$468 Million in signed municipal acquisition
agreements
Announces first Pittsburgh area municipal
wastewater acquisition
Reaffirms 2021 earnings per share guidance of
$1.64 to $1.69
Essential Utilities Inc. (NYSE: WTRG) (“Essential”), today
reported results for the third quarter ended Sept. 30, 2021.
Operating Results
Essential reported net income of $50.5 million for the third
quarter of 2021, compared to $55.7 million reported for the same
quarter in 2020. Earnings per share were $0.19 for the quarter.
Increased rates and surcharges and third quarter 2020 rate credits
were offset by operations and maintenance expense and decreased
volume in both the regulated water segment and the regulated gas
segment.
Essential’s revenues for the quarter were $361.9 million, an
increase of 3.8% compared to $348.6 million in the third quarter of
2020. Recovery of higher purchased gas costs, rates and surcharges,
third quarter 2020 rate credits, and customer growth from the
regulated water segment were the largest contributors to the
increase in revenues for the quarter. Operations and maintenance
expenses increased to $139.4 million for the third quarter of 2021
compared to $136.2 million in the third quarter of 2020. The
increase in operations and maintenance expenses was primarily a
result of employee-related costs.
Essential’s regulated water segment reported revenues for the
quarter of $259.9 million, an increase of 1.6% compared to $255.7
million in the third quarter of 2020. Rates and surcharges and
customer growth were the largest contributors to the increase in
revenues for the period. Lower water consumption in Pennsylvania,
Ohio, Texas, and New Jersey partially offset these increases, due
in part to the voluntary customer conservation efforts related to
operational impacts from Hurricane Ida. Operations and maintenance
expenses for Essential’s regulated water segment increased from
$79.3 million for the third quarter of 2020 to $86.9 million this
year, including additional repair and maintenance expenses stemming
from the company’s response to Hurricane Ida.
Essential’s regulated natural gas segment reported revenues for
the quarter of $94.8 million, compared to $88.9 million in the
third quarter of 2020. Purchased gas costs were $20.4 million for
the quarter as compared to $14.8 million for the same quarter in
2020. As a result, the recovery of higher purchased gas costs were
the largest driver in the increase of revenues. Operations and
maintenance expenses for the same period for Essential’s regulated
natural gas segment decreased to $54.0 million, from $59.6 million
in the third quarter of 2020.
As of Sept. 30, 2021, Essential reported year-to-date net income
of $315.1 million or $1.23 per share (GAAP) compared to $182.1
million or $0.71 per share (GAAP) reported through the same period
of 2020. Year-over-year comparisons were impacted by the Peoples
transaction, which closed on March 16, 2020. For the fiscal year
2020, the results of Peoples have been included in our consolidated
financial statements as of the closing date. Results for the first
nine months of 2021 include the full nine months of operating
results of Peoples, which comprises the company’s regulated natural
gas segment. For the first three quarters of 2020, adjusted income
and adjusted income per share (both non-GAAP financial measures)
excluded Peoples-related transaction expenses and third-quarter
2020 rate credits. Adjusting for those items, Essential’s adjusted
income in the first nine months of 2020 was $206.0 million
(non-GAAP), or $0.81 per share (non-GAAP). When compared to the
adjusted income in the first nine months of 2020, earnings on a
per-share basis in the first nine months of 2021 increased 51.9%.
Please refer to the reconciliation of GAAP to non-GAAP financial
measures later in this press release for additional information on
Essential’s use of non-GAAP financial measures as a supplement to
its GAAP results.
For the first nine months of 2021, the company reported revenues
of $1.3 billion, an increase of 35.8% compared to $988.7 million in
the first nine months of 2020. Operations and maintenance expenses
for the first nine months of 2021 were $391.9 million compared to
$371.4 million in 2020.
“We are pleased with the company’s financial performance, which
remains solidly on track for 5 to 7% annual earnings growth. We
remain on pace for another year of strong municipal acquisition
growth, including the recently announced $41.25 million Beaver
Falls acquisition in the Pittsburgh, Pennsylvania area, while
continuing to execute our nearly $1 billion infrastructure capital
plan and maintaining operational excellence for our customers,”
said Essential Chairman and CEO Christopher Franklin. “Our ability
to execute allows us to play an important role in solving our
nation’s infrastructure challenges and supports our mission of
delivering safe and reliable natural resources. We were also
pleased to be recognized for our recently published ESG report with
multiple awards, while also being celebrated again as a Champion of
Board Diversity by The Forum of Executive Women.”
Dividend
On Oct. 27, 2021, Essential’s board of directors declared a
quarterly cash dividend of $0.2682 per share of common stock. This
dividend will be payable on Dec. 1, 2021 to shareholders of record
on Nov. 12, 2021. Essential has paid a consecutive quarterly cash
dividend for 76 years.
Financing
In August 2020, Essential announced an offering of 6.7 million
shares of common stock via a forward equity sale agreement. The
company fully settled the transaction on Aug. 9, 2021. The company
received $299.7 million in proceeds at settlement, which is net of
expenses for interest and dividends during the term of the
agreement. The proceeds were used to fund general corporate
purposes, including for water and wastewater acquisitions, working
capital, and capital expenditures.
Water utility acquisition growth
Essential’s continued acquisition growth allows the company to
provide safe and reliable water and wastewater service to an even
larger customer base. On Aug. 31, 2021, the company’s regulated
water segment subsidiary, Aqua Illinois, closed its acquisition of
the Village of Bourbonnais wastewater system, adding approximately
$32.1 million in rate base and approximately 6,500 customer
connections.
The company currently has seven signed purchase agreements for
additional water and wastewater systems that are expected to serve
over 234,000 equivalent retail customers or equivalent dwelling
units and total approximately $468 million in purchase price in two
of our existing states. This includes the recently signed agreement
to acquire the wastewater system from the City of Beaver Falls for
$41.25 million, which serves approximately 7,600 customer
equivalents in Pennsylvania. Also included is the company’s
agreement to acquire the Delaware County Regional Water Quality
Control Authority (DELCORA) for $276.5 million. DELCORA, a
Pennsylvania sewer authority, serves approximately 198,000
equivalent dwelling units in the Philadelphia suburbs.
The pipeline of potential water and wastewater municipal
acquisitions the company is actively pursuing represents
approximately 400,000 total customers or equivalent dwelling units.
The company remains on track to on average annually increase
customers between 2 and 3% through acquisitions and organic
customer growth.
Capital expenditures
Essential invested approximately $675.8 million in the first
nine months of the year to improve its regulated water and natural
gas infrastructure systems and to enhance its customer service
across its operations. The company remains on track to invest
approximately $1 billion in 2021 to replace and expand its water
and wastewater utility infrastructure and to replace and upgrade
its natural gas utility infrastructure, leading to significant
reductions in methane emissions that occur in aged gas pipes. In
total, infrastructure investments of approximately $3 billion are
expected through 2023 to improve water and natural gas systems and
better serve our customers through improved information technology.
The capital investments made to rehabilitate and expand the
infrastructure of the communities Essential serves are critical to
its mission of safely and reliably delivering Earth’s most
essential resources. The company’s plan to accelerate the
replacement of aged gas pipe at Peoples continues, thereby enabling
significant reduction in methane emissions.
Rate activity
To date in 2021, the company’s regulated water segment received
rate awards or infrastructure surcharges in New Jersey, North
Carolina, Ohio, Pennsylvania, Illinois, Indiana, and Virginia of
$31.0 million. The company currently has rate proceedings for base
rate and infrastructure surcharges pending in Ohio, Pennsylvania
and North Carolina for its regulated water segment, which would add
an estimated $107.5 million in incremental revenue. Additionally,
the company’s regulated natural gas segment has received rate
awards or infrastructure surcharges in Pennsylvania and Kentucky
totaling an estimated increase to annualized revenues of $1.3
million. The company currently has a rate proceeding pending in
Kentucky for its regulated natural gas segment, which would add an
estimated $9.1 million in incremental revenue.
Essential 2021 Guidance
Essential continues to monitor the effects of the COVID-19
pandemic on its customers, employees and the business and will
update guidance impacts from the pandemic in the future if needed.
The following is the company’s 2021 full-year guidance:
- Net income per diluted common share of $1.64 to $1.69
- Earnings per share growth CAGR of 5 to 7% for the three-year
period through 2023
- Regulated infrastructure investments of approximately $1
billion in 2021, weighted towards the regulated water segment
- Infrastructure investments of approximately $3 billion through
2023 to rehabilitate and strengthen water, wastewater and natural
gas systems
- Regulated water segment rate base compound annual growth rate
of 6 to 7% through 2023
- Regulated natural gas segment rate base compound annual growth
rate of 8 to 10% through 2023
- Average annual regulated water segment customer (or equivalent
dwelling units) growth of between 2 and 3% from acquisitions and
organic customer growth
- Gas customer count stable for 2021
- Reduction of Scope 1 and Scope 2 greenhouse gas emissions by
60% by 2035
- Multiyear plan to increase diverse supplier spend to 15%
- Multiyear plan to achieve 17% employees of color
Essential Utilities does not guarantee future results of any
kind. Guidance is subject to risks and uncertainties, including,
without limitation, those factors outlined in the “Forward Looking
Statements” of this release and the “Risk Factors” section of the
company’s annual and quarterly reports filed with the Securities
and Exchange Commission.
Earnings Call Information
Date: Nov. 1, 2021 Time: 11 a.m. EDT (please dial in by 10:45
a.m.) Webcast and slide presentation link:
https://www.essential.co/events-and-presentations/events-calendar
Replay Dial-in #: 888.203.1112 (U.S.) & +1 719.457.0820
(International) Confirmation code: 4066164
The company’s conference call with financial analysts will take
place Monday, Nov. 1, 2021 at 11 a.m. Eastern Daylight Time. The
call and presentation will be webcast live so that interested
parties may listen over the internet by logging on to Essential.co
and following the link for Investors. The conference call will be
archived in the Investor Relations section of the company’s website
for 90 days following the call. Additionally, the call will be
recorded and made available for replay at 2 p.m. on Nov. 1, 2021
for 10 business days following the call. To access the audio replay
in the U.S., dial 888-203-1112 (pass code 4066164). International
callers can dial +1 719-457-0820 (pass code 4066164).
About Essential
Essential is one of the largest publicly traded water,
wastewater and natural gas providers in the U.S., serving
approximately 5 million people across 10 states under the Aqua and
Peoples brands. Essential is committed to excellence in proactive
infrastructure investment, regulatory expertise, operational
efficiency and environmental stewardship. The company recognizes
the importance water and natural gas play in everyday life and is
proud to deliver safe, reliable services that contribute to the
quality of life in the communities it serves. For more information,
visit http://www.essential.co.
Forward-looking statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including, among others: the guidance range of net income per
diluted common share for the fiscal year ending in 2021; the
three-year period of earnings growth through 2023; the anticipated
amount of capital investment in 2021; the anticipated amount of
capital investment from 2021 through 2023; the reduction of Scope 1
and Scope 2 greenhouse gas emissions by 60% by 2035; that the
Company’s pipeline replacement program will lead to significant
methane reductions; that the Company’s municipal growth pipeline is
strong; that the Company will help solve the nation’s
infrastructure challenge; the company’s ability to increase diverse
supplier spend to 15%; the company’s ability to achieve 17%
employees of color; the company’s anticipated rate base growth from
2021 through 2023; and, the company’s ability to accelerate the
replacement of aged gas pipes. There are important factors that
could cause actual results to differ materially from those
expressed or implied by such forward-looking statements including:
disruptions in the global economy; financial and workforce impacts
from the COVID-19 pandemic; potential disruptions in the supply
chain for raw and finished materials; the continuation of the
company's growth-through-acquisition program; general economic
business conditions; housing and customer growth trends;
unfavorable weather conditions; the success of certain
cost-containment initiatives; changes in regulations or regulatory
treatment; the company’s ability to successfully close municipally
owned systems presently under agreement; and other factors
discussed in our Annual Report on Form 10-K and our Quarterly
Reports on Form 10-Q, which are filed with the Securities and
Exchange Commission. For more information regarding risks and
uncertainties associated with Essential's business, please refer to
Essential's annual, quarterly and other SEC filings. Essential is
not under any obligation - and expressly disclaims any such
obligation - to update or alter its forward-looking statements
whether as a result of new information, future events or
otherwise.
WTRGF
Essential Utilities, Inc. and Subsidiaries Selected Operating Data
(In thousands, except per share amounts) (Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2021
2020
2021
2020
Operating revenues
$ 361,860
$ 348,647
$ 1,342,457
$ 988,700
Operations and maintenance expense
$ 139,355
$ 136,174
$ 391,945
$ 371,415
Net income
$ 50,503
$ 55,732
$ 315,106
$ 182,142
Basic net income per common share
$ 0.20
$ 0.22
$ 1.23
$ 0.73
Diluted net income per common share
$ 0.19
$ 0.22
$ 1.23
$ 0.71
Basic average common shares outstanding
258,773
254,280
256,051
248,212
Diluted average common shares outstanding
259,437
255,162
256,763
255,139
Essential Utilities, Inc. and Subsidiaries Consolidated Statement
of Operations (In thousands, except per share amounts) (Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
2021
2020
2021
2020
Operating revenues
$ 361,860
$ 348,647
$ 1,342,457
$ 988,700
Cost & expenses:
Operations and maintenance
139,355
136,174
391,945
371,415
Purchased gas
25,488
16,744
202,538
72,934
Depreciation
72,606
68,175
217,007
181,666
Amortization
1,901
1,766
4,616
4,412
Taxes other than income taxes
21,058
20,555
63,219
56,424
Total
260,408
243,414
879,325
686,851
Operating income
101,452
105,233
463,132
301,849
Other expense (income):
Interest expense
52,132
49,861
154,937
136,650
Interest income
(565)
(114)
(1,290)
(5,346)
Allowance for funds used during construction
(6,082)
(3,543)
(13,922)
(8,721)
Gain on sale of other assets
(320)
(233)
(623)
(358)
Equity loss in joint venture
-
3,626
-
3,283
Other
4,019
(4,127)
(1,393)
(3,170)
Income before income taxes
52,268
59,763
325,423
179,511
Provision for income taxes (benefit)
1,765
4,031
10,317
(2,631)
Net income
$ 50,503
$ 55,732
$ 315,106
$ 182,142
Net income per common share:
Basic
$ 0.20
$ 0.22
$ 1.23
$ 0.73
Diluted
$ 0.19
$ 0.22
$ 1.23
$ 0.71
Average common shares outstanding:
Basic
258,773
254,280
256,051
248,212
Diluted
259,437
255,162
256,763
255,139
Essential Utilities, Inc. and Subsidiaries Reconciliation of GAAP
to Non-GAAP Financial Measures (In thousands, except per share
amounts) (Unaudited)
The Company is providing disclosure of the reconciliation of the
non-GAAP financial measures to the most comparable GAAP financial
measures. The Company believes that the non-GAAP financial measures
"adjusted operating revenues" "adjusted income" and "adjusted
income per common share" provide investors the ability to measure
the Company’s financial operating performance by adjustment, which
is more indicative of the Company’s ongoing performance and is more
comparable to measures reported by other companies. The Company
further believes that the presentation of these non-GAAP financial
measures is useful to investors as a more meaningful way to compare
the Company’s operating performance against its historical
financial results.
This reconciliation includes a presentation of the non-GAAP
financial measures “adjusted income” and “adjusted income per
common share” and have been adjusted for the following items:
(1) Transaction-related expenses for the
Company's Peoples acquisition that closed on March 16, 2020, which
consists of costs recorded as operations and maintenance expenses
for the three months ended March 31, 2020 of $25,397, primarily representing
expenses associated with investment banking fees, obtaining
regulatory approvals, legal expenses, and integration planning;
(2) Transaction-related water rate credits,
for the Company's Peoples acquisition, issued to Pennsylvania
utility customers in September 2020; and
(3) The income tax impact of the non-GAAP
adjustments described above.
These financial measures are measures of the Company’s operating
performance that do not comply with U.S. generally accepted
accounting principles (GAAP), and are thus considered to be
“non-GAAP financial measures” under applicable Securities and
Exchange Commission regulations. These non-GAAP financial measures
are derived from our consolidated financial information and is
provided to supplement the Company's GAAP measures, and should not
be considered as a substitute for measures of financial performance
prepared in accordance with GAAP.
The following reconciles our GAAP results to the non-GAAP
information we disclose:
Quarter Ended Nine Months Ended
September 30, September
30,
2021
2020
2021
2020
(A)
Operating revenues (GAAP financial measure)
$ 361,860
$ 348,647
$ 1,342,457
$ 988,700
(2) Transaction-related water rate credits issued to utility
customers
-
4,080
-
4,080
Adjusted operating revenues (Non-GAAP financial measure)
$ 361,860
$ 352,727
$ 1,342,457
$ 992,780
Quarter Ended Nine Months Ended
September 30, September
30,
2021
2020
2021
2020
(A)
Net income (GAAP financial measure)
$
50,503
$
55,732
$ 315,106
$ 182,142
Adjustments: (1) Transaction-related expenses
for the Peoples transaction closed March 16, 2020
-
-
-
25,573
(2) Transaction-related water rate credits issued to utility
customers
-
4,080
-
4,080
(3) Income tax effect of non-GAAP adjustments
-
(1,179)
-
(5,827)
Adjusted income (Non-GAAP financial measure)
$
50,503
$
58,633
$ 315,106
$ 205,968
Net income per common share (GAAP
financial measure): Basic
$ 0.20
$ 0.22
$
1.23
$ 0.73
Diluted
$ 0.19
$ 0.22
$
1.23
$ 0.71
Adjusted income per common share
(Non-GAAP financial measure): Basic
$ 0.20
$ 0.23
$
1.23
$ 0.83
Diluted
$ 0.19
$ 0.23
$
1.23
$ 0.81
Average common shares outstanding:
Basic
258,773
254,280
256,051
248,212
Diluted
259,437
255,162
256,763
255,139
(A) Includes People's operating
results as of the closing date of the Peoples acquisition, March
16, 2020. Essential Utilities, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets (In thousands of dollars) (Unaudited)
September 30, December 31,
2021
2020
Net property, plant and equipment
$ 9,956,769
$ 9,512,877
Current assets
352,504
380,220
Regulatory assets and other assets
3,927,212
3,812,180
$ 14,236,485
$ 13,705,277
Total equity
$ 5,127,862
$ 4,683,877
Long-term debt, excluding current portion, net of debt issuance
costs
5,598,714
5,507,744
Current portion of long-term debt and loans payable
110,000
162,551
Other current liabilities
406,029
441,322
Deferred credits and other liabilities
2,993,880
2,909,783
$ 14,236,485
$ 13,705,277
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211101005505/en/
Brian Dingerdissen Essential Utilities Inc. Investor Relations
O: 610.645.1191 BJDingerdissen@Essential.co Erin O’Donnell
Communications and Marketing 412.208.6614 Media@essential.co
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