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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

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

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

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

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

3


Table of Contents

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

 


4


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

5


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

June 30,

December 31,

2022