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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 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

1


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

2


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

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

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

 


4


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:

Basic

$

1.23

$

0.73

Diluted

$

1.23

$

0.71

Average common shares outstanding during the period: