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, 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
ESSENTIAL UTILITIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania
23-1702594
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
762 W. Lancaster Avenue, Bryn Mawr, Pennsylvania
19010 -3489
(Address of principal executive offices)
(Zip Code)
(610) 527-8000
(Registrant’s telephone number, including area code)
N/A
(Former Name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes S No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.:
Large Accelerated Filer S
Accelerated Filer £
Non-Accelerated Filer £
Smaller Reporting Company £
Emerging Growth Company £
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.50 par value
WTRG
New York Stock Exchange
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 26, 2024: 273,672,080
ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Part I – Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited) – June 30, 2024 and December 31, 2023
2
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) – Three Months Ended June 30, 2024 and 2023
4
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) – Six Months Ended June 30, 2024 and 2023
5
Condensed Consolidated Statements of Capitalization (unaudited) - June 30, 2024 and December 31, 2023
6
Condensed Consolidated Statements of Equity (unaudited) – Six Months Ended June 30, 2024
7
Condensed Consolidated Statements of Equity (unaudited) – Six Months Ended June 30, 2023
8
Condensed Consolidated Statements of Cash Flow (unaudited) – Six Months Ended June 30, 2024 and 2023
9
Notes to Condensed Consolidated Financial Statements (unaudited)
10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3. Quantitative and Qualitative Disclosures About Market Risk
43
Item 4. Controls and Procedures
Part II – Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
45
Signatures
46
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except per share amounts)
(UNAUDITED)
June 30,
December 31,
Assets
2024
2023
Property, plant and equipment, at cost
$
15,519,111
14,977,021
Less: accumulated depreciation
2,999,982
2,879,949
Net property, plant and equipment
12,519,129
12,097,072
Current assets:
Cash and cash equivalents
18,819
4,612
Accounts receivable, net
139,768
144,300
Unbilled revenues
74,941
101,436
Inventory - materials and supplies
50,117
47,494
Inventory - gas stored
34,424
65,173
Prepayments and other current assets
28,712
99,884
Regulatory assets
15,952
29,080
Total current assets
362,733
491,979
1,895,512
1,766,892
Deferred charges and other assets, net
94,385
102,388
Funds restricted for construction activity
1,402
1,381
Goodwill
2,340,731
2,340,738
Operating lease right-of-use assets
34,791
37,416
Intangible assets
3,433
3,593
Total assets
17,252,116
16,841,459
The accompanying notes are an integral part of these condensed consolidated financial statements
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
Liabilities and Equity
Stockholders' equity:
Common stock at $0.50 par value, authorized 600,000,000 shares, issued 277,016,906 and 276,595,228 as of June 30, 2024 and December 31, 2023
138,508
138,297
Capital in excess of par value
4,149,208
4,137,696
Retained earnings
1,963,716
1,706,675
Treasury stock, at cost, 3,348,009 and 3,299,191 shares as of June 30, 2024 and December 31, 2023
(88,198)
(86,485)
Total stockholders' equity
6,163,234
5,896,183
Long-term debt, excluding current portion
7,057,623
6,870,593
Less: debt issuance costs
46,736
44,508
Long-term debt, excluding current portion, net of debt issuance costs
7,010,887
6,826,085
Commitments and contingencies (See Note 14)
Current liabilities:
Current portion of long-term debt
71,787
67,415
Loans payable
93,267
160,123
Accounts payable
204,772
221,191
Book overdraft
15,500
13,358
Accrued interest
64,430
53,084
Accrued taxes
29,464
40,641
Regulatory liabilities
6,250
31,270
Dividends payable
-
83,929
Other accrued liabilities
143,680
126,916
Total current liabilities
629,150
797,927
Deferred credits and other liabilities:
Deferred income taxes and investment tax credits
1,764,108
1,628,324
Customers' advances for construction
118,121
128,755
809,399
820,910
Asset retirement obligations
854
848
Operating lease liabilities
31,051
34,425
Pension and other postretirement benefit liabilities
37,948
38,850
Other
23,719
24,086
Total deferred credits and other liabilities
2,785,200
2,676,198
Contributions in aid of construction
663,645
645,066
Total liabilities and equity
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three Months Ended
Operating revenues
434,406
436,700
Operating expenses:
Operations and maintenance
142,512
133,508
Purchased gas
33,728
41,933
Depreciation
89,578
84,937
Amortization
1,068
724
Taxes other than income taxes
22,233
20,348
Total operating expenses
289,119
281,450
Operating income
145,287
155,250
Other expense (income):
Interest expense
73,045
69,182
Interest income
(276)
(970)
Allowance for funds used during construction
(5,229)
(3,424)
Gain on sale of other assets
(203)
(220)
Other, net
701
(323)
Income before income taxes
77,249
91,005
Income tax expense (benefit)
1,864
(263)
Net income
75,385
91,268
Comprehensive income
Net income per common share:
Basic
0.28
0.35
Diluted
0.34
Average common shares outstanding during the period:
273,567
264,418
273,953
264,818
Six Months Ended
1,046,475
1,163,150
279,412
271,502
163,403
298,248
178,294
167,860
2,156
1,595
47,257
43,226
670,522
782,431
375,953
380,719
146,318
141,850
(1,265)
(1,789)
(9,910)
(9,112)
(91,828)
(469)
259
(563)
332,379
250,802
Income tax benefit
(8,778)
(31,900)
341,157
282,702
1.25
1.07
273,472
264,306
273,869
264,840
CONDENSED CONSOLIDATED STATEMENTS OF CAPITALIZATION
Treasury stock, at cost
Long-term debt of subsidiaries (substantially collateralized by utility plant):
Interest Rate Range
Maturity Date Range
0.00% to 0.99%
2024 to 2033
2,821
2,935
1.00% to 1.99%
2024 to 2039
7,165
7,538
2.00% to 2.99%
2024 to 2058
207,025
207,917
3.00% to 3.99%
2024 to 2056
1,310,212
1,313,932
4.00% to 4.99%
2024 to 2059
1,242,197
1,245,727
5.00% to 5.99%
2024 to 2061
313,306
312,745
6.00% to 6.99%
2026 to 2036
31,000
7.00% to 7.99%
2025 to 2027
28,007
28,125
8.00% to 8.99%
2025
877
1,289
9.00% to 9.99%
2026
11,800
3,154,410
3,163,008
Notes payable to bank under revolving credit agreement, variable rate, due 2027
430,000
720,000
Unsecured notes payable:
Notes at 2.40% due 2031
400,000
Notes at 2.704% due 2030
500,000
Notes ranging from 3.01% to 3.59% due 2029 through 2050
1,125,000
Notes at 5.375%, due 2034
Notes at 4.276%, due 2049
Notes at 5.30%, due 2052
Notes at 5.95%, due 2024 through 2034
20,000
30,000
Total long-term debt
7,129,410
6,938,008
Total capitalization
13,174,121
12,722,268
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
Capital in
Common
Excess of
Retained
Treasury
Stock
Par Value
Earnings
Total
Balance at December 31, 2023
265,772
Dividends of March 1, 2024 ($0.3071 per share)
(1)
Dividends of June 1, 2024 declared ($0.3071 per share)
(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)
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
(51)
274
223
Balance at March 31, 2024
138,438
4,142,610
1,888,521
(88,442)
6,081,127
Dividends of June 1, 2024 ($0.3071 per share)
Issuance of common stock under dividend reinvestment plan (108,544 shares)
54
3,736
3,790
Repurchase of stock (30 shares)
Equity compensation plan (23,142 shares)
12
(12)
Exercise of stock options (7,117 shares)
244
248
2,751
(189)
2,562
(121)
245
124
Balance at June 30, 2024
Balance at December 31, 2022
133,486
3,793,262
1,534,331
(83,693)
5,377,386
191,434
Dividends of March 1, 2023 ($0.287 per share)
Dividends of June 1, 2023 declared ($0.287 per share)
(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)
Equity compensation plan (222,782 shares)
111
(111)
Exercise of stock options (2,917 shares)
101
103
3,410
(267)
3,143
(20)
273
253
Balance at March 31, 2023
133,848
3,819,804
1,649,621
(87,331)
5,515,942
Dividends of June 1, 2023 ($0.287 per share)
Issuance of common stock under dividend reinvestment plan (102,676 shares)
51
3,901
3,952
Repurchase of stock (971 shares)
(42)
Equity compensation plan (17,054 shares)
(9)
Exercise of stock options (3,026 shares)
1
105
106
3,515
(206)
3,309
(117)
281
164
Balance at June 30, 2023
133,909
3,827,199
1,740,682
(87,092)
5,614,698
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands of dollars)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization
180,450
169,455
Deferred income taxes
(12,404)
(34,711)
Provision for doubtful accounts
13,843
11,594
3,825
6,950
Gain on sale of utility systems and other assets
Net change in receivables, deferred purchased gas costs, inventory and prepayments
21,222
300,648
Net change in payables, accrued interest, accrued taxes and other accrued liabilities
(24,245)
(90,739)
(5,594)
(24,008)
Net cash flows from operating activities
426,426
621,422
Cash flows from investing activities:
Property, plant and equipment additions, including the debt component of allowance for funds used during construction of $3,482 and $2,587
(548,868)
(547,600)
Acquisitions of utility systems, net
(67)
(25,793)
Net proceeds from the sale of utility systems and other assets
166,982
613
(158)
386
Net cash flows used in investing activities
(382,111)
(572,394)
Cash flows from financing activities:
Customers' advances and contributions in aid of construction
7,361
9,375
Repayments of customers' advances
(3,009)
(1,958)
Net repayments of short-term debt
(66,857)
(180,457)
Proceeds from long-term debt
789,946
384,715
Repayments of long-term debt
(597,972)
(136,604)
Change in cash overdraft position
2,143
3,795
Proceeds from issuance of common stock under dividend reinvestment plan
7,672
8,069
Proceeds from issuance of common stock from at-the-market sale agreement
Proceeds from exercised stock options
423
209
Repurchase of common stock
(2,232)
(3,953)
Dividends paid on common stock
(167,930)
(151,686)
347
417
Net cash flows used in financing activities
(30,108)
(48,784)
Net change in cash and cash equivalents
14,207
Cash and cash equivalents at beginning of period
11,398
Cash and cash equivalents at end of period
11,642
Non-cash investing activities:
Property, plant and equipment additions purchased at the period end, but not yet paid for
131,189
124,503
Non-cash utility property contributions
18,791
25,980
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The accompanying unaudited condensed consolidated balance sheets and statements of capitalization of Essential Utilities, Inc. and subsidiaries (collectively, the “Company”, “we”, “us” or “our”) at June 30, 2024, the unaudited condensed consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2024, and the unaudited condensed consolidated statements of cash flow and of equity for the six months ended June 30, 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 condensed consolidated balance sheets, condensed consolidated statements of capitalization, condensed consolidated statements of equity, condensed consolidated statements of operations and comprehensive income, and condensed consolidated statements of 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 condensed consolidated balance sheets, the revenues and expenses in its condensed consolidated statements of operations and comprehensive income, and the information that is contained in its summary of significant accounting policies and notes to condensed 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 condensed 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, 2023.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 – Revenue Recognition
The following table presents our revenues disaggregated by major source and customer class:
June 30, 2024
June 30, 2023
Water Revenues
Wastewater Revenues
Natural Gas Revenues
Other Revenues
Revenues from contracts with customers:
Residential
165,412
36,053
70,597
167,121
34,046
76,476
Commercial
45,796
8,808
14,408
46,774
8,656
16,297
Fire protection
10,742
10,185
Industrial
8,638
564
357
8,289
509
471
Gas transportation & storage
35,391
34,862
Other water
19,893
11,917
Other wastewater
2,762
2,730
Other utility
7,450
2,901
10,845
2,649
Revenues from contracts with customers
250,481
48,187
128,203
244,286
45,941
138,951
Alternative revenue program
1,024
(114)
(15)
767
32
Other and eliminations
3,739
4,045
Consolidated
251,505
48,073
128,188
6,640
245,053
45,970
138,983
6,694
317,243
71,647
277,523
314,373
67,536
368,706
87,533
17,790
56,579
87,728
17,247
81,454
21,123
20,444
16,780
1,106
1,247
16,146
1,087
2,260
105,882
102,515
35,500
20,761
6,386
5,464
10,152
5,711
23,922
478,179
96,929
451,383
459,452
91,334
578,857
1,680
(127)
1,136
1,169
1,421
11,584
21,900
479,859
96,802
452,519
17,295
460,621
91,543
580,278
30,708
Note 3 – Acquisitions
Water and Wastewater Utility Acquisitions - Completed
In May 2024, the Company acquired the wastewater utility assets of Westfield HOA, which serves approximately 200 customers within Westfield Homeowners Subdivision in Glenview, Illinois for a cash purchase price of $67.
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 June 2024, the Company entered into a purchase agreement to acquire private water and wastewater utility assets in Harris County, Texas, which serves approximately 400 equivalent retail customers for $1,125.
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.
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 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 2025. 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. On June 14, 2024, the Pennsylvania Supreme Court granted the Petitions for Allowance of Appeal of the Pennsylvania Public Utility Commission, the Company, and East Whiteland Township. 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 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 condensed 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 condensed consolidated statement of operations.
Note 5 – Goodwill
The following table summarizes the changes in the Company’s goodwill, by business segment:
Regulated Water
Regulated Natural Gas
58,450
2,277,447
4,841
Reclassification to utility plant acquisition adjustment
(7)
58,443
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.
Note 6 – Capitalization
In March 2024, the Company filed a new universal shelf registration 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 expired in the second quarter of 2024.
At-the-Market Offering
On October 14, 2022, the Company entered into at-the market sales agreements (“2022 ATM”) with third-party sales agents, under which the Company offered and sold shares of its common stock, from time to time, at its option, pursuant to the Company’s then-effective shelf registration statement on Form S-3 (File No. 333-255235) that expired in April 2024. The Company used the net proceeds from the sales of shares through the 2022 ATM for working capital, capital expenditures, water and wastewater utility acquisitions and repaying outstanding indebtedness. During the three and six months ended June 30, 2024, there were no common stock sales under the 2022 ATM. As of December 31, 2023, the Company had issued 10,260,833 shares of common stock for net proceeds of $386,023 under the 2022 ATM.
Long-term Debt and Loans Payable
On June 12, 2024, Aqua Pennsylvania and Peoples Natural Gas Companies amended the terms of their respective $100,000 and $300,000, 364-day revolving credit agreements, as follows: (1) extended the maturity dates to June 10, 2025; and (2) revised the interest rate index from the Bloomberg Short-Term Bank Yield Index (BSBY) to the Secured Overnight Financing Rate (SOFR).
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, due in 2043, and with an interest rate of 5.60%. The proceeds from these bonds were used to repay existing indebtedness and for general corporate purposes.
Note 7 – Financial Instruments
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 six months ended June 30, 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 June 30, 2024 and December 31, 2023, the carrying amount of the Company’s loans payable was $93,267 and $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 June 30, 2024 and December 31, 2023, the carrying amounts of the Company's cash and cash equivalents was $18,819 and $4,612, respectively, which equates to their fair value. The Company’s assets underlying the deferred compensation and 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 June 30, 2024 and December 31, 2023, the carrying amount of these securities was $28,968 and $26,442, respectively, which equates to their fair value, and is reported in the condensed 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:
Net gain recognized during the period on equity securities
197
211
618
342
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
The net gain recognized on equity securities is presented on the condensed consolidated statements of operations and comprehensive income on the line item “Other, net”.
The carrying amounts and estimated fair values of the Company’s long-term debt is as follows:
Carrying amount
6,938,009
Estimated fair value
6,036,732
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 $118,121 as of June 30, 2024, and $128,755 as of December 31, 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 rates. Portions of these non-interest-bearing instruments are payable annually through 2033, 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-bearing feature.
Note 8 – Net Income per Common Share
Basic net income per common share is based on the weighted average number of common shares 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 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 of the stock-based compensation. The treasury stock method assumes that the proceeds from stock-based compensation is 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:
Average common shares outstanding during the period for basic computation
Effect of dilutive securities:
Employee stock-based compensation
400
397
534
Average common shares outstanding during the period for diluted computation
The number of outstanding employee stock options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was: 265,378 for the three and six months ended June 30, 2024; and 150,062 for the three and six months ended June 30, 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.
Note 9 – Stock-based Compensation
Under the Company’s Amended and Restated Equity Compensation Plan (the “Plan”) approved by the Company’s shareholders on May 2, 2019, to replace the 2004 Equity Compensation 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 Plan authorizes 6,250,000 shares for issuance under the Plan. A maximum of 3,125,000 shares under the Plan may be issued pursuant to stock awards, stock units and other stock-based awards, subject to adjustment as provided in the Plan. During any calendar year, no individual may be granted (i) stock options and stock appreciation rights under the 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 Plan for more than 500,000 shares of Company stock in the aggregate, subject to adjustment as provided in the Plan. Awards to employees and consultants under the 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 June 30, 2024, 1,229,638 shares were still available for issuance under the Plan. No further grants may be made under the Company’s 2004 Equity Compensation Plan.
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 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 expense for PSUs:
Stock-based compensation within operations and maintenance expenses
1,082
1,962
1,188
4,405
271
492
297
1,104
The following table summarizes the PSU transactions for the six months ended June 30, 2024:
Number
Weighted
of
Average
Share Units
Fair Value
Nonvested share units at beginning of period
531,437
40.03
Granted
227,284
38.10
Performance criteria adjustment
(156,857)
31.59
Share units issued
(96,425)
43.40
Forfeited
(11,599)
41.69
Nonvested share units at end of period
493,840
41.14
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 six months ended June 30, 2024 and 2023 was $38.10 and $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.
Restricted Stock Units – A 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 expense and income tax benefit for RSUs:
759
1,570
1,440
182
190
393
361
The following table summarizes the RSU transactions for the six months ended June 30, 2024:
Stock Units
Nonvested stock units at beginning of period
192,217
45.06
104,661
36.61
Stock units vested and issued
(64,618)
44.45
(4,966)
41.75
Nonvested stock units at end of period
227,294
41.39
The per unit weighted-average fair value at the date of grant for RSUs granted during the six months ended June 30, 2024 and 2023 was $36.61 and $45.61, respectively.
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, 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:
71
222
202
299
17
56
50
75
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:
Expected term (years)
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.
The following table summarizes stock option transactions for the six months ended June 30, 2024:
Aggregate
Exercise
Remaining
Intrinsic
Shares
Price
Life (years)
Value
Outstanding at beginning of period
882,442
37.03
119,548
35.78
(2,055)
39.64
Expired
(1,367)
41.66
Exercised
(12,088)
35.02
Outstanding at end of period
986,480
36.90
5.6
1,598
Exercisable at end of period
795,896
36.30
4.7
1,414
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:
13
24
25
3
The following table summarizes restricted stock transactions for the six months ended June 30, 2024:
Nonvested restricted stock at beginning of period
1,412
35.42
Vested
Nonvested restricted stock at end of period
There were no restricted stock awards granted during the six months ended June 30, 2024 and 2023.
Stock Awards – Stock awards represent the issuance of the Company’s common stock, without restriction. The issuance of stock awards results in compensation expense that is equal to the fair market value of the stock on the grant date and is expensed immediately upon grant.
The following table provides the compensation cost and income tax benefit for stock-based compensation related to stock awards:
840
570
780
233
160
219
The following table summarizes stock award transactions for the six months ended June 30, 2024:
Stock Awards
Nonvested stock awards at beginning of period
22,813
36.82
(22,813)
Nonvested stock awards at end of period
The weighted-average fair value at the date of grant for stock awards granted during the six months ended June 30, 2024 and 2023 was $36.82 and $41.78, respectively.
Note 10 – Pension 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
Service cost
714
801
Interest cost
3,908
4,309
7,816
8,617
Expected return on plan assets
(4,696)
(5,673)
(9,392)
(11,345)
Amortization of prior service cost
81
171
162
Amortization of actuarial loss
751
809
1,502
1,618
Net periodic benefit cost
401
16
802
33
Postretirement Benefits
363
337
726
674
1,112
1,119
2,224
2,238
(1,105)
(1,093)
(2,210)
(2,186)
Amortization of actuarial gain
(330)
(534)
(659)
206
67
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 Company presents the components of net periodic benefit cost other than service cost in the condensed consolidated statements of operations and comprehensive income on the line item “Other, net”.
There were no cash contributions made to the Pension Plan during the first six months of 2024.
Note 11 – Rate Activity
On May 23, 2024, Aqua Pennsylvania filed an application with the Pennsylvania Public Utility Commission designed to increase rates by $126,675 or 18.9% on an annual basis. The Company anticipates a final order to be issued by February 2025.
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 September 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 received a recommended decision from the administrative law judge on July 15, 2024 and anticipates a final order to be issued by September 2024.
On December 13, 2023, the Company’s 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.
On June 5, 2023, the Company’s regulated water and wastewater 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 six months of 2024, two of the Company’s water utility operating divisions in Ohio implemented base rate increases designed to increase total operating revenues on an annual basis by $1,627. Further, during the first six months of 2024, the Company implemented infrastructure rehabilitation surcharges designed to increase total operating revenues on an annual basis by $15,729 in its water and wastewater utility operating divisions in Pennsylvania and Illinois, and by $2,293 in its natural gas operating division in Kentucky.
Note 12 – Taxes Other than Income Taxes
The following table provides the components of taxes other than income taxes:
Property
8,535
8,431
17,411
16,535
Gross receipts, excise and franchise
4,297
4,175
8,600
8,205
Payroll
5,009
4,935
12,520
11,567
Regulatory assessments
1,925
1,715
3,398
Pumping fees
1,882
181
3,377
1,647
585
911
1,524
1,874
Total taxes other than income
Note 13 – Segment Information
The Company has eleven operating segments and two reportable segments. The 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 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.
In addition to the Company’s two reportable segments, we include two of our operating segments within the Other category below. These segments are not quantitatively significant and are comprised of our non-regulated natural gas operations and Aqua Resources. Our non-regulated natural gas operations consist of utility service line protection solutions and repair services to households and the operation of gas marketing and production entities. Aqua Resources offers, through a third party, water and sewer service line protection solutions and repair services to households. In addition to these segments, Other is comprised of business activities not included in the reportable segments, corporate costs that have not been allocated to the Regulated Water and Regulated Natural Gas segments, and intersegment eliminations. Corporate costs include general and administrative expenses, and interest expense. The Company reports these corporate costs within Other as they relate to corporate-focused responsibilities and decisions and are not included in internal measures of segment operating performance used by the Company to measure the underlying performance of the operating segments.
The following table presents information about the Company’s reportable segments:
302,479
293,672
Operations and maintenance expense
95,575
49,709
(2,772)
93,227
41,114
(833)
32,680
1,048
39,665
2,268
57,625
32,632
389
90,646
53,231
32,188
242
85,661
Interest expense, net (a)
34,450
20,869
17,450
72,769
30,523
20,982
16,707
68,212
(3,962)
(1,267)
(2,940)
(484)
Provision for income taxes (benefit)
14,505
(9,830)
(2,811)
15,859
(13,314)
(2,808)
Net income (loss)
87,679
(1,717)
(10,577)
90,027
13,630
(12,389)
582,372
560,972
186,258
95,626
(2,472)
176,029
98,264
(2,791)
158,222
5,181
281,521
16,727
114,819
65,043
588
106,698
62,316
441
69,240
46,225
29,588
145,053
60,236
48,489
31,336
140,061
(7,650)
(2,260)
(7,886)
(1,226)
35,315
(38,980)
(5,113)
29,373
(56,798)
(4,475)
151,583
208,223
(18,649)
167,429
137,176
(21,903)
Capital expenditures
302,085
246,783
548,868
329,862
215,212
2,526
547,600
(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.
Total assets:
Regulated water
9,638,046
9,386,347
Regulated natural gas
7,156,351
6,965,350
457,719
489,762
Note 14 – Commitments 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 June 30, 2024, the aggregate amount of $23,052 is accrued for loss contingencies and is reported in the Company’s condensed 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 June 30, 2024, estimates that approximately $855 of the amount accrued for these matters are probable of recovery through insurance, which amount is also reported in the Company’s condensed 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 settlement that was reached with the state and local regulators and approved by the Illinois court with jurisdiction over this matter in July, 2024. 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. While the final outcome of this 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 this matter is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Further, 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.
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. Several defendants in such lawsuit have agreed to settle. In February and April 2024, the MDL court issued its final approval of the DuPont and 3M class action settlements, respectively. In April 2024 and May 2024, Tyco Fire Products LP and BASF Corp, respectively, filed similar class action settlements in the MDL court to resolve claims. In June 2024, Tyco Fire Products LP settlement was granted preliminary approval by the MDL court. The Company submitted the phase one public water system claims requirements pursuant to the Dupont and 3M settlement agreements and will submit other requirements within the time period provided by the MDL court. The amount of recovery, if any, by the Company is uncertain.
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.
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 $1,846 at June 30, 2024 and represents a reserve for unpaid claim costs, including an estimate for the cost of incurred but not reported claims.
Note 15 – Income Taxes
The statutory Federal tax rate is 21.0% for the six months ended June 30, 2024 and 2023. For states with a corporate net income tax, the state corporate net income tax rates 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 distribution property must be capitalized for tax purposes. The Company evaluated the safe harbor and intends to adopt the methodology on its 2023 tax return. In the second quarter of 2023, based on the tax legislative guidance that was issued, the Company reevaluated the uncertain tax positions related to the Regulated Water Segment and ultimately released a portion of its historical income tax reserves. 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 that was filed in May 2024.
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 annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements and related disclosures.
In November 2023, the FASB 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 are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is currently assessing the timing 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 new rule. We are currently evaluating the impact of the new rule and, depending on the outcome of the proceedings, will include the required disclosures once it becomes effective.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 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, 2023 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in such 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.
Essential Utilities, Inc. (“we”, “us”, “our” or the “Company”), a Pennsylvania corporation, is the holding company for regulated utilities providing water, wastewater, or natural gas services to an estimated 5.5 million people in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia, and Kentucky under the Aqua and Peoples brands. One of our largest operating subsidiaries, Aqua Pennsylvania, Inc. (“Aqua Pennsylvania”), provides water or wastewater services to approximately one-half of the total number of water 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 additional states. Our Peoples subsidiaries provide natural gas distribution services to customers in western Pennsylvania and Kentucky. Approximately 95% of the total number of natural 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 repair services to households and gas marketing and production activities. Currently, the Company seeks to acquire businesses in the U.S. regulated sector, focusing on water and wastewater 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.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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 condensed consolidated financial statements and related notes.
Recent Developments
Macroeconomic 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, it is still above historical levels. Additionally, interest rates remain elevated to curb inflation. We experienced moderate macroeconomic pressures during the first half of 2024, which we expect 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.
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 to 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
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. As of July 2024, multiple lawsuits were filed by various companies and industry groups against the EPA's PFAS rule and are awaiting court action.
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 cleanup 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 condensed consolidated financial statements.
Act 12 Recent Development
On June 13, 2024, the Pennsylvania Public Utility Commission approved revised guidelines and procedures designed to increase public involvement and provide a consistent process for evaluating the acquisition and valuation of municipal or authority-owned water and wastewater systems under Act 12 of 2016 (“Act 12”). The Company supports refinements to Act 12 that would provide transparency in the acquisition process and timely regulatory review in Pennsylvania.
Our regulated water and gas 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 condensed 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.
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 $426,426 for the first half of 2024, compared to $621,422 for the first half of 2023. The net change in working capital and other assets and liabilities resulted in a decrease in cash from operations of $8,617 for the first half of 2024 compared to an increase of $185,901 for the first half 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. In 2023, there was a larger decline in natural gas commodity prices as compared to in 2024.
During the first six months of 2024, we incurred $548,868 of capital expenditures, issued $789,946 of long-term debt, received $166,982 from the sale of assets, repaid short-term debt, and made sinking fund contributions and other long-term debt repayments in aggregate of $664,829. 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, including borrowings from our revolving credit facility, and proceeds from the sale of the 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 half 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, due in 2043, and with an interest rate of 5.60%. The proceeds from these borrowings were used to repay existing indebtedness and for general corporate purposes.
On October 14, 2022, the Company entered into at-the market sales agreements (“2022 ATM”) with third-party sales agents, under which the Company offered and sold shares of its common stock, from time to time, at its option, pursuant to the Company’s then-effective shelf registration statement on Form
S-3 (File No. 333-255235) that expired in April 2024. During the six months ended June 30, 2024, there were no sales of common stock under the 2022 ATM. As of December 31, 2023, the Company had issued 10,260,833 shares of common stock for net proceeds of $386,023 under the 2022 ATM. The Company used the net proceeds from the sales of shares through the 2022 ATM for working capital, capital expenditures, water and wastewater utility acquisitions, and repaying outstanding indebtedness.
At June 30, 2024 our $1,000,000 unsecured revolving credit facility, which expires in December 2027, had $553,226 available for borrowing. Additionally, at June 30, 2024, we had short-term lines of credit of $435,500, primarily used for working capital, of which $342,233 was available for borrowing. On June 12, 2024, Aqua Pennsylvania and Peoples Natural Gas Companies amended the terms of its respective $100,000 and $300,000 364-day revolving credit agreements by extending the maturity dates to June 10, 2025 and revised the interest rate index from the Bloomberg Short-Term Bank Yield Index (BSBY) to the Secured Overnight Financing Rate (SOFR). Our short-term lines of credit of $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.
As of June 30, 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 ability to maintain its credit rating depends, among other things, on adequate and timely rate relief, its ability to fund capital expenditures in a balanced manner using both debt and equity, and its ability to generate cash flow. A material downgrade of our credit rating may result in the imposition of additional financial and/or other covenants, impact the market prices of equity and debt securities, increase our borrowing costs, and adversely affect our liquidity, among other things. Management continues to enhance our regulatory practices to address regulatory lag and recover capital
project costs and increases in operating costs efficiently and timely through various rate-making mechanisms.
Three Months Ended June 30,
Six Months Ended June 30,
Operating Statistics
Selected operating results as a percentage of operating revenues:
32.8%
30.6%
26.7%
23.3%
7.8%
9.6%
15.6%
25.6%
20.9%
19.6%
17.2%
14.6%
5.1%
4.7%
4.5%
3.7%
Interest expense, net of interest income
16.8%
13.9%
12.0%
17.4%
32.6%
24.3%
Effective tax rate
2.4%
-0.3%
-2.6%
-12.7%
an increase in customer assistance surcharge costs of $2,563 in our Regulated Natural Gas segment, which has an equivalent offsetting amount in revenues;
additional operating costs resulting from acquired water and wastewater utility systems and higher customer base of $1,286;
an increase in employee related costs of $625;
an increase in production costs for water and wastewater operations of $387;
lower capitalization of overhead costs of $4,391 in our Regulated Natural Gas segment; offset by
a decrease in bad debt expense of $975; and,
a decrease in operations and maintenance expense of $2,422 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.
Depreciation and amortization expense increased by $4,985 or 5.8% principally due to continued capital expenditures to expand and improve our utility facilities and our acquisitions of new utility systems.
Allowance for funds used during construction (AFUDC) increased by $1,805 or 52.7% due to an increase in the average balance of utility plant construction work in progress, to which AFUDC is applied.
an increase in employee related costs of $2,628, primarily resulting from higher salary, medical, and prescription costs and increased contributions to the Company’s defined contribution plan;
an increase in production costs for water and wastewater operations of $2,784, 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 $2,413;
lower capitalization of overhead costs of $2,046 in our Regulated Natural Gas segment;
an increase in bad debt expense of $2,249; offset by,
a decrease in operation and maintenance expense of $4,134 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
a decrease in customer assistance surcharge costs of $234 in our Regulated Natural Gas segment, which has an equivalent offsetting amount in revenues.
Depreciation and amortization expense increased by $10,995 or 6.5% principally due to continued capital expenditures to expand and improve our utility facilities and our acquisitions of new utility systems.
Gain on sale of assets was $91,828 and $469 during the first half 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.
The following tables present selected operating results and statistics for our Regulated Water segment for the periods ended June 30, 2024 and 2023:
Segment net income
31.6%
31.7%
32.0%
31.4%
19.1%
18.1%
19.7%
19.0%
5.4%
4.8%
5.6%
5.3%
11.4%
10.4%
11.9%
10.7%
29.0%
30.7%
26.0%
29.8%
14.2%
15.0%
18.9%
14.9%
a decrease in volume consumption of $9,681.
an increase in employee related costs of $998 primarily resulting from higher medical and prescription expenses;
an increase in production costs for water and wastewater operations of $387; offset by
a decrease in bad debt expense of $772.
an increase in water and wastewater rates, including infrastructure rehabilitation surcharges, of $26,460;
additional water and wastewater revenues of $6,103 associated with a larger customer base due to utility acquisitions and organic growth; offset by
a decrease in non-utility revenue of $2,622, primarily due to higher developer fees earned during the first quarter of 2023; and
a decrease in volume consumption of $8,589.
an increase in employee related costs of $2,813 primarily resulting from higher salary, medical, and prescription costs and increased contributions to the Company’s defined contribution plan;
an increase in production costs for water and wastewater operations of $2,784, primarily due to increased purchased water, wastewater, and power costs;
additional operating costs resulting from acquired water and wastewater utility systems and higher customer base of $2,413; and,
an increase in bad debt expense of $3,686.
Our effective income tax rate for our Regulated Water Segment was an expense of 18.9% in the first six months of 2024 and an expense of 14.9% in the first six months of 2023. The increase in effective tax rate is primarily the result of changes in the jurisdictional earnings mix, decrease in the amortization of certain regulatory liabilities associated with deferred taxes and decrease in the income tax benefit associated with the tax deduction for qualifying infrastructure.
The following tables present selected operating results and statistics for our Regulated Natural Gas segment, for the periods ended June 30, 2024 and 2023:
Segment net income (loss)
38.8%
29.6%
21.1%
16.9%
25.5%
28.5%
35.0%
48.5%
23.2%
14.4%
4.0%
3.9%
2.7%
1.9%
16.3%
15.1%
10.2%
8.4%
-1.3%
9.8%
46.0%
23.6%
85.1%
-4213.3%
-23.0%
-70.7%
a decrease in purchased gas costs of $6,985; refer to purchased gas costs discussion below for further information;
impact of lower volumes of $726 due to the sale of Peoples West Virginia in 2023 and $5,567 primarily due to warmer weather conditions in 2024 compared to prior period;
decrease in other utility revenues of $2,013 resulting from the sale of the Company’s interest in three non-utility local microgrid and distributed energy projects; offset by
an increase of $3,267 due to higher rates and other surcharges, and
an increase in customer assistance surcharge of $2,563, which has an equivalent offsetting amount in operations and maintenance expense.
an increase in customer assistance surcharge costs of $2,563, which has an equivalent offsetting amount in revenues;
lower capitalization of overhead costs of $4,391; offset by
a decrease in operation and maintenance expense of $2,422 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.
AFUDC increased by $783 or by 161.8% due to the increase in the average balance of utility plant construction work in progress, to which AFUDC is applied.
Our effective income tax benefit decreased in the second quarter of 2024 compared to second quarter of 2023. The decrease in the income tax benefit is primarily attributed to the decrease in income tax benefit associated with the tax deduction for continued qualifying infrastructure investment.
an increase of $5,746 due to higher rates and other surcharges.
The Regulated Natural Gas segment is subject to seasonal fluctuations with the peak usage period occurring in the heating season which generally runs from October to March. A heating degree day (HDD) is each degree that the average of the high and low temperatures for a day is below 65 degrees Fahrenheit in a specific geographic location. Particularly during the heating season, this measure is used to reflect the demand for natural gas needed for heating based on the extent to which the average temperature falls below a reference temperature above which no heating is required (65 degrees Fahrenheit). During the first half of 2024, we experienced actual HDDs of 2,616 days, which was warmer by 10.7% than the actual HDDs of 2,931 days in the first six months of 2023 for Pittsburgh Pennsylvania, which we use as a proxy for our western Pennsylvania service territory.
a decrease in bad debt expense of $1,464;
lower capitalization of overhead costs of $2,046;
a decrease in operation and maintenance expense of $4,134 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;
a decrease in customer assistance surcharge costs of $234, which has an equivalent offsetting amount in revenues; offset by
an increase in materials and supplies of $1,422.
Purchased gas decreased by $123,299 or 43.8% during the second half of 2024 compared with the same period in 2023 as a result of the impact of: (1) a decrease in the average cost of gas of $105,353; and (2) lower gas usage of $13,181 due to warmer weather conditions and $4,765 due to the sale of Peoples West Virginia in October 2023.
Interest expense, net, decreased by $2,264 or 4.7% 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 half 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.
Impact of Recent Accounting Pronouncements
We describe the impact of recent accounting pronouncements in Note 16, Recent Accounting Pronouncements, to the condensed consolidated financial statements in this report.
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. Refer to Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed February 29, 2024, for additional information on market risks.
Item 4 – 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
No change in our internal control over financial reporting occurred during the quarter ended June 30, 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
For a discussion of the Company’s legal proceedings, see Part I – Item I – Note 14 to the Company’s condensed consolidated financial statements.
Item 1A – Risk Factors
Please review the risks disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, under “Part 1, Item 1A – Risk Factors”.
Item 5 - Other Information
Security Trading Plans of Directors and Executive Officers
During the quarter ended June 30, 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”, except as follows:
Name & Title
Character of Trading Arrangement
Date of Adoption/ Termination
Aggregate Number of Shares of Common Stock to be Purchased/Sold Pursuant to Trading Arrangement
Duration of Plan
Christopher Luning, Executive Vice President & General Counsel
Rule 10b5-1(c) Trading Arrangement
Terminated - April 2, 2024
Up to 30,000 shares to be sold
3/5/2024 - 3/31/2025
Item 6 – Exhibits
Exhibit No.
Description
10.1*
Eighth Amendment to Credit Agreement, dated June 12, 2024, by and between Aqua Pennsylvania, Inc. PNC National Bank Association, Citizens Bank N.A., and The Huntington National Bank
10.2*
Fourth Amendment to Credit Agreement, dated June 12, 2024, by and between PNG Companies LLC, PNC National Bank Association, Citizens Bank N.A., and The Huntington National Bank
31.1*
Certification of Chief Executive Officer, filed pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934
31.2*
Certification of Chief Financial Officer, filed pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934
32.1*
Certification of Chief Executive Officer, furnished pursuant to 18 U.S.C. Section 1350
32.2*
Certification of Chief Financial Officer, furnished pursuant to 18 U.S.C. Section 1350
101.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
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
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 June 30, 2024, formatted in Inline XBRL (included in Exhibit 101)
*Filed herewith.
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.
August 6, 2024
Essential Utilities, Inc.
Registrant
/s/ Christopher H. Franklin
Christopher H. Franklin
Chairman, President and
Chief Executive Officer
/s/ Daniel J. Schuller
Daniel J. Schuller
Executive Vice President and
Chief Financial Officer