SEC Filing | Essential Utilities, Inc.

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Table of Contents

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 September 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 October 22, 2021: 252,742,882

Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


	Page
Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – September 30, 2021 and December 31, 2020	2

Consolidated Statements of Operations and Comprehensive Income (unaudited) – ‎Three Months Ended September 30, 2021 and 2020	4

Consolidated Statements of Operations and Comprehensive Income (unaudited) – ‎Nine Months Ended September 30, 2021 and 2020	5

Consolidated Statements of Capitalization (unaudited) – ‎September 30, 2021 and December 31, 2020	6

Consolidated Statements of Equity (unaudited) – ‎Nine Months Ended September 30, 2021	7

Consolidated Statements of Equity (unaudited) – ‎Nine Months Ended September 30, 2020	7

Consolidated Statements of Cash Flow (unaudited) – ‎Nine Months Ended September 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

Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except per share amounts)

(UNAUDITED)


	September 30,		December 31,
Assets	2021		2020
Property, plant and equipment, at cost	$	12,293,056	$	11,620,019
Less: accumulated depreciation		2,336,287		2,107,142
Net property, plant and equipment		9,956,769		9,512,877

Current assets:
Cash and cash equivalents		9,736		4,827
Accounts receivable, net		108,210		154,775
Unbilled revenues		63,479		118,538
Inventory - materials and supplies		35,023		21,669
Inventory - gas stored		78,787		36,732
Prepayments and other current assets		29,871		38,594
Regulatory assets		27,398		5,085
Total current assets		352,504		380,220

Regulatory assets		1,404,837		1,362,788
Deferred charges and other assets, net		118,910		56,002
Funds restricted for construction activity		1,288		1,268
Goodwill		2,340,836		2,324,547
Operating lease right-of-use assets		55,386		60,334
Intangible assets		5,955		7,241
Total assets	$	14,236,485	$	13,705,277

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

Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)


	September 30,		December 31,
Liabilities and Equity	2021		2020
Stockholders' equity:
Common stock at $0.50 par value, authorized 600,000,000 shares, issued 255,981,932 and 248,571,355 as of September 30, 2021 and December 31, 2020	$	127,990	$	124,285
Capital in excess of par value		3,698,095		3,379,057
Retained earnings		1,385,631		1,261,862
Treasury stock, at cost, 3,240,349 and 3,180,887 shares as of September 30, 2021 and December 31, 2020		(83,854)		(81,327)
Total stockholders' equity		5,127,862		4,683,877

Long-term debt, excluding current portion		5,638,961		5,545,890
Less: debt issuance costs		40,247		38,146
Long-term debt, excluding current portion, net of debt issuance costs		5,598,714		5,507,744
Commitments and contingencies (See Note 14)

Current liabilities:
Current portion of long-term debt		63,418		84,353
Loans payable		46,582		78,198
Accounts payable		163,836		177,489
Book overdraft		20,749		44,003
Accrued interest		70,461		39,408
Accrued taxes		37,502		37,172
Regulatory liabilities		171		19,866
Other accrued liabilities		113,310		123,384
Total current liabilities		516,029		603,873

Deferred credits and other liabilities:
Deferred income taxes and investment tax credits		1,352,425		1,258,098
Customers' advances for construction		110,939		99,014
Regulatory liabilities		778,416		773,310
Asset retirement obligations		1,363		1,336
Operating lease liabilities		50,086		55,642
Pension and other postretirement benefit liabilities		61,690		91,896
Other		50,856		56,713
Total deferred credits and other liabilities		2,405,775		2,336,009

Contributions in aid of construction		588,105		573,774
Total liabilities and equity	$	14,236,485	$	13,705,277

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

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
	September 30,
	2021		2020
Operating revenues	$	361,860	$	348,647

Operating expenses:
Operations and maintenance		139,355		136,174
Purchased gas		25,488		16,744
Depreciation		72,606		68,175
Amortization		1,901		1,766
Taxes other than income taxes		21,058		20,555
Total operating expenses		260,408		243,414

Operating income		101,452		105,233

Other expense (income):
Interest expense		52,132		49,861
Interest income		(565)		(114)
Allowance for funds used during construction		(6,082)		(3,543)
Gain on sale of other assets		(320)		(233)
Equity loss in joint venture		-		3,626
Other		4,019		(4,127)
Income before income taxes		52,268		59,763
Provision for income taxes		1,765		4,031
Net income	$	50,503	$	55,732

Comprehensive income	$	50,503	$	55,732

Net income per common share:
Basic	$	0.20	$	0.22
Diluted	$	0.19	$	0.22

Average common shares outstanding during the period:
Basic		258,773		254,280
Diluted		259,437		255,162

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

‎

Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(UNAUDITED)



	Nine Months Ended
	September 30,
	2021		2020
Operating revenues	$	1,342,457	$	988,700

Operating expenses:
Operations and maintenance		391,945		371,415
Purchased gas		202,538		72,934
Depreciation		217,007		181,666
Amortization		4,616		4,412
Taxes other than income taxes		63,219		56,424
Total operating expenses		879,325		686,851

Operating income		463,132		301,849

Other expense (income):
Interest expense		154,937		136,650
Interest income		(1,290)		(5,346)
Allowance for funds used during construction		(13,922)		(8,721)
Gain on sale of other assets		(623)		(358)
Equity loss in joint venture		-		3,283
Other		(1,393)		(3,170)
Income before income taxes		325,423		179,511
Provision for income taxes (benefit)		10,317		(2,631)
Net income	$	315,106	$	182,142

Comprehensive income	$	315,106	$	182,142

Net income per common share: