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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 June 30, 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 July 23, 2021: 245,757,399


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – June 30, 2021 and December 31, 2020

2

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Three Months Ended June 30, 2021 and 2020

4

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Six Months Ended June 30, 2021 and 2020

5

Consolidated Statements of Capitalization (unaudited) –
June 30, 2021 and December 31, 2020

6

Consolidated Statements of Equity (unaudited) –
Six Months Ended June 30, 2021

7

Consolidated Statements of Equity (unaudited) –
Six Months Ended June 30, 2020

8

Consolidated Statements of Cash Flow (unaudited) –
Six Months Ended June 30, 2021 and 2020,

9

Notes to Consolidated Financial Statements (unaudited)

10

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

38

Item 3. Quantitative and Qualitative Disclosures About Market Risk

51

Item 4. Controls and Procedures

51

 

Part II – Other Information

 

Item 1. Legal Proceedings

51

Item 1A. Risk Factors

51

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

52

Item 6. Exhibits

53

Signatures

54

1


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

 

June 30,

December 31,

Assets

2021

2020

Property, plant and equipment, at cost

$

11,977,707

$

11,620,019 

Less: accumulated depreciation

2,270,344

2,107,142 

Net property, plant and equipment

9,707,363

9,512,877 

Current assets:

Cash and cash equivalents

8,404

4,827 

Accounts receivable, net

129,151

154,775 

Unbilled revenues

63,912

118,538 

Inventory - materials and supplies

27,755

21,669 

Inventory - gas stored

35,627

36,732 

Prepayments and other current assets

29,440

38,594 

Regulatory assets

10,443

5,085 

Total current assets

304,732

380,220 

Regulatory assets

1,400,215

1,362,788 

Deferred charges and other assets, net

115,692

56,002 

Funds restricted for construction activity

1,268

1,268 

Goodwill

2,340,836

2,324,547 

Operating lease right-of-use assets

57,154

60,334 

Intangible assets

6,732

7,241 

Total assets

$

13,933,992

$

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)

 

June 30,

December 31,

Liabilities and Equity

2021

2020

Stockholders' equity:

Common stock at $0.50 par value, authorized 600,000,000 shares, issued 249,001,181 and 248,571,355 as of June 30, 2021 and December 31, 2020

$

124,500

$

124,285

Capital in excess of par value

3,393,372

3,379,057

Retained earnings

1,403,041

1,261,862

Treasury stock, at cost, 3,246,023 and 3,180,887 shares as of June 30, 2021 and December 31, 2020

(84,098)

(81,327)

Total stockholders' equity

4,836,815

4,683,877

Long-term debt, excluding current portion

5,689,430

5,545,890

Less: debt issuance costs

41,198

38,146

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

5,648,232

5,507,744

Commitments and contingencies (See Note 14)

 

 

Current liabilities:

Current portion of long-term debt

79,660

84,353

Loans payable

71,849

78,198

Accounts payable

131,815

177,489

Book overdraft

13,408

44,003

Accrued interest

43,731

39,408

Accrued taxes

15,307

37,172

Regulatory liabilities

5,314

19,866

Other accrued liabilities

108,071

123,384

Total current liabilities

469,155

603,873

Deferred credits and other liabilities:

Deferred income taxes and investment tax credits

1,349,873

1,258,098

Customers' advances for construction

108,605

99,014

Regulatory liabilities

779,355

773,310

Asset retirement obligations

1,355

1,336

Operating lease liabilities

51,992

55,642

Pension and other postretirement benefit liabilities

56,901

91,896

Other

50,334

56,713

Total deferred credits and other liabilities

2,398,415

2,336,009

Contributions in aid of construction

581,375

573,774

Total liabilities and equity

$

13,933,992

$

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

June 30,

2021

2020

Operating revenues

$

397,032

$

384,468

Operating expenses:

Operations and maintenance

127,515

128,604

Purchased gas

44,897

43,420

Depreciation

72,764

67,925

Amortization

1,408

1,967

Taxes other than income taxes

21,120

19,433

Total operating expenses

267,704

261,349

Operating income

129,328

123,119

Other expense (income):

Interest expense

52,036

51,666

Interest income

(338)

(196)

Allowance for funds used during construction

(4,906)

(2,230)

Gain on sale of other assets

(223)

(20)

Equity earnings in joint venture

-

(470)

Other

(1,941)

(722)

Income before income taxes

84,700

75,091

Provision for income taxes

3,786

462

Net income

$

80,914

$

74,629

Comprehensive income

$

80,914

$

74,629

Net income per common share:

Basic

$

0.32

$

0.29

Diluted

$

0.32

$

0.29

Average common shares outstanding during the period:

Basic

254,769

254,167

Diluted

255,441

254,434

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

 


4


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(UNAUDITED)

 

Six Months Ended

June 30,

2021

2020

Operating revenues

$

980,597

$

640,053

Operating expenses:

Operations and maintenance

252,590

235,241

Purchased gas

177,050

56,190

Depreciation

144,401

113,491

Amortization

2,715

2,646

Taxes other than income taxes

42,161

35,869

Total operating expenses

618,917

443,437

Operating income

361,680

196,616

Other expense (income):

Interest expense

102,805

86,788

Interest income

(725)

(5,231)

Allowance for funds used during construction

(7,840)

(5,178)

Gain on sale of other assets

(303)

(125)

Equity earnings in joint venture

-

(343)

Other

(5,412)

957

Income before income taxes

273,155

119,748

Provision for income taxes (benefit)

8,552

(6,662)

Net income

$

264,603

$

126,410

Comprehensive income

$

264,603

$

126,410

Net income per common share:

Basic

$

1.04

$

0.52

Diluted

$

1.04

$

0.50

Average common shares outstanding during the period:

Basic

254,667

245,144

Diluted

255,268

254,452

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

5


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)