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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 March 31, 2023

£ 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 April 26, 2023: 264,379,508


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – March 31, 2023 and December 31, 2022

2

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Three Months Ended March 31, 2023 and 2022

4

Consolidated Statements of Capitalization (unaudited) –
March 31, 2023 and December 31, 2022

5

Consolidated Statements of Equity (unaudited) –
Three Months Ended March 31, 2023

6

Consolidated Statements of Equity (unaudited) –
Three Months Ended March 31, 202
2

7

Consolidated Statements of Cash Flow (unaudited) –
Three Months Ended March 31, 2023 and 2022,

8

Notes to Consolidated Financial Statements (unaudited)

9

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

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

39

Item 4. Controls and Procedures

39

 

Part II – Other Information

 

Item 1. Legal Proceedings

39

Item 1A. Risk Factors

39

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

40

Item 6. Exhibits

41

Signatures

42

1


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

 

March 31,

December 31,

Assets

2023

2022

Property, plant and equipment, at cost

$

13,961,209

$

13,737,387 

Less: accumulated depreciation

2,666,629

2,606,441 

Net property, plant and equipment

11,294,580

11,130,946 

Current assets:

Cash and cash equivalents

20,149

11,398 

Accounts receivable, net

213,606

206,324 

Unbilled revenues

117,610

170,504 

Inventory - materials and supplies

48,401

46,592 

Inventory - gas stored

47,506

153,143 

Current assets held for sale

9,484

11,167 

Prepayments and other current assets

37,301

39,759 

Regulatory assets

15,715

19,272 

Total current assets

509,772

658,159 

Regulatory assets

1,429,165

1,342,753 

Deferred charges and other assets, net

164,608

166,653 

Funds restricted for construction activity

1,350

1,342 

Goodwill

2,340,755

2,340,792 

Non-current assets held for sale

32,959

32,124 

Operating lease right-of-use assets

40,665

41,734 

Intangible assets

4,412

4,604 

Total assets

$

15,818,266

$

15,719,107 

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)

 

ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsVestedInPeriod

March 31,

December 31,

Liabilities and Equity

2023

2022

Stockholders' equity:

Common stock at $0.50 par value, authorized 600,000,000 shares, issued 267,695,463 and 266,973,321 as of March 31, 2023 and December 31, 2022

$

133,848 

$

133,486 

Capital in excess of par value

3,819,804 

3,793,262 

Retained earnings

1,649,621 

1,534,331 

Treasury stock, at cost, 3,318,252 and 3,236,237 shares as of March 31, 2023 and December 31, 2022

(87,331)

(83,693)

Total stockholders' equity

5,515,942 

5,377,386 

Long-term debt, excluding current portion

6,530,810 

6,418,039 

Less: debt issuance costs

46,294 

46,982 

Long-term debt, excluding current portion, net of debt issuance costs

6,484,516 

6,371,057 

Commitments and contingencies (See Note 14)

 

 

Current liabilities:

Current portion of long-term debt

198,683 

199,356 

Loans payable

22,500 

228,500 

Accounts payable

155,722 

238,843 

Book overdraft

20,070 

28,694 

Accrued interest

81,089 

47,063 

Accrued taxes

29,992 

34,393 

Liabilities related to assets held for sale

2,355 

3,263 

Regulatory liabilities

102,802 

35,276 

Dividends payable

75,876 

75,808 

Other accrued liabilities

114,197 

130,673 

Total current liabilities

803,286 

1,021,869 

Deferred credits and other liabilities:

Deferred income taxes and investment tax credits

1,413,661 

1,345,766 

Customers' advances for construction

118,269 

114,732 

Regulatory liabilities

765,949 

778,754 

Asset retirement obligations

846 

843 

Operating lease liabilities

38,629 

37,666 

Non-current liabilities related to assets held for sale

948 

974 

Pension and other postretirement benefit liabilities

31,427 

31,244 

Other

27,287 

28,562 

Total deferred credits and other liabilities

2,397,016 

2,338,541 

Contributions in aid of construction

617,506 

610,254 

Total liabilities and equity

$

15,818,266 

$

15,719,107 

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

March 31,

2023

2022

Operating revenues

$

726,450

$

699,275

Operating expenses:

Operations and maintenance

137,994

142,581

Purchased gas

256,315

227,712

Depreciation

82,923

77,878

Amortization

871

468

Taxes other than income taxes

22,878

23,007

Total operating expenses

500,981

471,646

Operating income

225,469

227,629

Other expense (income):

Interest expense

72,668

53,636

Interest income

(819)

(609)

Allowance for funds used during construction

(5,688)

(5,839)

Gain on sale of other assets

(249)

-

Other

(240)

(1,702)

Income before income taxes

159,797

182,143

Income tax benefit

(31,637)

(17,233)

Net income

$

191,434

$

199,376

Comprehensive income

$

191,434

$

199,376

Net income per common share:

Basic

$

0.72

$

0.76

Diluted

$

0.72

$

0.76

Average common shares outstanding during the period:

Basic

264,192

261,952

Diluted

264,751

262,431

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

 

 

4


Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

March 31,

December 31,

2023

2022

Stockholders' equity:

Common stock, $0.50 par value

$

133,848

$

133,486

Capital in excess of par value

3,819,804

3,793,262

Retained earnings

1,649,621

1,534,331

Treasury stock, at cost

(87,331)

(83,693)

Total stockholders' equity

5,515,942

5,377,386

Long-term debt of subsidiaries (substantially collateralized by utility plant):

Interest Rate Range

Maturity Date Range

0.00% to 0.99%

2023 to 2033

1,839

1,875

1.00% to 1.99%

2023 to 2039

8,120

8,369

2.00% to 2.99%

2023 to 2058

209,434

209,755

3.00% to 3.99%

2023 to 2056

1,349,200

1,351,432

4.00% to 4.99%

2023 to 2059

1,401,796

1,403,313

5.00% to 5.99%

2023 to 2052

89,114

14,357

6.00% to 6.99%

2026 to 2036

31,000

31,000

7.00% to 7.99%

2025 to 2027

28,314

28,378

8.00% to 8.99%

2025

1,876

2,116

9.00% to 9.99%

2026

11,800

11,800

3,132,493

3,062,395

Notes payable to bank under revolving credit agreement, variable rate, due 2027

542,000

490,000

Unsecured notes payable: