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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

FORM 10-Q

(Mark One) 

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

For the quarterly period ended June 30, 2019 

£ 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, 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)

(Former Name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S  No £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes S  No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.:  

Large Accelerated Filer S

Accelerated Filer £

Non-Accelerated Filer £

Smaller Reporting Company £

Emerging Growth Company £

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £  No S

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.50 par value

WTR

New York Stock Exchange

6.00% Tangible Equity Units

WTRU

New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 24, 2019: 215,776,908


Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Page

Part I – Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets (unaudited) – June 30, 2019 and December 31, 2018

2

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Three Months Ended June 30, 2019 and 2018

3

Consolidated Statements of Operations and Comprehensive Income (unaudited) –
Six Months Ended June 30, 2019 and 2018

4

Consolidated Statements of Capitalization (unaudited) –
June 30, 2019 and December 31, 2018

5

Consolidated Statements of Equity (unaudited) –
Six Months Ended June 30, 2019

6

Consolidated Statements of Equity (unaudited) –
Six Months Ended June 30, 2018

7

Consolidated Statements of Cash Flow (unaudited) –
Six Months Ended June 30, 2019 and 2018

8

Notes to Consolidated Financial Statements (unaudited)

9

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

34

Item 3. Quantitative and Qualitative Disclosures About Market Risk

43

Item 4. Controls and Procedures

43

 

Part II – Other Information

 

Item 1. Legal Proceedings

43

Item 1A. Risk Factors

44

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

47

Item 6. Exhibits

48

Signatures

51

1


Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

June 30,

December 31,

Assets

2019

2018

Property, plant and equipment, at cost

$

7,881,313

$

7,648,469

Less: accumulated depreciation

1,766,465

1,718,143

Net property, plant and equipment

6,114,848

5,930,326

Current assets:

Cash and cash equivalents

1,974,076

3,627

Accounts receivable and unbilled revenues, net

110,741

101,225

Inventory, materials and supplies

16,294

15,844

Prepayments and other current assets

15,251

23,337

Assets held for sale

1,558

3,139

Total current assets

2,117,920

147,172

Regulatory assets

832,799

788,076

Deferred charges and other assets, net

41,449

39,237

Investment in joint venture

7,448

6,959

Goodwill

52,722

52,726

Operating lease right-of-use assets

13,164

-

Total assets

$

9,180,350

$

6,964,496

Liabilities and Equity

Stockholders' equity:

Common stock at $0.50 par value, authorized 300,000,000 shares, issued 218,887,834 and 181,151,827 as of June 30, 2019 and December 31, 2018

$

109,444

$

90,576

Capital in excess of par value

2,633,271

820,378

Retained earnings

1,159,753

1,174,245

Treasury stock, at cost, 3,112,376 and 3,060,206 shares as of June 30, 2019 and December 31, 2018

(77,694)

(75,835)

Total stockholders' equity

3,824,774

2,009,364

Long-term debt, excluding current portion

2,779,074

2,419,115

Less: debt issuance costs

29,870

20,651

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

2,749,204

2,398,464

Commitments and contingencies (See Note 15)

 

 

Current liabilities:

Current portion of long-term debt

221,393

144,545

Loans payable

6,076

15,449

Accounts payable

57,463

77,331

Book overdraft

22,294

8,950

Accrued interest

30,755

23,300

Accrued taxes

17,962

22,234

Interest rate swap agreements

-

59,779

Other accrued liabilities

43,006

47,389

Total current liabilities

398,949

398,977

Deferred credits and other liabilities:

Deferred income taxes and investment tax credits

876,332

845,403

Customers' advances for construction

102,801

93,343

Regulatory liabilities

525,864

531,027

Operating lease liabilities

11,913

-

Other

97,365

97,182

Total deferred credits and other liabilities

1,614,275

1,566,955

Contributions in aid of construction

593,148

590,736

Total liabilities and equity

$

9,180,350

$

6,964,496

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

 

2


Table of Contents

AQUA AMERICA, INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(UNAUDITED)

Three Months Ended

June 30,

2019

2018

Operating revenues

$

218,892

$

211,860

Operating expenses:

Operations and maintenance

86,445

73,515

Depreciation

39,550

36,613

Amortization

(2,920)

149

Taxes other than income taxes

14,868

14,829

Total operating expenses

137,943

125,106

Operating income

80,949

86,754

Other expense (income):

Interest expense, net

23,309

23,723

Allowance for funds used during construction

(3,611)

(2,577)

Change in fair value of interest rate swap agreements

(11,040)

-

Loss on debt extinguishment

18,935

-

Gain on sale of other assets

(48)

(141)

Equity earnings in joint venture

(1,240)

(911)

Other

1,912

437

Income before income taxes

52,732

66,223

Provision for income tax benefit

(2,171)

(367)

Net income

$

54,903

$

66,590

Comprehensive income

$

54,903

$

66,590

Net income per common share:

Basic

$

0.25

$

0.37

Diluted

$

0.25

$

0.37

Average common shares outstanding during the period:

Basic

219,055

177,901

Diluted

219,790

178,273

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 OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(UNAUDITED)

Six Months Ended

June 30,

2019

2018

Operating revenues

$

420,024

$

406,207

Operating expenses:

Operations and maintenance

165,759

147,461

Depreciation

78,624

72,580

Amortization

(2,584)

279

Taxes other than income taxes

29,837

29,796

Total operating expenses

271,636

250,116

Operating income

148,388

156,091

Other expense (income):

Interest expense, net

51,159

47,194

Allowance for funds used during construction

(7,667)

(5,444)

Change in fair value of interest rate swap agreements

23,742

-

Loss on debt extinguishment

18,935

-

Gain on sale of other assets

(268)

(337)

Equity earnings in joint venture

(1,783)

(1,293)

Other

2,784

1,040

Income before income taxes

61,486

114,931

Provision for income tax benefit

(10,341)

(2,498)

Net income

$

71,827

$

117,429

Comprehensive income

$

71,827

$

117,429

Net income per common share:

Basic

$

0.36

$

0.66

Diluted

$

0.36

$

0.66

Average common shares outstanding during the period:

Basic

198,747

177,852

Diluted

199,303

178,299

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 CAPITALIZATION 

(In thousands of dollars, except per share amounts) 

(UNAUDITED)

  

June 30,

December 31,

2019

2018

Stockholders' equity:

Common stock, $0.50 par value

$

109,444

$

90,576

Capital in excess of par value

2,633,271

820,378

Retained earnings

1,159,753

1,174,245

Treasury stock, at cost

(77,694)

(75,835)

Total stockholders' equity

3,824,774

2,009,364

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

Interest Rate Range

Maturity Date Range

0.00% to 0.99%

2023 to 2033

3,413

3,732

1.00% to 1.99%

2020 to 2035

11,624

11,588

2.00% to 2.99%

2024 to 2033

16,587

17,488

3.00% to 3.99%

2019 to 2056

496,319

497,426

4.00% to 4.99%

2020 to 2059

955,566

831,066

5.00% to 5.99%

2019 to 2043

134,478

154,788

6.00% to 6.99%

2026 to 2036

31,000

31,000

7.00% to 7.99%

2022 to 2027

31,163

31,564

8.00% to 8.99%

2021 to 2025

5,309

5,581

9.00% to 9.99%

2020 to 2026

20,000

20,000

1,705,459

1,604,233

Notes payable to bank under revolving credit agreement, variable rate, due 2023

-

370,000

Unsecured notes payable:

Bank notes at 2.48% and 3.50% due 2019 and 2020

100,000

100,000

Amortizing notes at 3.00% due 2022

119,081

-

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

525,000

245,000

Notes at 4.28%, due 2049

500,000

112,000

Notes ranging from 5.64% to 5.95%, due 2020 through 2034

50,927

132,427

3,000,467