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Item 7. Management’s Discussion and Analysis

2025-02-10 compared with 2024-02-13 · 103 added, 96 removed, 284 unchanged (41% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) (Note references are to the Notes to the Consolidated Financial Statements included in Item 8.)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) (Note references are to the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.)

You should read the following discussion and analysis together with the consolidated financial statements and related notes included elsewhere herein.

Unitil is a public utility holding company headquartered in Hampton, New Hampshire.

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Earnings from Unitil’s utility operations are derived from the return on investment in the three distribution utilities and Granite State.

The Company’s other subsidiaries include Unitil Service, which provides, at cost, a variety of administrative and professional services to Unitil’s affiliated companies, Unitil Resources, the Company’s non-regulated subsidiary, which currently does not have any activity, and Unitil Realty, which owns and manages Unitil’s corporate office building and property located in Hampton, New Hampshire.

The Company’s other subsidiaries include Unitil Service, which provides, at cost, a variety of administrative and professional services to Unitil’s affiliated companies, Unitil Resources, the Company’s non-regulated subsidiary, which currently does not have any activity, and Unitil Realty, which owns and manages the Company’s corporate office in Hampton, New Hampshire and land for future use in Kingston, New Hampshire.

Unitil’s consolidated net income includes the earnings of the holding company and these subsidiaries.

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Under this regulatory structure, Unitil’s distribution utilities are provided the opportunity to 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 natural gas

transmission pipeline company also may recover certain base rate costs, including capital project spending and enhanced reliability and vegetation management programs, through annual step adjustments and cost tracker rate mechanisms.

In addition, the Company’s distribution utilities and its natural gas transmission pipeline company also may recover certain base rate costs, including capital project spending and enhanced reliability and vegetation management programs, through annual step adjustments and cost tracker rate mechanisms.

Most of Unitil’s customers have the opportunity to purchase their electricity or natural gas supplies from third-party energy suppliers.

Many of Unitil’s distribution utilities’ largest C&I customers purchase their electricity or gas supply from third-party suppliers, while most small C&I customers, as well as residential customers, purchase their electricity or gas supply from the distribution utilities under regulated rates and tariffs.

For customers that choose not to participate in the third-party energy supplier market, Unitil acts as a provider of last resort.

Unitil’s distribution utilities purchase electricity or natural gas from unaffiliated wholesale energy suppliers and recover the actual approved costs of these supplies on a pass-through basis, through reconciling rate mechanisms that are periodically adjusted.

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The Company's electric and gas sales in New Hampshire and Massachusetts are now largely decoupled.

The following table shows the estimated percentages of electric and gas sales, as of December 31, 2023, that are subject to revenue decoupling for the periods presented.

Revenue Decoupling

Estimated Percentage of Decoupled Sales

For Periods Presented

Before June 1, 2022

After June 1, 2022

Substantially All

Before August 1, 2022

After August 1, 2022

Northern Utilities’ gas sales volumes in Maine are not subject to decoupling.

Also see Regulatory Matters in this section and Note 7 (Commitments and Contingencies) to the accompanying Consolidated Financial Statements for additional information on rates and regulation.

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Sales of electricity are generally less sensitive to weather than natural gas sales, but may also be affected by weather conditions and the temperature in the winter and summer seasons.

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 were 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 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 were 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 for the years ended December 31, 2023, December 31, 2022 and December 31, 2021 reflect the higher number of average shares outstanding.

Use of GAAP and Non-GAAP Financial Measures

The MD&A includes financial information prepared in accordance with generally accepted accounting principles in the United States (GAAP), as well as certain non-GAAP financial measures.

The Company's management believes that the non-GAAP presentations of earnings and Earnings Per Share (EPS) and Electric and Gas Adjusted Gross Margins are a more meaningful representation of the Company's financial performance and provide additional and useful information to readers of this report in analyzing the historical and future performance of the business.

The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP.

Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

The Company's earnings discussion includes Adjusted Net Income, a non-GAAP financial measure referencing the Company’s 2024 GAAP Net Income adjusted for certain transaction costs related to the Company's acquisition of Bangor Natural Gas Company (Bangor), which it disclosed previously in 2024.

The Company's management believes that the transaction costs related to the acquisition of Bangor, which are included in Operation and Maintenance expense on the Consolidated Statements of Earnings, are

not indicative of the Company's ongoing costs and not directly related to the ongoing operations of the business and therefore are not an indicator of baseline operating performance.

In the following tables the Company has reconciled Adjusted Net Income to GAAP Net Income, which we believe to be the most comparable GAAP financial measure.

(Millions, except per share data)

Twelve Months Ended December 31, 2024

GAAP Net Income

Transaction Costs

Adjusted Net Income

Twelve Months Ended December 31, 2023

GAAP Net Income

Transaction Costs

Adjusted Net Income

Twelve Months Ended December 31, 2022

GAAP Net Income

Transaction Costs

Adjusted Net Income

The Company analyzes operating results using Electric and Gas Adjusted Gross Margins, which are non-GAAP financial measures.

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Adjusted Gross Margin

Electric GAAP Gross Margin was $78.0 million in 2024, a decrease of $0.1 million compared to 2023.

The decrease was driven by higher depreciation and amortization expense of $3.3 million, largely offset by higher rates and customer growth of $3.2 million.

Electric GAAP Gross Margin was $78.1 million in 2023, an increase of $4.7 million compared to 2022.

The increase was driven by higher rates and customer growth of $5.3 million, partially offset by higher depreciation and amortization expense of $0.6 million.

Electric GAAP Gross Margin was $73.4 million in 2022, an increase of $1.9 million compared to 2021.

The increase was driven by higher rates and customer growth of $1.7 million and lower depreciation and amortization expense of $0.5 million, partially offset by the unfavorable effect on sales from cooler spring weather of $0.3 million when rates were not yet decoupled.

Gas GAAP Gross Margin was $120.1 million in 2024, an increase of $6.0 million compared to 2023.

The increase was driven by higher rates and customer growth of $14.1 million, partially offset by the unfavorable effects of warmer winter

weather in 2023 of $1.1 million, higher depreciation and amortization of $4.1 million, and the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company’s base rate case in New Hampshire.

The increase was driven primarily by higher rates, and customer growth, of $12.4 million, partially offset by higher depreciation and amortization of $6.4 million.

Gas GAAP Gross Margin was $114.1 million in 2023, an increase of $6.5 million compared to 2022.

The increase was driven by higher rates of $9.0 million and $1.8 million from customer growth and the favorable effect of colder winter weather in 2022, partially offset by higher depreciation and amortization of $3.7 million.

The increase was driven by higher rates and customer growth of $14.1 million, partially offset by the unfavorable effects of warmer winter weather in 2023 of $1.1 million, higher depreciation and amortization of $4.1 million, and the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company’s base rate case in New Hampshire.

Net Income and EPS Overview

2023 Compared to 2022— The Company’s Net Income was $45.2 million, or $2.82 in Earnings Per Share (EPS), for the year ended December 31, 2023, an increase of $3.8 million in Net Income, or $0.23 in EPS, compared to 2022.

The Company’s earnings in 2023 reflect higher Electric and Gas Adjusted Gross Margins (a non-GAAP financial measure), partially offset by higher operating expenses.

2024 Compared to 2023— The Company’s GAAP Net Income was $47.1 million, or $2.93 in Earnings Per Share (EPS), for the year ended December 31, 2024, an increase of $1.9 million in Net Income, or $0.11 in EPS, compared to 2023.

The Company’s Adjusted Net Income (a non-GAAP financial measure) was $47.8 million, or $2.97 in EPS for the year ended December 31, 2024, an increase of $2.6 million, or $0.15 in EPS, compared to 2023.

The Company’s earnings in 2024 reflect higher rates and customer growth.

Electric Adjusted Gross Margin (a non-GAAP financial measure) was $107.3 million in 2024, an increase of $3.2 million compared with 2023.

The increase was driven by higher rates from base rate cases and capital tracker mechanisms.

The increase was driven by higher rates and customer growth.

Gas Adjusted Gross Margin (a non-GAAP financial measure) was $166.9 million in 2024, an increase of $12.4 million compared to 2023.

The increase was driven by higher rates and customer growth of $14.1 million, partially offset by the unfavorable effects of warmer winter weather in 2023 of $1.1 million and the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company’s base rate case in New Hampshire.

Operation and Maintenance (O&M) expenses increased $1.9 million, or 2.6%, in 2023 compared to 2022, reflecting higher utility operating costs of $1.2 million, higher professional fees of $0.4 million and higher labor costs of $0.3 million.

Depreciation and Amortization expense increased $4.8 million in 2023 compared to 2022, reflecting additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.

Taxes Other Than Income Taxes increased $2.6 million in 2023 compared to 2022, reflecting higher local property taxes on higher utility plant in service and higher payroll, excise and other taxes.

Interest Expense, Net increased $3.2 million in 2023 compared to 2022 primarily reflecting higher interest on short-term borrowings, partially offset by higher interest income on regulatory assets and other.

Other Expense (Income), Net decreased $2.4 million in 2023 compared to 2022, reflecting lower retirement benefit costs.

Federal and State Income Taxes increased $2.0 million in 2023 compared to 2022, reflecting higher pre-tax earnings in 2023 and higher flow back, in 2022, of excess Accumulated Deferred Income Taxes per regulatory orders in New Hampshire.

The increase was driven primarily by higher rates, and customer growth.

Operation and Maintenance (O&M) expenses increased $2.0 million in 2024 compared to 2023, reflecting higher labor costs of $2.5 million, partially offset by lower utility operating costs of $0.5 million.

Depreciation and Amortization expense increased $8.7 million in 2024 compared to 2023, reflecting higher depreciation rates from recent base rate cases, additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.

Taxes Other Than Income Taxes increased $1.4 million in 2024 compared to 2023, reflecting higher local property taxes on higher utility plant in service and higher payroll taxes.

Interest Expense, Net increased $0.6 million in 2024 compared to 2023 primarily reflecting higher interest on higher levels of long-term debt and higher interest on short-term borrowings, partially offset by higher interest income on regulatory assets and other.

Other Expense (Income), Net increased $0.2 million in 2024 compared to 2023, reflecting higher retirement benefit costs.

Federal and State Income Taxes increased $0.8 million in 2024 compared to 2023, reflecting higher pre-tax earnings in 2024.

In 2024, Unitil’s annual common dividend was $1.70 per share, representing an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.

At its January 2024 meeting, the Unitil Corporation Board of Directors declared a quarterly dividend on the Company’s common stock of $0.425 per share, an increase of $0.02 per share on a quarterly basis, resulting in an increase in the effective annualized dividend rate to $1.70 per share from $1.62 per share.

At a January 2025 meeting of the Unitil Corporation Board of Directors (the “Board”), the Board declared a quarterly dividend on the Company’s common stock of $0.45 per share, an increase of $0.025 per share on a quarterly basis, resulting in an increase in the effective annualized dividend rate to $1.80 per share from $1.70 per share.

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Electric Revenues, Adjusted Gross Margin and Sales

Electric Operating Revenues and Electric Adjusted Gross Margin —The following table details Total Electric Operating Revenue and Electric Adjusted Gross Margin for the last three years by major customer class:

Electric Operating Revenues and Electric Adjusted Gross Margin (a non-GAAP financial measure) —The following table details Total Electric Operating Revenue and Electric Adjusted Gross Margin for the last three years by major customer class:

Electric Operating Revenues and Electric Adjusted Gross Margin

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Electric Adjusted Gross Margin

The decrease in Total Electric Operating Revenue of $58.2 million, or 19.0%, in 2024 compared to 2023 reflects lower costs of electric sales, which are tracked and reconciled costs as a pass-through to customers, partially offset by higher electric distribution rates and higher sales of electricity.

Electric GAAP Gross Margin is discussed above in the section entitled “Use of GAAP and Non-GAAP Financial Measures”.

Electric Adjusted Gross Margin (a non-GAAP financial measure) was $107.3 million in 2024, an increase of $3.2 million compared with 2023.

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Electric Adjusted Gross Margin (a non-GAAP financial measure) was $104.1 million in 2023, an increase of $5.3 million compared with 2022.

The increase was driven by higher rates and customer growth of $1.7 million, partially offset by the unfavorable effect on sales from cooler spring weather of $0.3 million when rates were not yet decoupled.

The increase in Total Electric Operating Revenue of $49.4 million, or 19.9%, in 2022 compared to 2021 primarily reflects higher cost of electric sales, which are tracked and reconciled costs as a pass-through to customers.

Kilowatt-hour Sales— Unitil’s total electric kWh sales decreased 3.2% in 2023 compared to 2022.

Sales to Residential customers decreased 4.6% and sales to C&I customers decreased 2.1% in 2023 compared to 2022.

The decreases in electric kWh sales reflect lower average usage, partially offset by customer growth.

The increase was driven by higher rates and customer growth.

Kilowatt-hour Sales— Unitil’s total electric kilowatt-hour (kWh) sales increased 1.3% in 2024 compared to 2023.

Sales to Residential customers increased 1.6% and sales to C&I customers increased 1.1% in 2024 compared to 2023, reflecting warmer weather for cooling purposes in the second quarter of 2024 compared to the same period in 2023, and customer growth.

Based on weather data collected in the Company’s electric service areas, on average there were 12.2% more Cooling Degree Days in 2024 compared to 2023.

As of December 31, 2024, the number of electric customers served increased by approximately 990 over the previous year.

Sales margins derived from decoupled unit sales are not sensitive to changes in electric kWh sales, although those sales margins are sensitive to changes in the number of customers served.

As of June 1, 2022, substantially all of the Company's electric kWh sales volumes are decoupled.

Substantially all of the Company's electric kWh sales volumes are decoupled.

Unitil’s total electric kWh sales decreased 3.2% in 2023 compared to 2022.

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As of December 31, 2023, the number of electric customers served increased by approximately 350 over the previous year.

Sales margins derived from decoupled unit sales are not sensitive to changes in electric kWh sales, although those sales margins are sensitive to changes in the number of customers served.

The following table details total kWh sales for the last three years by major customer class:

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Gas Revenues, Adjusted Gross Margin and Sales

Gas Operating Revenues and Adjusted Gross Margin — The following table details total Gas Operating Revenue and Gas Adjusted Gross Margin for the last three years by major customer class:

Gas Operating Revenues and Adjusted Gross Margin (a non-GAAP financial measure) — The following table details total Gas Operating Revenue and Gas Adjusted Gross Margin for the last three years by major customer class:

Gas Operating Revenues and Gas Adjusted Gross Margin

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Gas Adjusted Gross Margin

The decrease in Total Gas Operating Revenues of $4.1 million, or 1.6%, in 2024 compared to 2023 reflects lower costs of gas sales, which are tracked and reconciled as a pass-through to customers, and lower sales of gas, partially offset by higher gas distribution rates.

Gas GAAP Gross Margin is discussed above in the section entitled “Use of GAAP and Non-GAAP Financial Measures”.

Gas Adjusted Gross Margin (a non-GAAP financial measure) was $166.9 million in 2024, an increase of $12.4 million compared to 2023.

The increase reflects higher rates and customer growth of $14.1 million, partially offset by the unfavorable effects of warmer winter weather in 2023 of $1.1 million and the recognition, in the second quarter of 2022, of $2.4 million in higher rates resulting from the Company’s base rate case in New Hampshire.

The increase was driven primarily by higher rates, and customer growth.

The decrease in Total Gas Operating Revenues of $14.7 million, or 5.50%, in 2023 compared to 2022 reflects lower costs of gas sales, which are tracked and reconciled as a pass-through to customers, partially offset by higher gas distribution rates.

Gas Adjusted Gross Margin (a non-GAAP financial measure) was $154.5 million in 2023, an increase of $10.6 million compared to 2022.

The increase was driven by higher rates of $9.0 million, and $1.8 million from customer growth and the favorable effect of colder winter weather in 2022.

The increase in Total Gas Operating Revenues of $40.5 million, or 18.0%, in 2022 compared to 2021 reflects higher cost of gas sales, which are tracked and reconciled costs as a pass-through to customers, and higher gas sales volumes.

Therm Sales —Unitil’s total gas therm sales decreased 0.7% in 2024 compared to 2023.

Sales to Residential customers decreased 1.4% and sales to C&I customers decreased 0.5% in 2024 compared to 2023, reflecting lower average usage, partially offset by customer growth.

As of December 31, 2024, the number of gas customers served increased by approximately 730 over the previous year.

Sales margins derived from decoupled unit sales (currently representing approximately 43% of total annual therm sales volume) are not sensitive to changes in gas therm sales, although those sales margins are sensitive to changes in the number of customers served.

In 2024 and 2023, there were 9.5% and 11.0% fewer Effective Degree Days (EDD) than normal, respectively.

Unitil’s total gas therm sales decreased 1.5% in 2023 compared to 2022.

Sales to Residential customers decreased 3.8% and sales to C&I customers decreased 0.9% in 2023 compared to 2022.

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Unitil’s total gas therm sales increased 1.3% in 2022 compared to 2021.

Sales to Residential customers increased 0.5% and sales to C&I customers increased 1.5% in 2022 compared to 2021.

The overall increase in gas therm sales reflects customer growth and colder winter weather in 2022.

As of December 31, 2022, the number of gas customers served increased by approximately 850 over the previous year.

Based on weather data collected in the Company’s gas service areas, on average there were 2.6% more EDD in 2022 compared to 2021, although 5.1% fewer EDD compared to normal.

The Company estimates that weather-normalized gas therm sales, excluding decoupled sales, were essentially unchanged in 2022 compared to 2021.

Sales margins derived from decoupled unit sales (currently representing approximately 42% of total annual therm sales volume) are not sensitive to changes in gas therm sales, although those sales margins are sensitive to changes in the number of customers served.

The following table details total therm sales for the last three years, by major customer class:

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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 efficiency programs.

Cost of Electric Sales increased $3.3 million, or 1.7%, in 2023 compared to 2022.

This increase reflects higher wholesale electricity prices, partially offset by lower electric sales and an increase in the amount of electricity purchased by customers directly from third-party suppliers.

Cost of Electric Sales decreased $61.4 million, or 30.3%, in 2024 compared to 2023.

This decrease reflects lower wholesale electricity prices and an increase in the amount of electricity purchased by customers directly from third-party suppliers, partially offset by higher electric sales.

The Company reconciles and recovers the approved Cost of Electric Sales in its rates at cost on a pass through basis and therefore changes in approved expenses do not affect earnings.

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Cost of Gas Sales decreased $16.5 million, or 17.2%, in 2024 compared to 2023.

This decrease reflects lower gas sales, lower wholesale gas commodity prices, partially offset by a decrease in the amount of gas purchased by customers directly from third-party suppliers.

This decrease reflects lower gas sales, lower wholesale gas commodity prices and an increase in the amount of gas purchased by customers directly from third-party suppliers.

The Company reconciles and recovers the approved Cost of Gas Sales in its rates at cost on a pass through basis and therefore changes in approved expenses do not affect earnings.

In 2022, Cost of Gas increased $29.7 million, or 32.4%, compared to 2021.

This increase reflects higher gas sales and higher wholesale gas commodity prices, partially offset by an increase in the amount of gas purchased by customers directly from third-party suppliers.

In 2023, Cost of Gas Sales decreased $25.3 million, or 20.8%, compared to 2022.

This decrease reflects lower gas sales, lower wholesale gas commodity prices, partially offset by a decrease in the amount of gas purchased by customers directly from third-party suppliers.

Operation and Maintenance— O&M expense includes electric and gas utility operating costs, and the operating costs of the Company’s other subsidiaries.

Total O&M expenses increased $1.9 million, or 2.6%, in 2023 compared to 2022, reflecting higher utility operating costs of $1.2 million, higher professional fees of $0.4 million and higher labor costs of $0.3 million.

In 2022, total O&M expenses increased $5.0 million, or 7.3%, compared to 2021, reflecting higher labor costs of $1.9 million, higher utility operating costs of $1.6 million, and higher professional fees of $1.5 million.

Depreciation and Amortization— Depreciation and Amortization expense increased $4.8 million, or 7.7%, in 2023 compared to 2022, reflecting additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.

In 2022, Depreciation and Amortization expense increased $3.1 million, or 5.2%, compared to 2021, reflecting additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case costs.

Taxes Other Than Income Taxes— Taxes Other Than Income Taxes increased $2.6 million, or 10.0%, in 2023 compared to 2022, reflecting higher local property taxes on higher utility plant in service and higher payroll, excise and other taxes.

In 2022, Taxes Other Than Income Taxes increased $1.4 million, or 5.7%, compared to 2021, reflecting higher payroll taxes and higher local property taxes on higher utility plant in service.

Total O&M expenses increased $2.0 million, or 2.6%, in 2024 compared to 2023, reflecting higher labor costs of $2.5 million, partially offset by lower utility operating costs of $0.5 million.

In 2023, total O&M expenses increased $1.9 million, or 2.6%, compared to 2022, reflecting higher utility operating costs of $1.2 million, higher professional fees of $0.4 million and higher labor costs of $0.3 million.

Depreciation and Amortization— Depreciation and Amortization expense increased $8.7 million, or 12.9%, in 2024 compared to 2023, reflecting higher depreciation rates from recent base rate cases, additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.

In 2023, Depreciation and Amortization expense increased $4.8 million, or 7.7%, compared to 2022, reflecting additional depreciation associated with higher levels of utility plant in service and higher amortization of rate case and other deferred costs.

Taxes Other Than Income Taxes— Taxes Other Than Income Taxes increased $1.4 million, or 4.9%, in 2024 compared to 2023, reflecting higher local property taxes on higher utility plant in service and higher payroll taxes.

In 2023, Taxes Other Than Income Taxes increased $2.6 million, or 10.0%, compared to 2022, reflecting higher local property taxes on higher utility plant in service and higher payroll, excise and other taxes.

Interest Expense, Net

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Certain reconciling rate mechanisms used by the Company’s distribution utilities give rise to regulatory assets and regulatory liabilities on which interest is calculated.

Interest Expense, Net increased $0.6 million, or 2.1%, in 2024 compared to 2023 primarily reflecting higher interest on higher levels of long-term debt and higher interest on short-term borrowings, partially offset by higher interest income on regulatory assets and other.

Interest Expense, Net increased $3.2 million, or 12.6%, in 2023 compared to 2022 primarily reflecting higher interest on short-term borrowings, partially offset by higher interest income on regulatory assets and other.

Interest Expense, Net decreased $0.1 million, or 0.4%, in 2022 compared to 2021 primarily reflecting lower interest on long-term debt and higher interest income, on regulatory assets, partially offset by higher interest on short-term borrowings.

Other (Income) Expense, Net

Other Expense (Income), Net increased $0.2 million in 2024 compared to 2023, reflecting higher retirement benefit costs.

Other Expense (Income), Net decreased $2.4 million in 2023 compared to 2022, reflecting lower retirement benefit costs.

Other Expense (Income), Net decreased $2.2 million, or 47.8% in 2022 compared to 2021, reflecting lower retirement benefit costs.

Provision for Income Taxes

Federal and State Income Taxes increased $0.8 million in 2024 compared to 2023, reflecting higher pre-tax earnings in 2024.

Federal and State Income Taxes decreased $0.3 million in 2022 compared to 2021, reflecting lower taxes associated with the flowback of excess Accumulated Deferred Income Taxes.

LIQUIDITY, COMMITMENTS AND CAPITAL REQUIREMENTS

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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.

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 and was 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 over-allotment option to purchase additional shares.

The underwriters exercised the over-allotment 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 over-allotment sales was approximately $5.9 million and was 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 (Cash Pool).

The Cash Pool is the financing vehicle for day-to-day cash borrowing and investing.

The Cash Pool allows for an efficient exchange

of cash among the Company and its subsidiaries.

The 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.

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On September 29, 2022, the Company entered into a Third Amended and Restated Credit Agreement with a syndicate of lenders (collectively, the “Credit Facility”), which amended and restated in its entirety the prior credit facility.

On January 29, 2025, the Company entered into an amendment to the Credit Facility, which (among other things) increased the borrowing limit under the Credit Facility from $200 million to $275 million and extended the term of the Credit Facility from September 29, 2027 until September 29, 2028.

Unitil may borrow under the Credit Facility until September 29, 2028, subject to two one-year extensions under certain circumstances.

The Credit Facility terminates and all amounts outstanding thereunder are due and payable on September 29, 2027, subject to the potential extension discussed in the prior sentence.

The Credit Facility has a borrowing limit of $200 million, which includes a $25 million sublimit for the issuance of standby letters of credit.

The Credit Facility has a borrowing limit of $275 million ($200 million as of December 31, 2024), which includes a $25 million sublimit for the issuance of standby letters of credit.

Unitil may increase the borrowing limit under the Credit Facility by up to $75 million under certain circumstances.

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Approximately $0.2 million of costs associated with this issuance were recorded as a reduction of Long-Term Debt for presentation purposes on the Consolidated Balance Sheet in the third quarter of 2023.

On August 21, 2024, Unitil Corporation issued $20.0 million of Notes due 2034 at 5.99%.

Fitchburg issued $12.5 million of Notes due 2034 at 5.54% and $12.5 million of Notes due 2044 at 5.99%.

Unitil Energy issued $40.0 million of Bonds due 2054 at 5.69%.

Northern Utilities issued $25.0 million of Notes due 2034 at 5.54% and $15.0 million of Notes due 2039 at 5.74%.

Granite State issued $10.0 million of Notes due 2034 at 5.74%.

The Company used the net proceeds from these

offerings to refinance existing debt and for general corporate purposes.

Approximately $1.0 million of costs associated with this issuance were recorded as a reduction of Long-Term Debt for presentation purposes on the Consolidated Balance Sheet in the third quarter of 2024.

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

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The change to Net Income is primarily attributable to increases in electric and gas sales margin.

The increase in depreciation and amortization of $4.8 million in 2023 compared to 2022 reflects higher

depreciation on higher utility plant in service.

The decrease in the deferred tax provision of $3.6 million in 2023 compared to 2022 is primarily driven by the use of net operating loss carryforwards in 2023.

The increase in depreciation and amortization of $8.7 million in 2024 compared to 2023 reflects higher rates and additional depreciation on higher utility plant in service.

The increase in the deferred tax provision of $5.8 million in 2024 compared to 2023 is primarily driven by higher tax depreciation in 2024.

Changes in working capital items resulted in a ($1.6) million use of cash in 2024 compared to a ($4.6) million use of cash in 2023, representing an increase in sources of cash of $3.0 million.

The change in working capital in 2023 compared to 2022 is primarily related to the net change in accrued revenue, accounts payable and exchange gas receivable and is reflective of the effect of the current macroeconomic environment including lower commodity costs on business and operating conditions.

Deferred Regulatory and Other Charges decreased by $2.0 million in 2023 compared to 2022, primarily driven by changes in Regulatory Assets and Liabilities, and the change in Other, net in 2023 compared to 2022 was $4.9 million.

The change in working capital in 2024 compared to 2023 is primarily related to the net change in accrued revenue, accounts payable and exchange gas receivable and is reflective of the effect of the current macroeconomic environment and the timing of cash receipts and disbursements in the normal course of business.

Deferred Regulatory and Other Charges changed by $1.6 million in 2024 compared to 2023, primarily driven by changes in Regulatory Assets and Liabilities, and the change in Other, net in 2024 compared to 2023 was $2.1 million.

Cash Used in Investing Activities

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The higher spending in 2024 is primarily related to normal utility capital expenditures for electric and gas utility system additions.

The Company’s projected capital spending range for 2024 is $165 million to $170 million.

The Company’s projected capital spending for 2025 is $176 million.

Cash Provided by Financing Activities

Cash Provided by Financing Activities - Cash Provided by Financing Activities was $43.8 million in 2024 compared to cash provided of $31.5 million in 2023.

The higher cash provided from financing activities in 2023 compared to 2022 of $4.6 million is primarily attributable to, proceeds from the issuance of long-term debt of $25.0 million, lower repayment of long-term debt of $3.5 million, a decrease in exchange gas financing of $17.2 million, and lower proceeds from short-term borrowings of 5.9 million.

The higher cash provided from financing activities in 2024 compared to 2023 of $12.3 million is primarily attributable to, higher proceeds from the issuance of long-term debt of $110.0 million, lower repayment of long-term debt of $2.0 million, a change in exchange gas financing of $5.0 million, and higher repayment of short-term borrowings of ($102.2) million.

Other changes in financing activities in 2024 total a use of ($2.5) million.

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There are restrictions on, among other things, Unitil’s and its subsidiaries’ ability to permit liens or incur indebtedness, and restrictions on Unitil’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 to Unitil 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 affirmative and negative covenants under the Credit Facility apply to Unitil 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 Unitil’s Funded Debt to Capitalization (as each term is defined in the Credit Facility) cannot exceed 65%, tested on a quarterly basis.

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The Company and its subsidiaries are currently in compliance with all such covenants in these debt instruments.

Unitil’s annual common dividend was $1.62 per common share in 2023, $1.56 per common share in 2022, and $1.52 per share in 2021.

Unitil’s dividend policy is reviewed periodically by the Board of Directors.

Unitil’s annual common dividend was $1.70 per common share in 2024, $1.62 per common share in 2023, and $1.56 per common share in 2022.

Unitil’s dividend policy is reviewed periodically by the Board.

Unitil has maintained an unbroken record of quarterly dividend payments since trading began in Unitil’s common stock.

At its January 2024 meeting, the Unitil Corporation Board of Directors declared a quarterly dividend on the Company’s common stock of $0.425 per share, an

increase of $0.02 per share on a quarterly basis, resulting in an increase in the effective annualized dividend rate to $1.70 from $1.62.

The amount and timing of all dividend payments are subject to the discretion of the Board of Directors and will depend upon business conditions, results of operations, financial conditions and other factors.

At a January 2025 meeting of the Board, the Board declared a quarterly dividend on the Company’s common stock of $0.45 per share, an increase of $0.025 per share on a quarterly basis, resulting in an increase in the effective annualized dividend rate to $1.80 from $1.70.

The amount and timing of all dividend payments are subject to the discretion of the Board and will depend upon business conditions, results of operations, financial conditions and other factors.

In addition, the ability of the Company’s subsidiaries to pay dividends or make distributions to Unitil, and, therefore, Unitil’s ability to pay dividends, depends on, among other things:

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The following is a summary of the Company’s most critical accounting policies, which are defined as those policies where judgments or uncertainties could materially affect the application of those policies.

For a complete discussion of the Company’s significant accounting policies, refer to the financial statements and Note 1 (Summary of Significant Accounting Policies).

For a complete

discussion of the Company’s significant accounting policies, refer to the financial statements and Note 1 (Summary of Significant Accounting Policies).

Regulatory Accounting— The Company’s principal business is the distribution of electricity and natural gas by the three distribution utilities:

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The discount rate assumptions used in determining retirement plan costs and retirement plan obligations are based on an assessment of current market conditions using high quality corporate bond interest rate indices and pension yield curves.

For the year ended December 31, 2023, a change in the discount rate of 0.25% would have resulted in an increase or decrease of approximately $113,000 in the Net Periodic Benefit Cost for the Pension Plan.

For the year ended

December 31, 2024, a change in the discount rate of 0.25% would have resulted in an increase or decrease of approximately $450,800 in the Net Periodic Benefit Cost for the Pension Plan.

Similarly, a change of 0.50% in the expected long-term rate of return on plan assets would have resulted in an increase or decrease of approximately $706,635 in the Net Periodic Benefit Cost for the Pension Plan.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis