Unitil(UTL) - 2022 Q1 - Quarterly Report

Part I. Financial Information This section details the company's financial performance, condition, and management's analysis for the reporting period Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) For the first quarter of 2022, Unitil reported Net Income of $21.5 million, an increase of $2.6 million from Q1 2021, driven by higher Electric and Gas Adjusted Gross Margins due to new rates, customer growth, and colder weather Q1 2022 vs Q1 2021 Financial Performance | Metric | Q1 2022 | Q1 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Income | $21.5 million | $18.9 million | +$2.6 million | +13.8% | | Earnings Per Share (EPS) | $1.35 | $1.26 | +$0.09 | +7.1% | | Electric Adjusted Gross Margin | $24.6 million | $23.7 million | +$0.9 million | +3.8% | | Gas Adjusted Gross Margin | $52.0 million | $47.8 million | +$4.2 million | +8.8% | - The increase in Gas Adjusted Gross Margin was driven by $2.8 million from higher rates and $1.4 million from the favorable effects of customer growth and colder winter weather[43] - Operating & Maintenance (O&M) expenses increased by $1.5 million, reflecting higher labor costs ($1.4 million) and professional fees ($0.6 million), partially offset by lower utility operating costs ($0.5 million)[45] - The company declared a quarterly dividend of $0.39 per share, resulting in an annualized rate of $1.56 per share, continuing an unbroken record of quarterly dividend payments[50] Overview Unitil Corporation is a public utility holding company that distributes electricity and natural gas in New Hampshire, Massachusetts, and Maine, serving approximately 107,700 electric and 86,600 gas customers - Unitil's principal business is the local distribution of electricity and gas through its three wholly-owned utilities: Unitil Energy Systems, Inc., Fitchburg Gas and Electric Light Company, and Northern Utilities, Inc[16][25] Customer Base and Assets | Metric | Value | As of Date | | :--- | :--- | :--- | | Electric Customers | ~107,700 | March 31, 2022 | | Gas Customers | ~86,600 | March 31, 2022 | | Net Utility Plant | $1,259.9 million | March 31, 2022 | Rates and Regulation Unitil operates under a comprehensive regulatory framework, with oversight from federal and state commissions, utilizing a cost-of-service model and revenue decoupling for Fitchburg's operations - The company's utility operations are regulated by FERC and state public utility commissions in New Hampshire, Massachusetts, and Maine regarding rates, securities issuance, and operations[23] - Fitchburg's operations are subject to revenue decoupling, which eliminates the dependency of distribution revenue on the volume of electricity or gas sold[26] Results of Operations In Q1 2022, Net Income rose to $21.5 million from $18.9 million in Q1 2021, driven by increased Electric and Gas Adjusted Gross Margins due to higher rates, customer growth, and colder weather Q1 2022 vs Q1 2021 Adjusted Gross Margin (Non-GAAP) | Metric ($ in millions) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Electric Adjusted Gross Margin | $24.6 | $23.7 | | Gas Adjusted Gross Margin | $52.0 | $47.8 | | Total Adjusted Gross Margin | $76.6 | $71.5 | Q1 2022 vs Q1 2021 Sales Volume Change | Category | % Change YoY | | :--- | :--- | | Total Electric kWh Sales | +1.4% | | Total Gas Therm Sales | +3.8% | - The increase in gas therm sales was influenced by 4.6% more Effective Degree Days (EDD) in Q1 2022 compared to Q1 2021, indicating colder weather[44] Capital Requirements Unitil funds capital requirements through internal cash, short-term borrowings, and equity offerings, maintaining investment-grade credit ratings and compliance with financial covenants - In August and September 2021, the company raised net proceeds of approximately $44.5 million ($38.6 million + $5.9 million) from a public offering of 920,000 shares of common stock[70][71] Revolving Credit Facility Status ($ in millions) | Date | Limit | Outstanding | Available | | :--- | :--- | :--- | :--- | | March 31, 2022 | $120.0 | $64.0 | $56.0 | - The company's credit ratings are 'BBB+' from S&P and 'Baa2'/'Baa1' from Moody's for the corporation and its utility subsidiaries[77] Employees As of March 31, 2022, Unitil had 508 employees, with 161 represented by labor unions, and anticipates negotiations for expiring collective bargaining agreements - The company had 508 employees as of March 31, 2022, with 161 represented by labor unions[83][88] Collective Bargaining Agreement Expirations | Subsidiary | Employees Covered | CBA Expiration | | :--- | :--- | :--- | | Fitchburg | 42 | 05/31/2022 | | Unitil Energy | 38 | 05/31/2023 | | Unitil Service | 4 | 05/31/2023 | | Northern Utilities NH | 35 | 06/07/2025 | | Northern Utilities ME | 38 | 03/31/2026 | | Granite State | 4 | 03/31/2026 | Financial Statements (Unaudited) The unaudited consolidated financial statements for Q1 2022 show increased operating revenues and net income, growth in total assets, and strong cash from operations Consolidated Statements of Earnings For Q1 2022, Unitil reported total operating revenues of $192.6 million and net income of $21.5 million, or $1.35 per share, significantly up from the prior year Consolidated Earnings Summary (Three Months Ended March 31) | ($ in millions, except per share data) | 2022 | 2021 | | :--- | :--- | :--- | | Total Operating Revenues | $192.6 | $138.8 | | Operating Income | $35.8 | $33.4 | | Net Income | $21.5 | $18.9 | | Net Income Per Common Share | $1.35 | $1.26 | Consolidated Balance Sheets As of March 31, 2022, total assets reached $1,552.3 million, driven by Net Utility Plant additions, with Total Common Stock Equity increasing to $465.1 million Consolidated Balance Sheet Summary ($ in millions) | Account | March 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $163.1 | $159.7 | | Net Utility Plant | $1,259.9 | $1,257.2 | | Total Assets | $1,552.3 | $1,540.3 | | Total Current Liabilities | $157.7 | $173.5 | | Long-Term Debt, Less Current Portion | $496.6 | $497.8 | | Total Common Stock Equity | $465.1 | $448.3 | | Total Liabilities and Capitalization | $1,552.3 | $1,540.3 | Consolidated Statements of Cash Flows Cash provided by operating activities was $29.1 million in Q1 2022, funding $15.4 million in capital expenditures and $13.7 million in financing activities, with stable cash balances Consolidated Cash Flow Summary (Three Months Ended March 31) | ($ in millions) | 2022 | 2021 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $29.1 | $47.7 | | Cash (Used in) Investing Activities | $(15.4) | $(14.1) | | Cash (Used in) Financing Activities | $(13.7) | $(33.5) | | Net Change in Cash | $0.0 | $0.1 | Notes to Consolidated Financial Statements The notes detail accounting policies, segment performance, debt, equity, regulatory matters, environmental liabilities, income taxes, and employee benefit plans, supporting the financial statements - Note 4 (Debt): As of March 31, 2022, the company had total long-term debt of $508.3 million and short-term borrowings of $64.0 million[156][159] - Note 6 (Regulatory): The company has multiple pending rate cases and regulatory filings, including base rate cases for Northern Utilities (NH) and Unitil Energy, seeking permanent and implementing temporary rate increases[188][189] - Note 7 (Environmental): The company has accrued $2.7 million for environmental obligations as of March 31, 2022, primarily for former manufactured gas plant (MGP) site remediation, with costs expected to be recovered through regulatory mechanisms[227][228] Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on variable-rate debt, but commodity price risk is mitigated by regulatory pass-through mechanisms for supply costs - A 1% change in interest rates on an average of $25 million of short-term debt would change annual interest expense by approximately $250,000[90] - Commodity price risk is limited because regulatory frameworks allow for full collection of power and gas supply costs in rates on a pass-through basis[91] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - The company's management concluded that disclosure controls and procedures were effective as of March 31, 2022[243] - No material changes to internal control over financial reporting occurred during the fiscal quarter[244] Part II. Other Information This section covers legal proceedings, risk factors, equity sales, and other relevant disclosures for the reporting period Legal Proceedings The company is involved in various legal and administrative proceedings, but management expects their ultimate resolution will not materially affect financial position - The company states that the resolution of ongoing legal proceedings is not expected to have a material effect on its financial position[245] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021, were reported - No material changes to risk factors were reported since the last Annual Report on Form 10-K[247] Unregistered Sales of Equity Securities and Use of Proceeds The company had no unregistered equity security sales in Q1 2022 and made no share repurchases under its Rule 10b5-1 plan for Directors' retainers - There were no sales of unregistered equity securities during the quarter[248] - The company has a Rule 10b5-1 trading plan to repurchase shares for Directors' retainers, but no shares were purchased under this plan in Q1 2022[249][251] Other Information On May 3, 2022, the company issued a press release announcing its financial results for the three-month period ended March 31, 2022, furnished as Exhibit 99.1 - A press release announcing Q1 2022 earnings was issued on May 3, 2022, and is included as an exhibit[252] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from key officers, the earnings press release, and XBRL data files - Exhibits filed include Sarbanes-Oxley certifications (31.1, 31.2, 31.3, 32.1), the earnings press release (99.1), and XBRL data files[254]