Essential Utilities, Inc. Leases Disclosure
The Company leases land, office facilities, office equipment, and vehicles for use in its operations, which are accounted for as operating leases. Leases with a term of 12 months or less are not recorded on the balance sheet; rather, lease expense is recognized over the lease term. Our leases have remaining lives of 1 to 69 years.
Some of the Company’s leases can be extended on a month-to-month basis, which allow us to terminate the lease at any given month without penalty while others include options to extend the leases for up to 50 years. The renewal of a month-to-month lease is at our sole discretion.
The Company accounts for lease and non-lease components of lease arrangements separately. For calculating lease liabilities, we may deem lease terms to include options to extend or terminate the lease when it’s reasonably certain
that we will exercise that option. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants.
Lease liabilities and corresponding right-of-use assets are recorded based on the present value of the lease payments over the expected lease term, including leases with variable payments that are based on a market rate or an index and net of any impairment. All other variable payments are expensed as incurred. Since the Company’s lease agreements do not provide an implicit interest rate, we utilize our incremental borrowing rate to determine the discount rate used to present value the lease payments.
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| Years Ended December 31, | |||||
| 2025 | 2024 | 2023 | |||
Components of lease expense were as follows: |
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Operating lease cost | $ | 9,201 | $ | 9,821 | $ | 9,307 |
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| Years Ended December 31, | |||
| 2025 | 2024 | ||
Supplemental cash flow information related to leases was as follows: |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases | $ | 9,254 | $ | 8,148 |
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| December 31, | |||
| 2025 | 2024 | ||
Supplemental balance sheet information related to leases was as follows: |
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Operating leases: |
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Operating lease right-of-use assets | $ | 25,923 | $ | 31,263 |
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Other accrued | $ | 6,663 |
| 7,591 |
Operating lease liabilities |
| 21,608 |
| 27,447 |
Total operating lease liabilities | $ | 28,271 | $ | 35,038 |
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| December 31, | |||
| 2025 | 2024 | ||
Weighted average remaining lease term: |
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Operating leases |
| 10.7 years |
| 10.2 years |
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Weighted average discount rate: |
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Operating leases |
| 5.07% |
| 5.15% |
Maturities of operating lease liabilities and a reconciliation of the operating lease liabilities reported on our consolidated balance sheets as of December 31, 2025 are as follows:
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| Operating Leases | |
2026 | $ | 7,906 |
2027 |
| 7,663 |
2028 |
| 6,988 |
2029 |
| 1,094 |
2030 |
| 602 |
Thereafter |
| 12,225 |
Total operating lease payments | $ | 36,478 |
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Total operating lease payments | $ | 36,478 |
Less operating lease liabilities |
| 28,271 |
Present value adjustment | $ | 8,207 |
Historical Timeline
| Fiscal Year | Filed | |
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| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 28, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.