SEC Filing | Essential Utilities, Inc.

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Table of Contents

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, 2022	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

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

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

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

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)		(478)