Essential Utilities, Inc. Files Quarterly Report (10-Q)

TL;DR

<b>Essential Utilities, Inc. (WTRG) filed its Q1 2024 10-Q report, detailing utility operations and financial information.</b>

AI Summary

Essential Utilities, Inc. (WTRG) filed a Quarterly Report (10-Q) with the SEC on May 8, 2024. Essential Utilities, Inc. filed its quarterly report on Form 10-Q for the period ending March 31, 2024. The filing covers operations for the first quarter of 2024. The company's former names include AQUA AMERICA INC and PHILADELPHIA SUBURBAN CORP. The report details various water and wastewater utility systems across multiple states. It also references regulated natural gas utility assets in West Virginia.

Why It Matters

For investors and stakeholders tracking Essential Utilities, Inc., this filing contains several important signals. This 10-Q filing provides investors with the latest financial performance and operational updates for Essential Utilities, Inc. for the first quarter of 2024. The detailed segment information and asset descriptions offer insights into the company's regulated utility business, which is crucial for understanding its revenue streams and growth potential.

Risk Assessment

Risk Level: medium — Essential Utilities, Inc. shows moderate risk based on this filing. The company operates in the regulated utility sector, which is subject to significant regulatory oversight and potential changes in rates and environmental standards, impacting financial performance.

Analyst Insight

Investors should review the detailed financial statements and risk factors in the 10-Q to assess the company's performance and outlook in the regulated utility market.

Key Numbers

• 2024-03-31 — Reporting Period End Date (Conformed period of report)
• 2024-05-08 — Filing Date (Filed as of date)
• 2024-01-01 — Q1 2024 Start Date (Water segment reporting period)
• 2023-12-31 — Q4 2023 End Date (Water and wastewater utility systems reporting period)

Key Players & Entities

• Essential Utilities, Inc. (company) — Filer name
• AQUA AMERICA INC (company) — Former company name
• PHILADELPHIA SUBURBAN CORP (company) — Former company name
• Pennsylvania (location) — State of incorporation and business address
• West Virginia (location) — Regulated natural gas utility assets
• North Versailles, Pennsylvania (location) — Water and wastewater utility systems
• Greenville, Pennsylvania (location) — Water and wastewater utility systems
• Glenview, Illinois (location) — Water and wastewater utility systems

FAQ

Risk Factors

• Regulatory Environment [high — regulatory]: The company operates in a highly regulated industry, subject to state and federal regulations that can impact rates, operations, and capital expenditures.
• Debt Obligations [medium — financial]: The company has significant long-term debt, and its ability to service this debt is subject to various financial covenants and market conditions.
• Infrastructure Maintenance [medium — operational]: Maintaining and upgrading aging water and wastewater infrastructure requires substantial capital investment and is subject to operational risks.
• Interest Rate Fluctuations [medium — market]: Changes in interest rates can affect the cost of borrowing for the company and the attractiveness of its debt securities.

Key Dates

• 2024-03-31: Quarterly Period End — End of the reporting period for the 10-Q filing.
• 2024-05-08: Filing Date — Date the 10-Q was officially filed with the SEC.

Key Financial Figures

• $0.50 — nge on which registered Common stock, $0.50 par value WTRG New York Stock Excha

Filing Documents

• wtrg-20240331x10q.htm (10-Q) — 3603KB
• wtrg-20240331xex10_1.htm (EX-10.1) — 49KB
• wtrg-20240331xex10_2.htm (EX-10.2) — 51KB
• wtrg-20240331xex10_3.htm (EX-10.3) — 53KB
• wtrg-20240331xex31_1.htm (EX-31.1) — 17KB
• wtrg-20240331xex31_2.htm (EX-31.2) — 17KB
• wtrg-20240331xex32_1.htm (EX-32.1) — 10KB
• wtrg-20240331xex32_2.htm (EX-32.2) — 10KB
• 0001562762-24-000128.txt (&nbsp;) — 12699KB
• wtrg-20240331.xsd (EX-101.SCH) — 54KB
• wtrg-20240331_cal.xml (EX-101.CAL) — 60KB
• wtrg-20240331_def.xml (EX-101.DEF) — 224KB
• wtrg-20240331_lab.xml (EX-101.LAB) — 416KB
• wtrg-20240331_pre.xml (EX-101.PRE) — 408KB
• wtrg-20240331x10q_htm.xml (XML) — 2853KB

– Financial Information

Part I – Financial Information

Financial Statements

Item 1. Financial Statements: Consolidated Balance Sheets (unaudited) – March 31, 2024 and December 31, 2023 2 Consolidated Statements of Operations and Comprehensive Income (unaudited) – Three Months Ended March 31, 2024 and 2023 4 Consolidated Statements of Capitalization (unaudited) – March 31, 2024 and December 31, 2023 5 Consolidated Statements of Equity (unaudited) – Three Months Ended March 31, 2024 6 Consolidated Statements of Equity (unaudited) – Three Months Ended March 31, 202 3 7 Consolidated Statements of Cash Flow (unaudited) – Three Months Ended March 31, 2024 and 2023 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 9

Management's Discussion and Analysis of Financial

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 38

Controls and Procedures

Item 4. Controls and Procedures 38

– Other Information

Part II – Other Information

Legal Proceedings

Item 1. Legal Proceedings 38

Risk Factors

Item 1A. Risk Factors 39

Other Information

Item 5. Other Information 39

Exhibits

Item 6. Exhibits 40

Signatures

Signatures 41 1 Table of Contents ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES CO NS OLIDATED BALANCE SHEETS (In thousands of dollars, except per share amounts) (UNAUDITED) 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 ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) (In thousands of dollars, except per share amounts) (UNAUDITED) ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsVestedInPeriod 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 (

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands of dollars, except per share amounts) (UNAUDITED) Note 1 – Basis of Presentation The accompanying unaudited consolidated balance sheets and statements of capitalization of Essential Utilities, Inc. and subsidiaries (collectively, the "Company", "we", "us" or "our") at March 31, 2024, and the unaudited consolidated statements of operations and comprehensive income, cash flows and equity for the three months ended March 31, 2024 and 2023, have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim reporting and the rules and regulations for 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, 2023. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, consisting of only recurring accruals, which are necessary to present a fair statement of its consolidated balance sheets, consolidated statements of equity, consolidated statements of operations and comprehensive income, and consolidated cash flow for the periods presented, have been made. The preparation of financial statements often requires the selection of specific accounting methods and policies. Significant 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 operations and comprehensive income, and the information that is contained in its summary of significant accounting policies and notes to consolidated financial statements. Making these e

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (In thousands of dollars, except per share amounts) (UNAUDITED) Note 2 – Revenue 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 wat

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 2 00 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 $ 54,37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 consolidat

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (In thousands of dollars, except per share amounts) (UNAUDITED) 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. At-the-Market Offering 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 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

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