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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, 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 July 24, 2023: 264,505,777


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, 2023 and December 31, 2022

2

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Three Months Ended June 30, 2023 and 2022

4

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Six Months Ended June 30, 2023 and 2022

5

Consolidated Statements of Capitalization (unaudited) –
June 30, 2023 and December 31, 2022

6

Consolidated Statements of Equity (unaudited) –
Six Months Ended June 30, 2023

7

Consolidated Statements of Equity (unaudited) –
Six Months Ended June 30, 202
2

8

Consolidated Statements of Cash Flow (unaudited) –
Six Months Ended June 30, 2023 and 2022

9

Notes to Consolidated Financial Statements (unaudited)

10

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

32

Item 3. Quantitative and Qualitative Disclosures About Market Risk

47

Item 4. Controls and Procedures

47

 

Part II – Other Information

 

Item 1. Legal Proceedings

47

Item 1A. Risk Factors

47

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

48

Item 5. Other Information

48

Item 6. Exhibits

49

Signatures

50

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

2023

2022

Property, plant and equipment, at cost

$

14,344,435

$

13,737,387 

Less: accumulated depreciation

2,753,586

2,606,441 

Net property, plant and equipment

11,590,849

11,130,946 

Current assets:

Cash and cash equivalents

11,642

11,398 

Accounts receivable, net

149,942

206,324 

Unbilled revenues

75,737

170,504 

Inventory - materials and supplies

45,300

46,592 

Inventory - gas stored

63,216

153,143 

Current assets held for sale

7,378

11,167 

Prepayments and other current assets

36,557

39,759 

Regulatory assets

16,938

19,272 

Total current assets

406,710

658,159 

Regulatory assets

1,518,079

1,342,753 

Deferred charges and other assets, net

166,391

166,653 

Funds restricted for construction activity

1,360

1,342 

Goodwill

2,340,755

2,340,792 

Non-current assets held for sale

34,419

32,124 

Operating lease right-of-use assets

39,151

41,734 

Intangible assets

4,221

4,604 

Total assets

$

16,101,935

$

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

June 30,

December 31,

Liabilities and Equity

2023

2022

Stockholders' equity:

Common stock at $0.50 par value, authorized 600,000,000 shares, issued 267,818,219 and 266,973,321 as of June 30, 2023 and December 31, 2022

$

133,909

$

133,486 

Capital in excess of par value

3,827,199

3,793,262 

Retained earnings

1,740,682

1,534,331 

Treasury stock, at cost, 3,312,850 and 3,236,237 shares as of June 30, 2023 and December 31, 2022

(87,092)

(83,693)

Total stockholders' equity

5,614,698

5,377,386 

Long-term debt, excluding current portion

6,661,014

6,418,039 

Less: debt issuance costs

45,498

46,982 

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

6,615,516

6,371,057 

Commitments and contingencies (See Note 14)

 

 

Current liabilities:

Current portion of long-term debt

198,749

199,356 

Loans payable

48,043

228,500 

Accounts payable

178,902

238,843 

Book overdraft

32,490

28,694 

Accrued interest

50,625

47,063 

Accrued taxes

26,232

34,393 

Liabilities related to assets held for sale

3,081

3,263 

Regulatory liabilities

96,669

35,276 

Dividends payable

-

75,808 

Other accrued liabilities

130,344

130,673 

Total current liabilities

765,135

1,021,869 

Deferred credits and other liabilities:

Deferred income taxes and investment tax credits

1,459,002

1,345,766 

Customers' advances for construction

125,362

114,732 

Regulatory liabilities

807,240

778,754 

Asset retirement obligations

842

843 

Operating lease liabilities

36,387

37,666 

Non-current liabilities related to assets held for sale

803

974 

Pension and other postretirement benefit liabilities

31,196

31,244 

Other

24,648

28,562 

Total deferred credits and other liabilities

2,485,480

2,338,541 

Contributions in aid of construction

621,106

610,254 

Total liabilities and equity

$

16,101,935

$

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

June 30,

2023

2022

Operating revenues

$

436,700

$

448,756

Operating expenses:

Operations and maintenance

133,508

134,981

Purchased gas

41,933

75,143

Depreciation

84,937

77,425

Amortization

724

1,751

Taxes other than income taxes

20,348

21,720

Total operating expenses

281,450

311,020

Operating income

155,250

137,736

Other expense (income):

Interest expense

69,182

55,221

Interest income

(970)

(824)

Allowance for funds used during construction

(3,424)

(6,151)

Gain on sale of other assets

(220)

(478)

Other

(323)

(423)

Income before income taxes

91,005

90,391

Provision for income taxes (benefit)

(263)

8,100

Net income

$

91,268

$

82,291

Comprehensive income

$

91,268

$

82,291

Net income per common share:

Basic

$

0.35

$

0.31

Diluted

$

0.34

$

0.31

Average common shares outstanding during the period:

Basic

264,418

262,099

Diluted

264,818

262,558

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,

2023

2022

Operating revenues

$

1,163,150

$

1,148,031

Operating expenses:

Operations and maintenance

271,502

277,562

Purchased gas

298,248

302,855

Depreciation

167,860

155,303

Amortization

1,595

2,219

Taxes other than income taxes

43,226

44,727

Total operating expenses

782,431

782,666

Operating income

380,719

365,365

Other expense (income):

Interest expense

141,850

108,857

Interest income

(1,789)

(1,433)

Allowance for funds used during construction

(9,112)

(11,990)

Gain on sale of other assets

(469)