Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

FORM 10-Q

(Mark One)

SQUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2017March 31, 2024

£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

AQUA AMERICA,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. YesS  No£

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YesS  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 filerAccelerated Filer S

Acceleratedfiler Filer £

Non-accelerated filer (donotcheckifasmallerreportingcompany)Non-Accelerated Filer £

Smallerreportingcompany Reporting Company £

Emerginggrowthcompany 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£  NoS

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, 2024: 273,523,533

October 20, 2017:  177,690,598


Table of Contents

AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – September 30, 2017March 31, 2024 and December 31, 20162023

2

Consolidated Statements of Net Income (unaudited) –
Three Months Ended September 30, 2017Operations and 2016

Consolidated Statements of Net Income (unaudited) –
Nine Months Ended September 30, 2017 and 2016

Consolidated Statements of Comprehensive Income (unaudited) –
Three and Nine Months Ended September 30, 2017March 31, 2024 and 20162023

4

Consolidated Statements of Capitalization (unaudited)
September 30, 2017
March 31, 2024 and December 31, 20162023

5

Consolidated StatementStatements of Equity (unaudited) –
Nine
Three Months Ended September 30, 2017March 31, 2024

6

Consolidated Statements of Equity (unaudited) –
Three Months Ended March 31, 202
3

7

Consolidated Statements of Cash Flow (unaudited) –
Nine
Three Months Ended September 30, 2017March 31, 2024 and 20162023

8

Notes to Consolidated Financial Statements (unaudited)

9

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

26 

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

31 

38

Item 4. Controls and Procedures

31 

38

Part II – Other Information

Item 1. Legal Proceedings

31 

38

Item 1A. Risk Factors

31 

39

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

32 

Item 6.  Exhibits5. Other Information

32 

39

Exhibit Index

33 

SignaturesItem 6. Exhibits

34 

40

Signatures

41

1


Table of Contents

AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)



 

 

 

 

 

 



 

 

 

 

 



 

September 30,

 

December 31,

Assets

 

2017

 

2016

Property, plant and equipment, at cost

 

$

6,857,093 

 

$

6,509,117 

Less:  accumulated depreciation

 

 

1,580,619 

 

 

1,507,502 

Net property, plant and equipment

 

 

5,276,474 

 

 

5,001,615 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,139 

 

 

3,763 

Accounts receivable and unbilled revenues, net

 

 

104,894 

 

 

97,394 

Inventory, materials and supplies

 

 

16,557 

 

 

12,961 

Prepayments and other current assets

 

 

11,209 

 

 

12,804 

Assets held for sale

 

 

1,543 

 

 

1,728 

Total current assets

 

 

138,342 

 

 

128,650 



 

 

 

 

 

 

Regulatory assets

 

 

1,044,787 

 

 

948,647 

Deferred charges and other assets

 

 

36,169 

 

 

30,845 

Investment in joint venture

 

 

7,379 

 

 

7,026 

Goodwill

 

 

42,230 

 

 

42,208 

Total assets

 

$

6,545,381 

 

$

6,158,991 

Liabilities and Equity

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock at $.50 par value, authorized 300,000,000 shares, issued 180,669,222 and 180,311,345 as of September 30, 2017 and December 31, 2016

 

$

90,334 

 

$

90,155 

Capital in excess of par value

 

 

804,753 

 

 

797,513 

Retained earnings

 

 

1,115,601 

 

 

1,032,844 

Treasury stock, at cost, 2,984,973 and 2,916,969 shares as of September 30, 2017 and December 31, 2016

 

 

(73,229)

 

 

(71,113)

Accumulated other comprehensive income

 

 

806 

 

 

669 

Total stockholders' equity

 

 

1,938,265 

 

 

1,850,068 



 

 

 

 

 

 

Long-term debt, excluding current portion

 

 

1,974,327 

 

 

1,759,962 

Less:  debt issuance costs

 

 

21,854 

 

 

22,357 

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

 

 

1,952,473 

 

 

1,737,605 

Commitments and contingencies (See Note 13)

 

 

 

 

 

 



 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

 

84,704 

 

 

150,671 

Loans payable

 

 

20,990 

 

 

6,535 

Accounts payable

 

 

63,358 

 

 

59,872 

Accrued interest

 

 

23,210 

 

 

18,367 

Accrued taxes

 

 

21,745 

 

 

25,607 

Other accrued liabilities

 

 

38,943 

 

 

40,484 

Total current liabilities

 

 

252,950 

 

 

301,536 



 

 

 

 

 

 

Deferred credits and other liabilities:

 

 

 

 

 

 

Deferred income taxes and investment tax credits

 

 

1,391,096 

 

 

1,269,253 

Customers' advances for construction

 

 

107,715 

 

 

91,843 

Regulatory liabilities

 

 

239,469 

 

 

250,635 

Other

 

 

110,412 

 

 

115,583 

Total deferred credits and other liabilities

 

 

1,848,692 

 

 

1,727,314 



 

 

 

 

 

 

Contributions in aid of construction

 

 

553,001 

 

 

542,468 

Total liabilities and equity

 

$

6,545,381 

 

$

6,158,991 



 

 

 

 

 

 

See notes to consolidated financial statements beginning on page 9 of this report.

March 31,

December 31,

Assets

2024

2023

Property, plant and equipment, at cost

$

15,208,072 

$

14,977,021 

Less: accumulated depreciation

2,952,487 

2,879,949 

Net property, plant and equipment

12,255,585 

12,097,072 

Current assets:

Cash and cash equivalents

35,200 

4,612 

Accounts receivable, net

164,638 

144,300 

Unbilled revenues

102,793 

101,436 

Inventory - materials and supplies

48,947 

47,494 

Inventory - gas stored

17,849 

65,173 

Prepayments and other current assets

34,619 

99,884 

Regulatory assets

15,488 

29,080 

Total current assets

419,534 

491,979 

Regulatory assets

1,899,984 

1,766,892 

Deferred charges and other assets, net

97,865 

102,388 

Funds restricted for construction activity

1,391 

1,381 

Goodwill

2,340,733 

2,340,738 

Operating lease right-of-use assets

35,739 

37,416 

Intangible assets

3,513 

3,593 

Total assets

$

17,054,344 

$

16,841,459 

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

2


Table of Contents

AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF NET INCOMEBALANCE SHEETS (continued)

(In thousands, except per share amounts)

(UNAUDITED)



 

 

 

 

 

 



 

Three Months Ended



 

September 30,



 

2017

 

2016

Operating revenues

 

$

215,008 

 

$

226,593 



 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Operations and maintenance

 

 

67,982 

 

 

79,812 

Depreciation

 

 

34,264 

 

 

33,881 

Amortization

 

 

42 

 

 

389 

Taxes other than income taxes

 

 

15,234 

 

 

14,712 

Total operating expenses

 

 

117,522 

 

 

128,794 



 

 

 

 

 

 

Operating income

 

 

97,486 

 

 

97,799 



 

 

 

 

 

 

Other expense (income):

 

 

 

 

 

 

Interest expense, net

 

 

22,411 

 

 

20,168 

Allowance for funds used during construction

 

 

(3,914)

 

 

(2,267)

Gain on sale of other assets

 

 

(43)

 

 

(62)

Equity earnings in joint venture

 

 

(593)

 

 

(1,621)

Income before income taxes

 

 

79,625 

 

 

81,581 

Provision for income taxes

 

 

3,400 

 

 

8,411 

Net income

 

$

76,225 

 

$

73,170 



 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

Basic

 

$

0.43 

 

$

0.41 

Diluted

 

$

0.43 

 

$

0.41 



 

 

 

 

 

 

Average common shares outstanding during the period:

 

 

 

 

 

 

Basic

 

 

177,660 

 

 

177,336 

Diluted

 

 

178,124 

 

 

177,817 



 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.2047 

 

$

0.191 



 

 

 

 

 

 

See notes to consolidated financial statements beginning on page 9 of this report.



 

 

 

 

 

 

3


Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF NET INCOME

(In thousands, except per share amounts)

(UNAUDITED)



 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2017

 

2016

Operating revenues

 

$

606,213 

 

$

623,076 



 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Operations and maintenance

 

 

207,963 

 

 

227,347 

Depreciation

 

 

101,508 

 

 

97,645 

Amortization

 

 

358 

 

 

1,367 

Taxes other than income taxes

 

 

44,390 

 

 

43,094 

Total operating expenses

 

 

354,219 

 

 

369,453 



 

 

 

 

 

 

Operating income

 

 

251,994 

 

 

253,623 



 

 

 

 

 

 

Other expense (income):

 

 

 

 

 

 

Interest expense, net

 

 

65,124 

 

 

60,136 

Allowance for funds used during construction

 

 

(10,570)

 

 

(6,446)

Gain on sale of other assets

 

 

(322)

 

 

(390)

Equity earnings in joint venture

 

 

(402)

 

 

(1,143)

Income before income taxes

 

 

198,164 

 

 

201,466 

Provision for income taxes

 

 

11,899 

 

 

16,933 

Net income

 

$

186,265 

 

$

184,533 



 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

Basic

 

$

1.05 

 

$

1.04 

Diluted

 

$

1.05 

 

$

1.04 



 

 

 

 

 

 

Average common shares outstanding during the period:

 

 

 

 

 

 

Basic

 

 

177,583 

 

 

177,243 

Diluted

 

 

178,103 

 

 

177,781 



 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.5873 

 

$

0.5473 



 

 

 

 

 

 

See notes to consolidated financial statements beginning on page 9 of this report.

4


Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(In thousands of dollars) 

(UNAUDITED)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Net income

 

$

76,225 

 

$

73,170 

 

$

186,265 

 

$

184,533 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gain on investments, net of tax expense of $22 and $11 for the three months, and $73 and $14 for the nine months ended September 30, 2017 and 2016, respectively

 

 

42 

 

 

20 

 

 

137 

 

 

26 

Reclassification of gain on sale of investment to net income, net of tax of $30 for the nine months ended September 30, 2016 (1)

 

 

 -

 

 

 -

 

 

 -

 

 

(57)

Comprehensive income

 

$

76,267 

 

$

73,190 

 

$

186,402 

 

$

184,502 



 

 

 

 

 

 

 

 

 

 

 

 

(1) Amount of pre-tax gain of $87 reclassified from accumulated other comprehensive income to gain on sale of other assets on the consolidated statements of net income for the nine months ended September 30, 2016.



 

 

 

 

 

 

 

 

 

 

 

 

See notes to consolidated financial statements beginning on page 9 of this report.

5


Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsVestedInPeriod



 

 

 

 

 

 

 



 

 

 

 

 

 



 

 

September 30,

 

December 31,



 

 

2017

 

2016

Stockholders' equity:

 

 

 

 

 

 

 

    Common stock, $.50 par value

 

 

$

90,334 

 

$

90,155 

    Capital in excess of par value

 

 

 

804,753 

 

 

797,513 

    Retained earnings

 

 

 

1,115,601 

 

 

1,032,844 

    Treasury stock, at cost

 

 

 

(73,229)

 

 

(71,113)

    Accumulated other comprehensive income

 

 

806 

 

 

669 

Total stockholders' equity

 

 

 

1,938,265 

 

 

1,850,068 



 

 

 

 

 

 

 

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

 

 

 

 

 

 

Interest Rate Range

Maturity Date Range

 

 

 

 

 

 

0.00% to  0.99%

2023 to 2033

 

 

4,196 

 

 

4,661 

1.00% to  1.99%

2019 to 2035

 

 

13,196 

 

 

15,539 

2.00% to  2.99%

2024 to 2033

 

 

19,689 

 

 

19,668 

3.00% to  3.99%

2019 to 2056

 

 

475,904 

 

 

381,944 

4.00% to  4.99%

2020 to 2054

 

 

556,681 

 

 

487,318 

5.00% to  5.99%

2019 to 2043

 

 

205,703 

 

 

213,078 

6.00% to  6.99%

2017 to 2036

 

 

44,000 

 

 

52,985 

7.00% to  7.99%

2022 to 2027

 

 

32,521 

 

 

33,066 

8.00% to  8.99%

2021 to 2025

 

 

6,214 

 

 

6,565 

9.00% to  9.99%

2018 to 2026

 

 

25,700 

 

 

26,400 

10.00% to 10.99%

2018

 

 

6,000 

 

 

6,000 



 

 

 

1,389,804 

 

 

1,247,224 



 

 

 

 

 

 

 

Notes payable to bank under revolving credit agreement, variable rate, due 2021

 

 

49,000 

 

 

25,000 

Unsecured notes payable:

 

 

 

 

 

 

 

Bank notes at 1.975% and 2.48% due 2018 and 2019

 

 

 

100,000 

 

 

100,000 

Notes ranging from 3.01% to 3.59% due 2027 through 2041

 

 

245,000 

 

 

245,000 

Notes ranging from 4.62% to 4.87%, due 2018 through 2024

 

 

122,800 

 

 

133,600 

Notes ranging from 5.20% to 5.95%, due 2018 through 2037

 

 

152,427 

 

 

159,809 

Total long-term debt

 

 

 

2,059,031 

 

 

1,910,633 



 

 

 

 

 

 

 

Current portion of long-term debt

 

 

 

84,704 

 

 

150,671 

Long-term debt, excluding current portion

 

 

1,974,327 

 

 

1,759,962 

Less:  debt issuance costs

 

 

 

21,854 

 

 

22,357 

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

 

 

1,952,473 

 

 

1,737,605 



 

 

 

 

 

 

 

Total capitalization

 

 

$

3,890,738 

 

$

3,587,673 



 

 

 

 

 

 

 

See notes to consolidated financial statements beginning on page 9 of this report.

March 31,

December 31,

Liabilities and Equity

2024

2023

Stockholders' equity:

Common stock at $0.50 par value, authorized 600,000,000 shares, issued 276,878,103 and 276,595,228 as of March 31, 2024 and December 31, 2023

$

138,438 

$

138,297 

Capital in excess of par value

4,142,610 

4,137,696 

Retained earnings

1,888,521 

1,706,675 

Treasury stock, at cost, 3,354,887 and 3,299,191 shares as of March 31, 2024 and December 31, 2023

(88,442)

(86,485)

Total stockholders' equity

6,081,127 

5,896,183 

Long-term debt, excluding current portion

6,903,544 

6,870,593 

Less: debt issuance costs

47,415 

44,508 

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

6,856,129 

6,826,085 

Commitments and contingencies (See Note 14)

 

 

Current liabilities:

Current portion of long-term debt

67,247 

67,415 

Loans payable

87,500 

160,123 

Accounts payable

161,210 

221,191 

Book overdraft

10,938 

13,358 

Accrued interest

86,512 

53,084 

Accrued taxes

36,911 

40,641 

Regulatory liabilities

14,216 

31,270 

Dividends payable

83,999 

83,929 

Other accrued liabilities

130,073 

126,916 

Total current liabilities

678,606 

797,927 

Deferred credits and other liabilities:

Deferred income taxes and investment tax credits

1,733,947 

1,628,324 

Customers' advances for construction

125,191 

128,755 

Regulatory liabilities

838,084 

820,910 

Asset retirement obligations

851 

848 

Operating lease liabilities

32,415 

34,425 

Pension and other postretirement benefit liabilities

37,363 

38,850 

Other

23,699 

24,086 

Total deferred credits and other liabilities

2,791,550 

2,676,198 

Contributions in aid of construction

646,932 

645,066 

Total liabilities and equity

$

17,054,344 

$

16,841,459 

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

63


Table of Contents

AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENT OF EQUITY 

(In thousands of dollars)

(UNAUDITED)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 



 

 

 

 

Capital in

 

 

 

 

 

 

 

Other

 

 

 



 

Common

 

Excess of

 

Retained

 

Treasury

 

Comprehensive

 

 

 



 

Stock

 

Par Value

 

Earnings

 

Stock

 

Income

 

Total

Balance at December 31, 2016

 

$

90,155 

 

$

797,513 

 

$

1,032,844 

 

$

(71,113)

 

$

669 

 

$

1,850,068 

Net income

 

 

 -

 

 

 -

 

 

186,265 

 

 

 -

 

 

 -

 

 

186,265 

Other comprehensive income, net of income tax of $73

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

137 

 

 

137 

Dividends

 

 

 -

 

 

 -

 

 

(104,286)

 

 

 -

 

 

 -

 

 

(104,286)

Sale of stock (34,814 shares)

 

 

17 

 

 

1,067 

 

 

 -

 

 

 -

 

 

 -

 

 

1,084 

Repurchase of stock (68,004 shares)         

 

 

 -

 

 

 -

 

 

 -

 

 

(2,116)

 

 

 -

 

 

(2,116)

Equity compensation plan (165,442) shares)

 

 

83 

 

 

(83)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Exercise of stock options (157,621) shares)

 

 

79 

 

 

2,524 

 

 

 -

 

 

 -

 

 

 -

 

 

2,603 

Stock-based compensation

 

 

 -

 

 

4,379 

 

 

(204)

 

 

 -

 

 

 -

 

 

4,175 

Cumulative effect of change in accounting principle - windfall tax benefit

 

 

 -

 

 

 -

 

 

982 

 

 

 -

 

 

 -

 

 

982 

Other  

 

 

 -

 

 

(647)

 

 

 -

 

 

 -

 

 

 -

 

 

(647)

Balance at September 30, 2017

 

$

90,334 

 

$

804,753 

 

$

1,115,601 

 

$

(73,229)

 

$

806 

 

$

1,938,265 



Refer to Note 15 - Recent Accounting Pronouncements for a discussion of the cumulative effect of change in accounting principle - windfall tax benefit

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOW OPERATIONS AND COMPREHENSIVE INCOME 

(In thousands of dollars) 

(UNAUDITED)



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2017

 

2016

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

186,265 

 

$

184,533 

Adjustments to reconcile net income to net cash flows from operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

101,866 

 

 

99,012 

Deferred income taxes

 

 

9,774 

 

 

15,345 

Provision for doubtful accounts

 

 

3,476 

 

 

3,533 

Stock-based compensation

 

 

4,379 

 

 

3,642 

Loss (gain) on sale of utility system and market-based business unit

 

 

324 

 

 

(1,824)

Gain on sale of other assets

 

 

(322)

 

 

(390)

Net change in receivables, inventory and prepayments

 

 

(13,550)

 

 

(15,235)

Net change in payables, accrued interest, accrued taxes and other accrued liabilities

 

 

3,705 

 

 

(241)

Pension and other postretirement benefits contributions

 

 

(15,421)

 

 

(8,145)

Other

 

 

1,565 

 

 

8,404 

Net cash flows from operating activities

 

 

282,061 

 

 

288,634 

Cash flows from investing activities:

 

 

 

 

 

 

Property, plant and equipment additions, including the debt component of allowance for funds used during construction of $2,533 and $1,626

 

 

(337,731)

 

 

(270,019)

Acquisitions of utility systems and other, net

 

 

(5,860)

 

 

(5,626)

Net proceeds from the sale of utility system and other assets

 

 

1,144 

 

 

6,545 

Other

 

 

1,448 

 

 

(32)

Net cash flows used in investing activities

 

 

(340,999)

 

 

(269,132)

Cash flows from financing activities:

 

 

 

 

 

 

Customers' advances and contributions in aid of construction

 

 

5,648 

 

 

6,006 

Repayments of customers' advances

 

 

(3,519)

 

 

(1,882)

Net proceeds of short-term debt

 

 

14,455 

 

 

31,269 

Proceeds from long-term debt

 

 

441,294 

 

 

234,288 

Repayments of long-term debt

 

 

(293,270)

 

 

(181,359)

Change in cash overdraft position

 

 

(1,932)

 

 

(12,586)

Proceeds from issuing common stock

 

 

1,084 

 

 

1,029 

Proceeds from exercised stock options

 

 

2,603 

 

 

3,836 

Stock-based compensation windfall tax benefits

 

 

 -

 

 

1,263 

Repurchase of common stock

 

 

(2,116)

 

 

(2,905)

Dividends paid on common stock

 

 

(104,286)

 

 

(96,994)

Other

 

 

(647)

 

 

(984)

Net cash flows from (used in) financing activities

 

 

59,314 

 

 

(19,019)

Net change in cash and cash equivalents

 

 

376 

 

 

483 

Cash and cash equivalents at beginning of period

 

 

3,763 

 

 

3,229 

Cash and cash equivalents at end of period

 

$

4,139 

 

$

3,712 



Non-cash investing activities:

Property, plant and equipment additions purchased at the period end, but not yet paid for

 

$

35,145 

 

$

23,548 

Non-cash customer advances and contributions in aid of construction

 

 

31,615 

 

 

20,065 



 

 

 

 

 

 

Refer to Note 3 - Acquisitions for a description of non-cash activities

 

 

 

 

 

 

See notes to consolidated financial statements beginning on page 9 of this report.

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Three Months Ended

March 31,

2024

2023

Operating revenues

$

612,069

$

726,450

Operating expenses:

Operations and maintenance

136,900

137,994

Purchased gas

129,675

256,315

Depreciation

88,716

82,923

Amortization

1,088

871

Taxes other than income taxes

25,024

22,878

Total operating expenses

381,403

500,981

Operating income

230,666

225,469

Other expense (income):

Interest expense

73,273

72,668

Interest income

(989)

(819)

Allowance for funds used during construction

(4,681)

(5,688)

Gain on sale of other assets

(91,625)

(249)

Other

(442)

(240)

Income before income taxes

255,130

159,797

Income tax benefit

(10,642)

(31,637)

Net income

$

265,772

$

191,434

Comprehensive income

$

265,772

$

191,434

Net income per common share:

Basic

$

0.97

$

0.72

Diluted

$

0.97

$

0.72

Average common shares outstanding during the period:

Basic

273,377

264,192

Diluted

273,738

264,751

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

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

March 31,

December 31,

2024

2023

Stockholders' equity:

Common stock, $0.50 par value

$

138,438

$

138,297

Capital in excess of par value

4,142,610

4,137,696

Retained earnings

1,888,521

1,706,675

Treasury stock, at cost

(88,442)

(86,485)

Total stockholders' equity

6,081,127

5,896,183

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

Interest Rate Range

Maturity Date Range

0.00% to 0.99%

2024 to 2033

2,885

2,935

1.00% to 1.99%

2024 to 2039

7,352

7,538

2.00% to 2.99%

2024 to 2058

207,403

207,917

3.00% to 3.99%

2024 to 2056

1,312,241

1,313,932

4.00% to 4.99%

2024 to 2059

1,242,557

1,245,727

5.00% to 5.99%

2024 to 2061

313,406

312,745

6.00% to 6.99%

2026 to 2036

31,000

31,000

7.00% to 7.99%

2025 to 2027

28,061

28,125

8.00% to 8.99%

2025

1,086

1,289

9.00% to 9.99%

2026

11,800

11,800

3,157,791

3,163,008

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

258,000

720,000

Unsecured notes payable:

Notes at 2.40% due 2031

400,000

400,000

Notes at 2.704% due 2030

500,000

500,000

Notes ranging from 3.01% to 3.59% due 2029 through 2050

1,125,000

1,125,000

Notes at 5.375%, due 2034

500,000

-

Notes at 4.28%, due 2049

500,000

500,000

Notes at 5.30%, due 2052

500,000

500,000

Notes at 5.95%, due 2024 through 2034

30,000

30,000

Total long-term debt

6,970,791

6,938,008

Current portion of long-term debt

67,247

67,415

Long-term debt, excluding current portion

6,903,544

6,870,593

Less: debt issuance costs

47,415

44,508

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

6,856,129

6,826,085

Total capitalization

$

12,937,256

$

12,722,268

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

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF EQUITY 

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Capital in

Common

Excess of

Retained

Treasury

Stock

Par Value

Earnings

Stock

Total

Balance at December 31, 2023

$

138,297 

$

4,137,696 

$

1,706,675 

$

(86,485)

$

5,896,183 

Net income

-

-

265,772 

-

265,772 

Dividends of March 1, 2024 ($0.3071 per share)

-

-

(1)

-

(1)

Dividends of June 1, 2024 declared ($0.3071 per share)

-

-

(83,998)

-

(83,998)

Issuance of common stock under dividend reinvestment plan (117,210 shares)

59 

3,823 

-

-

3,882 

Repurchase of stock (62,872 shares)

-

-

-

(2,231)

(2,231)

Equity compensation plan (160,694 shares)

80 

(80)

-

-

-

Exercise of stock options (4,971 shares)

173 

-

-

175 

Stock-based compensation

-

1,049 

73 

-

1,122 

Other

-

(51)

-

274 

223 

Balance at March 31, 2024

$

138,438 

$

4,142,610 

$

1,888,521 

$

(88,442)

$

6,081,127 

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


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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF EQUITY 

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Capital in

Common

Excess of

Retained

Treasury

Stock

Par Value

Earnings

Stock

Total

Balance at December 31, 2022

$

133,486 

$

3,793,262 

$

1,534,331 

$

(83,693)

$

5,377,386 

Net income

-

-

191,434 

-

191,434 

Dividends of March 1, 2023 ($0.287 per share)

-

-

(1)

-

(1)

Dividends of June 1, 2023 declared ($0.287 per share)

-

-

(75,876)

-

(75,876)

Issuance of common stock under dividend reinvestment plan (97,315 shares)

49 

4,068 

-

-

4,117 

Issuance of common stock from at-the-market sale agreements (399,128 shares)

200 

19,094 

-

-

19,294 

Repurchase of stock (88,051 shares)

-

-

-

(3,911)

(3,911)

Equity compensation plan (222,782 shares)

111 

(111)

-

-

-

Exercise of stock options (2,917 shares)

101 

-

-

103 

Stock-based compensation

-

3,410 

(267)

-

3,143 

Other

-

(20)

-

273 

253 

Balance at March 31, 2023

$

133,848 

$

3,819,804 

$

1,649,621 

$

(87,331)

$

5,515,942 

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

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOW 

(In thousands of dollars) 

(UNAUDITED)

Three Months Ended

March 31,

2024

2023

Cash flows from operating activities:

Net income

$

265,772 

$

191,434 

Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation and amortization

89,804 

83,794 

Deferred income taxes

(12,323)

(33,257)

Provision for doubtful accounts

7,756 

4,532 

Stock-based compensation

1,061 

3,422 

Gain on sale of utility systems and other assets

(91,625)

(249)

Net change in receivables, deferred purchased gas costs, inventory and prepayments

122 

219,624 

Net change in payables, accrued interest, accrued taxes and other accrued liabilities

(18,212)

(58,361)

Other

(1,642)

(9,311)

Net cash flows from operating activities

240,713 

401,628 

Cash flows from investing activities:

Property, plant and equipment additions, including the debt component of allowance for funds used during construction of $1,807 and $1,428

(252,998)

(243,730)

Acquisitions of utility systems, net

-

(136)

Net proceeds from the sale of utility systems and other assets

166,563 

337 

Other

(48)

321 

Net cash flows used in investing activities

(86,483)

(243,208)

Cash flows from financing activities:

Customers' advances and contributions in aid of construction

4,094 

7,010 

Repayments of customers' advances

(2,171)

(984)

Net repayments of short-term debt

(72,623)

(206,000)

Proceeds from long-term debt

618,008 

229,770 

Repayments of long-term debt

(586,649)

(114,889)

Change in cash overdraft position

(2,420)

(8,624)

Proceeds from issuance of common stock under dividend reinvestment plan

3,882 

4,117 

Proceeds from issuance of common stock from at-the-market sale agreement

-

19,294 

Proceeds from exercised stock options

175 

103 

Repurchase of common stock

(2,231)

(3,911)

Dividends paid on common stock

(83,930)

(75,808)

Other

223 

253 

Net cash flows used in financing activities

(123,642)

(149,669)

Net change in cash and cash equivalents

30,588 

8,751 

Cash and cash equivalents at beginning of period

4,612 

11,398 

Cash and cash equivalents at end of period

$

35,200 

$

20,149 

Non-cash investing activities:

Property, plant and equipment additions purchased at the period end, but not yet paid for

$

91,576 

$

86,136 

Non-cash utility property contributions

5,740 

13,126 

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

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 1Basis of Presentation

The accompanying unaudited consolidated balance sheets and statements of capitalization of Aqua America,Essential Utilities, Inc. and subsidiaries (the(collectively, the “Company”, “we”, “us” or “our”) at September 30, 2017,March 31, 2024, and the unaudited consolidated statements of net incomeoperations and comprehensive income, cash flows and equity for the three and nine months ended September 30, 2017March 31, 2024 and 20162023, have been prepared in accordance with accounting principles generally accepted in the consolidated statements of cash flowUnited States (“GAAP”) for the nine months ended September 30, 2017 and 2016,interim reporting and the consolidated statement of equityrules and regulations for the nine months ended September 30, 2017 are unaudited, but reflect all adjustments, consisting of only normal recurring accruals, which are, in the opinion of management, necessary to present a  fair statement of its consolidated financial position, consolidated changes in equity, consolidated results of operations, and consolidated cash flow for the periods presented.reporting on Quarterly Reports on Form 10-Q. Because they cover interim periods, the statements and related notes to the financial statements do not include all disclosures and notes normally provided in annual financial statements and, therefore, should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.  The2023. Interim results of operations for interim periods mayare not benecessarily indicative of results for a full year. In the results that may be expected for the entire year.  The December 31, 2016opinion of management, all adjustments, consisting of only recurring accruals, which are necessary to present a fair statement of its consolidated balance sheet data presented herein was derived from the Company’s December 31, 2016 audited consolidated financial statements, but does not include all disclosures and notes normally provided in annual financial statements.  Certain prior period amounts have been reclassified to conform to the current period presentation in thesheets, consolidated statements of equity, consolidated statements of operations and comprehensive income, and consolidated cash flows:

·

pension and other postretirement benefit contributions, and

·

as a result of the early adoption, in the third quarter of 2017, of the Financial Accounting Standards Board’s (“FASB”) accounting guidance on the classification of certain cash receipts and cash payments,  the presentation of debt extinguishment costs (refer to Note 15 – Recent Accounting Pronouncements).

flow for the periods presented, have been made.

The preparation of financial statements often requires the selection of specific accounting methods and policies. Further, significantSignificant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in its consolidated balance sheets, the revenues and expenses in its consolidated statements of netoperations and comprehensive income, and the information that is contained in its summary of significant accounting policies and notes to consolidated financial statements. Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time. Furthermore, we are exposed to the uncertain state of the economy and macroeconomic conditions, including inflation and rising interest rates. As these continue to evolve, future events and effects related to these conditions cannot be determined with precision. Accordingly, actual amounts or future results can differ materially from those estimates that the Company includes currently in its consolidated financial statements, summary of significant accounting policies, and notes.

There have been no changes to the summary of significant accounting policies previously identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.  2023.

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AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 2 – GoodwillRevenue Recognition

The following table presents our revenues disaggregated by major source and customer class:

Three Months Ended

Three Months Ended

March 31, 2024

March 31, 2023

Water Revenues

Wastewater Revenues

Natural Gas Revenues

Other Revenues

Water Revenues

Wastewater Revenues

Natural Gas Revenues

Other Revenues

Revenues from contracts with customers:

Residential

$

151,831 

$

35,594 

$

206,926 

$

-

$

147,252 

$

33,490 

$

292,230 

$

-

Commercial

41,737 

8,983 

42,171 

-

40,954 

8,591 

65,157 

-

Fire protection

10,381 

-

-

-

10,259 

-

-

-

Industrial

8,142 

542 

890 

-

7,857 

578 

1,789 

-

Gas transportation & storage

-

-

70,491 

-

-

-

67,653 

-

Other water

15,607 

-

-

-

8,844 

-

-

-

Other wastewater

-

3,624 

-

-

-

2,734 

-

-

Other utility

-

-

2,702 

2,810 

-

-

13,077 

6,159 

Revenues from contracts with customers

227,698 

48,743 

323,180 

2,810 

215,166 

45,393 

439,906 

6,159 

Alternative revenue program

656 

(13)

1,151 

-

402 

180 

1,389 

-

Other and eliminations

-

-

-

7,844 

-

-

-

17,855 

Consolidated

$

228,354 

$

48,730 

$

324,331 

$

10,654 

$

215,568 

$

45,573 

$

441,295 

$

24,014 

Note 3 – Acquisitions

Water and Wastewater Utility Acquisitions - Completed

In July 2023, the Company completed the following water utility asset acquisitions: Shenandoah Borough, Pennsylvania, which serves approximately 2,900 customers for $12,291; La Rue, an Ohio municipality, which serves approximately 300 customers for $2,253; and, Southern Oaks Water System, which serves approximately 800 customers in Texas for $3,321. Additionally, in July 2023, the Company completed their acquisition of a portion of the water and wastewater utility assets of the Village of Frankfort, an Illinois municipality, which serves approximately 1,500 customers for $1,424.

In June 2023, the Company acquired the wastewater utility assets of Union Rome, Ohio, which serves approximately 4,300 customers for a cash purchase price of $25,547.

In March 2023, the Company acquired the North Heidelberg Sewer Company in Berks County, Pennsylvania, which serves approximately 300 customer connections for a cash purchase price of $136.

The purchase price allocation for these acquisitions consisted primarily of property, plant and equipment.

The pro forma effect of the utility systems acquired is not material either individually or collectively to the Company’s results of operations.

Water and Wastewater Utility Acquisitions – Pending Completion

In December 2023, the Company entered into a purchase agreement to acquire North Versailles wastewater assets in North Versailles Township, Pennsylvania which serves approximately 4,400 customers for between $25,000 and $30,000.

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

In September 2023, the Company entered into a purchase agreement to acquire Greenville Municipal Water Authority’s water system in Greenville, Pennsylvania which serves approximately 3,000 customers for $18,000.

In June 2023, the Company entered into a purchase agreement to acquire Westfield HOA wastewater assets, which serves approximately 200 customers within Westfield Homeowners Subdivision in Glenview, Illinois for $50.

In April 2023, the Company entered into a purchase agreement to acquire Greenville Sanitation Authority’s wastewater utility assets, which serves approximately 2,300 customers in Greenville, Pennsylvania for $18,000.

In October 2021, the Company entered into a purchase agreement to acquire the wastewater utility assets of the City of Beaver Falls, Pennsylvania which consists of approximately 7,600 equivalent retail customers for $41,250.

The purchase price for these pending acquisitions are subject to certain adjustments at closing, and are subject to regulatory approval, including the final determination of the fair value of the rate base acquired. We plan to finance the purchase price of these acquisitions by utilizing our revolving credit facility until permanent debt and common equity are secured. These pending acquisitions are expected to close in 2024. Closing for our utility acquisitions are subject to the timing of the respective regulatory approval processes.

East Whiteland Purchase Agreement

On July 29, 2022, the Pennsylvania Public Utility Commission issued an order (the “PUC Order”) approving the Company’s acquisition of the municipal wastewater assets of East Whiteland Township, Chester County, Pennsylvania, which serves 4,018 customers (the “East Whiteland Wastewater Assets”). On August 12, 2022, the Company acquired the East Whiteland Wastewater Assets for a cash purchase price of $54,374. Subsequently on August 25, 2022, the Office of Consumer Advocate (“OCA”) filed an appeal of the PUC Order to the Pennsylvania Commonwealth Court. On July 31, 2023, a decision was issued by the Pennsylvania Commonwealth Court, in which the Pennsylvania Commonwealth Court agreed with the OCA and reversed the PUC order which approved the acquisition. On September 26, 2023, the Pennsylvania Commonwealth Court denied our motion for reargument. On October 26, 2023, the Company, the Pennsylvania Public Utility Commission, and East Whiteland Township filed an appeal to the Pennsylvania Supreme Court. East Whiteland Township filed to Supplement its Petition for Allowance of Appeal on January 2, 2024. On January 16, 2024, the Company, the OCA and the PUC filed Answers to East Whiteland Township’s Petition. The Company is currently waiting to see if the Supreme Court will grant allocatur. Management believes the final resolution of this matter will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

DELCORA Purchase Agreement

In 2019, the Company entered into a purchase agreement to acquire the wastewater utility system assets of the Delaware County Regional Water Quality Control Authority (“DELCORA”), which consists of approximately 16,000 customers, or the equivalent of 198,000 retail customers, in 42 municipalities in

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Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Southeast Pennsylvania for $276,500. There are several legal proceedings involving the Company as a result of the purchase agreement that are on-going. For additional information, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The purchase price for this pending acquisition is subject to certain adjustments at closing, and is subject to regulatory approval, including the final determination of the fair value of the rate base acquired. We plan to finance the purchase price of this acquisition with a mix of equity and debt financing, utilizing our revolving credit facility until permanent debt is secured. Closing of our acquisition of DELCORA is subject to regulatory approval and on-going litigation.

Note 4 –Dispositions

On October 1, 2023, the Company sold its regulated natural gas utility assets in West Virginia, which served approximately 13,000 customers or about two percent of the Company’s regulated natural gas customers (“Peoples Gas West Virginia”). Initially the sale closed for an estimated purchase price of $39,965, subject to working capital and other adjustments. In March 2024, the Company received an additional $1,213 from the buyer. The additional proceeds were based on finalizing closing working capital and other adjustments, resulting in a final purchase price of $41,178 and a loss of an inconsequential amount. The sale of Peoples Gas West Virginia had no major effect on the Company’s operations and did not meet the requirements to be classified as discontinued operations.

In October 2023, the Company entered into an agreement to sell its interest in three non-utility local microgrid and distributed energy projects for $165,000. As of December 31, 2023, balances associated with these projects of $63,182 were included in prepayments and other current assets in the consolidated balance sheets. The sale was completed in January 2024, and the Company recognized a gain of $91,236 during the first quarter of 2024 which is included in other expense (income) in the accompanying consolidated statement of operations.

Note 5 – Goodwill

The following table summarizes the changes in the Company’s goodwill, by business segment:



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Regulated

 

 

 

 

 

 



 

Segment

 

Other

 

Consolidated

Balance at December 31, 2016

 

$

37,367 

 

$

4,841 

 

$

42,208 

Goodwill acquired

 

 

72 

 

 

 -

 

 

72 

Reclassification to utility plant acquisition adjustment

 

 

(50)

 

 

 -

 

 

(50)

Balance at September 30, 2017

 

$

37,389 

 

$

4,841 

 

$

42,230 

Regulated Water

Regulated Natural Gas

Other

Consolidated

Balance at December 31, 2023

$

58,450

$

2,277,447

$

4,841

$

2,340,738

Reclassification to utility plant acquisition adjustment

(5)

-

-

(5)

Balance at March 31, 2024

$

58,445

$

2,277,447

$

4,841

$

2,340,733

The reclassification of goodwill to utility plant acquisition adjustment results from a mechanism approved by the applicable utility commission. The mechanism provides for the transfer over time, and the recovery through customer rates, of goodwill associated with some acquisitions upon achieving specific objectives.

Goodwill is not amortized but is tested for impairment annually, or more often, if circumstances indicate a possible impairment may exist, to determine whether it  is more likely than not that the fair value of a reporting unit is less than its carrying amount.  When testing goodwill for impairment,

Note 6 – Capitalization

In March 2024, the Company may assess qualitative factors, including macroeconomic conditions, industryfiled a new universal shelf registration through a filing with the Securities and market considerations, cost factors, overall financial performance,Exchange Commission (SEC) to allow for the potential future offer and entity specific events.  Alternatively,sale by the Company, may bypass this qualitative assessment for some of its reporting units and perform a quantitative goodwill impairment test by determining the fair value of a reporting unit based on a discounted cash flow analysis.  The Company tested the goodwill attributable to each of its reporting units for impairment as of July 31, 2017, in conjunction with the timing of its annual strategic business plan, and concluded that the estimated fair value of each reporting unit, which has goodwill recorded, exceeded the reporting unit’s carrying amount, indicating that none of the Company’s goodwill was impaired.from

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AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 3 – Acquisitionstime to time, in one or more public offerings, of an indeterminate amount of our common stock, preferred stock, debt securities, and other securities specified therein at indeterminate prices.  This registration statement is effective for three years and replaces a similar filing that expires in the second quarter of 2024. 

During the first nine months of 2017,At-the-Market Offering

On October 14, 2022, the Company completed four acquisitionsentered into at-the market sales agreements (“ATM”) with third-party sales agents, under which the Company may offer and sell shares of its common stock, from time to time, at its option, having an aggregate gross offering price of up to $500,000 pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-255235). The Company intends to use the net proceeds from the sales of shares through the ATM for working capital, capital expenditures, water and wastewater utility systems in various states adding 1,003 customers.  The total purchase priceacquisitions and repaying outstanding indebtedness. During the three months ended March 31, 2024, there were no common stock sales under the ATM. As of these utility systems consisted of $5,860 in cash, which resulted in $72 of goodwill being recorded.  The pro forma effect ofMarch 31, 2024, approximately $110,000 remained available for sale under the businesses acquired is not material either individually or collectively to the Company’s results of operations. ATM.

As part of the Company’s growth-through-acquisition strategy,Long-term Debt and Loans Payable

On January 8, 2024, the Company has entered into purchase agreements to acquireissued $500,000 of long-term debt (the “2024 Senior Notes”), less expenses of $4,610, due in 2034 with an interest rate of 5.375%. The Company used the water or wastewater utility system assets of five municipalities for a total combined purchase price in cash of $145,700.  The purchase price for these pending acquisitions is subject to certain adjustments at closing, and is subject to regulatory approvals.  Closing for these acquisitions are expected to occur by mid-year 2018, which is subject to the timing of the regulatory approval process.  These acquisitions will add approximately 14,900 customers in two of the states that the Company operates in.     

Pursuant to its strategy to grow through acquisitions, in January 2016, the Company acquired Superior Water Company, Inc., which provides public water service to approximately 3,900 customers in portions of Berks, Chester, and Montgomery counties in Pennsylvania.  The total purchase price for the utility system was $16,750, which consisted ofnet proceeds from the issuance of 439,943 shares2024 Senior Notes (1) to repay a portion of the borrowings under the Company’s common stockexisting five year unsecured revolving credit facility, and $3,905(2) for general corporate purposes.

In August 2023, the Company’s subsidiary, Aqua Pennsylvania, issued $225,000 in cash.aggregate principal amount of first mortgage bonds. The purchase price allocation for this acquisition consisted primarily of acquired property, plant and equipment of $25,167, contributions in aid of construction of $16,565, and goodwill of $8,622.  Additionally, during 2016, the Company completed eighteen acquisitions of water and wastewater utility systems in various states adding 2,469 customers.  The total purchase price of these utility systemsbonds consisted of $5,518$175,000 of 5.48% first mortgage bonds due in cash, which resulted2053; and $50,000 of 5.56% first mortgage bonds due in $1,756 of goodwill being recorded.  The pro forma effect of the businesses acquired is not material either individually or collectively to the Company’s results of operations.        

Note 4  –  Assets Held for Sale

2061. In the first quarter of 2017, the Company decided to market for sale a water system that serves approximately 265 customers.  This water system is reported as assets held for sale in the Company’s consolidated balance sheet.

In the second quarter of 2016, the Company decided to market for sale two business units that are reported within the Company’s market-based subsidiary, Aqua Resources.  One business unit installed and tested devices that prevent the contamination of potable water and repaired water and wastewater systems, for which the sale was completed in January 2017.  The other business unit repairs and performs maintenance on water and wastewater systems, for which the sale was completed in June 2017.

]

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 5  –  Capitalization

In October 2017,2023, Aqua Pennsylvania issued $75,000 of first mortgage bonds, of which $35,000 is due in 2054,  $20,000 is due in 2055,2043, and $20,000 is due in 2057 with an interest ratesrate of 4.06%,  4.07%, and 4.09%, respectively.5.60%. The proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes.

In July 2017, Aqua Illinois issued $100,000 of first mortgage bonds consisting of the following:

\

 

 

Amount

Interest Rate

Maturity

$25,000

3.64%

2032

$6,000

3.89%

2037

$15,000

3.90%

2038

$10,000

4.18%

2047

$22,000

4.22%

2049

$22,000

4.24%

2050

The proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes. 

In July 2017, Aqua Pennsylvania issued $80,000 of first mortgage bonds, of which $40,000 is due in 2055 and $40,000 is due in 2057 with interest rates of 4.04% and 4.06%, respectively.  The proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes. 

In January 2017, Aqua Pennsylvania issued $50,000 of first mortgage bonds, of which $10,000 is due in 2042 and $40,000 is due in 2044 with interest rates of 3.65% and 3.69%, respectively. The proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes.

Note 67Fair Value of Financial Instruments

The Company follows the FASB’s accounting guidance for fair value measurements and disclosures, which defines fair value and establishes a framework for using fair value to measure assets and liabilities.  That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are as follows:

·

Level 1:  unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access;

·

Level 2:  inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in non-active markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or

·

Level 3:  inputs that are unobservable and significant to the fair value measurement.

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.  There have been no changes in the valuation techniques used to measure fair value, or asset or liability transfers between the levels of the fair value hierarchy for the quarter ended September 30, 2017. 

Financial instruments are recorded at carrying value in the financial statements and approximate fair value as of the dates presented.  The fair value of these instruments is disclosed below in accordance with current accounting guidance related to financial instruments. There have been no changes in the valuation techniques used to measure fair value, or asset or liability transfers between the levels of the fair value hierarchy for the three months ended March 31, 2024 and 2023. 

The fair value of loans payable is determined based on its carrying amount and utilizing Level 1 methods and assumptions. As of September 30, 2017March 31, 2024 and December 31, 2016,2023, the carrying amount of the Company’s loans payable was $20,990$87,500 and $6,535,$160,123, respectively, which equates to their estimated fair value. The fair value of cash and cash equivalents, is determined based on Level 1 methods and assumptions. As of March 31, 2024 and December 31, 2023, the carrying amounts of the Company's cash and cash equivalents was $35,200 and $4,612, respectively, which equates to their fair value. The Company’s assets underlying the deferred compensation plan liability isand non-qualified pension plans are determined by the fair value of mutual funds, which are based on quoted market prices from active markets utilizing Level 1 methods and assumptions. As of September 30, 2017March 31, 2024 and December 31, 2016,2023, the carrying amount

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

of these securities was $18,145$28,357 and $17,072,$26,442, respectively, which equates to their fair value, and is reported in the consolidated balance sheet in deferred charges and other assets.

Unrealized gain and loss on equity securities held in conjunction with our non-qualified pension plan is as follows:

Three Months Ended

March 31,

2024

2023

Net gain recognized during the period on equity securities

$

421

$

131

Less: net gain recognized during the period on equity securities sold during the period

-

-

Unrealized gain recognized during the reporting period on equity securities still held at the reporting date

$

421

$

131

The fair value of cash and cash equivalents, whichnet gain recognized on equity securities is comprised of a money market fund, is determined basedpresented on the net asset value per unit utilizing Level 2 methodsconsolidated statements of operations and assumptions.  As of September 30, 2017 and December 31, 2016,comprehensive income on the carrying amounts of the Company's cash and cash equivalents was $4,139 and $3,763, respectively, which equates to their fair value.line item “Other”.

The carrying amounts and estimated fair values of the Company’s long-term debt is as follows:



 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,



 

2017

 

2016

Carrying Amount

 

$

2,059,031 

 

$

1,910,633 

Estimated Fair Value

 

 

2,185,051 

 

 

2,018,933 

March 31,

December 31,

2024

2023

Carrying amount

$

6,970,791

$

6,938,009

Estimated fair value

5,883,354

5,980,722

The fair value of long-term debt has been determined by discounting the future cash flows using current market interest rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions.

The Company’s customers’ advances for construction have a carrying value of $107,715$125,191 as of September 30, 2017,March 31, 2024, and $91,843$128,755 as of December 31, 2016.2023. Their relative fair values cannot be accurately estimated because future refund payments depend on several variables, including new customer connections, customer consumption levels, and future rate increases.rates. Portions of these non-interest bearingnon-interest-bearing instruments are payable annually through 20272033, and amounts not paid by the respective contract expiration dates become non-refundable. The fair value of these amounts would, however, be less than their carrying value due to the non-interest bearingnon-interest-bearing feature.

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 78Net Income per Common Share

Basic net income per common share is based on the weighted average number of common shares outstanding.outstanding and the weighted average minimum number of shares issued upon settlement of the stock purchase contracts issued under the tangible equity units. Diluted net income per common share is based on the weighted average number of common shares outstanding and potentially dilutive shares. The dilutive effect of employee stock-based

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

compensation is included in the computation of diluted net income per common share. The dilutive effect of stock-based compensation is calculated using the treasury stock method and expected proceeds upon exercise or issuance of the stock-based compensation. The treasury stock method assumes that the proceeds from stock-based compensation areis used to purchase the Company’s common stock at the average market price during the period. The following table summarizes the shares, in thousands, used in computing basic and diluted net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

Three Months Ended

 

September 30,

 

September 30,

March 31,

 

2017

 

2016

 

2017

 

2016

2024

2023

Average common shares outstanding during the period for basic computation

 

177,660 

 

177,336 

 

177,583 

 

177,243 

273,377

264,192

Dilutive effect of employee stock-based compensation

 

464 

 

481 

 

520 

 

538 

Effect of dilutive securities:

Employee stock-based compensation

361

559

Average common shares outstanding during the period for diluted computation

 

178,124 

 

177,817 

 

178,103 

 

177,781 

273,738

264,751

 

 

 

 

 

 

 

 

For the three and nine months ended September 30, 2017 and 2016, allThe number of the Company’soutstanding employee stock options that were not included in the calculationsdiluted earnings per share calculation because the effect would have been anti-dilutive was: 268,273 for the three months ended March 31, 2024; and 152,138 for the three months ended March 31, 2023. Additionally, the dilutive effect of performance share units and restricted share units granted are included in the Company’s calculation of diluted net income per share.

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share as the calculated cost to exercise the stock options was less than the average market price of the Company’s common stock during these periods.amounts)

(UNAUDITED)

Note 89Stock-based Compensation

Under the Company’s 2009 OmnibusAmended and Restated Equity Compensation Plan as amended as of February 27, 2014 (the “2009 Plan”“Plan”), as approved by the Company’s shareholders on May 2, 2019, to replace the 2004 Equity Compensation Plan, (the “2004 Plan”), stock options, stock units, stock awards, stock appreciation rights, dividend equivalents, and other stock-based awards may be granted to employees, non-employee directors, and consultants and advisors. The 2009 Plan authorizes 6,250,000 shares for issuance under the plan.Plan. A maximum of 3,125,000 shares under the 2009 Plan may be issued pursuant to stock awards, stock units and other stock-based awards, subject to adjustment as provided in the 2009 Plan. During any calendar year, no individual may be granted (i) stock options and stock appreciation rights under the 2009 Plan for more than 500,000 shares of Company stock in the aggregate or (ii) stock awards, stock units or other stock-based awards under the 2009 Plan for more than 500,000 shares of Company stock in the aggregate, subject to adjustment as provided in the 2009 Plan. Awards to employees and consultants under the 2009 Plan are made by a committee of the Board of Directors of the Company, except that with respect to awards to the Chief Executive Officer, the committee recommends those awards for approval by the non-employee directors of the Board of Directors. In the case of awards to non-employee directors, the Board of Directors makes such awards. At September 30, 2017,  3,741,526March 31, 2024, 1,227,138 shares were still available for issuance under the 2009 Plan. No further grants may be made under the Company’s 2004 Equity Compensation Plan.  

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Performance Share Units– A performance share unit (“PSU”) represents the right to receive a share of the Company’s common stock if specified performance goals are met over the three-yearthree year performance period specified in the grant, subject to exceptions through the respective vesting period, which is generally three years. Each grantee is granted a target award of PSUs and may earn between 0% and 200% of the target amount depending on the Company’s performance against the performance goals. The following table provides compensation costsexpense for stock-based compensation related to PSUs:

Three Months Ended

March 31,

2024

2023

Stock-based compensation within operations and maintenance expenses

$

106

$

2,443

Income tax benefit

26

612



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Stock-based compensation within operations and maintenance expenses

 

$

1,035 

 

$

1,012 

 

$

2,875 

 

$

2,504 

Income tax benefit

 

 

420 

 

 

411 

 

 

1,167 

 

 

1,013 

The following table summarizes the PSU transactions for the ninethree months ended September 30, 2017:March 31, 2024:

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

Number

Weighted

 

of

 

Average

of

Average

 

Share Units

 

Fair Value

Share Units

Fair Value

Nonvested share units at beginning of period

 

476,896 

 

$

27.96 

531,437

$

40.03

Granted

 

125,202 

 

 

30.79 

226,971

38.10

Performance criteria adjustment

 

(64,398)

 

 

27.75 

(142,772)

30.22

Actual vested

(96,425)

43.40

Forfeited

 

(16,306)

 

 

28.26 

(4,271)

42.63

Share units vested in prior period and issued in current period

 

32,400 

 

 

25.31 

Share units issued

 

(125,999)

 

 

36.37 

Nonvested share units at end of period

 

427,795 

 

$

26.13 

514,940

41.25

 

 

 

 

 

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date, regardless of whether the market-based condition is satisfied. The per unit weighted-average fair value at the date of grant for PSUs granted during the ninethree months ended September 30, 2017March 31, 2024 and 20162023 was $30.79$38.10 and $28.89,$45.06, respectively. The fair value of each PSU grant is amortized monthly into compensation expense on a straight-line basis over their respective vesting periods, generally 36 months. The accrual of compensation costs is based on the Company’s estimate of the final expected value of the award and is adjusted as required for the portion based on the performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs. The recording of compensation expense for PSUs has no impact on net cash flows.  

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Restricted Stock UnitsA restricted stock unit (“RSU”) represents the right to receive a share of the Company’s common stock. RSUs are eligible to be earned at the end of a specified restricted period, which is generally three years, beginning on the date of grant. The Company assumes that forfeitures will be minimal and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the RSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the RSUs. The following table provides the compensation costexpense and income tax benefit for stock-based compensation related to RSUs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

Three Months Ended

 

September 30,

 

September 30,

March 31,

 

2017

 

2016

 

2017

 

2016

2024

2023

Stock-based compensation within operations and maintenance expenses

 

$

311 

 

$

299 

 

$

915 

 

$

763 

$

846

$

681

Income tax benefit

 

 

129 

 

 

124 

 

 

378 

 

 

315 

211

171

The following table summarizes the RSU transactions for the ninethree months ended September 30, 2017: March 31, 2024: 

 

 

 

 

 

 

 

 

 

 

Number

 

Weighted

Number

Weighted

 

of

 

Average

of

Average

 

Stock Units

 

Fair Value

Stock Units

Fair Value

Nonvested stock units at beginning of period

 

109,273 

 

$

28.48 

192,217

$

45.06

Granted

 

41,293 

 

30.37 

102,306

36.60

Stock units vested and issued

 

(26,914)

 

26.18 

(63,982)

44.45

Forfeited

 

(2,287)

 

30.52 

(1,600)

42.40

Nonvested stock units at end of period

 

121,365 

 

$

29.60 

228,941

41.46

The per unit weighted-average fair value at the date of grant for RSUs granted during the ninethree months ended September 30, 2017March 31, 2024 and 20162023 was $30.37$36.60 and $32.09,$45.61, respectively.

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Stock Options – A stock option represents the option to purchase a number of shares of common stock of the Company as specified in the stock option grant agreement at the exercise price per share as determined by the closing market price of our common stock on the grant date. Stock options are exercisable in installments of 33% annually, starting one year from the grant date and expire 10 years from the grant date.date, subject to satisfaction of designated performance goals. The fair value of each stock option is amortized into compensation expense using the graded-vesting method, which results in the recognition of compensation costs over the requisite service period for each separately vesting tranche of the stock options as though the stock options were, in substance, multiple stock option grants. The following table provides the compensation cost and income tax benefit for stock-based compensation related to stock options:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

 

September 30,



 

2017

 

2016

 

2017

 

2016

Stock-based compensation within operations and maintenance expenses

 

$

73 

 

$

 -

 

$

177 

 

$

 -

Income tax benefit

 

 

43 

 

 

15 

 

 

167 

 

 

249 

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Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Three Months Ended

March 31,

2024

2023

Stock-based compensation within operations and maintenance expenses

$

131

$

77

Income tax benefit

33

19

The fair value of options was estimated at the grant date using the Black-Scholes option-pricing model.  The following assumptions were used in the application of this valuation model:

2017

Expected term (years)

5.45 

Risk-free interest rate

2.01% 

Expected volatility

17.7% 

Dividend yield

2.51% 

Grant date fair value per option

$       4.07

2024

2023

Expected term (years)

5.5

5.5

Risk-free interest rate

4.00%

4.03%

Expected volatility

28.30%

27.80%

Dividend yield

3.43%

2.53%

Grant date fair value per option

$

8.12

$

11.37

Historical information was the principal basis for the selection of the expected term and dividend yield.  The expected volatility is based on a weighted-average combination of historical and implied volatilities over a time period that approximates the expected term of the option.  The risk-free interest rate was selected based upon the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option.

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For the nine months ended September 30, 2016, there were no compensation costs for stock-based compensation related to stock options, as the previous stock option grant that occurred in 2010 became fully amortized in 2013.  Additionally, there were no stock options granted during the nine months ended September 30, 2016. ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

The following table summarizes stock option transactions for the ninethree months ended September 30, 2017:March 31, 2024:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

Weighted

 

 

 

Weighted

Weighted

 

 

 

Average

 

Average

 

Aggregate

Average

Average

Aggregate

 

 

 

Exercise

 

Remaining

 

Intrinsic

Exercise

Remaining

Intrinsic

 

Shares

 

Price

 

Life (years)

 

Value

Shares

Price

Life (years)

Value

Outstanding at beginning of period

 

427,335 

 

$

15.55 

 

 

 

 

 

882,442

$

37.03

Granted

 

120,127 

 

30.47 

 

 

 

 

 

119,548

35.78

Forfeited

 

(2,439)

 

30.47 

 

 

 

 

 

Expired / Cancelled

 

(2,812)

 

14.26 

 

 

 

 

 

Expired

(527)

35.94

Exercised

 

(157,621)

 

16.51 

 

 

 

 

 

(4,971)

35.25

Outstanding at end of period

 

384,590 

 

$

19.73 

 

3.9 

 

$

5,175 

996,492

$

36.89

5.8

$

1,380

 

 

 

 

 

 

 

 

 

 

Exercisable at end of period

 

266,902 

 

$

15.00 

 

1.4 

 

$

4,855 

803,853

$

36.29

5.0

$

1,228

Restricted Stock – Restricted stock awards provide the grantee with the rights of a shareholder, including the right to receive dividends and to vote such shares, but not the right to sell or otherwise transfer the shares during the restriction period. Restricted stock awards result in compensation expense that is equal to the fair market value of the stock on the date of the grant and is amortized ratably over the restriction period. The Company expects forfeitures of restricted stock to be de minimis. The following table provides the compensation cost and income tax benefit for stock-based compensation related to restricted stock:

Three Months Ended

March 31,

2024

2023

Stock-based compensation within operations and maintenance expenses

$

12

$

12

Income tax benefit

3

3

17

The following table summarizes restricted stock transactions for the three months ended March 31, 2024:

Number

Weighted

of

Average

Shares

Fair Value

Nonvested restricted stock at beginning of period

1,412

$

35.42

Granted

-

-

Vested

-

-

Nonvested restricted stock at end of period

1,412

$

35.42

There were no restricted stock awards granted during the three months ended March 31, 2024.

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AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Stock Awards – Stock awards represent the issuance of the Company’s common stock, without restriction. The issuance of stock awards results in compensation expense whichthat is equal to the fair market value of the stock on the grant date and is expensed immediately upon grant. There were no stock awards granted and vested during the three months ended March 31, 2024.

The following table provides the compensation cost and income tax benefit for stock-based compensation related to stock awards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

Three Months Ended

 

September 30,

 

September 30,

March 31,

 

2017

 

2016

 

2017

 

2016

2024

2023

Stock-based compensation within operations and maintenance expenses

 

$

150 

 

$

131 

 

$

412 

 

$

375 

$

-

$

210

Income tax benefit

 

 

62 

 

 

54 

 

 

171 

 

 

155 

-

59

The following table summarizes stock award transactions for the nine months ended September 30, 2017:



 

 

 

 

 



 

 

 

 

 



 

Number

 

Weighted



 

of

 

Average



 

Stock Awards

 

Fair Value

Nonvested stock awards at beginning of period

 

 -

 

$

 -

Granted

 

12,529 

 

 

32.92 

Vested

 

(12,529)

 

 

32.92 

Nonvested stock awards at end of period

 

 -

 

$

 -

The per unit weighted-average fair value at the date of grant for stock awards granted during the nine months ended September 30, 2017 and 2016 was $32.92 and $32.57, respectively.

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AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 910Pension Plans and Other Postretirement Benefits

The Company maintains a qualified defined benefit pension plan (the “Pension Plan”), a nonqualified pension plan, and other postretirement benefit plans for certain of its employees.

The following tables provide the components of net periodic benefit cost for the Company’s pension and other postretirement benefit plans:

Pension Benefits

Three Months Ended

March 31,

2024

2023

Service cost

$

357

$

401

Interest cost

3,908

4,308

Expected return on plan assets

(4,696)

(5,672)

Amortization of prior service cost

81

171

Amortization of actuarial loss

751

809

Net periodic benefit cost

$

401

$

17

Other

Postretirement Benefits

Three Months Ended

March 31,

2024

2023

Service cost

$

363

$

337

Interest cost

1,112

1,119

Expected return on plan assets

(1,105)

(1,093)

Amortization of actuarial gain

(267)

(329)

Net periodic benefit cost

$

103

$

34

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

The net periodic benefit cost is based on estimated values and an extensive use of assumptions about the discount rate, expected return on plan assets, the rate of future compensation increases received by the Company’s employees, mortality, turnover, and medical costs. The following tables provideCompany presents the components of net periodic benefit cost:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Pension Benefits



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2017

 

2016

 

2017

 

2016

Service cost

 

$

794 

 

$

784 

 

$

2,382 

 

$

2,394 

Interest cost

 

 

3,108 

 

 

3,251 

 

 

9,324 

 

 

9,787 

Expected return on plan assets

 

 

(4,270)

 

 

(4,215)

 

 

(12,810)

 

 

(12,696)

Amortization of prior service cost

 

 

145 

 

 

145 

 

 

435 

 

 

435 

Amortization of actuarial loss

 

 

2,001 

 

 

1,797 

 

 

6,003 

 

 

5,354 

Settlement charge

 

 

 -

 

 

 -

 

 

 -

 

 

3,028 

Special termination benefit charge

 

 

 -

 

 

 -

 

 

 -

 

 

302 

Net periodic benefit cost

 

$

1,778 

 

$

1,762 

 

$

5,334 

 

$

8,604 



 

 

 

 

 

 

 

 

 

 

 

 



 

Other



 

Postretirement Benefits



 

 

Three Months Ended

 

 

Nine Months Ended



 

 

September 30,

 

 

September 30,



 

2017

 

2016

 

2017

 

2016

Service cost

 

$

255 

 

$

253 

 

$

765 

 

$

761 

Interest cost

 

 

737 

 

 

726 

 

 

2,211 

 

 

2,202 

Expected return on plan assets

 

 

(647)

 

 

(645)

 

 

(1,941)

 

 

(2,001)

Amortization of prior service cost

 

 

(127)

 

 

(137)

 

 

(381)

 

 

(411)

Amortization of actuarial loss

 

 

291 

 

 

220 

 

 

873 

 

 

707 

Net periodic benefit cost

 

$

509 

 

$

417 

 

$

1,527 

 

$

1,258 

cost other than service cost in the consolidated statements of operations and comprehensive income on the line item “Other”.

Effective July 1, 2015, the Company added a permanent lump sum option

There were no cash contributions made to the form of benefit payments offered to participants of the qualified defined benefit pension plan and non-qualified retirement plans upon retirement or termination.  During the first quarter of 2016, the lump sum payments paid to participants who elected this option for payments from the non-qualified retirement plans resulted in a settlement charge.    

The Company made cash contributions of $15,421 to its Pension Plan during the first sixthree months of 2017,  which completed2024. 

Note 11 – Rate Activity

On January 19, 2024, Aqua New Jersey filed an application with the New Jersey Board of Public Utilities designed to increase water rates by $8,328 or 17.3% on an annual basis. The Company anticipates a final order to be issued by August 2024.

On January 2, 2024, Aqua Illinois filed an application with the Illinois Commerce Commission designed to increase water and wastewater rates by $19,196 or 18.9% on an annual basis. The Company anticipates a final order to be issued by December 2024.

On December 29, 2023, Peoples Natural Gas filed an application with the Pennsylvania Public Utility Commission designed to increase natural gas rates by $156,024 or 18.7% on an annual basis. The Company anticipates a final order to be issued by September 2024.

On December 13, 2023, the Company’s 2017 cash contributions. regulated water and wastewater utility operating divisions in Ohio received an order from the Public Utilities Commission of Ohio designed to increase operating revenues by $4,850 annually. New rates for water and sewer service went into effect on December 13, 2023.

On September 28, 2023, the Company’s regulated water and wastewater operating subsidiary in Texas, Aqua Texas, received a final order from the Public Utility Commission of Texas approving infrastructure rehabilitation surcharges designed to increase revenues by $8,388 annually. The rates authorized on March 28, 2023 and implemented on an interim basis effective April 1, 2023 did not change with the final order.

On July 27, 2023, the Company’s regulated water and wastewater operating subsidiary in Virginia, Aqua Virginia, filed an application with the State Corporation Commission designed to increase revenues by $6,911 or 29.5% on an annual basis. In February 2024, the Company implemented interim rates which may be subject to refund for the difference between interim and final approved rates pending the final order.

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AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

Note 10 –  Water

On June 5, 2023, the Company’s regulated water and Wastewater Rateswastewater operating subsidiary in North Carolina, Aqua North Carolina, received an order from the North Carolina Utilities Commission designed to increase rates by $14,001 in the first year of new rates being implemented, then by an additional $3,743 and $4,130 in the second and third years, respectively. In February 2023, the Company had implemented interim rates, based on an estimate of the final outcome of the order, and no refunds or additional billings are required for the difference between interim and final approved rates.

During the first ninethree months of 2017,2024, two of the Company’s water utility operating divisions in Indiana and Ohio were grantedimplemented base rate increases designed to increase total operating revenues on an annual basis by $7,403.$1,627. Further, during the first ninethree months of 2017,2024, the Company’s operating divisions in Illinois, New Jersey, and North Carolina received approval to billCompany implemented infrastructure rehabilitation surcharges designed to increase total operating revenues on an annual basis by $3,659.$7,445 in its water and wastewater utility operating divisions in Pennsylvania and Illinois, and by $1,220 its natural gas operating division in Kentucky.

Note 1112Taxes Other than Income Taxes

The following table provides the components of taxes other than income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

Three Months Ended

 

September 30,

 

September 30,

March 31,

 

2017

 

2016

 

2017

 

2016

2024

2023

Property

 

$

6,955 

 

$

7,007 

 

$

20,608 

 

$

20,119 

$

8,877

$

8,104

Gross receipts, excise and franchise

 

 

3,969 

 

 

3,409 

 

 

10,507 

 

 

9,468 

4,155

4,030

Payroll

 

 

2,066 

 

 

2,140 

 

 

7,322 

 

 

7,775 

7,658

6,632

Regulatory assessments

 

 

674 

 

 

639 

 

 

1,933 

 

 

1,991 

1,900

1,684

Pumping fees

 

 

1,526 

 

 

1,442 

 

 

3,820 

 

 

3,501 

1,496

1,466

Other

 

 

44 

 

 

75 

 

 

200 

 

 

240 

938

962

Total taxes other than income

 

$

15,234 

 

$

14,712 

 

$

44,390 

 

$

43,094 

$

25,024

$

22,878

 

 

 

 

 

 

 

 

 

 

 

 

Note 1213Segment Information

The Company has teneleven operating segments and onetwo reportable segment.segments. The Regulated segment, the Company’s single reportableWater segment is comprised of eight operating segments representing its water and wastewater regulated utility companies, which are organized by the states where the Company provides water and wastewater services. TheseThe eight water and wastewater utility operating segments are aggregated into one reportable segment, because each of these operating segments has the following similarities: economic characteristics, nature of services, production processes, customers, water distribution or wastewater collection methods, and the nature of the regulatory environment. The Regulated Natural Gas segment is comprised of one operating segment representing natural gas utility companies, acquired in the Peoples Gas Acquisition, for which the Company provides natural gas distribution services.

TwoIn addition to the Company’s two reportable segments, we include two of our operating segments are included within the Other category below. These segments are not quantitatively significant and are comprised of Aqua Resourcesour non-regulated natural gas operations and Aqua Infrastructure.Resources. Our non-regulated natural gas operations consist of utility service line protection solutions and repair services to households and the operation of

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

gas marketing and production entities. Aqua Resources provides water and wastewater service through operating and maintenance contracts with municipal authorities and other parties close to its utility companies’ service territories; and offers, through a third party, water and sewer line repair service andline protection solutions and repair services to households.  Aqua Infrastructure provides non-utility raw water supply services for firms in the natural gas drilling industry. In addition to these segments, Other is comprised of other business activities not included in the reportable segment, includingsegments, corporate costs that have not been allocated to the Regulated segmentWater and Regulated Natural Gas segments, and intersegment eliminations. Corporate costs include general and administrative expenses, and interest expense. Additionally, containedThe Company reports these corporate costs within total assets forOther as they relate to corporate-focused responsibilities and decisions and are not included in internal measures of segment operating performance used by the Other category, inCompany to measure the table below, is a regulatory asset for postretirement benefits for the underfunded statusunderlying performance of the Company’s  pension and other postretirement benefit plans and an intercompany receivable. operating segments.

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Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

The following table presents information about the Company’s reportable segment:segments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

Three Months Ended

Three Months Ended

 

September 30, 2017

 

September 30, 2016

March 31, 2024

March 31, 2023

 

Regulated

 

Other

 

Consolidated

 

Regulated

 

Other

 

Consolidated

Regulated Water

Regulated Natural Gas

Other

Consolidated

Regulated Water

Regulated Natural Gas

Other

Consolidated

Operating revenues

 

$

214,032 

 

$

976 

 

$

215,008 

 

$

222,231 

 

$

4,362 

 

$

226,593 

$

279,894 

$

324,331 

$

7,844 

$

612,069 

$

267,300 

$

441,295 

$

17,855 

$

726,450 

Operations and maintenance expense

 

 

70,772 

 

 

(2,790)

 

67,982 

 

 

73,013 

 

6,799 

 

79,812 

90,683 

45,917 

300 

136,900 

82,802 

57,150 

(1,958)

137,994 

Depreciation

 

 

34,533 

 

 

(269)

 

34,264 

 

 

34,025 

 

(144)

 

33,881 

Operating income (loss)

 

 

94,142 

 

 

3,344 

 

97,486 

 

 

100,563 

 

(2,764)

 

97,799 

Interest expense, net

 

 

20,753 

 

 

1,658 

 

22,411 

 

 

19,167 

 

1,001 

 

20,168 

Purchased gas

-

125,542 

4,133 

129,675 

-

241,856 

14,459 

256,315 

Depreciation and amortization

57,194 

32,411 

199 

89,804 

53,467 

30,128 

199 

83,794 

Interest expense, net (a)

34,790 

25,356 

12,138 

72,284 

29,713 

27,507 

14,629 

71,849 

Allowance for funds used during construction

 

 

3,914 

 

 

 -

 

3,914 

 

 

2,267 

 

 -

 

2,267 

(3,688)

(993)

-

(4,681)

(4,946)

(742)

-

(5,688)

Income tax expense (benefit)

 

 

3,138 

 

 

262 

 

3,400 

 

 

9,027 

 

(616)

 

8,411 

Net income (loss)

 

 

74,208 

 

 

2,017 

 

76,225 

 

 

74,681 

 

(1,511)

 

73,170 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

Nine Months Ended

 

September 30, 2017

 

September 30, 2016

 

Regulated

 

Other

 

Consolidated

 

Regulated

 

Other

 

Consolidated

Operating revenues

 

$

602,341 

 

$

3,872 

 

$

606,213 

 

$

606,323 

 

$

16,753 

 

$

623,076 

Operations and maintenance expense

 

 

210,842 

 

 

(2,879)

 

 

207,963 

 

 

210,014 

 

 

17,333 

 

 

227,347 

Depreciation

 

 

102,340 

 

 

(832)

 

 

101,508 

 

 

98,445 

 

 

(800)

 

 

97,645 

Operating income (loss)

 

 

246,361 

 

 

5,633 

 

 

251,994 

 

 

255,431 

 

 

(1,808)

 

 

253,623 

Interest expense, net

 

 

60,277 

 

 

4,847 

 

 

65,124 

 

 

57,061 

 

 

3,075 

 

 

60,136 

Allowance for funds used during construction

 

 

10,570 

 

 

 -

 

 

10,570 

 

 

6,446 

 

 

 -

 

 

6,446 

Income tax expense (benefit)

 

 

12,243 

 

 

(344)

 

 

11,899 

 

 

18,610 

 

 

(1,677)

 

 

16,933 

Provision for income taxes (benefit)

20,810 

(29,150)

(2,302)

(10,642)

13,514 

(43,484)

(1,667)

(31,637)

Net income (loss)

 

 

184,733 

 

 

1,532 

 

 

186,265 

 

 

186,579 

 

 

(2,046)

 

 

184,533 

63,905 

209,940 

(8,073)

265,772 

77,402 

123,546 

(9,514)

191,434 

Capital expenditures

 

 

337,321 

 

 

410 

 

 

337,731 

 

 

269,046 

 

 

973 

 

 

270,019 

152,231 

100,767 

-

252,998 

159,394 

81,669 

2,667 

243,730 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) The regulated water and regulated natural gas segments report interest expense that includes long-term debt that was pushed-down to the regulated operating subsidiaries from Essential Utilities, Inc.

 

 

 

 

 

September 30,

 

December 31,

March 31,

December 31,

 

2017

 

2016

2024

2023

Total assets:

 

 

 

 

 

 

Regulated

 

$

6,355,896 

 

$

5,953,702 

Regulated water

$

9,498,773

$

9,386,347

Regulated natural gas

7,191,015

6,965,350

Other

 

 

189,485 

 

 

205,289 

364,556

489,762

Consolidated

 

$

6,545,381 

 

$

6,158,991 

$

17,054,344

$

16,841,459

 

 

 

 

 

 

Note 1314Commitments and Contingencies

The Company is routinely involved in various disputes, claims, lawsuits and other regulatory and legal matters, including both asserted and unasserted legal claims, in the ordinary course of business. The status of each such matter, referred to herein as a loss contingency, is reviewed and assessed in accordance with applicable accounting rules regarding the nature of the matter, the likelihood that a loss will be incurred, and the amounts involved. As of September 30, 2017,March 31, 2024, the aggregate amount of $16,898$23,819 is accrued for loss contingencies and is reported in the Company’s consolidated balance sheet as other accrued liabilities and other liabilities. These accruals represent management’s best estimate of probable loss (as defined in the accounting guidance) for loss contingencies or the low end of a range of losses if no single probable loss can be estimated. For some loss contingencies, the Company is unable to estimate the amount of the probable loss or range of probable losses. Further, Essential Utilities has insurance coverage for certain of these loss contingencies, and as of March 31, 2024, estimates that approximately $1,283 of the amount accrued for these matters are probable of recovery through

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Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(In thousands of dollars, except per share amounts)

(UNAUDITED)

insurance, which amount is also reported in the Company’s consolidated balance sheet as deferred charges and other assets, net.

During a portion of 2019, the Company initiated a do not consume advisory for some of its customers in one division served by the Company’s Illinois subsidiary. The do not consume advisory was lifted in 2019 and, in 2022, the water system was determined to be in compliance with the federal Lead and Copper Rule. The Company has accrued for the penalty and other fees that will be paid as a result of a conditional settlement that was reached with the regulators. The settlement was subject to court approval.  However, the court declined to approve the settlement agreement. The Company is considering its options in the light of this decision. In addition, on September 3, 2019, two individuals, on behalf of themselves and those similarly situated, commenced an action against the Company’s Illinois subsidiary in the State court in Will County, Illinois related to this do not consume advisory. The complaint seeks class action certification, attorney’s fees, and “damages, including, but not limited to, out of pocket damages, and discomfort, aggravation, and annoyance” based upon the water provided by the Company’s subsidiary to a discrete service area in University Park, Illinois. The complaint contains allegations of damages as a result of supplied water that exceeded the standards established by the federal Lead and Copper Rule. The complaint is in the discovery phase and class certification has not been granted. The Company has an accrual for the amount of loss asserted in the complaint that we determined to be probable and estimable of being incurred. The Company is vigorously defending against this claim. The Company submitted a claim for the expenses incurred to its insurance carrier for potential recovery of a portion of these costs and is currently in litigation with one of its carriers seeking to enforce its claims. The Company continues to assess the potential loss contingency on this matter. While the final outcome of these loss contingenciesthis claim cannot be predicted with certainty, and unfavorable outcomes could negatively impact the Company, at this time in the opinion of management, the final resolution of these matters arethis matter is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

A number of the Company’s subsidiaries are parties to several lawsuits against manufacturers of certain per- and polyfluoroalkyl substances or compounds (“PFAS”) for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and operated by these utility subsidiaries throughout its service area. One such suit to which the Company is a party is a multi-district litigation (the “MDL”) lawsuit which commenced on December 7, 2018, in the United States District Court for the District of South Carolina. In August 2023, a potential class action settlement involving defendants The Chemours Company, Corteva, Inc., and DuPont de Nemours, Inc. to resolve claims brought in the MDL against them by public water systems, including the Company, and a similar class action settlement with defendant 3M Company received preliminary approval from the MDL court. In February and April 2024, the MDL court issued its final approval of the DuPont and 3M settlements, respectively. The Company is monitoring and evaluating the ongoing litigation and settlement activity with the PFAS manufacturers for potential impacts to the various claims that the Company has asserted.

Although the results of legal proceedings cannot be predicted with certainty, other than disclosed above, there are no pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of its properties is the subject that are material or are expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

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(In thousands of dollars, except per share amounts)

(UNAUDITED)

cash flows.  Further, the Company has insurance coverage for certain of these loss contingencies, and as of September 30, 2017, estimates that approximately $5,415 of the amount accrued for these matters are probable of recovery through insurance, which amount is also reported in the Company’s consolidated balance sheet as deferred charges and other assets.

In addition to the aforementioned loss contingencies, the Company self-insures a portion of its employee medical benefit program, and maintains stop-loss coverage to limit the exposure arising from these claims. The Company’s reserve for these claims totaled $1,451$1,846 at September 30, 2017March 31, 2024 and represents a reserve for unpaid claim costs, including an estimate for the cost of incurred but not reported claims.

Note 1415Income Taxes

During

The Company’s effective tax rate was a benefit of 4.2 % and 19.8% for the ninethree months ended September 30, 2017, the Company’s Federal net operating loss (“NOL”) carryforward decreased by $31,935.  In addition, during the nine months ended September 30, 2017, the Company’s state NOL carryforward increased by $23,173.  As of September 30, 2017, the balance of the Company’s Federal NOL was $81,208.  The Company believes its Federal NOL carryforward is more likely than not to be recovered and requires no valuation allowance.  As of September 30, 2017, the balance of the Company’s gross state NOL was $600,358, a portion of which is offset by a valuation allowance because the Company does not believe the state NOLs are more likely than not to be realized.  The Company’s Federal and state NOL carryforwards begin to expire in 2032March 31, 2024 and 2023, respectively.  The Company’s Federal and state NOL carryforwards are reduced by an unrecognizeddecrease in income tax position, on a gross basis, of $64,738 and $85,523, respectively.  The amountsbenefit is primarily attributed to the gain recognized from the sale of the Company’s Federalinterest in three non-utility local microgrid and state NOL carryforwards prior to being reduceddistributed energy projects in the first quarter of 2024 partially offset by the unrecognizedincrease in tax positions were $145,947benefit associated with the tax deduction for continued qualifying infrastructure investment. In determining its interim tax provision, the Company reflects its estimated permanent and $685,880 respectively.flow-through tax differences for the taxable year. The Company recordsuses the flow-through method to account for the tax deduction for qualifying utility infrastructure at its unrecognizedregulated Pennsylvania and New Jersey subsidiaries.

The statutory Federal tax benefit asrate is 21.0% for the three months ended March 31, 2024 and 2023. For states with a reduction to its deferredcorporate net income tax, liability. 

In accordance with a 2012 settlement agreement with the Pennsylvania Public Utility Commission, Aqua Pennsylvania expenses, for tax purposes, qualifying utility asset improvement costs, which results in a substantial reduction instate corporate net income tax expenserates range from 2.5% to 9.50% for all periods presented.

In April 2023, the Internal Revenue Service issued Revenue Procedure 2023-15 which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and greater net income and cash flows.  The Company’s effective income tax rate for the third quarter of 2017 and 2016 was 4.3% and 10.3%, respectively, and for the first nine months of 2017 and 2016 was 6.0% and 8.4%, respectively. 

As of September 30, 2017 regulatory assets increased by $96,140, as compared to the beginning of the year, primarily due to the effect of additional tax deductions for certain qualifying infrastructure improvements, which results in differences between costsdistribution property must be capitalized for book and deducted as an expense for tax purposes.

AsThe Company evaluated the safe harbor and intends to adopt the methodology on its 2023 tax return. In the second quarter of September 30, 2017,2023, based on the total gross unrecognized tax benefitlegislative guidance that was $28,938, of which $23,700, if recognized, would affect the Company’s effective tax rate as a result of the regulatory treatment afforded for qualifying infrastructure improvements in Pennsylvania.  At December 31, 2016,issued, the Company had unrecognized tax benefits of $28,099. 

Accounting rules forreevaluated the uncertain tax positions specify thatrelated to the Regulated Water Segment and ultimately released a portion of its historical income tax positionsreserves. Concurrently, the Company deferred this tax benefit from the reserve release as a regulatory liability, as the accounting treatment is expected to be determined in the next rate case.

Note 16 – Recent Accounting Pronouncements and Disclosure Rules

Pronouncements to be adopted upon the effective date:

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”.  The ASU enhances the transparency and decision usefulness of income tax disclosures and is effective for which the timing of resolutionannual periods beginning after December 15, 2024 on a prospective basis. Early adoption is uncertain should be classified as long-term liabilities.  Judgmentpermitted. The Company is required incurrently evaluating the Company’s uncertain tax positionsimpact of this ASU on its consolidated financial statements and determiningrelated disclosures.

In November 2023, the provision for income taxes.  Management believesFASB issued ASU 2023-07 Segment Reporting – Improving Reportable Segment Disclosures (Topic 280).  The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that an adequate provision has been made forare regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any adjustments that may result from tax

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(In thousands of dollars, except per share amounts)

(UNAUDITED)

examinations.  Althoughadditional measures of a segment’s profit or loss used by the timing of income tax audit resolutions and negotiations with taxing authorities is highly uncertain, the Company does not anticipate a significant changeCODM when deciding how to the total amount of unrecognized income tax benefits within the next 12 months.

Note 15 –  Recent Accounting Pronouncements

In March 2017, the FASB issued updated accounting guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost).  Historically, net benefit cost is reported as an employee cost within operating income, net of amounts capitalized.allocate resources. The guidanceASU also requires the bifurcation of net benefit cost.  The service cost component will be presented with other employee compensation costs in operating income and the other components of net benefit cost will be reported separately outside of operating income, and will not be eligible for capitalization.  The guidance is effective forall annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period, and isdisclosures currently required by Topic 280 to be applied retrospectively for the presentation of the service cost component and the other components of net benefit cost, and on a prospective basis for the capitalization of only the service cost component of net benefit cost.included in interim periods. The Company is evaluating the requirements of the updated guidance to determine the impact of adoption, and does not believe it will have a material impact on its results of operations or financial position.  

In January 2017, the FASB issued updated accounting guidance that eliminates step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment.  A goodwill impairment loss will instead be measured at the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill.  The guidance will be effective for annual reporting periods beginning after December 15, 2019, and interim periods within that reporting period, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017.  The Company has elected to early adopt the provisions of the updated guidance, for its annual impairment valuation performed in the third quarter of 2017, and the provisions of the updated guidance did not have an impact on its results of operations or financial position.  

In August 2016, the FASB issued updated accounting guidance on the classification of certain cash receipts and cash payments in the statement of cash flows, which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows.  This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted.  The Company has elected to early adopt the provisions of the updated guidance, which resulted in the reclassification of $375 debt extinguishment costs, for the nine months ended September 30, 2016, from cash flows from operating to financing activities to conform to the new classification. 

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(In thousands of dollars, except per share amounts)

(UNAUDITED)

In March 2016, the FASB issued updated accounting guidance on simplifying the accounting for share-based payments, which includes several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.   The updated guidance was effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption available.  On January 1, 2017, the Company adopted the updated guidance, prospectively, and recognized a previously unrecognized windfall tax benefit for stock-based compensation of $982 associated with the Company’s 2012 Federal net operating loss, which was recorded as an adjustment to deferred income taxes and retained earnings (refer to the presentation of “cumulative effect of change in accounting principle - windfall tax benefit” on the Company’s Consolidated Statement of Equity).  Additionally, income tax benefits in excess of compensation costs or tax deficiencies for share-based compensation are now recorded to the Company’s income tax provision, instead of historically to stockholder’s equity, which impacts its effective tax rate.  Lastly, all tax-related cash flows resulting from share-based payments are reported prospectively as operating activities on the statement of cash flows, a change from the historical requirement to present tax benefits as an inflow from financing activities and an outflow from operating activities.

In February 2016, the FASB issued updated accounting guidance on accounting for leases, which requires lessees to establish a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.  For income statement purposes, leases will be classified as either operating or finance.  Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern.  The updated accounting guidanceupdate is effective for fiscal years beginning after December 15, 2018,2023, and interim periods within those fiscal years beginning after December 15, 2024, with early adoption available.permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is evaluatingcurrently assessing the requirementstiming and impact of adopting the updated provisions.

In March 2024, the U.S. Securities and Exchange Commission (SEC) issued its final climate disclosure rule, which requires the disclosure of Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics in annual reports and registration statements, when material. A number of petitions have been filed in federal courts seeking to challenge the SEC’s climate disclosure rule. As a result, in April 2024, the SEC placed a pause on its implementation of the updated guidance to determinenew rule. We are currently evaluating the impact of adoption.

In January 2016, the FASB issued updated accounting guidancenew rule and, depending on the recognition and measurement of financial assets and financial liabilities, which amends certain aspects of recognition, measurement, presentation, and disclosure of financial instruments, including the requirement to measure certain equity investments at fair value with changes in fair value recognized in net income.  The updated guidance is effective for interim and annual periods beginning after December 31, 2017.  The Company does not expect the provisionsoutcome of the updated guidance to have a material impact on its results of operations or financial position.  proceedings, will include the required disclosures once it becomes effective.

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 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL STATEMENTS (continued)CONDITION AND RESULTS OF OPERATIONS

(In thousands of dollars, except per share amounts)

(UNAUDITED)

In May 2014, the FASB issued updated accounting guidance on recognizing revenue from contracts with customers, which outlines a single comprehensive model that an entity will apply to determine the measurement of revenue and timing of recognition.  The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.  The updated guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract.  Additionally, the accounting for contributions in aid of construction may be impacted by the updated accounting guidance if the contributions are determined to be in scope.  In July 2015, the FASB approved a one year deferral to the original effective date of this guidance.  The updated guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the updated guidance in each prior reporting period, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the updated guidance recognized through retained earnings at the date of adoption.  In 2016, the Company performed an evaluation of the requirements of the updated guidance and based on current interpretations of the updated guidance believes that the impact of adoption will not result in a material change in the Company’s measurement of revenue and timing of recognition if contributions in aid of construction are determined to not be in scope.  In 2017, the American Institute of Certified Public Accountants (AICPA) power and utility entities revenue recognition task force has determined that contributions in aid of construction are not in the scope of the new standard, and submitted its recommendation to the AICPA’s revenue recognition working group for approval.  The Company plans to implement the updated guidance using the modified retrospective approach on January 1, 2018.

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(In thousands of dollars, except per share amounts)

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

Forward-looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report contain, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address, among other things: the expected timing of closing of our acquisitions; the projected impact of various legal proceedings; the projected effects of recent accounting pronouncements; prospects, plans, objectives, expectations and beliefs of management, as well as information contained in this report where statements are preceded by, followed by or include the words “believes,” “expects,” “estimates,” “anticipates,” “plans,” “future,” “potential,” “probably,” “predictions,” “intends,” “will,” “continue,” “in the event” or the negative of such terms or similar expressions. Forward-looking statements are based on a number of assumptions concerning future events, and are subject to a number of risks, uncertainties and other factors, many of which are outside our control, which could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, among others:others, the effects of regulation, abnormal weather, geopolitical forces, the impact of inflation and supply chain pressures, the threat of cyber-attacks and data breaches, changes in capital requirements and funding, our ability to close acquisitions, changes to the capital markets, impact of public health threats, and our ability to assimilate acquired operations, as well as those risks, uncertainties and other factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 20162023 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in such report.reports. As a result, readers are cautioned not to place undue reliance on any forward-looking statements. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.  

General Information

Aqua America,Essential Utilities, Inc. (“we”, “us”, “our” or the “Company”), a Pennsylvania corporation, is the holding company for regulated utilities providing water, wastewater, or wastewaternatural gas services to what we estimate to be almost threean estimated 5.5 million people in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia, and Virginia.  OurKentucky under the Aqua and Peoples brands. One of our largest operating subsidiary,subsidiaries, Aqua Pennsylvania, Inc. (“Aqua Pennsylvania”), provides water or wastewater services to approximately one-half of the total number of peoplewater or wastewater customers we serve, who are located in the suburban areas in counties north and west of the City of Philadelphia and in 27 other counties in Pennsylvania. Our other regulated water or wastewater utility subsidiaries provide similar services in seven otheradditional states. In addition, the Company’s market-based activities are conducted through Aqua Infrastructure, LLC and Aqua Resources, Inc.  Aqua Infrastructure provides non-utility raw water supply services for firms in theOur Peoples subsidiaries provide natural gas drilling industry.    Aqua Resources provides waterdistribution services to customers in western Pennsylvania and wastewater service through operating and maintenance contracts with municipal authorities and other parties close to our utility companies’ service territories; and offers, through a third party, water and wastewater line repair service and protection solutions to households.   

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 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

During 2016, we completed the sale of business units within Aqua Resources which provided liquid waste hauling and disposal services, and inspection, cleaning and repair of storm and sanitary wastewater lines.  Additionally, in 2016, we decided to market for sale two business units that are reported within the Company’s market-based subsidiary, Aqua Resources.  One business unit installed and tested devices that prevent the contamination of potable water and repaired water and wastewater systems, for which the sale was completed in January 2017.  The other business unit repairs and performs maintenance on water and wastewater systems, for which the sale was completed in June 2017.  

Aqua America, Inc., which prior to its name change in 2004 was known as Philadelphia Suburban Corporation, was formed in 1968 as a holding company for its primary subsidiary, Aqua Pennsylvania, formerly known as Philadelphia Suburban Water Company.  In the early 1990s, we embarked on a growth-through-acquisition strategy focused on water and wastewater operations.  Our most significant transactions to date have been the merger with Consumers Water Company in 1999, the acquisitionKentucky. Approximately 95% of the regulated water and wastewater operations of AquaSource, Inc. in 2003, the acquisition of Heater Utilities, Inc. in 2004, and the acquisition of American Water Works Company, Inc.’s regulated operations in Ohio in 2012.  Since the early 1990s, our business strategy has been primarily directed toward the regulated water and wastewater utility industry, where we have more than quadrupled thetotal number of regulatednatural gas utility customers we serve are in western Pennsylvania. The Company also operates market-based businesses, conducted through its non-regulated subsidiaries, that provide utility service line protection solutions and has extended our regulated operations from southeastern Pennsylvaniarepair services to include operations in seven other states.households and gas marketing and production activities. Currently, the Company seeks to acquire businesses in the U.S. regulated sector, which includesfocusing on water and wastewater utilities and other regulated utilities and to opportunistically pursue growth ventures in select market-based activities, such as infrastructure opportunities that are supplementary and complementary to our regulated water utility businesses.

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 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

On October 1, 2023, the Company sold its regulated natural gas utility assets in West Virginia, which represented approximately two percent of the Company’s regulated natural gas customers. Initially the sale closed for an estimated purchase price of $39,965, subject to working capital and other adjustments. In March 2024, the Company received an additional $1,213 from the buyer. The additional proceeds were based on finalizing closing working capital and other adjustments, resulting in a final purchase price of $41,178 and a loss of an inconsequential amount. In October 2023, the Company entered into an agreement to sell its interest in three non-utility local microgrid and distributed energy projects for $165,000. The sale was completed in January 2024, and the Company recognized a gain of $91,236 in the first quarter of 2024. These transactions are consistent with the Company’s long-term strategy of focusing on its core business and will allow the Company to prioritize the growth of its utilities in states where it has scale. The Company used the proceeds from these transactions to finance its capital expenditures and water and wastewater acquisitions, in place of external funding from equity and debt issuances.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes.

Financial ConditionRecent Developments

DuringMacroeconomic Factors

Our industry has been significantly impacted by inflation, higher interest rates, and other macroeconomic factors. This resulted in an increase in our operating and capital spending requirements in 2022 and 2023. As of the current period, inflation decelerated compared with the prior year, however, is still above historical levels. Additionally, interest rates remain elevated to curb inflation. We experienced moderate macroeconomic pressures during the first nine monthsquarter of 2017,2024, which we had $337,731expect to continue through the remainder of 2024. We continue to pursue enhancements to our regulatory practices to facilitate the efficient recovery of the increased cost of providing services and infrastructure improvements in our rates and mitigate the inherent regulatory lag associated with traditional rate making processes.

Environmental Compliance

On April 10, 2024, the U.S. Environmental Protection Agency (“EPA”) announced the final National Primary Drinking Water Regulation (“NPDWR”) for the treatment of six per- and polyfluoroalkyl substances or compounds (“PFAS”). The NPDWR established the maximum contaminant levels (MCLs) in drinking water and allows for a five-year window to comply. In 2023, the Company performed its initial analysis of the NPDWR and estimated an investment of at least $450,000 of capital expenditures expended $5,860to install additional treatment facilities over the Compliance Period in order to comply (i.e. 2029 pending no delays due to lawsuits). This figure could increase as plans for construction execution are refined or if additional sites require treatment in the future. Additionally, the Company estimated annual operating expenses of approximately five percent of the installed capital expenditures, in today’s dollars, related to testing, treatment, and disposal. These were preliminary estimates and actual capital expenditures and expenses may differ based upon a variety of factors, including supply chain issues and site-by-site

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(In thousands of dollars, except per share amounts)

requirements. Capital expenditures and operating costs required as a result of water quality standards have been traditionally recognized by state utility commissions as appropriate for inclusion in establishing rates; however, we are also actively applying for grants and low interest loans, whenever possible, to reduce the overall cost to customers.

On April 19, 2024, the U.S. Environmental Protection Agency (“EPA”) announced a final rule that designated two PFAS chemicals, perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”), as hazardous substances under the under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as Superfund.  This final action will address PFOA and PFOS contamination by enabling investigation and cleanup of these harmful chemicals and ensuring that leaks, spills, and other releases are reported. In addition to the final rule, EPA issued a separate CERCLA enforcement discretion policy that makes it clear that EPA will focus enforcement on parties who significantly contributed to the release of PFAS chemicals into the environment, including parties that have manufactured PFAS or used PFAS in the manufacturing process, federal facilities, and other industrial parties.  The policy identifies examples for operators of public water systems and wastewater systems or entities performing a public service role in providing safe drinking water, handling municipal solid waste, treating or managing stormwater and wastewater, disposing of pollution control residuals, or ensuring beneficial application of wastewater products as a fertilizer substitute. The potential liabilities to the Company, if any, resulting from this rule are currently being evaluated. 

The Company continues to advocate for actions to hold polluters accountable and is part of the Multi-District Litigation and other legal actions against multiple PFAS manufacturers and polluters to attempt to ensure that the ultimate responsibility for the acquisitioncleanup of these contaminants is attributed to the polluters and is seeking damages and other costs to address the contamination of its public water supply systems by PFAS. The Company is also monitoring ongoing litigation and settlement activity with manufacturers of PFAS in these proceedings. For more information, see Part I - Item I - Note 14 to the Company’s consolidated financial statements.

Liquidity and Capital Resources

Our regulated water and wastewater utility systems, issued $441,294gas business is capital intensive and requires a significant level of capital spending. The liquidity required to fund our working capital, capital expenditures and other cash needs is provided from a combination of internally generated cash flows and external debt and equity financing. The Company’s consolidated balance sheet historically has had a negative working capital position whereby our current liabilities routinely exceed our current assets. Management believes that internally generated funds along with existing credit facilities, and the proceeds from the issuance of long-term debt and equity will be adequate to provide sufficient working capital to maintain normal operations and to meet our financing requirements for at least the next twelve months.

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 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

Our operating cash flow can be significantly affected by changes in operating working capital, especially during periods with significant changes in natural gas commodity prices and also the timing of our natural gas inventory purchases.  Cash flow from operations was $240,713 for the first quarter of 2024, compared to $401,628 for the first quarter of 2023. The net change in working capital and other assets and liabilities resulted in a decrease in cash from operations of $19,732 for the first quarter of 2024 compared to an increase of $151,952 for the first quarter of 2023. The change in working capital in 2024 as compared to 2023 was primarily driven by the year over year decrease in accounts receivable, unbilled revenues and deferred purchased gas cost balances, and most significantly in gas inventory, as a result of lower gas prices in the current period as compared with the prior period for our Regulated Natural Gas segment.    

During the first three months of 2024, we incurred $252,998 of capital expenditures, issued $618,008 of long-term debt, received $166,563 from the sale of assets, repaid short-term debt, and made sinking fund contributions and other loanlong-term debt repayments in aggregate of $293,270.$659,272. The capital expenditures were related to new and replacement water, wastewater, and natural gas mains, improvements to treatment plants, tanks, hydrants, and service lines, well and booster improvements, information technology improvements, and other enhancements and improvements. The proceeds from the issuance of long-term debt, was comprised principally of the funds borrowed underincluding borrowings from our revolving credit facility, and proceeds from the issuancessale of $80,000the non-utility energy projects were used for capital expenditures, repayment of existing indebtedness, and general corporate purposes. Cash flows used in financing activities were lower during the first three months of 2024 principally as a result of the decrease in the amount of the paydown of loans payable associated with the financing of inventory.

On January 8, 2024, the Company issued $500,000 of long-term debt (the “2024 Senior Notes”), less expenses of $4,610, due in 2034 with an interest rate of 5.375%. In August 2023, the Company’s subsidiary, Aqua Pennsylvania, issued $225,000 in aggregate principal amount of first mortgage bonds. The bonds consisted of $175,000 of 5.48% first mortgage bonds due in 2053; and $50,000 of 5.56% first mortgage bonds due in 2061. In January 2023, Aqua Pennsylvania issued $75,000 of first mortgage bonds, by Aqua Pennsylvaniadue in July2043, and January 2017with an interest rate of 5.60%. The proceeds from these borrowings were used to repay existing indebtedness and $100,000for general corporate purposes.

On October 14, 2022, the Company entered into at-the market sales agreements (“ATM”) with third-party sales agents, under which the Company may offer and sell shares of first mortgage bonds by Aqua Illinois in July 2017. its common stock, from time to time, at its option, having an aggregate gross offering price of up to $500,000 pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-255235).  During the three months ended March 31, 2024, there were no sales of common stock under the ATM. As of March 31, 2024, the Company had issued 10,260,833 shares of common stock for net proceeds of $386,023 under the ATM. As of March 31, 2024, approximately $110,000 remained available for sale under the ATM. The Company used the net proceeds from the sales of shares through the ATM for working capital, capital expenditures, water and wastewater utility acquisitions, and repaying outstanding indebtedness.

At September 30, 2017,March 31, 2024, we had $4,139$35,200 of cash and cash equivalents compared to $3,763$4,612 at December 31, 2016.2023. During the first ninethree months of 2017,2024, we used the proceeds from long-term debt, the proceeds

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from issuance of long-term debtcommon stock, and proceeds from the sale of the non-utility energy projects, as well as internally generated funds, to fund the cash requirements discussed above and to pay dividends.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

At September 30, 2017,March 31, 2024 our $250,000$1,000,000 unsecured revolving credit facility, which expires in February 2021,December 2027, had $183,547$725,162 available for borrowing. At September 30, 2017,Additionally, at March 31, 2024, we had short-term lines of credit of $135,500,$435,500, primarily used for working capital, of which $114,510$348,000 was available for borrowing. One of our short-term lines of credit is anOn June 29, 2023, Aqua Pennsylvania and Peoples Natural Gas Companies amended the terms of its respective $100,000 and $300,000 364-day unsecured revolving credit facility with four banks, which is usedagreements by extending the maturity dates to provide working capital,June 27, 2024 and as of September 30, 2017, $80,000 was available for borrowing.   In July we issued $180,000 of long-term debt,updated the proceeds of which were used to reduce our borrowings under our revolving credit facilities.  Subsequently, in October we issued $75,000 of long-term debt,adjustment on the proceeds of which were used to reduce our borrowings under our revolving credit facilities.       

Bloomberg Short-Term Bank Yield Index (BSBY) floating rate.  Our short-term lines of credit of $135,500$435,500 are subject to renewal on an annual basis. Although we believe we will be able to renew these facilities, there is no assurance that they will be renewed, or what the terms of any such renewal will be.

In March 2024, the Company filed a new universal shelf registration through a filing with the Securities and Exchange Commission (SEC) to allow for the potential future offer and sale by the Company, from time to time, in one or more public offerings, of an indeterminate amount of our common stock, preferred stock, debt securities, and other securities specified therein at indeterminate prices.  This registration statement is effective for three years and replaces a similar filing that expires in the second quarter of 2024. 

As of March 31, 2024, our credit ratings remained at investment grade levels. On March 19, 2024, S&P lowered its credit rating for the Company, Aqua Pennsylvania, and Peoples Natural Gas Companies from A to A-, citing weakening financial measures as a result of inflationary pressures and our significant capital spending; and revised its outlook from negative to stable for the companies. However, as can be noted in their report, S&P continues to assess our business risk profile as excellent, considering our low-risk and rate-regulated water and gas distribution operations in credit-supportive regulatory environments, our geographic and regulatory diversity, our large and stable residential and commercial customer base, and our solid and reliable operations.  On August 29, 2023, Moody’s Investors Service (“Moody’s”) affirmed the Company’s senior unsecured notes rating of Baa2 and stable outlook; and, affirmed Peoples Natural Gas Companies’ senior secured notes rating of Baa1 and revised its outlook from stable to negative. The Company’s consolidated balance sheet historically has had a negative working capital position whereby routinely our current liabilities exceed our current assets.  Management believes that internally generated funds along with existing credit facilities and the proceeds from the issuance of long-term debt will be adequate to provide sufficient working capitalability to maintain normal operationsits credit rating depends, among other things, on adequate and timely rate relief, its ability to meetfund capital expenditures in a balanced manner using both debt and equity, and its ability to generate cash flow.  A material downgrade of our financing requirements for at leastcredit rating may result in the next twelve months. 

Resultsimposition of Operations

Analysisadditional financial and/or other covenants, impact the market prices of Third Quarter of 2017 Comparedequity and debt securities, increase our borrowing costs, and adversely affect our liquidity, among other things. Management continues to Third Quarter of 2016 

Revenues decreased by $11,585 or 5.1%, primarily dueenhance our regulatory practices to a decrease in customer water consumption,address regulatory lag and a decrease in market-based activities revenue of $3,431 associated with the dispositions of business units, offset by an increase in waterrecover capital project costs and wastewater rates and infrastructure rehabilitation surcharges of $1,759, and additional water and wastewater revenues of $505 associated with a larger customer base due to utility acquisitions. 

Operations and maintenance expenses decreased by $11,830 or 14.8%,  primarily due to a reductionincreases in operating expenses for Aqua Resources of $4,249 associated with the completion of the disposition of business units, which was finalized in June 2017, a decrease in water production costs of $2,928, a decrease in the Company’s self-insured employee medical benefit program expense of $2,425,efficiently and a decrease in postretirement benefits expense of $1,011.  The decrease in water production costs is due to a reduction in purchased water expense of $1,907 due to replacing a purchased water supply coincident with the Company securing its own water supply source. timely through various rate-making mechanisms.

Depreciation expense increased by $383 or 1.1%, primarily due to the utility plant placed in service since September 30, 2016. 

Interest expense increased by $2,243 or 11.1%, primarily due to an increase in average borrowings. 

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AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

Results of Operations

Consolidated Results of Operations

Consolidated financial and operational highlights for the periods ended March 31, 2024 and 2023 are presented below.

Three Months Ended March 31,

2024

2023

Increase (Decrease)

% change

Operating revenues

$

612,069

$

726,450

$

(114,381)

-15.7%

Operations and maintenance expense

$

136,900

$

137,994

$

(1,094)

-0.8%

Purchased gas

$

129,675

$

256,315

$

(126,640)

-49.4%

Net income

$

265,772

$

191,434

$

74,338

38.8%

Operating Statistics

Selected operating results as a percentage of operating revenues:

Operations and maintenance

22.4%

19.0%

Purchased gas

21.2%

35.3%

Depreciation and amortization

14.7%

11.5%

Taxes other than income taxes

4.1%

3.1%

Interest expense, net of interest income

11.8%

9.9%

Net income

43.4%

26.4%

Effective tax rate

-4.2%

-19.8%

Three months ended March 31, 2024 compared with three months ended March 31, 2023

Consolidated operating revenues decreased by $114,381 or 15.7% as compared to the same period in 2023. Revenues from our Regulated Water segment increased by $12,594. Revenues from our Regulated Natural Gas segment and Other business segment decreased by $116,964 and $10,011, respectively. A detailed discussion of the factors contributing to the changes in segment revenue is included below under the section, Segment Results of Operations.The decrease in our Other business segment revenue is due to lower revenues from our non-regulated natural gas operations primarily as a result of lower average gas prices and lower gas usage in the current period as compared to the prior period.

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ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

Consolidated operations and maintenance expense decreased by $1,094 or 0.8%, primarily due to:

decrease in customer assistance surcharge costs of $2,797 in our Regulated Natural Gas segment, which has an equivalent offsetting amount in revenues;

decrease in operation and maintenance expense of $1,712 as a result of the sale of both the regulated natural gas utility assets in West Virginia in October 2023 and the three non-utility local microgrid and distributed energy projects in January 2024;

decrease in outside services and other expenses due to higher capitalization as a result of greater capital spend in the current period compared to the prior period; offset by

an increase in employee related costs of $2,003, primarily resulting from higher salary costs and increased contributions to the Company’s defined contribution plan;

increase in bad debt expense of $3,224;

an increase in production costs for water and wastewater operations of $2,397, primarily due to increased purchased water, wastewater, and power costs; and

additional operating costs resulting from acquired water and wastewater utility systems and higher customer base of $1,127.

Purchased gas decreased by $126,640 or 49.4%. Purchased gas represents the cost of gas sold by Peoples, which for the regulated gas business has a corresponding offset in revenue. The decrease is the result of the impact of lower average cost of gas of $107,916, and the impact of lower gas usage of $18,724 due to warmer weather conditions during the first quarter of 2024 as well as the sale of Peoples West Virginia.

Depreciation and amortization expense increased by $6,010 or 7.2% principally due to continued capital expenditures to expand and improve our utility facilities and our acquisitions of new utility systems.

Taxes other than income taxes increased by $2,146 or 9.4% largely due to an increase in property taxes and payroll taxes in our Regulated Natural Gas segment.

Other expense, net - Interest expense, net of interest income increased by $435 or 0.6% for the quarter. Interest expense increased by $5,077 in our Regulated Water segment and decreased by $2,151 for our Regulated Natural Gas segment. Refer to Segment Results of Operations below for further details. Interest expense in Other relates to our corporate operations, and this decreased by $2,491 primarily due to lower average borrowings on our revolving credit facility during the first quarter of 2024.

Allowance for funds used during construction (“AFUDC”) increased by $1,647,(AFUDC) was $4,681 and $5,688 during the first quarter of 2024 and 2023, respectively. The decrease in 2024 is primarily due to an increasea decrease in the average balance of utility plant construction work in progress, to which AFUDC is applied for our Regulated Water segment.

Gain on sale of assets was $91,625 and an increase$249 during the first quarters of 2024 and 2023, respectively. During the first quarter of 2024, the Company completed the sale of its interest in the AFUDC rate asthree non-utility local microgrid and distributed energy projects and recognized a resultgain of an increase in the amount$91,236.

33


Table of AFUDC related to equity. Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

Income tax benefit - Our effective income tax rate was 4.3%a benefit of 4.2% and 19.8% in the thirdfirst quarter of 20172024 and 10.3%2023, respectively. The decrease in the thirdincome tax benefit is primarily attributed to the gain recognized from the sale of the Company’s interest in three non-utility local microgrid and distributed energy projects in the first quarter of 2016.  The effective2024 partially offset by the increase in income tax rate decreasedbenefit associated with the tax deduction for continued qualifying infrastructure investment.

Segment Results of Operations

Regulated Water Segment

Our Regulated Water segment is comprised of eight operating segments representing its water and wastewater regulated utility companies which are organized by the states where the Company provides water and wastewater services. The Regulated Water segment is aggregated into one reportable segment.

The following tables present selected operating results and statistics for our Regulated Water segment for the periods ended March 31, 2024 and 2023:

Three Months Ended March 31,

2024

2023

Increase (Decrease)

% change

Operating revenues

$

279,894

$

267,300

$

12,594

4.7%

Operations and maintenance expense

$

90,683

$

82,802

$

7,881

9.5%

Segment net income

$

63,905

$

77,402

$

(13,497)

-17.4%

Operating Statistics

Selected operating results as a percentage of operating revenues:

Operations and maintenance

32.4%

31.0%

Depreciation and amortization

20.4%

20.0%

Taxes other than income taxes

5.8%

5.9%

Interest expense, net of interest income

12.4%

11.1%

Segment net income

22.8%

29.0%

Effective tax rate

24.6%

14.9%

Three months ended March 31, 2024 compared with three months ended March 31, 2023

Revenues from our Regulated Water segment increased by $12,594 or 4.7% for the first quarter of 2024 as compared to the same period in 2023, mainly due to the effect of additional tax deductions recognized in the third quarter of 2017 for certain qualifying infrastructure improvements for Aqua Pennsylvania.     

Net income increased by $3,055 or 4.2%, primarily as a result of the factors described above. 

Analysis of First Nine Months of 2017 Compared to First Nine Months of 2016 

Revenues decreased by $16,863 or 2.7%, primarily due to a decrease in market-based activities revenue of $12,970 associated with the dispositions of business units, and a decrease in customer water consumption, offset by following:

an increase in water and wastewater rates, andincluding infrastructure rehabilitation surcharges, of $4,586,  additional water and wastewater revenues from organic growth of $2,296, and $11,378;

additional water and wastewater revenues of $1,257$2,990 associated with a larger customer base due to utility acquisitions.  acquisitions and organic growth;

an increase in volume consumption of $1,092; offset by

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Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

a decrease in non-utility revenue of $2,930, primarily due to higher developer fees earned in the first quarter of 2023.

Operations and maintenance expenses decreased by $19,384 or 8.5%, primarily due to a reduction in operating expensesexpense for Aqua Resources of $12,981 associated with the completion of the disposition of business units, which was finalized in June 2017, a decrease in water production costs of $4,459, a decrease in the Company’s self-insured employee medical benefit program expense of $4,239, and a decrease in postretirement benefits expense of $2,946, offset by the prior year effect of a gain on sale of a utility system of $1,215.  The gain on sale of a utility system is reported in the consolidated statement of net income as a component of operations and maintenance expense.  The decrease in water production costs is due to a reduction in purchased water expense of $2,886 due to replacing a purchased water supply coincident with the Company securing its own water supply source.   

Depreciation expensethree months ended March 31, 2024 increased by $3,863$7,881 or 4.0%,9.5% primarily due to the utility plant placedfollowing:

increase in service since September 30, 2016. 

Taxes other than income taxes increased by $1,296 or 3.0%production costs for water and wastewater operations of $2,397, primarily due to an increased purchased water, wastewater, and power costs;

additional operating costs resulting from acquired water and wastewater utility systems and higher customer base of $1,127;

increase in property taxesbad debt expense of $489$4,458; and

increase in employee related costs of $1,814 primarily resulting from higher salary costs and increased contributions to the Company’s defined contribution plan.

Depreciation and amortization increased by $3,727 or 7.0% primarily due to continued capital investment to expand and improve our utility facilities and our acquisitions of new utility systems.

Other expense, net – Interest expense, net, increased by $5,077 or 17.1% for the effect of a benefit recorded in 2016 for Ohio based on the final settlement of a property tax bill, and an increase in pumping fees of $319 in Texasquarter primarily due to higher ratespush down debt borrowings and water production.

Interest expenseoperating company debt issuances for the Regulated Water segment and increased borrowing costs.

AFUDC decreased by $4,988$1,258 or 8.3%, primarilyby 25.4% due to an increase in average borrowings. 

AFUDC increased by $4,124, due to an increasethe decrease in the average balance of utility plant construction work in progress, to which AFUDC is applied, andapplied.

Provision for income tax – Our effective income tax rate for our Regulated Water Segment was an expense of 24.6% in the first quarter of 2024, compared to an expense of 14.9% in the first quarter of 2023. The increase in the AFUDCeffective tax rate as ais primarily the result of an increasechanges in the amountjurisdictional earnings mix, decrease in the amortization of AFUDC relatedcertain regulatory liabilities associated with deferred taxes, and a decrease in the income tax benefit associated with the tax deduction for qualifying infrastructure.

Regulated Natural Gas Segment

Our Regulated Natural Gas segment recognizes revenues by selling gas directly to equity. customers at approved rates or by transporting gas through our pipelines at approved rates to customers that have purchased gas directly from other producers, brokers, or marketers. Natural gas sales to residential, commercial and industrial customers are seasonal, which results in higher demand for natural gas for heating purposes during the colder months.

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Table of Contents

AQUA AMERICA,ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

The following tables present selected operating results and statistics for our Regulated Natural Gas segment, for the periods ended March 31, 2024 and 2023:

Three Months Ended March 31,

2024

2023

Increase (Decrease)

% change

Operating revenues

$

324,331

$

441,295

$

(116,964)

-26.5%

Operations and maintenance expense

$

45,917

$

57,150

$

(11,233)

-19.7%

Purchased gas

$

125,542

$

241,856

$

(116,314)

-48.1%

Segment net income

$

209,940

$

123,546

$

86,394

69.9%

Operating Statistics

Selected operating results as a percentage of operating revenues:

Operations and maintenance

14.2%

13.0%

Purchased gas

38.7%

54.8%

Depreciation and amortization

10.0%

6.8%

Taxes other than income taxes

2.2%

1.3%

Segment net income

64.7%

28.0%

Effective tax rate

-16.1%

-54.3%

Three months ended March 31, 2024 compared with three months ended March 31, 2023

Operating revenues from the Regulated Natural Gas segment decreased by $116,964 or by 26.5% due to:

decrease in purchased gas costs of $116,314 during the quarter as compared to the prior period, refer to purchased gas costs discussion below for further information;

decrease in customer assistance surcharge of $2,797, which has an equivalent offsetting amount in operations and maintenance expense; and offset by,

an increase of $2,479 due to higher rates and other surcharges.

Operations and maintenance expense for the three months ended March 31, 2024 decreased by $11,233 or 19.7% primarily due to the following:

decrease in customer assistance surcharge costs of $2,797, which has an equivalent offsetting amount in revenues;

decrease in bad debt expense of $1,261;

decrease in operation and maintenance expense of $1,712 as a result of the sale of both the regulated natural gas utility assets in West Virginia in October 2023 and the three non-utility local microgrid and distributed energy projects in January 2024; and

decrease in outside services and other expenses due to higher capitalization as a result of greater capital spend in the current period.

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Table of Contents

ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES 

 MANAGEMENT’S DISCUSSION AND ANALYSIS OF 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

(In thousands of dollars, except per share amounts)

Our Regulated Natural Gas segment is affected by the cost of natural gas, which is passed through to customers using a purchased gas adjustment clause and includes commodity price, transportation and storage costs. These costs are reflected in the consolidated statement of operations and comprehensive income as purchased gas expenses. Fluctuations in the cost of purchased gas impact operating revenues on a dollar-for-dollar basis. Purchased gas decreased by $116,314 or 48.1% as a result of the impact of: (1) decrease in the average cost of gas of $107,122; (2) lower gas usage of $5,994 due to warmer weather conditions during the first quarter of 2024; and (3) the sale of Peoples West Virginia of $3,198 in October 2023.

Depreciation and amortization increased by $2,283 or 7.6% primarily due to continued capital investment.

Taxes other than income taxes increased by $1,599 or 28.4% primarily due an increase in property taxes and payroll taxes.

Other expense, net – Interest expense, net, decreased by $2,151 or 7.8% due to interest incurred in the first quarter of 2023 on refunded gas cost collections, partially offset by an increase in interest expense resulting from higher push down debt borrowings of the Regulated Natural Gas segment with Essential Utilities, Inc.

Gain on sale of assets was $91,581 and $0 during the first quarters of 2024 and 2023, respectively. During the first quarter of 2024, the Company completed the sale of its interest in three non-utility local microgrid and distributed energy projects and recognized a gain of $91,236.

Income tax benefitOur effective income tax rate was 6.0%a benefit of 16.1% in the first nine monthsquarter of 2017 and 8.4%2024, compared to a benefit of 54.3% in the first nine monthsquarter of 2016.2023. The effectivedecrease in the income tax rate decreased duebenefit is primarily attributed to the effectgain recognized from the sale of additional tax deductions recognizedthe Company’s interest in three non-utility local microgrid and distributed energy projects in the first nine monthsquarter of 20172024 partially offset by the increase in income tax benefit associated with the tax deduction for certaincontinued qualifying infrastructure improvements for Aqua Pennsylvania.     investment.

Net income increased by $1,732 or 0.9%, primarily as a result of the factors described above. 

Impact of Recent Accounting Pronouncements

We describe the impact of recent accounting pronouncements in Note 15, 16, Recent Accounting Pronouncements, to the consolidated financial statements in this report.

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Item 3 – Quantitative and Qualitative Disclosures About Market Risk 

We are subject to market risks in the normal course of business, including changes in interest rates and equity prices. There have been no significant changes in our exposure to market risks since December 31, 2016.  Refer to Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 20162023, filed February 29, 2024, for additional information.information on market risks.

Item 4 – Controls and Procedures 

(a)

Evaluation of Disclosure Controls and Procedures 

(a)Evaluation of Disclosure Controls and Procedures 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.  

(b)

Changes in Internal Control over Financial Reporting 

(b)Changes in Internal Control over Financial Reporting 

No change in our internal control over financial reporting occurred during our most recent fiscalthe quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1 – Legal Proceedings 

We are party to various legal proceedings.  AlthoughFor a discussion of the results ofCompany’s legal proceedings, cannot be predicted with certainty, there are no pending legal proceedingssee Part I – Item I – Note 14 to which we or any of our subsidiaries is a party or to which any of our properties is the subject that we believe are material or are expected to have a material adverse effect on ourCompany’s consolidated financial position, results of operations or cash flows.   statements.

Item 1A – Risk Factors 

There have been no material changes toPlease review the risks disclosed in our Annual Report on Form 10-K for the year ended December 31, 20162023, under “Part 1, Item 1A – Risk Factors.”Factors”.

Item 5 - Other Information

(a) Amendments to the Form of Stock Award Agreements

On May 2, 2024, the Board of Directors approved amendments to the forms of award agreements for the grant of Restricted Stock Units (“RSUs”), Performance-based Share Units (“PSUs”) and stock options to acquire shares of common stock to certain officers of the Company, including the named executive officers. The amendments amend the definition of “Retirement” under the award agreements to mean (i) the executive’s voluntary termination of employment after (A) the executive has attained age fifty-five (55) and has five (5) full years of service with the Company or (B) a combination of age and years of service equal to at least 60, and (ii) the executive has provided the Company at least six (6) months’ advance written notice

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of such Retirement. In the event of a Retirement, all outstanding awards under the award agreement accelerate and vest in full. However, if a change in control of the Company occurs, the provisions in the award agreement with respect to the impact of a change in control supersede this amended Retirement provision. The changes to the award agreements will apply prospectively to any new awards made to the designated officers.

Item 2 – Unregistered Sales(c) Security Trading Plans of Equity SecuritiesDirectors and Use of ProceedsExecutive Officers

The following table summarizes the Company’s purchases of its common stock forDuring the quarter ended September 30, 2017:March 31, 2024, none of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.



 

 

 

 

 

 

 

 

 



 

Issuer Purchases of Equity Securities

 

 



 

 

 

 

 

 

Total

 

Maximum



 

 

 

 

 

 

Number of

 

Number of



 

 

 

 

 

 

Shares

 

Shares



 

 

 

 

 

 

Purchased

 

that May



 

 

 

 

 

 

as Part of

 

Yet be



 

Total

 

 

 

 

Publicly

 

Purchased



 

Number

 

Average

 

Announced

 

Under the



 

of Shares

 

Price Paid

 

Plans or

 

Plan or

Period

 

Purchased (1)

 

per Share

 

Programs

 

Programs

July 1-31, 2017

 

196 

 

$

33.46 

 

 -

 

 -

August 1-31, 2017

 

513 

 

$

33.86 

 

 -

 

 -

September 1-30, 2017

 

 -

 

$

 -

 

 -

 

 -

Total

 

709 

 

$

33.75 

 

 -

 

 -

(1)

These amounts include the following:  (a) 196 shares we acquired from employees associated with the withholding of shares to pay certain withholding taxes upon the vesting of stock-based compensation; and (b) 513 shares we acquired from our employees who elected to pay the exercise price of their stock options (and then hold shares of the stock), upon exercise, by delivering to us shares of our common stock in accordance with the terms of our equity compensation plan that were previously approved by our shareholders and disclosed in our proxy statements.  These features of our equity compensation plan are available to all employees who receive stock-based compensation under the plan.  We purchased these shares at their fair market value, as determined by reference to the closing price of our common stock on the day prior to the option exercise.     


39


Item 6 – Exhibits  

The information required by this Item is set forth in the Exhibit Index hereto which is incorporated herein by reference.

32


Table of Contents

EXHIBIT INDEX 

Exhibit No. 

 Description 

4.1Exhibit No. 

 Description 

10.1*!

Bond Purchase Agreement, dated July 10, 2017 byForm of 2025 Restricted Stock Unit Grant Terms and among Aqua Illinois, Inc., Teachers InsuranceConditions for Certain Officers and Annuity Association of AmericaExecutive Officers

4.2

10.2*!

Bond Purchase Agreement, dated July 20, 2017 byForm of 2025 Stock Option Terms and among Aqua Pennsylvania, Inc., New York Life Insurance Company, New York Life InsuranceConditions for Certain Officers and Annuity Corporation, New York Life Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 3), New York Life Insurance and Annuity Corporation Institutionally Owned Life Insurance Separate Account (BOLI 3-2)Executive Officers

31.1 

10.3*!

Form of 2025 Performance Stock Unit Terms and Conditions for Certain Officers and Executive Officers

31.1* 

Certification of Chief Executive Officer, filed pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934.1934

31.2 

31.2* 

Certification of Chief Financial Officer, filed pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934.1934

32.1 

32.1* 

Certification of Chief Executive Officer, furnished pursuant to 18 U.S.C. Section 1350.1350

32.2 

32.2* 

Certification of Chief Financial Officer, furnished pursuant to 18 U.S.C. Section 1350.1350

101.INS

XBRL Instance Document

101.SCH101.INS

Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRES

101.PRES

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (included in Exhibit 101)

*Filed herewith.

! Indicates management contract or compensatory plan or arrangement.


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SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be executed on its behalf by the undersigned thereunto duly authorized. 

November 2,  2017May 8, 2024

Aqua America,Essential Utilities, Inc.                  

Registrant

/s/ Christopher H. Franklin

Christopher H. Franklin

Chairman, President and

Chief Executive Officer

/s/ David P. SmeltzerDaniel J. Schuller

David P. SmeltzerDaniel J. Schuller

Executive Vice President and

Chief Financial Officer

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