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 September 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 October 21, 2022: 262,290,857

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, 2022 and December 31, 2021	2

Consolidated Statements of Operations and Comprehensive Income (unaudited) – ‎Three Months Ended September 30, 2022 and 2021	4

Consolidated Statements of Operations and Comprehensive Income (unaudited) – ‎Nine Months Ended September 30, 2022 and 2021	5

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

Consolidated Statements of Equity (unaudited) – ‎Nine Months Ended September 30, 2022	7

Consolidated Statements of Equity (unaudited) – ‎Nine Months Ended September 30, 2021	8

Consolidated Statements of Cash Flow (unaudited) – ‎Nine Months Ended September 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	31

Item 3. Quantitative and Qualitative Disclosures About Market Risk	45

Item 4. Controls and Procedures	45

Part II – Other Information

Item 1. Legal Proceedings	45

Item 1A. Risk Factors	45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6. Exhibits	47

Signatures	48

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	2022		2021
Property, plant and equipment, at cost	$	13,468,046	$	12,610,376
Less: accumulated depreciation		2,592,368		2,358,510
Net property, plant and equipment		10,875,678		10,251,866

Current assets:
Cash and cash equivalents		23,366		10,567
Accounts receivable, net		119,803		141,025
Unbilled revenues		82,643		119,896
Inventory - materials and supplies		41,565		33,756
Inventory - gas stored		188,147		75,804
Prepayments and other current assets		39,241		36,597
Regulatory assets		46,541		20,150
Total current assets		541,306		437,795

Regulatory assets		1,300,554		1,429,840
Deferred charges and other assets, net		172,236		141,955
Funds restricted for construction activity		1,336		1,313
Goodwill		2,340,792		2,340,815
Operating lease right-of-use assets		43,095		48,930
Intangible assets		4,795		5,764
Total assets	$	15,279,792	$	14,658,278

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	2022		2021
Stockholders' equity:
Common stock at $0.50 par value, authorized 600,000,000 shares, issued 265,530,007 and 256,102,388 as of September 30, 2022 and December 31, 2021	$	132,764	$	128,050
Capital in excess of par value		3,723,523		3,705,814
Retained earnings		1,570,652		1,434,201
Treasury stock, at cost, 3,239,286 and 3,234,765 shares as of September 30, 2022 and December 31, 2021		(83,837)		(83,615)
Total stockholders' equity		5,343,102		5,184,450

Long-term debt, excluding current portion		6,220,973		5,815,211
Less: debt issuance costs		47,345		35,707
Long-term debt, excluding current portion, net of debt issuance costs		6,173,628		5,779,504
Commitments and contingencies (See Note 13)

Current liabilities:
Current portion of long-term debt		149,926		132,146
Loans payable		213,235		65,000
Accounts payable		217,597		192,932
Book overdraft		17,396		81,722
Accrued interest		75,305		40,815
Accrued taxes		33,316		37,924
Regulatory liabilities		1,196		384
Other accrued liabilities		140,122		124,140
Total current liabilities		848,093		675,063

Deferred credits and other liabilities:
Deferred income taxes and investment tax credits		1,304,548		1,406,537
Customers' advances for construction		121,247		103,619
Regulatory liabilities		771,734		769,617
Asset retirement obligations		1,274		1,256
Operating lease liabilities		39,657		48,230
Pension and other postretirement benefit liabilities		54,309		50,226
Other		25,929		43,666
Total deferred credits and other liabilities		2,318,698		2,423,151

Contributions in aid of construction		596,271		596,110
Total liabilities and equity	$	15,279,792	$	14,658,278

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)


	Three Months Ended
	September 30,
	2022		2021
Operating revenues	$	434,618	$	361,860

Operating expenses:
Operations and maintenance		151,361		139,355
Purchased gas		52,041		25,488
Depreciation		80,471		72,606
Amortization		2,259		1,901
Taxes other than income taxes		22,625		21,058
Total operating expenses		308,757		260,408

Operating income		125,861		101,452

Other expense (income):
Interest expense		60,488		52,132
Interest income		(1,510)		(565)
Allowance for funds used during construction		(5,812)		(6,082)
Gain on sale of other assets		(299)		(320)
Other		(441)		4,019
Income before income taxes		73,435		52,268
Provision for income taxes		4,797		1,765
Net income	$	68,638	$	50,503

Comprehensive income	$	68,638	$	50,503

Net income per common share:
Basic	$	0.26	$	0.20
Diluted	$	0.26	$	0.19

Average common shares outstanding during the period:
Basic		262,213		258,773
Diluted		262,754		259,437

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)



	Nine Months Ended
	September 30,
	2022		2021
Operating revenues	$	1,582,649	$	1,342,457

Operating expenses:
Operations and maintenance		428,923		391,945
Purchased gas		354,896		202,538
Depreciation		235,774		217,007
Amortization		4,478		4,616
Taxes other than income taxes		67,352		63,219
Total operating expenses		1,091,423		879,325

Operating income		491,226		463,132

Other expense (income):
Interest expense		169,345		154,937
Interest income		(2,943)		(1,290)
Allowance for funds used during construction		(17,802)		(13,922)
Gain on sale of other assets		(777)		(623)
Other		(2,566)		(1,393)
Income before income taxes		345,969		325,423
Provision for income taxes (benefit)		(4,336)		10,317
Net income	$	350,305	$	315,106

Comprehensive income	$	350,305	$	315,106

Net income per common share:
Basic	$	1.34	$	1.23
Diluted	$	1.33	$	1.23

Average common shares outstanding during the period: