SEC Filing | Unitil Corp

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10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number 1-8858

UNITIL CORPORATION

(Exact name of registrant as specified in its charter)


New Hampshire		02-0381573
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


6 Liberty Lane West, Hampton, New Hampshire		03842-1720
(Address of principal executive office)		(Zip Code)

Registrant’s telephone number, including area code: (603)

772-0775

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange of which registered
Common Stock, no par value	UTL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the 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.

If an emerging growth company, indicate by check mark if the 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 ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).

Yes ☐

No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at October 29, 2021
Common Stock, no par value		15,973,019 Shares

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UNITIL CORPORATION AND SUBSIDIARY COMPANIES

FORM

10-Q

For the Quarter Ended September 30, 2021

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		Page No.
Cautionary Statement			2

Part I. Financial Information

Item 1.	Financial Statements - Unaudited

	Consolidated Statements of Earnings - Three and Nine Months Ended September 30, 2021 and 2020		18

	Consolidated Balance Sheets, September 30, 2021, September 30, 2020 and December 31, 2020		19-20

	Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2021 and 2020		21

	Consolidated Statements of Changes in Common Stock Equity – Three and Nine Months Ended September 30, 2021 and 2020		22-23

	Notes to Consolidated Financial Statements		24-51

Item 2.	Management’s Discussion and Analysis (MD&A) of Financial Condition and Results of Operations		3-17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		52

Item 4.	Controls and Procedures		52

Part II. Other Information

Item 1.	Legal Proceedings		52

Item 1A.	Risk Factors		52

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		52

Item 3.	Defaults Upon Senior Securities		Inapplicable

Item 4.	Mine Safety Disclosures		Inapplicable

Item 5.	Other Information		53

Item 6.	Exhibits		53-54

Signatures			55

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CAUTIONARY STATEMENT

This report and the documents incorporated by reference into this report contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included or incorporated by reference into this report, including, without limitation, statements regarding the financial position, business strategy and other plans and objectives for the Company’s future operations, are forward-looking statements.

These statements include declarations regarding the Company’s beliefs and current expectations. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms or other comparable terminology. These forward-looking statements are subject to inherent risks and uncertainties in predicting future results and conditions that could cause the actual results to differ materially from those projected in these forward-looking statements. Some, but not all, of the risks and uncertainties include those described in Item 1A (Risk Factors) and the following:

•

the novel coronavirus

(COVID-19)

pandemic could adversely affect Unitil’s business, financial condition, results of operations and cash flows, including by disrupting the Company’s employees’ and contractors’ ability to provide ongoing services to the Company, by reducing customer demand for electricity or natural gas, or by reducing the supply of electricity or natural gas;

•

unforeseen or changing circumstances, which could adversely affect the reduction of Company-wide direct greenhouse gas emissions;

•

the Company’s regulatory and legislative environment (including laws and regulations relating to climate change, greenhouse gas emissions and other environmental matters), could affect the rates the Company is able to charge, the Company’s authorized rate of return, the Company’s ability to recover costs in its rates, the Company’s financial condition, results of operations and cash flows and the scope of the Company’s regulated activities;

•

fluctuations in the supply of, demand for, and the prices of, gas and electric energy commodities and transmission and transportation capacity and the Company’s ability to recover energy supply costs in its rates;

•

customers’ preferred energy sources;

•

severe storms and the Company’s ability to recover storm costs in its rates;

•

declines in the valuation of capital markets, which could require the Company to make substantial cash contributions to cover its pension obligations, and the Company’s ability to recover pension obligation costs in its rates;

•

general economic conditions, which could adversely affect (i) the Company’s customers and, consequently, the demand for the Company’s distribution services, (ii) the availability of credit and liquidity resources and (iii) certain of the Company’s counterparty’s obligations (including those of its insurers and lenders);

•

the Company’s ability to obtain debt or equity financing on acceptable terms;

•

increases in interest rates, which could increase the Company’s interest expense;

•

restrictive covenants contained in the terms of the Company’s and its subsidiaries’ indebtedness, which restrict certain aspects of the Company’s business operations;

•

variations in weather, which could decrease demand for the Company’s distribution services;

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•

long-term global climate change, which could adversely affect customer demand or cause extreme weather events that could disrupt the Company’s electric and gas distribution services;

•

cyber-attacks, acts of terrorism, acts of war, severe weather, a solar event, an electromagnetic event, a natural disaster, the age and condition of information technology assets, human error, or other reasons could disrupt the Company’s operations and cause the Company to incur unanticipated losses and expense;

•

outsourcing of services to third parties could expose us to substandard quality of service delivery or substandard deliverables, which may result in missed deadlines or other timeliness issues,

non-compliance

(including with applicable legal requirements and industry standards) or reputational harm, which could negatively affect our results of operations;

•

numerous hazards and operating risks relating to the Company’s electric and gas distribution activities, which could result in accidents and other operating risks and costs;

•

catastrophic events;

•

the Company’s ability to retain its existing customers and attract new customers; and

•

increased competition.

Many of these risks are beyond the Company’s control. Any forward-looking statements speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of these factors, nor can the Company assess the effect of any such factor on its business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

PART I. FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Unitil Corporation (Unitil or the Company) is a public utility holding company headquartered in Hampton, New Hampshire. Unitil is subject to regulation as a holding company system by the Federal Energy Regulatory Commission (FERC) under the Energy Policy Act of 2005.

Unitil’s principal business is the local distribution of electricity and gas throughout its service territory in the states of New Hampshire, Massachusetts and Maine. Unitil is the parent company of three wholly-owned distribution utilities:

Unitil Energy Systems, Inc. (Unitil Energy), which provides electric service in the southeastern seacoast and state capital regions of New Hampshire, including the capital city of Concord;

ii)

Fitchburg Gas and Electric Light Company (Fitchburg), which provides both electric and gas service in the greater Fitchburg area of north central Massachusetts; and

iii)

Northern Utilities, Inc. (Northern Utilities), which provides gas service in southeastern New Hampshire and portions of southern and central Maine, including the city of Portland, which is the largest city in northern New England.

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Unitil Energy, Fitchburg and Northern Utilities are collectively referred to as the “distribution utilities.” Together, the distribution utilities serve approximately 107,100 electric customers and 85,600 gas customers in their service territory.

In addition, Unitil is the parent company of Granite State Gas Transmission, Inc. (Granite State), an interstate gas transmission pipeline company, operating 86 miles of underground gas transmission pipeline primarily located in Maine and New Hampshire. Granite State provides Northern Utilities with interconnection to major gas pipelines and access to domestic gas supplies in the south and Canadian gas supplies in the north.

Unitil had an investment in Net Utility Plant of $1,237.3 million at September 30, 2021. Unitil’s total operating revenue includes revenue to recover the approved cost of purchased electricity and gas in rates on a fully reconciling basis. As a result of this reconciling rate structure, the Company’s earnings are not directly affected by changes in the cost of purchased electricity and gas. Earnings from Unitil’s utility operations are primarily derived from the return on investment in the utility assets of the three distribution utilities and Granite State.

Unitil Resources is the Company’s wholly-owned

non-regulated

subsidiary. The Company’s other subsidiaries include Unitil Service Corp., which provides, at cost, a variety of administrative and professional services to Unitil’s affiliated companies; Unitil Realty Corp., which owns and manages Unitil’s corporate office building and property located in Hampton, New Hampshire; and Unitil Power Corp., which formerly functioned as the full requirements wholesale power supply provider for Unitil Energy. Unitil’s consolidated net income includes the earnings of the holding company and these subsidiaries.

RATES AND REGULATION

Regulation

Unitil is subject to comprehensive regulation by federal and state regulatory authorities. Unitil and its subsidiaries are subject to regulation as a holding company system by the FERC under the Energy Policy Act of 2005. Unitil’s utility operations related to wholesale and interstate energy business activities are also regulated by the FERC. Unitil’s distribution utilities are subject to regulation by the applicable state public utility commissions, with regard to their rates, issuance of securities and other accounting and operational matters: Unitil Energy is subject to regulation by the New Hampshire Public Utilities Commission (NHPUC); Fitchburg is subject to regulation by the Massachusetts Department of Public Utilities (MDPU); and Northern Utilities is regulated by the NHPUC and the Maine Public Utilities Commission (MPUC). Granite State, Unitil’s interstate gas transmission pipeline, is subject to regulation by the FERC with regard to its rates and operations. Because Unitil’s primary operations are subject to rate regulation, the regulatory treatment of various matters could significantly affect the Company’s operations and financial position.

Unitil’s distribution utilities deliver electricity and/or gas to all customers in their service territory, at rates established under cost of service regulation. Under this regulatory structure, Unitil’s distribution utilities recover the cost of providing distribution service to their customers based on a historical test year, and earn a return on their capital investment in utility assets. In addition, the Company’s distribution utilities and its gas transmission pipeline company may also recover certain base rate costs, including capital project spending and enhanced reliability and vegetation management programs, through annual step adjustments and cost-tracking rate mechanisms.

Fitchburg is subject to revenue decoupling. Revenue decoupling is the term given to the elimination of the dependency of a utility’s distribution revenue on the volume of electricity or gas sales. The difference between distribution revenue amounts billed to customers and targeted revenue decoupling amounts is recognized as an increase or a decrease in Accrued Revenue which forms the basis for resetting rates for future cash recoveries from, or credits to, customers. These revenue decoupling targets may be adjusted as a result of rate cases and other authorized adjustments that the Company files with the MDPU. The Company estimates that revenue decoupling currently applies to approximately 27% and 11% of Unitil’s total annual electric and gas sales volumes, respectively.

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RESULTS OF OPERATIONS

The following section of MD&A compares the results of operations for each of the two fiscal periods ended September 30, 2021 and September 30, 2020 and should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and the accompanying Notes to unaudited Consolidated Financial Statements included in Part I, Item 1 of this report, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

The Company is responding to the novel coronavirus

(COVID-19)

pandemic (the “coronavirus pandemic”) by taking steps to mitigate the potential risks posed by its spread. The Company’s electric and gas service utility distribution operating systems have continued to provide service to customers without disruption due to the coronavirus pandemic through the date of this filing. The Company has implemented its Crisis Response Plan to address specific aspects of the coronavirus pandemic. The Crisis Response Plan guides emergency response, business continuity, and the precautionary measures being taken on behalf of employees and the public. The Company has initiated extra precautions to protect employees who work in the field and for employees who continue to work in operations, distribution and corporate facilities. The Company has implemented social distancing and work from home policies, where appropriate. The Company continues to implement strong physical and cyber-security measures to ensure that its systems remain functional in order to serve both operational needs with a remote workforce and to help ensure uninterrupted service to customers.

The extent to which the coronavirus pandemic affects the Company’s financial condition, results of operations, and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus pandemic, and the actions to contain the coronavirus pandemic or treat its effect, among others. In particular, the continued spread of the coronavirus could adversely affect the Company’s business, including (i) by disrupting the Company’s employees and contractors ability to provide ongoing services to the Company, (ii) by reducing customer demand for electricity or gas, or (iii) by reducing the supply of electricity or gas, each of which could have an adverse effect on the Company’s financial condition, results of operations, and cash flows.

The Company’s results of operations reflect the seasonal nature of the gas business. Annual gas revenues are substantially realized during the heating season as a result of higher sales of gas due to cold weather. Accordingly, the results of operations are historically most favorable in the first and fourth quarters. Fluctuations in seasonal weather conditions may have a significant effect on the result of operations. Sales of electricity are generally less sensitive to weather than gas sales, but may also be affected by the weather conditions in both the winter and summer seasons. Also, as a result of recent rate cases, the Company’s gas GAAP gross margins and gas adjusted gross margins (a

non-GAAP

measure discussed below) are derived from a higher percentage of fixed billing components, including customer charges. Therefore, gas revenues and gas adjusted gross margin will be less affected by the seasonal nature of the gas business. As noted earlier, 27% and 11% of the Company’s total annual electric and gas sales volumes, respectively, are currently decoupled. Changes in sales to existing customers with decoupled rates do not affect GAAP gross margin and adjusted gross margin.

On August 6, 2021, the Company issued and sold 800,000 shares of its common stock at a price of $50.80 per share in a registered public offering (Offering). The Company’s net increase to Common Equity and Cash proceeds from the Offering was approximately $38.6 million. The proceeds will be used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.

As part of the Offering, the Company granted the underwriters a

30-day

option to purchase additional shares. The underwriters exercised the option and purchased an additional

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120,000 shares of the Company’s common stock on September 8, 2021. The Company’s net increase to Common Equity and Cash proceeds from the exercise of the option was approximately $5.9 million. The proceeds will be used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes. Overall, the results of operations and earnings reflect the higher number of average shares outstanding period over period.

The Company analyzes operating results using Gas and Electric Adjusted Gross Margins, which are

non-GAAP

measures. Gas Adjusted Gross Margin is calculated as Total Gas Operating Revenue less Cost of Gas Sales. Electric Adjusted Gross Margin is calculated as Total Electric Operating Revenues less Cost of Electric Sales. The Company’s management believes Gas and Electric Adjusted Gross Margins provide useful information to investors regarding profitability. Also the Company’s management believes Gas and Electric Adjusted Gross Margins are important measures to analyze revenue from the Company’s ongoing operations because the approved cost of gas and electric sales are tracked, reconciled and passed through directly to customers in gas and electric tariff rates, resulting in an equal and offsetting amount reflected in Total Gas and Electric Operating Revenue.

In the following tables the Company has reconciled Gas and Electric Adjusted Gross Margin to GAAP Gross Margin, which we believe to be the most comparable GAAP measure. GAAP Gross Margin is calculated as Revenue less Cost of Sales, and Depreciation and Amortization. The Company calculates Gas and Electric Adjusted Gross Margin as Revenue less Cost of Sales. The Company believes excluding Depreciation and Amortization, which are period costs and not related to volumetric sales, is a meaningful measure to inform investors of the Company’s profitability from gas and electric sales in the period.


Three Months Ended September 30, 2021 ($ millions)
	Gas			Electric			Non- Regulated and Other			Total
Total Operating Revenue	$	32.6		$	65.5		$	—		$	98.1
Less: Cost of Sales		(13.2	)		(40.1	)		—			(53.3	)
Less: Depreciation and Amortization		(8.1	)		(6.5	)		(0.2	)		(14.8	)

GAAP Gross Margin		11.3			18.9			(0.2	)		30.0
Depreciation and Amortization		8.1			6.5			0.2			14.8

Adjusted Gross Margin	$	19.4		$	25.4		$	—		$	44.8


Three Months Ended September 30, 2020 ($ millions)
	Gas			Electric			Non- Regulated and Other			Total
Total Operating Revenue	$	27.5		$	59.9		$	—		$	87.4
Less: Cost of Sales		(9.5	)		(35.4	)		—			(44.9	)
Less: Depreciation and Amortization		(7.5	)		(6.0	)		(0.2	)		(13.7	)

GAAP Gross Margin		10.5			18.5			(0.2	)		28.8
Depreciation and Amortization		7.5			6.0			0.2			13.7

Adjusted Gross Margin	$	18.0		$	24.5		$	—		$	42.5

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Nine Months Ended September 30, 2021 ($ millions)
	Gas			Electric			Non- Regulated and Other			Total
Total Operating Revenue	$	151.3		$	182.2		$	—		$	333.5
Less: Cost of Sales		(59.1	)		(108.8	)		—			(167.9	)
Less: Depreciation and Amortization		(24.5	)		(19.4	)		(0.6	)		(44.5	)

GAAP Gross Margin		67.7			54.0			(0.6	)		121.1
Depreciation and Amortization		24.5			19.4			0.6			44.5

Adjusted Gross Margin	$	92.2		$	73.4		$	—		$	165.6


Nine Months Ended September 30, 2020 ($ millions)
	Gas			Electric			Non- Regulated and Other			Total
Total Operating Revenue	$	131.4		$	170.3		$	—		$	301.7
Less: Cost of Sales		(48.1	)		(100.3	)		—			(148.4	)
Less: Depreciation and Amortization		(22.3	)		(17.8	)		(0.6	)		(40.7	)

GAAP Gross Margin		61.0			52.2			(0.6	)		112.6
Depreciation and Amortization		22.3			17.8			0.6			40.7

Adjusted Gross Margin	$	83.3		$	70.0		$	—		$	153.3

Gas GAAP Gross Margin was $11.3 million and $67.7 million in the three and nine months ended September 30, 2021, respectively, increases of $0.8 million and $6.7 million compared to the same periods in 2020. The increase in the three month period was driven by higher rates and customer growth of $1.4 million, partially offset by higher depreciation and amortization expense of $0.6 million. The increase in the nine month period was driven by higher rates and customer growth of $7.5 million and $1.4 million from the favorable effect of colder winter weather, partially offset by higher depreciation and amortization expense of $2.2 million.

Electric GAAP Gross Margin was $18.9 million and $54.0 million in the three and nine months ended September 30, 2021, respectively, increases of $0.4 million and $1.8 million compared to the same periods in 2020. The increase in the three month period was driven by higher rates and customer growth of $1.3 million, partially offset by $0.4 million from the effect of milder summer weather and higher depreciation and amortization expense of $0.5 million. The increase in the nine month period was driven by higher rates and customer growth of $3.4 million, partially offset by higher depreciation and amortization expense of $1.6 million.

Earnings Overview

The Company reported breakeven Net Income and earnings per share (EPS) for the third quarter of 2021, a decrease of $0.3 million in Net Income, or $0.02 in EPS, compared to the third quarter of 2020. For the third quarter of 2021, higher Gas and Electric Adjusted Margins (a

non-GAAP

measure) were offset by higher operating expenses compared to the same period in 2020.

For the nine months ended September 30, 2021, the Company reported Net Income of $21.6 million, or $1.42 per share, an increase of $3.0 million, or $0.17 per share, compared to the same nine month period in 2020. The Company’s earnings in the first nine months of 2021 reflect higher Gas and Electric Adjusted Margins (a

non-GAAP

measure), partially offset by higher operating expenses. Also, EPS in 2021 reflects the sale of 920,000 common shares in the third quarter of 2021, discussed above.

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Gas Adjusted Gross Margin (a

non-GAAP

measure) was $19.4 million and $92.2 million in the three and nine months ended September 30, 2021, respectively, increases of $1.4 million and $8.9 million compared to the same periods in 2020. The increase in the three month period was driven by higher rates and customer growth of $1.4 million. The increase over the nine month period was driven by higher rates and customer growth of $7.5 million and $1.4 million from the favorable effect of colder winter weather.

Gas therm sales increased 5.0% and 4.3% in the three and nine month periods ended September 30, 2021, respectively, compared to the same periods in 2020. The increase in gas therm sales reflects colder winter weather in the first quarter of 2021 compared to the same period in 2020, and customer growth. Based on weather data collected in the Company’s gas service areas, on average there were 2.1% more Effective Degree Days (EDD) in the first nine months of 2021 compared to the same period in 2020, although 6.4% fewer EDD compared to normal. The Company estimates weather-normalized gas therm sales, excluding decoupled sales, increased 2.9% in the first nine months of 2021 compared to the same period in 2020. As of September 30, 2021, the number of gas customers increased by 592 over the previous year.

Electric Adjusted Gross Margin (a

non-GAAP

measure) was $25.4 million and $73.4 million in the three and nine months ended September 30, 2021, respectively, increases of $0.9 million and $3.4 million compared with the same periods in 2020. The increase in the three month period was driven by higher rates and customer growth of $1.3 million, partially offset by $0.4 million from the effect of milder summer weather. The increase over the nine month period was driven by higher rates and customer growth of $3.4 million.

Total electric kilowatt-hour (kWh) sales increased 0.2% and 2.0%, respectively in the three and nine month periods ended September 30, 2021 compared to the same periods in 2020. Sales to Residential customers decreased 3.5% and increased 0.4%, respectively, in the three and nine month periods ended September 30, 2021 compared to the same periods in 2020. Sales to Commercial and Industrial (C&I) customers increased 3.3% and 3.2%, respectively, in the three and nine month periods ended September 30, 2021 compared to the same periods in 2020. The changes in sales to Residential customers reflects customer growth and colder winter weather, offset by the effects of milder summer weather and lower Residential electric sales as the economy continues to reopen. The increase in sales to C&I customers reflects customer growth and increased usage due to improving economic conditions. Based on weather data collected in the Company’s electric service areas, on average there were 5.4% fewer Cooling Degree Days (CDD) in the first nine months of 2021 compared to the same period in 2020. As of September 30, 2021, the number of electric customers increased by 652 over the previous year.

Operation and Maintenance (O&M) expenses increased $0.6 million and $2.6 million in three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. The increase in the three month period reflects higher labor costs of $0.8 million, higher utility operating costs of $0.2 million, and lower professional fees of $0.4 million. The increase in the nine month period reflects higher utility operating costs of $1.6 million, higher labor costs of $1.2 million, and lower professional fees of $0.2 million.

Depreciation and Amortization expense increased $1.1 million and $3.8 million in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. These increases primarily reflect additional depreciation associated with higher levels of utility plant in service and higher amortization.

Taxes Other Than Income Taxes increased $0.8 million and $0.6 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. The increase in the three month period reflects higher payroll taxes and higher local property taxes on higher utility plant in service. The increase in the nine month period reflects higher local property taxes on higher utility plant in service and slightly higher payroll taxes.

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Interest Expense, Net increased $0.9 million and $1.8 million, respectively, in the three and nine months ended September 30, 2021, compared to the same periods in 2020, reflecting higher interest on long-term debt, partially offset by lower rates on lower levels of short-term debt.

Other Expense (Income), Net decreased $0.1 million and $0.6 million, respectively for the three and nine months ended September 30, 2021 compared to the same periods in 2020, reflecting lower retirement benefit and other costs.

Federal and State Income Taxes increased $1.1 million for the nine months ended September 30, 2021, respectively, compared to the same period in 2020, reflecting higher

pre-tax

earnings in the current period.

At its January 2021, April 2021, July 2021 and October 2021 meetings, the Unitil Corporation Board of Directors declared quarterly dividends on the Company’s common stock of $0.38 per share. These quarterly dividends result in a current effective annualized dividend rate of $1.52 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.

Gas Sales, Revenues and Adjusted Gross Margin

Therm Sales

Unitil’s total gas therm sales increased 5.0% and 4.3% in the three and nine month periods ended September 30, 2021, respectively, compared to the same periods in 2020. In the third quarter of 2021, sales to Residential customers decreased 3.7% and sales to C&I customers increased 6.0%, compared to the same period in 2020. For the nine months ended September 30, 2021, sales to Residential and C&I customers increased 0.3% and 5.4%, respectively, compared to the same period in 2020. The increase in gas therm sales reflects colder winter weather in the first quarter of 2021 compared to the same period in 2020, and customer growth. Based on weather data collected in the Company’s gas service areas, on average there were 2.1% more EDD in the first nine months of 2021 compared to the same period in 2020, although 6.4% fewer EDD compared to normal. The Company estimates weather-normalized gas therm sales, excluding decoupled sales, increased 2.9% in the first nine months of 2021 compared to the same period in 2020. As of September 30, 2021, the number of gas customers increased by 592 over the previous year. Sales margins derived from decoupled unit sales (currently representing approximately 11% of total annual therm sales volume) are not sensitive to changes in gas therm sales.

The following table details total firm therm sales for the three and nine months ended September 30, 2021 and 2020, by major customer class:


Therm Sales (millions)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021		2020		Change			% Change			2021		2020		Change		% Change
Residential		2.6		2.7		(0.1	)		(3.7	%)		34.3		34.2		0.1		0.3	%
Commercial / Industrial		24.7		23.3		1.4			6.0	%		132.7		125.9		6.8		5.4	%

Total		27.3		26.0		1.3			5.0	%		167.0		160.1		6.9		4.3	%

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Gas Operating Revenues and Adjusted Gross Margin -

The following table details Total Gas Operating Revenues and Gas Adjusted Gross Margin for the three and nine months ended September 30, 2021 and 2020:


Gas Operating Revenues and Gas Adjusted Gross Margin ($ millions)
	Three Months Ended September 30,									Nine Months Ended September 30,
	2021		2020		$ Change		% Change			2021		2020		$ Change		% Change
Gas Operating Revenue:
Residential	$	12.0	$	10.2	$	1.8		17.6	%	$	61.4	$	54.3	$	7.1		13.1	%
Commercial / Industrial		20.6		17.3		3.3		19.1	%		89.9		77.1		12.8		16.6	%

Total Gas Operating Revenue	$	32.6	$	27.5	$	5.1		18.5	%	$	151.3	$	131.4	$	19.9		15.1	%

Cost of Gas Sales	$	13.2	$	9.5	$	3.7		38.9	%	$	59.1	$	48.1	$	11.0		22.9	%

Gas Adjusted Gross Margin	$	19.4	$	18.0	$	1.4		7.8	%	$	92.2	$	83.3	$	8.9		10.7	%

Gas Adjusted Gross Margin (a

non-GAAP

measure) was $19.4 million and $92.2 million in the three and nine months ended September 30, 2021, respectively, increases of $1.4 million and $8.9 million, respectively, compared to the same periods in 2020. The increase in the three month period was driven by higher rates and customer growth of $1.4 million. The increase over the nine month period was driven by higher rates and customer growth of $7.5 million and $1.4 million from the favorable effect of colder winter weather.

The increases in Total Gas Operating Revenue of $5.1 million and $19.9 million in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020, reflect higher costs of gas sales, which are tracked and reconciled costs that are passed through directly to customers, and higher gas sales volumes.

Electric Sales, Revenues and Adjusted Gross Margin

Kilowatt-hour Sales

- Unitil’s total electric kWh sales increased 0.2% and 2.0%, respectively in the three and nine month periods ended September 30, 2021 compared to the same periods in 2020. Sales to Residential customers decreased 3.5% and increased 0.4%, respectively, in the three and nine month periods ended September 30, 2021 compared to the same periods in 2020. Sales to C&I customers increased 3.3% and 3.2%, respectively, in the three and nine month periods ended September 30, 2021 compared to the same periods in 2020. The changes in sales to Residential customers reflects customer growth and colder winter weather, offset by the effects of milder summer weather and lower Residential electric sales as the economy continues to reopen. The increase in sales to C&I customers reflects customer growth and increased usage due to improving economic conditions. Based on weather data collected in the Company’s electric service areas, on average there were 5.4% fewer CDD in the first nine months of 2021 compared to the same period in 2020. As of September 30, 2021, the number of electric customers increased by 652 over the previous year. Sales margins derived from decoupled unit sales (currently representing approximately 27% of total annual electric kWh sales volume) are not sensitive to changes in electric kWh sales.

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The following table details total kWh sales for the three and nine months ended September 30, 2021 and 2020 by major customer class:


kWh Sales (millions)
	Three Months Ended September 30,										Nine Months Ended September 30,
	2021		2020		Change			% Change			2021		2020		Change		% Change
Residential		199.7		207.0		(7.3	)		(3.5	%)		541.4		539.4		2.0		0.4	%
Commercial / Industrial		258.7		250.4		8.3			3.3	%		714.6		692.4		22.2		3.2	%

Total		458.4		457.4		1.0			0.2	%		1,256.0		1,231.8		24.2		2.0	%

Electric Operating Revenues and Electric Adjusted Gross Margin

The following table details Total Electric Operating Revenues and Electric Adjusted Gross Margin for the three and nine month periods ended September 30, 2021 and 2020:


Electric Operating Revenues and Electric Adjusted Gross Margin ($ millions)

	Three Months Ended September 30,									Nine Months Ended September 30,
	2021		2020		$ Change		% Change			2021		2020		$ Change		% Change
Electric Operating Revenue:
Residential	$	37.6	$	36.1	$	1.5		4.2	%	$	105.3	$	102.3	$	3.0		2.9	%
Commercial / Industrial		27.9		23.8		4.1		17.2	%		76.9		68.0		8.9		13.1	%

Total Electric Operating Revenue	$	65.5	$	59.9	$	5.6		9.3	%	$	182.2	$	170.3	$	11.9		7.0	%

Cost of Electric Sales	$	40.1	$	35.4	$	4.7		13.3	%	$	108.8	$	100.3	$	8.5		8.5	%

Electric Adjusted Gross Margin	$	25.4	$	24.5	$	0.9		3.7	%	$	73.4	$	70.0	$	3.4		4.9	%

Electric Adjusted Gross Margin (a

non-GAAP

measure) was $25.4 million and $73.4 million in the three and nine months ended September 30, 2021, respectively, increases of $0.9 million and $3.4 million, respectively, compared with the same periods in 2020. The increase in the three month period was driven by higher rates and customer growth of $1.3 million, partially offset by $0.4 million from the effect of milder summer weather. The increase over the nine month period was driven by higher rates and customer growth of $3.4 million.

The increases in Total Electric Operating Revenue of $5.6 million and $11.9 million in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 reflect higher costs of electric sales, which are tracked and reconciled to costs that are passed through directly to customers, and higher sales of electricity.

Operating Expenses

Cost of Gas Sales

Cost of Gas Sales includes the cost to supply the Company’s total gas requirements and spending on energy efficiency programs. Cost of Gas Sales increased $3.7 million, or 38.9%, and $11.0 million, or 22.9%, in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. These increases reflect higher sales of gas and higher wholesale gas commodity prices, partially offset by an increase in the amount of gas purchased by customers directly from third-party suppliers. Because the Company reconciles and recovers the approved Cost of Gas Sales in its rates at cost on a pass-through basis, changes in approved expenses do not affect earnings.

Cost of Electric Sales

Cost of Electric Sales includes the cost of electric supply as well as other energy supply related restructuring costs, including power supply buyout costs, and spending on energy

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efficiency programs. Cost of Electric Sales increased $4.7 million, or 13.3%, and $8.5 million, or 8.5% in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. These increases reflect higher sales of electricity and higher wholesale electricity prices, partially offset by an increase in the amount of electricity purchased by customers directly from third-party suppliers. Because the Company reconciles and recovers the approved Cost of Electric Sales in its rates at cost on a pass-through basis, changes in approved expenses do not affect earnings.

Operation and Maintenance (O&M) -

O&M expense includes gas and electric utility operating costs, and the operating cost of the Company’s corporate and other business activities. O&M expense increased $0.6 million, or 3.7%, and $2.6 million, or 5.4%, in three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. The increase in the three month period reflects higher labor costs of $0.8 million, higher utility operating costs of $0.2 million, and lower professional fees of $0.4 million. The increase in the nine month period reflects higher utility operating costs of $1.6 million, higher labor costs of $1.2 million, and lower professional fees of $0.2 million.

Depreciation and Amortization -

Depreciation and Amortization expense increased $1.1 million, or 8.0%, and $3.8 million, or 9.3%, in the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. These increases reflect additional depreciation associated with higher levels of utility plant in service and higher amortization.

Taxes Other Than Income Taxes

Taxes Other Than Income Taxes increased $0.8 million, or 15.1%, and $0.6 million, or 3.4% for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020. The increase in the three month period reflects higher payroll taxes and higher local property taxes on higher utility plant in service. The increase in the nine month period reflects higher local property taxes on higher utility plant in service and slightly higher payroll taxes.

Other Expense (Income), Net -

Other Expense (Income), Net decreased $0.1 million, or 9.1%, and $0.6 million, or 15.0%, respectively for the three and nine months ended September 30, 2021 compared to the same periods in 2020, reflecting lower retirement benefit and other costs.

Provision for Income Taxes

Federal and State Income Taxes for the three months ended September 30, 2021 decreased $0.7 million compared with the same period in 2020, reflecting lower

pre-tax

earnings in the current period. For the nine months ended September 30, 2021, Federal and State Income Taxes increased $1.1 million compared to the same period in 2020, reflecting higher

pre-tax

earnings in the current period.

Interest Expense, Net -

Interest expense is presented in the Consolidated Financial Statements net of interest income. Interest expense is mainly comprised of interest on long-term debt and short-term borrowings. In addition, certain reconciling rate mechanisms used by the Company’s distribution operating utilities give rise to regulatory assets and regulatory liabilities on which interest is accrued.

Unitil’s utility subsidiaries operate a number of reconciling rate mechanisms to recover specifically identified costs on a pass-through basis. These reconciling rate mechanisms track costs and revenue on a monthly basis. In any given month, this tracking and reconciling process will produce either an under-collected or an over-collected position. In accordance with the distribution utilities’ rate tariffs, interest is accrued on these balances and will produce either interest income or interest expense. Consistent with regulatory precedent, interest income is recorded on an under-collection of costs which creates a regulatory asset to be recovered in future periods when rates are reset. Interest expense is recorded on an over-collection of costs, which creates a regulatory liability to be refunded in future periods when rates are reset.

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Interest Expense, Net ($ millions)	Three Months Ended September 30,									Nine Months Ended September 30,
	2021			2020			Change			2021			2020			Change
Interest Expense
Long-term Debt	$	6.5		$	6.0		$	0.5		$	19.8		$	18.1		$	1.7
Short-term Debt		0.2			0.3			(0.1	)		0.5			1.3			(0.8	)
Regulatory Liabilities		0.1			0.1			—			0.3			0.2			0.1

Subtotal Interest Expense		6.8			6.4			0.4			20.6			19.6			1.0

Interest (Income)
Regulatory Assets		—			(0.2	)		0.2			(0.4	)		(0.6	)		0.2
AFUDC (1) and Other		(0.3	)		(0.6	)		0.3			(0.7	)		(1.3	)		0.6

Subtotal Interest (Income)		(0.3	)		(0.8	)		0.5			(1.1	)		(1.9	)		0.8

Total Interest Expense, Net	$	6.5		$	5.6		$	0.9		$	19.5		$	17.7		$	1.8

(1)	AFUDC – Allowance for Funds Used During Construction.

Interest Expense, Net increased $0.9 million, or 16.1%, and $1.8 million, or 10.2%, respectively, in the three and nine months ended September 30, 2021, compared to the same periods in 2020, primarily reflecting higher interest on long-term debt, partially offset by lower rates on lower levels of short-term debt.

CAPITAL REQUIREMENTS

Sources of Capital

Unitil requires capital to fund utility plant additions, working capital and other utility expenditures recovered in subsequent periods through regulated rates. The capital necessary to meet these requirements is derived primarily from internally generated funds, which consist of cash flows from operating activities. The Company initially supplements internally generated funds through short-term bank borrowings, as needed, under its unsecured revolving Credit Facility. Periodically, the Company replaces portions of its short-term debt with long-term debt financings more closely matched to the long-term nature of its utility assets. Additionally, from time to time, the Company accesses the public capital markets through public offerings of equity securities. The Company’s utility operations are seasonal in nature and therefore are subject to seasonal fluctuations in cash flows. The amount, type and timing of any future financing will vary from year to year based on capital needs and maturity or redemptions of securities.

As part of the Offering, the Company granted the underwriters a

30-day

option to purchase additional shares. The underwriters exercised the option and purchased an additional 120,000 shares of the Company’s common stock on September 8, 2021. The Company’s net increase to Common Equity and Cash proceeds from the exercise of the option was approximately $5.9 million. The proceeds will be used to make equity capital contributions to the Company’s regulated utility subsidiaries, to repay debt and for other general corporate purposes.

The Company and its subsidiaries are individually and collectively members of the Unitil Cash Pool (the Cash Pool). The Cash Pool is the financing vehicle for

day-to-day

cash borrowing and investing. The

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Cash Pool allows for an efficient exchange of cash among the Company and its subsidiaries. The interest rates charged to the subsidiaries for borrowing from the Cash Pool are based on actual interest costs from lenders under the Company’s revolving Credit Facility (as defined). At September 30, 2021, September 30, 2020 and December 31, 2020, the Company and all of its subsidiaries were in compliance with the regulatory requirements to participate in the Cash Pool.

On July 25, 2018, the Company entered into a Second Amended and Restated Credit Agreement and related documents (collectively, the Credit Facility) with a syndicate of lenders, which amended and restated in its entirety the Company’s prior credit facility. The Credit Facility extends to July 25, 2023, subject to two

one-year

extensions under certain circumstances, and has a borrowing limit of $120 million, which includes a $25 million sublimit for the issuance of standby letters of credit. The Credit Facility provides the Company with the ability to elect that borrowings under the Credit Facility bear interest under several options, including at a daily fluctuating rate of interest per annum equal to

one-month

London Interbank Offered Rate plus 1.125%. The Company may increase the borrowing limit under the Credit Facility by up to $50 million under certain circumstances.

The Company utilizes the Credit Facility for cash management purposes related to its short-term operating activities. Total gross borrowings were $170.7 million for the nine months ended September 30, 2021. Total gross repayments were $194.9 million for the nine months ended September 30, 2021. The following table details the borrowing limits, amounts outstanding and amounts available under the Credit Facility as of September 30, 2021, September 30, 2020 and December 31, 2020:


	Revolving Credit Facility ($ millions)
	September 30,				December 31,
	2021		2020		2020
Limit	$	120.0	$	120.0	$	120.0
Short-Term Borrowings Outstanding		30.5		17.3		54.7
Letter of Credit Outstanding		—		0.1		0.1

Available	$	89.5	$	102.6	$	65.2

The Credit Facility contains customary terms and conditions for credit facilities of this type, including affirmative and negative covenants. There are restrictions on, among other things, the Company’s and its subsidiaries’ ability to permit liens or incur indebtedness, and restrictions on the Company’s ability to merge or consolidate with another entity or change its line of business. The affirmative and negative covenants under the Credit Facility apply until the Credit Facility terminates and all amounts borrowed under the Credit Facility are paid in full (or with respect to letters of credit, they are cash collateralized). The only financial covenant in the Credit Facility provides that Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%, tested on a quarterly basis. At September 30, 2021, September 30, 2020 and December 31, 2020, the Company was in compliance with the covenants contained in the Credit Facility in effect on those dates.

The Company is monitoring the coronavirus pandemic, and does not believe the pandemic will adversely affect its access to capital and funding sources, or its planned capital expenditures. The Company believes its future operating cash flows, its available borrowing capacity, and its access to private and public capital markets for the issuance of long-term debt and equity securities will be sufficient to meet its working capital and capital investment needs.

On December 18, 2020, Unitil Realty Corp. entered into a loan agreement in the amount of $4.7 million at 2.64%, with a maturity date of December 18, 2030. Less than $0.1 million of costs associated with this loan have been recorded as a reduction to the proceeds. Unitil Realty Corp. used the net proceeds from this loan for general corporate purposes.

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On September 15, 2020, Northern Utilities issued $40 million of Notes due 2040 at 3.78%. Fitchburg issued $27.5 million of Notes due 2040 at 3.78%. Unitil Energy issued $27.5 million of Bonds due 2040 at 3.58%. Northern Utilities, Fitchburg and Unitil Energy used the net proceeds from these offerings to repay short-term debt and for general corporate purposes. Approximately $0.5 million of costs associated with these issuances have been recorded as a reduction to Long-Term Debt on the Consolidated Balance Sheets.

Unitil Corporation and its utility subsidiaries, Fitchburg, Unitil Energy, Northern Utilities, and Granite State currently are rated “BBB+” by Standard & Poor’s Ratings Services. Unitil Corporation and Granite State currently are rated “Baa2”, and Fitchburg, Unitil Energy and Northern Utilities are currently rated “Baa1” by Moody’s Investors Services.

The continued availability of various methods of financing, as well as the choice of a specific form of security for such financing, will depend on many factors, including, but not limited to: security market conditions; general economic climate; regulatory approvals; the ability to meet covenant issuance restrictions; the level of earnings, cash flows and financial position; and the competitive pricing offered by financing sources.

The Company provides limited guarantees on certain energy and gas storage management contracts entered into by the distribution utilities. The Company’s policy is to limit the duration of these guarantees. As of September 30, 2021, there were approximately $0.7 million of guarantees outstanding with a duration less than one year.

Northern Utilities enters into asset management agreements under which Northern Utilities releases certain gas pipeline and storage assets, resells to an asset manager and subsequently repurchases the gas over the course of the gas heating season at the same price at which it sold the gas to the asset manager. There was $9.7 million, $6.0 million and $5.4 million of gas obligations at September 30, 2021, September 30, 2020 and December 31, 2020, respectively, related to these asset management agreements. The amount of gas released in September 2021 and payable in October 2021 is $0.1 million and is recorded in Accounts Payable at September 30, 2021. The amount of gas released in September 2020 and payable in October 2020 was less than $0.1 million and was recorded in Accounts Payable at September 30, 2020. The amount of gas released in December 2020 and payable in January 2021 was $1.0 million and was recorded in Accounts Payable at December 31, 2020.

Off-Balance

Sheet Arrangements

The Company and its subsidiaries do not currently use, and are not dependent on the use of,

off-balance

sheet financing arrangements such as securitization of receivables or obtaining access to assets or cash through special purpose entities or variable interest entities. Unitil Corporation’s subsidiaries conduct a portion of their operations in leased facilities, and lease some of their vehicles, machinery and office equipment under both capital and operating lease arrangements. As of September 30, 2021, there were approximately $0.7 million of guarantees on certain energy and gas storage management contracts entered into by the distribution utilities outstanding. See Note 4 (Debt and Financing Arrangements) to the accompanying Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In making those estimates and assumptions, the Company is sometimes required to make difficult, subjective and/or complex judgments about the effect of matters that are inherently uncertain and for which different estimates that could reasonably have been used could have resulted in material differences in its financial statements. If actual results were to differ significantly from those

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estimates, assumptions and judgment, the financial position of the Company could be materially affected and the results of operations of the Company could be materially different than reported. As of September 30, 2021, the Company’s critical accounting policies and estimates had not changed significantly from December 31, 2020. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” in the Company’s 2020 Form

10-K

for additional information.

LABOR RELATIONS

Unitil’s commitment to excellence begins with its employees. As of September 30, 2021, the Company and its subsidiaries had 513 employees. The Company considers its relationship with employees to be good and has not experienced any major labor disruptions. Unitil’s employees are focused on the Company’s mission to safely and reliably deliver “energy for life” and provide customers with affordable and sustainable energy solutions.

The Company strives to be the employer of choice in the communities it serves – regardless of race, religion, color, gender identification, or sexual orientation. The Company works diligently to attract the best talent from a diverse range of sources to meet the current and future demands of our business.

To attract and retain a talented workforce, Unitil provides employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location. All employees are eligible for health insurance, paid and unpaid leave, educational assistance, retirement plan and life and disability/accident coverage.

Employees at Unitil have the opportunity to be heard. Feedback from employees is collected annually in the Company’s Employee Opinion survey. This feedback helps create action plans to improve the engagement of employees consistent with the Company’s culture of continuous improvement.

As of September 30, 2021, a total of 165 employees of certain of the Company’s subsidiaries were represented by labor unions. The following table details by subsidiary the employees covered by a collective bargaining agreement (CBA) as of September 30, 2021:


	Employees Covered		CBA Expiration
Fitchburg		44		05/31/2022
Northern Utilities NH Division		36		06/07/2025
Northern Utilities ME Division		36		03/31/2026
Granite State		4		03/31/2026
Unitil Energy		40		05/31/2023
Unitil Service		5		05/31/2023

The CBAs provide discrete salary adjustments, established work practices and uniform benefit packages. The Company expects to negotiate new agreements prior to their expiration dates.

INTEREST RATE RISK

Unitil meets its external financing needs by issuing short-term and long-term debt. The majority of debt outstanding represents long-term notes or bonds bearing fixed rates of interest. Changes in market interest rates do not affect interest expense resulting from these outstanding long-term debt securities. However, the Company periodically repays its short-term debt borrowings through the issuance of new long-term debt securities. Changes in market interest rates may affect the interest rate and corresponding interest expense on any new issuances of long-term debt securities. In addition, short-term debt borrowings bear a variable rate of interest. As a result, changes in short-term interest rates will increase

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or decrease interest expense in future periods. For example, if the average amount of short-term debt outstanding was $25 million for the period of one year, a change in interest rates of 1% would result in a change in annual interest expense of approximately $250,000. The average interest rates on the Company’s short-term borrowings and intercompany money pool transactions for the three months ended September 30, 2021 and September 30, 2020 were 1.2% and 1.3%, respectively. The average interest rates on the Company’s short-term borrowings for the nine months ended September 30, 2021 and September 30, 2020 were 1.2% and 1.8%, respectively. The average interest rate on the Company’s short-term borrowings for the twelve months ended December 31, 2020 was 1.7%.

COMMODITY PRICE RISK

Although Unitil’s three distribution utilities are subject to commodity price risk as part of their traditional operations, the current regulatory framework within which these companies operate allows for full collection of electric power and natural gas supply costs in rates on a pass-through basis. Consequently, there is limited commodity price risk after consideration of the related rate-making.

REGULATORY MATTERS

Please refer to Note 6 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of Regulatory Matters.

ENVIRONMENTAL MATTERS

Please refer to Note 7 to the Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of Environmental Matters.

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UNITIL CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF EARNINGS

(Millions except per share data)

(UNAUDITED)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021		2020
Operating Revenues
Gas	$	32.6		$	27.5	$	151.3	$	131.4
Electric		65.5			59.9		182.2		170.3

Total Operating Revenues		98.1			87.4		333.5		301.7

Operating Expenses
Cost of Gas Sales		13.2			9.5		59.1		48.1
Cost of Electric Sales		40.1			35.4		108.8		100.3
Operation and Maintenance		16.7			16.1		51.2		48.6
Depreciation and Amortization		14.8			13.7		44.5		40.7
Taxes Other Than Income Taxes		6.1			5.3		18.5		17.9

Total Operating Expenses		90.9			80.0		282.1		255.6

Operating Income		7.2			7.4		51.4		46.1
Interest Expense, Net		6.5			5.6		19.5		17.7
Other Expense (Income), Net		1.0			1.1		3.4		4.0

Income (Loss) Before Income Taxes		(0.3	)		0.7		28.5		24.4
Provision (Benefit) for Income Taxes		(0.3	)		0.4		6.9		5.8

Net Income	$	—		$	0.3	$	21.6	$	18.6

Net Income Per Common Share (Basic and Diluted)	$	—		$	0.02	$	1.42	$	1.25
Weighted Average Common Shares Outstanding – (Basic and Diluted)		15.5			14.9		15.2		14.9

(The accompanying notes are an integral part of these consolidated unaudited financial statements.)

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UNITIL CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Millions)

(UNAUDITED)


	September 30,				December 31,
	2021		2020		2020
ASSETS:

Current Assets :
Cash and Cash Equivalents	$	8.8	$	8.2	$	6.0
Accounts Receivable, Net		46.3		48.6		62.0
Accrued Revenue		38.6		39.1		50.9
Exchange Gas Receivable		10.5		6.5		4.9
Gas Inventory		0.9		0.6		0.6
Materials and Supplies		8.6		8.5		8.5
Prepayments and Other		7.3		5.8		6.4

Total Current Assets		121.0		117.3		139.3


Utility Plant:
Gas		932.8		876.8		920.2
Electric		581.0		545.9		575.9
Common		64.8		63.3		64.1
Construction Work in Progress		84.8		101.0		34.8

Utility Plant		1,663.4		1,587.0		1,595.0
Less: Accumulated Depreciation		426.1		401.7		401.8

Net Utility Plant		1,237.3		1,185.3		1,193.2


Other Noncurrent Assets:
Regulatory Assets		132.4		104.4		127.4
Operating Lease Right of Use Assets		5.1		5.6		5.2
Other Assets		13.2		11.3		12.8

Total Other Noncurrent Assets		150.7		121.3		145.4


TOTAL ASSETS	$	1,509.0	$	1,423.9	$	1,477.9

(The accompanying notes are an integral part of these consolidated unaudited financial statements.)

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UNITIL CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS (Cont.)

(Millions, except number of shares)

(UNAUDITED)


	September 30,				December 31,
	2021		2020		2020
LIABILITIES AND CAPITALIZATION:
Current Liabilities:
Accounts Payable	$	29.5	$	25.1	$	33.2
Short-Term Debt		30.5		17.3		54.7
Long-Term Debt, Current Portion		10.1		6.3		8.5
Regulatory Liabilities		13.1		10.6		5.5
Energy Supply Obligations		16.1		12.1		10.4
Interest Payable		6.7		7.2		5.0
Environmental Obligations		0.7		0.3		0.3
Other Current Liabilities		19.9		19.3		18.5

Total Current Liabilities		126.6		98.2		136.1

Noncurrent Liabilities:
Retirement Benefit Obligations		166.2		145.0		162.3
Deferred Income Taxes, net		115.7		109.4		109.0
Cost of Removal Obligations		108.2		107.1		105.2
Regulatory Liabilities		42.9		44.7		44.3
Environmental Obligations		1.7		1.9		1.8
Other Noncurrent Liabilities		6.8		7.8		6.9

Total Noncurrent Liabilities		441.5		415.9		429.5

Capitalization:
Long-Term Debt, Less Current Portion		501.3		529.0		523.1
Stockholders’ Equity:
Common Equity (Authorized: 25,000,000 and Outstanding: 15,971,962, 15,005,881 and 15,012,310 Shares)		331.6		284.8		285.3
Retained Earnings		107.8		95.8		103.7

Total Common Stock Equity		439.4		380.6		389.0
Preferred Stock		0.2		0.2		0.2

Total Stockholders’ Equity		439.6		380.8		389.2

Total Capitalization		940.9		909.8		912.3

Commitments and Contingencies (Notes 6 & 7)
TOTAL LIABILITIES AND CAPITALIZATION	$	1,509.0	$	1,423.9	$	1,477.9

(The accompanying notes are an integral part of these consolidated unaudited financial statements.)

Table of Contents

UNITIL CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions) (UNAUDITED)


	Nine Months Ended September 30,
	2021		2020
Operating Activities:
Net Income	$	21.6	$	18.6
Adjustments to Reconcile Net Income to Cash
Provided by Operating Activities: