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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

FORM 10-Q

(Mark One) 

S QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. 

For the quarterly period ended March 31, 2021

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

For the transition period from_______________ to _______________

Commission File Number 1-6659 

ESSENTIAL UTILITIES, INC. 

(Exact name of registrant as specified in its charter) 

Pennsylvania

23-1702594

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania

19010 -3489

(Address of principal executive offices)

(Zip Code)

 

(610) 527-8000

(Registrant’s telephone number, including area code)

N/A

(Former Name, former address and former fiscal year, if changed since last report.)

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 S  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 S  No £

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 12(b)-2 of the Exchange Act.:  

Large Accelerated Filer S

Accelerated Filer £

Non-Accelerated Filer £

Smaller Reporting Company £

Emerging Growth Company £

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 S

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.50 par value

WTRG

New York Stock Exchange

6.00% Tangible Equity Units

WTRU

New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 22, 2021: 245,643,343


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – March 31, 2021 and December 31, 2020

2

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Three Months Ended March 31, 2021 and 2020

4

Consolidated Statements of Capitalization (unaudited) –
March 31, 2021 and December 31, 2020

5

Consolidated Statements of Equity (unaudited) –
Three Months Ended March 31, 2021

6

Consolidated Statements of Equity (unaudited) –
Three Months Ended March 31, 2020

7

Consolidated Statements of Cash Flow (unaudited) –
Three Months Ended March 31, 2021 and 2020,

8

Notes to Consolidated Financial Statements (unaudited)

9

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

37

Item 3. Quantitative and Qualitative Disclosures About Market Risk

45

Item 4. Controls and Procedures

45

 

Part II – Other Information

 

Item 1. Legal Proceedings

45

Item 1A. Risk Factors

45

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

46

Item 6. Exhibits

47

Signatures

48

1


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

 

March 31,

December 31,

Assets

2021

2020

Property, plant and equipment, at cost

$

11,771,225 

$

11,620,019 

Less: accumulated depreciation

2,201,890 

2,107,142 

Net property, plant and equipment

9,569,335 

9,512,877 

Current assets:

Cash and cash equivalents

18,046 

4,827 

Accounts receivable, net

168,464 

154,775 

Unbilled revenues

84,700 

118,538 

Inventory - materials and supplies

24,092 

21,669 

Inventory - gas stored

10,730 

36,732 

Prepayments and other current assets

33,547

38,594 

Regulatory assets

8,530 

5,085 

Total current assets

348,109

380,220 

Regulatory assets

1,409,022 

1,362,788 

Deferred charges and other assets, net

87,777 

56,002 

Funds restricted for construction activity

1,268 

1,268 

Goodwill

2,340,905 

2,324,547 

Operating lease right-of-use assets

58,513 

60,334 

Intangible assets

6,986 

7,241 

Total assets

$

13,821,915

$

13,705,277 

The accompanying notes are an integral part of these consolidated financial statements

2


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

 

March 31,

December 31,

Liabilities and Equity

2021

2020

Stockholders' equity:

Common stock at $0.50 par value, authorized 600,000,000 shares, issued 248,882,867 and 248,571,355 as of March 31, 2021 and December 31, 2020

$

124,441

$

124,285

Capital in excess of par value

3,386,376

3,379,057

Retained earnings

1,383,857

1,261,862

Treasury stock, at cost, 3,251,478 and 3,180,887 shares as of March 31, 2021 and December 31, 2020

(84,333)

(81,327)

Total stockholders' equity

4,810,341

4,683,877

Long-term debt, excluding current portion

5,585,245

5,545,890

Less: debt issuance costs

37,309

38,146

Long-term debt, excluding current portion, net of debt issuance costs

5,547,936

5,507,744

Commitments and contingencies (See Note 14)

 

 

Current liabilities:

Current portion of long-term debt

80,351

84,353

Loans payable

74,893

78,198

Accounts payable

121,593

177,489

Book overdraft

-

44,003

Accrued interest

65,286

39,408

Accrued taxes

38,365

37,172

Regulatory liabilities

14,662

19,866

Other accrued liabilities

108,244

123,384

Total current liabilities

503,394

603,873

Deferred credits and other liabilities:

Deferred income taxes and investment tax credits

1,310,000

1,258,098

Customers' advances for construction

102,830

99,014

Regulatory liabilities

784,151

773,310

Asset retirement obligations

1,348

1,336

Operating lease liabilities

53,542

55,642

Pension and other postretirement benefit liabilities

83,306

91,896

Other

46,310

56,713

Total deferred credits and other liabilities

2,381,487

2,336,009

Contributions in aid of construction

578,757

573,774

Total liabilities and equity

$

13,821,915

$

13,705,277

The accompanying notes are an integral part of these consolidated financial statements

3


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(UNAUDITED)

 

Three Months Ended

March 31,

2021

2020

Operating revenues

$

583,565

$

255,585

Operating expenses:

Operations and maintenance

125,075

106,637

Purchased gas

132,153

12,770

Depreciation

71,637

45,566

Amortization

1,307

679

Taxes other than income taxes

21,041

16,436

Total operating expenses

351,213

182,088

Operating income

232,352

73,497

Other expense (income):

Interest expense

50,769

35,122

Interest income

(387)

(5,035)

Allowance for funds used during construction

(2,934)

(2,948)

Gain on sale of other assets

(80)

(105)

Equity loss in joint venture

-

127

Other

(3,471)

1,679

Income before income taxes

188,455

44,657

Provision for income taxes (benefit)

4,766

(7,124)

Net income

$

183,689

$

51,781

Comprehensive income

$

183,689

$

51,781

Net income per common share:

Basic

$

0.72

$

0.22

Diluted

$

0.72

$

0.20

Average common shares outstanding during the period:

Basic

254,565

236,122

Diluted

254,969

255,054

The accompanying notes are an integral part of these consolidated financial statements

 

4


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

  

 

March 31,

December 31,

2021

2020

Stockholders' equity:

Common stock, $0.50 par value

$

124,441

$

124,285

Capital in excess of par value

3,386,376

3,379,057

Retained earnings

1,383,857

1,261,862

Treasury stock, at cost

(84,333)

(81,327)

Total stockholders' equity

4,810,341

4,683,877

Long-term debt of subsidiaries (substantially collateralized by utility plant):

Interest Rate Range

Maturity Date Range

0.00% to 0.99%

2023 to 2033

2,764

2,805

1.00% to 1.99%

2021 to 2039

10,061

10,260

2.00% to 2.99%

2022 to 2033

264,861

265,557

3.00% to 3.99%

2021 to 2056

1,314,846

1,316,872

4.00% to 4.99%

2021 to 2059

1,314,127

1,315,812

5.00% to 5.99%

2021 to 2043

17,610

17,804

6.00% to 6.99%

2022 to 2036

33,926

33,955

7.00% to 7.99%

2022 to 2027

29,668

29,890

8.00% to 8.99%

2021 to 2025

4,267

4,425

9.00% to 9.99%

2021 to 2026

12,400

16,900

3,004,530

3,014,280

Notes payable to bank under revolving credit agreement, variable rate, due 2023

440,000

385,000

Unsecured notes payable:

Amortizing notes at 3.00% due 2022

50,605

60,502

Notes at 2.704% due 2030

500,000

500,000

Notes ranging from 3.01% to 3.59% due 2029 through 2050

1,125,000

1,125,000

Notes at 4.28%, due 2049

500,000

500,000

Notes ranging from 5.64% to 5.95%, due 2021 through 2034

45,461

45,461

5,665,596

5,630,243

Current portion of long-term debt

80,351

84,353

Long-term debt, excluding current portion

5,585,245

5,545,890

Less: debt issuance costs

37,309