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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

1


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

2


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

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

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

 


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)

 

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:

Basic

262,089

256,051

Diluted

262,641

256,763

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