Essential Utilities Reports Financial Results For 2020
Reports results at the top of the guidance range
Over 20,500 water and wastewater customer connections added
Invests a record amount in infrastructure improvements
“2020 marks another remarkable year in our company’s history. We changed our name, acquired Peoples, reported another year of operational excellence and strong growth and invested a record amount in infrastructure,” said Essential Chairman and Chief Executive Officer
“As we look to 2021, I am confident that we have positioned ourselves to play a critical role in solving our country’s infrastructure challenges while recognizing our responsibility to be an industry leader in protecting our environment,” said Franklin.
Full-year 2020 Operating Results
Essential reported total operating revenues of
Operations and maintenance expenses were
Essential reported adjusted net income for the full year 2020 of
Essential’s net income of
Fourth Quarter 2020 Operating Results
Revenues increased to
Operations and maintenance expenses increased to
For the fourth quarter 2020, Essential reported net income of
Dividend
On
Water Utility Acquisition Growth
In 2020, Essential invested approximately
The company currently has six signed purchase agreements for additional water and wastewater systems that are expected to serve approximately 227,000 equivalent retail customers or equivalent dwelling units and add approximately
The pipeline of potential water and wastewater municipal acquisitions the company is actively pursuing represents approximately 375,000 total customers.
Capital Expenditures
In 2020, Essential invested approximately
Environmental, Social and Governance
As announced in January, Essential is committed to substantially reducing Scope 1 and 2 greenhouse gas emissions and by 2035, the company plans to reduce its emissions by 60% from its 2019 baseline. This will be achieved by extensive gas pipeline replacement, renewable energy purchasing, accelerated methane leak detection and repair, and various other currently planned initiatives that are highly feasible with proven technology. In a further commitment to ESG, the company’s 2021 Proxy Statement will include compensation metrics that include a multiyear plan to increase the amount of diverse supplier spend to 15% and a multiyear plan to achieve 17% employees of color.
Financing
At year-end 2020, Essential’s weighted average cost of fixed-rate long-term debt was 3.73%, and the company had
Rate Activity
In 2020, the regulated water segment received rate awards or infrastructure surcharges in
To date in 2021, the company’s regulated water segment received rate awards in
2021 Essential 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 2020 through 2023
-
Regulated water segment infrastructure investments of approximately
$550 million in 2021 -
Regulated natural gas segment infrastructure investments of approximately
$450 million in 2021 -
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
Earnings Call Information
Date:
Time:
Webcast and slide presentation link: https://www.essential.co/events-and-presentations/events-calendar
Confirmation code: 7428652
The company’s conference call with financial analysts will take place
About Essential
Essential is one of the largest publicly traded water, wastewater and natural gas providers in the
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 company’s role in the United States’ infrastructure investments; its ability to be an industry leader in protecting the environment; the guidance range of adjusted income per diluted common share for the fiscal year ending in 2021; the 3-year earnings growth from 2021 to 2023; the projected total regulated water segment customer growth for 2021; the anticipated amount of capital investment in 2021; the anticipated amount of capital investment from 2021 through 2023; and the company’s anticipated rate base growth from 2021 through 2023. 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; the continuation of the company's growth-through-acquisition program; the company’s continued ability to adapt itself for the future and build value by fully optimizing company assets; general economic business conditions; the company’s ability to fund needed infrastructure; housing and customer growth trends; unfavorable weather conditions; the success of certain cost-containment initiatives; changes in regulations or regulatory treatment; availability and access to capital; the cost of capital; disruptions in the credit markets; the success of growth initiatives; the company’s ability to successfully close municipally owned systems presently under agreement; the company’s ability to continue to deliver strong results; the company’s ability to continue to pay its dividend, add shareholder value and grow earnings; municipalities’ willingness to privatize their water and/or wastewater utilities; the company’s ability to control expenses and create and maintain efficiencies; the company’s ability to acquire municipally owned water and wastewater systems listed in its “pipeline”; 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
WTRGF
Selected Operating Data |
|||||||||||||||
(In thousands, except per share amounts) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Quarter Ended |
|
|
|
Year Ended |
|||||||||||
|
|
|
|
|
|||||||||||
2020 |
|
2019 |
|
|
|
2020 |
|
2019 |
|||||||
Operating revenues |
$ |
473,998 |
$ |
226,042 |
$ |
1,462,698 |
$ |
889,692 |
|||||||
Operations and maintenance expense |
$ |
157,196 |
$ |
85,321 |
$ |
528,611 |
$ |
333,102 |
|||||||
Net income |
$ |
102,707 |
$ |
64,227 |
$ |
284,849 |
$ |
224,543 |
|||||||
Basic net income per common share |
$ |
0.40 |
$ |
0.28 |
$ |
1.14 |
$ |
1.04 |
|||||||
Diluted net income per common share |
$ |
0.40 |
$ |
0.28 |
$ |
1.12 |
$ |
1.04 |
|||||||
Basic average common shares outstanding |
|
254,403 |
|
232,107 |
|
249,768 |
|
215,550 |
|||||||
Diluted average common shares outstanding |
|
254,774 |
|
232,581 |
|
254,629 |
|
215,931 |
|||||||
|
||||||||||||||||
Consolidated Statement of Income |
||||||||||||||||
(In thousands, except per share amounts) |
||||||||||||||||
(Unaudited) |
||||||||||||||||
Quarter Ended |
|
Year Ended |
||||||||||||||
|
|
|
||||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
Operating revenues |
$ |
473,998 |
|
$ |
226,042 |
|
$ |
1,462,698 |
|
$ |
889,692 |
|
||||
Cost & expenses: | ||||||||||||||||
Operations and maintenance |
|
157,196 |
|
|
85,321 |
|
|
528,611 |
|
|
333,102 |
|
||||
Purchased gas |
|
92,811 |
|
|
- |
|
|
165,745 |
|
|
- |
|
||||
Depreciation |
|
69,777 |
|
|
40,066 |
|
|
251,443 |
|
|
158,179 |
|
||||
Amortization |
|
1,204 |
|
|
437 |
|
|
5,616 |
|
|
(1,703 |
) |
||||
Taxes other than income taxes |
|
20,173 |
|
|
14,917 |
|
|
76,597 |
|
|
59,955 |
|
||||
Total |
|
341,161 |
|
|
140,741 |
|
|
1,028,012 |
|
|
549,533 |
|
||||
Operating income |
|
132,837 |
|
|
85,301 |
|
|
434,686 |
|
|
340,159 |
|
||||
Other expense (income): | ||||||||||||||||
Interest expense |
|
51,785 |
|
|
33,142 |
|
|
188,435 |
|
|
125,383 |
|
||||
Interest income |
|
(17 |
) |
|
(7,287 |
) |
|
(5,363 |
) |
|
(25,406 |
) |
||||
Allowance for funds used during construction |
|
(3,966 |
) |
|
(3,892 |
) |
|
(12,687 |
) |
|
(16,172 |
) |
||||
Change in fair value of interest rate swap agreements |
|
- |
|
|
- |
|
|
- |
|
|
23,742 |
|
||||
Loss on debt extinguishment |
|
- |
|
|
- |
|
|
- |
|
|
18,528 |
|
||||
Gain on sale of other assets |
|
(303 |
) |
|
(480 |
) |
|
(661 |
) |
|
(923 |
) |
||||
Equity loss (earnings) in joint venture |
|
91 |
|
|
(292 |
) |
|
3,374 |
|
|
(2,210 |
) |
||||
Other |
|
(213 |
) |
|
1,006 |
|
|
(3,383 |
) |
|
5,691 |
|
||||
Income before income taxes |
|
85,460 |
|
|
63,104 |
|
|
264,971 |
|
|
211,526 |
|
||||
Provision for income tax benefit |
|
(17,247 |
) |
|
(1,123 |
) |
|
(19,878 |
) |
|
(13,017 |
) |
||||
Net income |
$ |
102,707 |
|
$ |
64,227 |
|
$ |
284,849 |
|
$ |
224,543 |
|
||||
Net income per common share: | ||||||||||||||||
Basic |
$ |
0.40 |
|
$ |
0.28 |
|
$ |
1.14 |
|
$ |
1.04 |
|
||||
Diluted |
$ |
0.40 |
|
$ |
0.28 |
|
$ |
1.12 |
|
$ |
1.04 |
|
||||
Average common shares outstanding: | ||||||||||||||||
Basic |
|
254,403 |
|
|
232,107 |
|
|
249,768 |
|
|
215,550 |
|
||||
Diluted |
|
254,774 |
|
|
232,581 |
|
|
254,629 |
|
|
215,931 |
|
||||
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 operating revenues," “adjusted income,” and “adjusted income per common share” and have been adjusted for the following items:
(1) Transaction-related rate credits issued to
(2) Transaction-related expenses for the Company's Peoples acquisition that closed on
(3) In order to illustrate the full-year 2020 effects of the Peoples acquisition as if this transaction closed on
(4) Pre-acquisition interest expense of
(5) On
(6) Interest income earned on the proceeds received from our
(7) The income tax impact of the non-GAAP adjustments described above; and
(8) The effect on average diluted shares outstanding of the shares issued in
These financial measures are measures of the Company’s operating performance that do not comply with
The following reconciles our GAAP results to the non-GAAP information we disclose :
Quarter Ended |
|
Year Ended |
||||||||||||||
|
|
|
||||||||||||||
|
|
|
|
|
|
|
||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
Operating revenues (GAAP financial measure) |
$ |
473,998 |
|
$ |
226,042 |
|
$ |
1,462,698 |
|
$ |
889,692 |
|
||||
(1) Transaction-related rate credits issued to utility customers |
|
18,924 |
|
|
- |
|
|
23,004 |
|
|
- |
|
||||
Adjusted operating revenues (Non-GAAP financial measure) |
$ |
492,922 |
|
$ |
226,042 |
|
$ |
1,485,702 |
|
$ |
889,692 |
|
||||
Net income (GAAP financial measure) |
$ |
102,707 |
|
$ |
64,227 |
|
$ |
284,849 |
|
$ |
224,543 |
|
||||
(1) Transaction-related rate credits issued to utility customers |
|
18,924 |
|
|
- |
|
|
23,004 |
|
|
- |
|
||||
(2) Transaction-related expenses for the Peoples transaction closed |
|
- |
|
|
613 |
|
|
25,573 |
|
|
66,066 |
|
||||
(3) Adjustments to provide full-year 2020 run rate of Peoples operating results, including additional net interest expense |
|
- |
|
|
- |
|
|
108,132 |
|
|
- |
|
||||
(4) Pre-acquisition interest expense for funds borrowed for acquisition of Peoples, net |
|
- |
|
|
2,643 |
|
|
- |
|
|
5,961 |
|
||||
(5) Overlapping interest expense on refinanced debt |
|
- |
|
|
- |
|
|
- |
|
|
452 |
|
||||
(6) Interest income earned on proceeds from |
|
- |
|
|
(6,898 |
) |
|
- |
|
|
(23,377 |
) |
||||
(7) Income tax effect of non-GAAP adjustments |
|
(5,468 |
) |
|
777 |
|
|
(38,450 |
) |
|
(10,149 |
) |
||||
Adjusted income (Non-GAAP financial measure) |
$ |
116,163 |
|
$ |
61,362 |
|
$ |
403,108 |
|
$ |
263,496 |
|
||||
Net income per common share (GAAP financial measure): | ||||||||||||||||
Basic |
$ |
0.40 |
|
$ |
0.28 |
|
$ |
1.14 |
|
$ |
1.04 |
|
||||
Diluted |
$ |
0.40 |
|
$ |
0.28 |
|
$ |
1.12 |
|
$ |
1.04 |
|
||||
Adjusted income per common share (Non-GAAP financial measure): | ||||||||||||||||
Diluted |
$ |
0.46 |
|
$ |
0.34 |
|
$ |
1.58 |
|
$ |
1.47 |
|
||||
Average common shares outstanding: | ||||||||||||||||
Basic |
|
254,403 |
|
|
232,107 |
|
|
249,768 |
|
|
215,550 |
|
||||
Diluted |
|
254,774 |
|
|
232,581 |
|
|
254,629 |
|
|
215,931 |
|
||||
Average common shares outstanding: | ||||||||||||||||
Shares used in calculating diluted net income per common share |
|
254,774 |
|
|
232,581 |
|
|
254,629 |
|
|
215,931 |
|
||||
(8) Less: Adjustment for effects of |
|
- |
|
|
(37,370 |
) |
|
- |
|
|
(25,903 |
) |
||||
(8) Less: Adjustment for effects of |
|
- |
|
|
(16,271 |
) |
|
- |
|
|
(11,278 |
) |
||||
Shares used in calculating adjusted diluted income per common share (Non-GAAP financial measure) |
|
254,774 |
|
|
178,940 |
|
|
254,629 |
|
|
178,750 |
|
||||
|
||||||
Condensed Consolidated Balance Sheets |
||||||
(In thousands of dollars) |
||||||
(Unaudited) |
||||||
|
|
|
||||
2020 |
|
2019 |
||||
Net property, plant and equipment |
$ |
9,512,877 |
$ |
6,345,790 |
||
Current assets |
|
380,220 |
|
2,015,127 |
||
Regulatory assets and other assets |
|
3,812,180 |
|
1,001,068 |
||
Total assets |
$ |
13,705,277 |
$ |
9,361,985 |
||
Total equity |
$ |
4,683,877 |
$ |
3,880,860 |
||
Long-term debt, excluding current portion, net of debt issuance costs |
|
5,507,744 |
|
2,943,327 |
||
Current portion of long-term debt and loans payable |
|
162,551 |
|
130,775 |
||
Other current liabilities |
|
441,322 |
|
192,686 |
||
Deferred credits and other liabilities |
|
2,909,783 |
|
2,214,337 |
||
Total liabilities and equity |
$ |
13,705,277 |
$ |
9,361,985 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20210224006084/en/
Investor Relations
O: 610.645.1191
BJDingerdissen@Essential.co
Communications and Marketing
856.981.5497
Media@essential.co
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