SEC Filing | Essential Utilities, Inc.

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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, 2022

£ 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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 22, 2022: 262,170,763

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, 2022 and December 31, 2021	2
Consolidated Statements of Operations and Comprehensive Income (unaudited) – ‎Three Months Ended June 30, 2022 and 2021	4
Consolidated Statements of Operations and Comprehensive Income (unaudited) – ‎Six Months Ended June 30, 2022 and 2021	4

Consolidated Statements of Capitalization (unaudited) – ‎June 30, 2022 and December 31, 2021	6

Consolidated Statements of Equity (unaudited) – ‎Six Months Ended June 30, 2022	7

Consolidated Statements of Equity (unaudited) – ‎Six Months Ended June 30, 2021	7

Consolidated Statements of Cash Flow (unaudited) – ‎Six Months Ended June 30, 2022 and 2021,	9

Notes to Consolidated Financial Statements (unaudited)	10

Item 2. Management’s Discussion and Analysis of Financial ‎Condition and Results of Operations	30

Item 3. Quantitative and Qualitative Disclosures About Market Risk	43

Item 4. Controls and Procedures	43

Part II – Other Information

Item 1. Legal Proceedings	43

Item 1A. Risk Factors	43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 6. Exhibits	45

Signatures	46

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	2022		2021
Property, plant and equipment, at cost	$	13,111,170	$	12,610,376
Less: accumulated depreciation		2,518,805		2,358,510
Net property, plant and equipment		10,592,365		10,251,866

Current assets:
Cash and cash equivalents		12,976		10,567
Accounts receivable, net		143,385		141,025
Unbilled revenues		79,394		119,896
Inventory - materials and supplies		38,193		33,756
Inventory - gas stored		90,417		75,804
Prepayments and other current assets		31,722		36,597
Regulatory assets		17,208		20,150
Total current assets		413,295		437,795

Regulatory assets		1,511,541		1,429,840
Deferred charges and other assets, net		136,764		141,955
Funds restricted for construction activity		1,313		1,313
Goodwill		2,340,792		2,340,815
Operating lease right-of-use assets		44,713		48,930
Intangible assets		5,381		5,764
Total assets	$	15,046,164	$	14,658,278

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

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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	2022		2021
Stockholders' equity:
Common stock at $0.50 par value, authorized 600,000,000 shares, issued 265,415,337 and 256,102,388 as of June 30, 2022 and December 31, 2021	$	132,707	$	128,050
Capital in excess of par value		3,715,975		3,705,814
Retained earnings		1,577,442		1,434,201
Treasury stock, at cost, 3,244,664 and 3,234,765 shares as of June 30, 2022 and December 31, 2021		(84,092)		(83,615)
Total stockholders' equity		5,342,032		5,184,450

Long-term debt, excluding current portion		6,135,390		5,815,211
Less: debt issuance costs		47,654		35,707
Long-term debt, excluding current portion, net of debt issuance costs		6,087,736		5,779,504
Commitments and contingencies (See Note 13)

Current liabilities:
Current portion of long-term debt		120,931		132,146
Loans payable		4,703		65,000
Accounts payable		194,105		192,932
Book overdraft		20,659		81,722
Accrued interest		43,384		40,815
Accrued taxes		34,457		37,924
Regulatory liabilities		1,878		384
Other accrued liabilities		124,008		124,140
Total current liabilities		544,125		675,063

Deferred credits and other liabilities:
Deferred income taxes and investment tax credits		1,511,182		1,406,537
Customers' advances for construction		109,457		103,619
Regulatory liabilities		755,651		769,617
Asset retirement obligations		1,268		1,256
Operating lease liabilities		41,736		48,230
Pension and other postretirement benefit liabilities		28,698		50,226
Other		28,328		43,666
Total deferred credits and other liabilities		2,476,320		2,423,151

Contributions in aid of construction		595,951		596,110
Total liabilities and equity	$	15,046,164	$	14,658,278

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

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands of dollars, except per share amounts)

(UNAUDITED)


	Three Months Ended
	June 30,
	2022		2021
Operating revenues	$	448,756	$	397,032

Operating expenses:
Operations and maintenance		134,981		127,515
Purchased gas		75,143		44,897
Depreciation		77,425		72,764
Amortization		1,751		1,408
Taxes other than income taxes		21,720		21,120
Total operating expenses		311,020		267,704

Operating income		137,736		129,328

Other expense (income):
Interest expense		55,221		52,036
Interest income		(824)		(338)
Allowance for funds used during construction		(6,151)		(4,906)
Gain on sale of other assets		(478)		(223)
Other		(423)		(1,941)
Income before income taxes		90,391		84,700
Provision for income taxes		8,100		3,786
Net income	$	82,291	$	80,914

Comprehensive income	$	82,291	$	80,914

Net income per common share:
Basic	$	0.31	$	0.32
Diluted	$	0.31	$	0.32

Average common shares outstanding during the period:
Basic		262,099		254,769
Diluted		262,558		255,441

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 of dollars, except per share amounts)

(UNAUDITED)



	Six Months Ended
	June 30,
	2022		2021
Operating revenues	$	1,148,031	$	980,597

Operating expenses:
Operations and maintenance		277,562		252,590
Purchased gas		302,855		177,050
Depreciation		155,303		144,401
Amortization		2,219		2,715
Taxes other than income taxes		44,727		42,161
Total operating expenses		782,666		618,917

Operating income		365,365		361,680

Other expense (income):
Interest expense		108,857		102,805
Interest income		(1,433)		(725)
Allowance for funds used during construction		(11,990)		(7,840)
Gain on sale of other assets		(478)		(303)
Other		(2,125)		(5,412)
Income before income taxes		272,534		273,155
Provision for income taxes (benefit)		(9,133)		8,552
Net income	$	281,667	$	264,603

Comprehensive income	$	281,667	$	264,603

Net income per common share:
Basic	$	1.08	$	1.04
Diluted	$	1.07	$	1.04

Average common shares outstanding during the period:
Basic		262,026		254,667
Diluted		262,545		255,268

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

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