-tax book income.
Gas Utility
For the quarter ended December 31, 2023, Gas Utility net income was $12.6 higher than the prior-year period, reflecting stronger financial performance across all utilities. Net economic earnings in the current year was $12.9 higher than the prior year, which tracks the net income trend. These results are described in further detail below.
The decrease in Gas Utility operating revenues was attributable to the following factors:
| Spire Missouri – Lower PGA/GSA collections (gas cost recovery) |
$ | (23.2 | ) | |
| Spire Missouri and Spire Alabama – Volumetric usage (including weather mitigation impact) |
(21.8 | ) | ||
| Spire Missouri – 2022 rate order |
22.5 | |||
| Spire Alabama – RSE adjustments, net |
4.0 | |||
| All other factors |
0.7 | |||
| Total Variation |
$ | (17.8 | ) |
The primary driver of the current year drop in revenue was lower usage due to weather. Warmer weather across our utility footprint in the current year negatively impacted both gas cost recoveries and customer usage, particularly for Spire Missouri. Spire Missouri realized $23.2 lower gas cost recoveries in the current year, as the current year lower volumes more than offset the higher PGA rates being charged to customers. Both Spire Missouri and Spire Alabama also experienced lower volumetric usage totaling $21.8 in the current year quarter. These unfavorable impacts were only partly offset by a $22.5 increase from Spire Missouri reflecting the final quarterly impact of implementing the 2022 rate order, and $4.0 of favorable RSE adjustments at Spire Alabama.
The year-over-year increase in Gas Utility contribution margin was attributable to the following factors:
| Spire Missouri – 2022 rate order |
$ | 22.5 | ||
| Spire Alabama – RSE adjustments, net |
3.9 | |||
| Spire EnergySouth |
1.7 | |||
| Spire Missouri and Spire Alabama – Volumetric usage (net of weather mitigation) |
(5.5 | ) | ||
| All other factors |
0.2 | |||
| Total Variation |
$ | 22.8 |
Contribution margin increased $22.8 versus the prior-year quarter. The $22.5 increase attributable to the implementation of the 2022 Missouri rate case order, the $3.9 favorable RSE adjustment at Spire Alabama, combined with the $1.7 increase at Spire EnergySouth more than offset the $5.5 negative volume usage impact (net of weather mitigation) experienced in the current year quarter.
O&M expenses for the three months ended December 31, 2023, were $3.2 lower than the prior year. Run-rate expenses decreased $3.3 after removing the $0.1 impact of the NSC Transfer. The Gas Utility segment O&M decrease reflects lower expense levels for employee-related costs, non-payroll operations expense, and efficiencies in customer care expense. These favorable benefits were only partly offset by higher insurance expense.
Taxes, other than income taxes, increased $1.7, primarily due to higher property and real estate taxes. Depreciation and amortization expenses for the quarter ended December 31, 2023 were $4.5 higher than the same period in the prior year primarily driven by continued infrastructure capital expenditures across all the Utilities. Interest expense increased $6.9 to $39.0 primarily due to higher rates. The benefit of carrying cost credits increased $1.7 quarter over quarter.
Gas Marketing
The quarter-over-quarter decline in net economic earnings primarily reflects very favorable market conditions in the prior year that allowed the business to leverage regional basis differentials to optimize storage and transportation positions. Current year market conditions returned to a more normalized business environment of less commodity and basis volatility. Net income reflected the same variance drivers, as well as unfavorable mark-to-market activity.
Revenues in the current quarter decreased $37.8 and contribution margin decreased $28.4 versus the prior-year quarter, reflecting the lower current-year asset optimization opportunities outlined above. Operating expenses decreased by $1.9 quarter-over-quarter, due primarily lower employee-related costs.
Midstream
Net income and net economic earnings for the Company’s Midstream segment for the quarter ended December 31. 2023 versus the prior-year quarter decreased $2.9 and $1.4, respectively. Of the reduction in net income and net economic earnings, $1.2 was attributable to Spire Storage West, which benefited from more favorable market conditions in the prior year when it was able to optimize storage operations and commitments. Net income was also impacted by $1.5 (after-tax) in acquisition transaction expenses incurred in the current year relating to the announced acquisition of the MoGas and Omega pipelines.
Revenues in the current quarter decreased $0.3 versus the prior-year quarter, reflecting lower Spire Storage West revenues attributable primarily to the previously mentioned more favorable market conditions in the prior year. Operating expenses increased by $2.8 quarter-over-quarter, due primarily to operating expenses associated with Spire Storage Salt Plains and transaction costs related to MoGas and Omega.
Other
The Company’s other activities generated a $2.7 loss in the three months ended December 31, 2023, $4.6 lower than the prior-year quarter. The improved results were driven by the current year $8.2 gain realized on an interest rate swap contract after management determined the anticipated issuance of certain debt was no longer probable of occurring, resulting in the discontinuation of hedge accounting. This gain more than offset higher corporate costs in the current year.
Spire Missouri
| Three Months Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| Operating Income [GAAP] |
$ | 87.3 | $ | 72.4 | ||||
| Operation and maintenance expenses |
74.9 | 77.1 | ||||||
| Depreciation and amortization |
42.1 | 38.6 | ||||||
| Taxes, other than income taxes |
38.5 | 36.4 | ||||||
| Less: Gross receipts tax expense |
(22.5 | ) | (22.1 | ) | ||||
| Contribution Margin [Non-GAAP] |
220.3 | 202.4 | ||||||
| Natural gas costs |
292.6 | 316.7 | ||||||
| Gross receipts tax expense |
22.5 | 22.1 | ||||||
| Operating Revenues |
$ | 535.4 | $ | 541.2 | ||||
| Net Income |
$ | 57.0 | $ | 47.3 | ||||
Revenues for the quarter ended December 31, 2023 were $5.8 lower than the comparable prior-year period. A key driver was a decrease in gas recovery (PGA) totaling $23.2. Higher rates in the current year quarter were more than offset by lower volumetric usage. This lower volume usage decreased revenues versus the prior year by $5.0. These negative impacts were only partly offset by an increase of $22.5 attributable to the impact of the 2022 rate order (new rates became effective the last week of December 2022).
Contribution margin for the three months ended December 31, 2023 increased $17.9 from the same period in the prior year. The previously mentioned timing of the 2022 rate case implementation generated $22.5 incremental contribution that was only partly offset by the $5.0 impact of lower volumes.
Degree days in Spire Missouri’s service areas during the three months ended December 31, 2023, were 18.7% warmer than normal, and 18.0% warmer than the same period last year. Spire Missouri’s total system volume sold and transported were 449.7 million centum (Latin for “hundred”) cubic feet (CCF) for the quarter, compared with 559.4 million CCF for the same period in the prior year. Total off-system volume sold and transported were 2.2 million CCF for the current-year quarter, compared with 2.7 million CCF a year ago.
Reported O&M expenses for the current-year quarter decreased $2.2 versus the prior year. Run-rate expenses decreased $2.1 after removing the $0.1 impact of the NSC Transfer. The reduction of current year O&M was driven by non-payroll operations expense, lower customer experience expense and outside services. These lower expenditure levels in the current year were only partly offset by higher insurance expense.
Depreciation and amortization expenses increased $3.5 versus the prior-year quarter due to ongoing capital investments. Taxes, other than income taxes, increased $2.1, driven by higher property taxes and pass-through gross receipts taxes.
Other income improved by $2.1 after removing the $0.1 impact due to the NSC Transfer. This variance is primarily attributable to increased inventory carrying cost credits of $1.7, and, to a lesser extent, favorable mark-to-market valuations on unqualified retirement trusts. Interest expense increased $5.9, reflecting higher short-term interest rates in the current year and the $400 in long-term debt that was issued in the prior-year second quarter.
Resulting net income for the quarter ended December 31, 2023 increased $9.7 versus the prior-year quarter.
Spire Alabama
| Three Months Ended December 31, |
||||||||
| 2023 |
2022 |
|||||||
| Operating Income [GAAP] |
$ | 24.0 | $ | 20.3 | ||||
| Operation and maintenance expenses |
34.2 | 35.1 | ||||||
| Depreciation and amortization |
17.9 | 17.0 | ||||||
| Taxes, other than income taxes |
10.2 | 10.6 | ||||||
| Less: Gross receipts tax expense |
(6.9 | ) | (6.8 | ) | ||||
| Contribution Margin [Non-GAAP] |
79.4 | 76.2 | ||||||
| Natural gas costs |
55.8 | 69.4 | ||||||
| Gross receipts tax expense |
6.9 | 6.8 | ||||||
| Operating Revenues |
$ | 142.1 | $ | 152.4 | ||||
| Net Income |
$ | 11.1 | $ | 9.2 | ||||
Operating revenues for the three months ended December 31, 2023 decreased $10.3 from the same period in the prior year. The change in operating revenue was principally due to unfavorable weather/usage impacts of $16.8. For the quarter, these unfavorable impacts were only partly offset by favorable RSE adjustments of $4.0 and a $2.7 increase attributable to gas cost recovery.
Contribution margin was $3.2 higher versus the prior-year quarter primarily driven by $3.9 favorable net rate adjustments under the RSE mechanism. This increase was slightly offset by a $0.5 decrease attributable to usage (net of weather mitigation).
As measured in degree days, temperatures in Spire Alabama’s service area during the three months ended December 31, 2023, were 14.4% warmer than normal and 9.5% warmer than a year ago. Spire Alabama’s total system volume sold and transported were 229.3 million CCF for the three months ended December 31, 2023, compared with 252.1 million CCF for the same period in the prior year. Total off-system volume sold and transported were 26.4 million CCF for the quarter, compared with 14.6 million CCF off-system volume sold and transported in last year’s first quarter.
O&M expenses for the three months ended December 31, 2023 decreased $0.9 versus the prior-year quarter, $1.0 after removing the NSC Transfer variance versus the prior-year quarter. The decrease was primarily due to lower employee-related costs and lower non-employee operating expenses, only partly offset by higher insurance expense.
Depreciation and amortization expenses were up $0.9, the result of continued investment in infrastructure upgrades. Interest expense for the current-year quarter increased $1.0 versus the prior-year quarter, primarily the result of higher short-term interest rates.
For the quarter ended December 31, 2023, resulting net income increased $1.9 versus the prior-year quarter.
LIQUIDITY AND CAPITAL RESOURCES
Recent Cash Flows
| Three Months Ended December 31, |
||||||||
| Cash Flow Summary |
2023 |
2022 |
||||||
| Net cash provided by (used in) operating activities |
$ | 70.0 | $ | (170.8 | ) | |||
| Net cash used in investing activities |
(225.2 | ) | (151.7 | ) | ||||
| Net cash provided by financing activities |
154.7 | 321.0 | ||||||
For the three months ended December 31, 2023, net cash from operating activities improved $240.8 from the corresponding period of fiscal 2023. The key drivers of the favorable change are regulatory timing and fluctuations in working capital items, as discussed below in the Future Cash Requirements section, particularly prior-year swings in accounts payable and regulatory assets and liabilities.
For the three months ended December 31, 2023, net cash used in investing activities was $73.5 greater than for the same period in the prior year. Total capital expenditures were $71.7 higher than last year, with a $28.6 spending increase in the Utilities and a $43.8 increase for Midstream (Spire Storage West expansion).
Lastly, for the three months ended December 31, 2023, net cash provided by financing activities decreased $166.3 versus the three months ended December 31, 2022 as lower debt issuances were only partially offset by increased equity issuances. In the first quarter of fiscal 2024, there were no issuances of long-term debt and only a $92.0 increase in short-term debt outstanding, but in last year’s first quarter, $205.0 of long-term debt was issued and short-term debt outstanding increased $189.5. Cash from the issuance of common stock in the current-year period included the $112.2 settlement of forward sales under its ATM program, described in Note 4 of the Notes to Financial Statements in Item 1.
Future Cash Requirements
The Company’s short-term borrowing requirements typically peak during colder months when the Utilities borrow money to cover the lag between when they purchase natural gas and when their customers pay for that gas. Changes in the wholesale cost of natural gas (including cash payments for margin deposits associated with Spire Missouri’s use of natural gas derivative instruments), variations in the timing of collections of gas cost under the Utilities’ PGA clauses and GSA riders, the seasonality of accounts receivable balances, and the utilization of stored gas inventories cause short-term cash requirements to vary during the year and from year to year, and may cause significant variations in the Company’s cash provided by or used in operating activities.
Spire’s material cash requirements as of December 31, 2023, are related to capital expenditures, business acquisitions, principal and interest payments on long-term debt, natural gas purchase obligations, and dividends. There were no material changes outside the ordinary course of business from the future cash requirements discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Total Company capital expenditures are planned to be $765 for fiscal 2024.
Source of Funds
It is management’s view that the Company, Spire Missouri and Spire Alabama have adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated requirements. Their debt is rated by two rating agencies: Standard & Poor’s Corporation (“S&P”) and Moody’s Investors Service (“Moody’s”). As of December 31, 2023, the debt ratings of the Company, Spire Missouri and Spire Alabama (shown in the following table) remain at investment grade, with a negative outlook (other than Moody’s stable outlook for Spire Inc. and Spire Missouri).
|
|
|
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 |
Cash and Cash Equivalents
Bank deposits were used to support working capital needs of the business. Spire had no temporary cash investments as of December 31, 2023.
Short-term Debt
The Company’s short-term cash requirements can be met through the sale of up to $1,300.0 of commercial paper or through the use of Spire’s $1,300.0 revolving credit facility. For information about short-term borrowings, see Note 6 of the Notes to Financial Statements in Item 1.
Long-term Debt and Equity
At December 31, 2023, Spire had outstanding principal of long-term debt totaling $3,726.1, of which $1,798.0 was issued by Spire Missouri, $750.0 was issued by Spire Alabama, and $223.1 was issued by other subsidiaries. For information about long-term debt issued this fiscal year, see Note 6 of the Notes to Financial Statements in Item 1.
Effective March 5, 2022, Spire Missouri was authorized by the MoPSC to issue conventional term loans, first mortgage bonds, unsecured debt, preferred stock and common stock in an aggregate amount of up to $800.0 for financings placed any time before December 31, 2024. Under this authorization through December 2023, Spire Missouri has issued $79.1 of common stock and $400.0 of first mortgage bonds. Spire Alabama has no standing authority to issue long-term debt and must petition the APSC for each planned issuance.
Spire has a shelf registration statement on Form S-3 on file with 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 237,408 and 231,788 shares at December 31, 2023 and January 29, 2024, 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 9, 2025.
Under Spire’s “at-the-market” (ATM) equity distribution agreement and as authorized by its board of directors, the Company may offer and sell, from time to time, shares of its common stock (including shares of common stock that may be sold pursuant to forward sale agreements entered into in connection with the ATM equity distribution agreement). Specifically in the first quarter of fiscal 2024, on December 11, 2023, 1,744,549 shares were settled, generating $112.2 of net proceeds. On January 25, 2024, Spire’s board approved a new authorization for the sale of additional shares with an aggregate offering price of up to $200.0 through January 2027.
Including the current portion of long-term debt, the Company’s long-term consolidated capitalization consisted of 45% and 44% equity at December 31, 2023 and September 30, 2023, respectively.
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 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 11 of the Notes to Financial Statements in Item 1.
REGULATORY MATTERS
For discussions of regulatory matters for Spire, Spire Missouri, and Spire Alabama, see Note 5, Regulatory Matters, of the Notes to Financial Statements in Item 1.
ACCOUNTING PRONOUNCEMENTS
The Company, Spire Missouri and Spire Alabama have evaluated or are in the process of evaluating the effects that recently issued accounting standards will have on the companies’ financial position or results of operations upon adoption, but none are currently expected to have a significant impact.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources are based upon our financial statements, which have been prepared in accordance with GAAP, which requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting estimates used in the preparation of our financial statements are described in Item 7 of Spire, Spire Missouri, and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2023, and include regulatory accounting, employee benefits and postretirement obligations, impairment of long-lived assets, and income taxes. There were no significant changes to critical accounting estimates during the three months ended December 31, 2023.
For discussion of other significant accounting policies, see Note 1 of the Notes to Financial Statements included in this Form 10-Q as well as Note 1 of the Notes to Financial Statements included in Spire, Spire Missouri, and Spire Alabama’s combined Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
There were no material changes in the Company’s commodity price risk or counterparty credit risk as of December 31, 2023, relative to the corresponding information provided in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Spire enters into cash flow hedges through execution of interest rate swap contracts to protect itself against adverse movements in interest rates. At December 31, 2023, the following swaps were outstanding:
| Period Originated |
Contract Hedge Term (Years) |
Notional Amount |
Fixed Interest Rate |
Fiscal 2024 Mark-to-Market Loss |
Net Asset (Liability) |
|||||||||||||||
| Quarter 1, fiscal 2022 |
10 | $ | 50.0 | 1.4918 | % | $ | (2.4 | ) | $ | 7.3 | ||||||||||
| Quarter 2, fiscal 2022 |
10 | 75.0 | 1.6475 | % | (3.7 | ) | 10.0 | |||||||||||||
| Quarter 2, fiscal 2022 |
10 | 25.0 | 1.7460 | % | (1.2 | ) | 3.1 | |||||||||||||
| Quarter 1, fiscal 2023 |
10 | 50.0 | 3.4480 | % | (2.9 | ) | (0.4 | ) | ||||||||||||
| Quarter 2, fiscal 2023 |
10 | 50.0 | 3.6850 | % | (0.7 | ) | 0.2 | |||||||||||||
| Quarter 2, fiscal 2023 |
10 | 25.0 | 3.5350 | % | (0.3 | ) | 0.2 | |||||||||||||
| Quarter 2, fiscal 2023 |
10 | 25.0 | 3.3850 | % | (0.3 | ) | 0.3 | |||||||||||||
| Quarter 3, fiscal 2023 |
10 | 25.0 | 2.9020 | % | (1.4 | ) | 0.9 | |||||||||||||
| Quarter 3, fiscal 2023 |
10 | 25.0 | 3.0180 | % | (1.2 | ) | 0.7 | |||||||||||||
| Quarter 1, fiscal 2024 |
2 | 50.0 | 4.5200 | % | (0.6 | ) | (0.6 | ) | ||||||||||||
| Quarter 1, fiscal 2024 |
2 | 50.0 | 4.5300 | % | (0.6 | ) | (0.6 | ) | ||||||||||||
| Quarter 1, fiscal 2024 |
10 | 25.0 | 3.5250 | % | (0.2 | ) | (0.2 | ) | ||||||||||||
| Quarter 1, fiscal 2024 |
10 | 25.0 | 3.5350 | % | (0.2 | ) | (0.2 | ) | ||||||||||||
| Quarter 1, fiscal 2024 |
10 | 25.0 | 3.4500 | % | — | — | ||||||||||||||
| Quarter 1, fiscal 2024 |
10 | 25.0 | 3.4000 | % | — | — | ||||||||||||||
| $ | 550.0 | $ | (15.7 | ) | $ | 20.7 | ||||||||||||||
As of December 31, 2023, the Company has recorded through accumulated other comprehensive income a cumulative mark-to-market net gain of $20.7 on open swap contracts.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For this discussion, see Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk.
Item 4. Controls and Procedures
Spire
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Change in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Spire Missouri
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Spire Alabama
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
For a description of legal proceedings, environmental matters and regulatory matters, see Note 11, Commitments and Contingencies, and Note 5, Regulatory Matters, of the Notes to Financial Statements in Item 1 of Part I.
There were no material changes in the Company’s risk factors from those disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The only repurchases of Spire’s common stock in the quarter were pursuant to elections by employees to have shares of stock withheld to cover employee tax withholding obligations upon the vesting of performance-based and time-vested restricted stock and stock units. The following table provides information on those repurchases.
| Period |
(a) Total Number of Shares Purchased |
(b) Average Price Paid Per Share |
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs |
||||||||||||
| October 1, 2023 – October 31, 2023 |
125 | $ | 55.67 | — | — | |||||||||||
| November 1, 2023 – November 30, 2023 |
23,434 | 60.63 | — | — | ||||||||||||
| December 1, 2023 – December 31, 2023 |
— | — | — | — | ||||||||||||
| Total |
23,559 | 60.60 | — | — | ||||||||||||
Spire Missouri’s outstanding first mortgage bonds contain restrictions on its ability to pay cash dividends on its common stock. As of December 31, 2023, all of Spire Missouri’s retained earnings were free from such restrictions.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
During the quarterly period ended December 31, 2023, director or officer of the Company adopted or terminated any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in the Exchange Act).
| Exhibit No. |
Description |
| 31.1 |
CEO and CFO Certifications under Exchange Act Rule 13a-14(a) of Spire Inc. |
| 31.2 |
CEO and CFO Certifications under Exchange Act Rule 13a-14(a) of Spire Missouri Inc. |
| 31.3 |
CEO and CFO Certifications under Exchange Act Rule 13a-14(a) of Spire Alabama Inc. |
| 32.1 |
|
| 32.2 |
CEO and CFO Section 1350 Certifications of Spire Missouri Inc. |
| 32.3 |
CEO and CFO Section 1350 Certifications of Spire Alabama Inc. |
| 101 |
Interactive Data Files including the following information from the Quarterly Report on Form 10-Q for the period ended December 31, 2023, formatted in inline extensible business reporting language (“Inline XBRL”): (i) Cover Page Interactive Data and (ii) the Financial Statements included in Item 1. |
| 104 |
Cover Page Interactive Data File (formatted in Inline XBRL and included in the Interactive Data Files submitted under Exhibit 101). |
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Spire Inc. |
||||
| Date: |
February 1, 2024 |
By: |
/s/ Steven P. Rasche |
|
| Steven P. Rasche |
||||
| Executive Vice President and Chief Financial Officer |
||||
| (Authorized Signatory and Principal Financial Officer) |
||||
| Spire Missouri Inc. |
||||
| Date: |
February 1, 2024 |
By: |
/s/ Timothy W. Krick |
|
| Timothy W. Krick |
||||
| Controller and Chief Accounting Officer |
||||
| (Authorized Signatory and Chief Accounting Officer) |
||||
| Spire Alabama Inc. |
||||
| Date: |
February 1, 2024 |
By: |
/s/ Timothy W. Krick |
|
| Timothy W. Krick |
||||
| Chief Accounting Officer |
||||
| (Authorized Signatory and Chief Accounting Officer) |
||||