Evergy(US:EVRG)2022-08-03 16:00markdown [Part I - Financial Information](index=8&type=section&id=Part%20I%20-%20Financial%20Information) This section provides the unaudited consolidated financial statements and management's discussion and analysis for Evergy, Inc. and its subsidiaries [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Evergy, Inc., Evergy Kansas Central, Inc., and Evergy Metro, Inc. for the period ended June 30, 2022. It includes balance sheets, statements of comprehensive income, cash flows, and changes in equity for each entity, followed by combined notes detailing accounting policies, regulatory matters, and specific financial items [Evergy, Inc. Financial Statements](index=8&type=section&id=Evergy%2C%20Inc.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Evergy, Inc., including balance sheets, income statements, and cash flow statements Evergy, Inc. Key Financials (Q2 2022 vs Q2 2021) | Metric | Q2 2022 (millions) | Q2 2021 (millions) | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $1,446.5 | $1,236.2 | +17.0% | | Income from Operations | $335.5 | $295.3 | +13.6% | | Net Income Attributable to Evergy, Inc. | $194.5 | $185.3 | +5.0% | | Diluted EPS | $0.84 | $0.81 | +$0.03 | Evergy, Inc. Balance Sheet Summary | Metric | June 30, 2022 (millions) | Dec 31, 2021 (millions) | | :--- | :--- | :--- | | Total Current Assets | $1,922.1 | $1,710.3 | | Total Assets | $29,188.8 | $28,520.5 | | Total Current Liabilities | $3,859.7 | $3,102.9 | | Total Long-Term Debt, net | $9,196.7 | $9,297.9 | | Total Equity | $9,310.8 | $9,241.7 | Evergy, Inc. Cash Flow Summary (YTD) | Metric | YTD June 30, 2022 (millions) | YTD June 30, 2021 (millions) | | :--- | :--- | :--- | | Cash Flows from Operating Activities | $588.9 | $224.6 | | Cash Flows used in Investing Activities | $(1,128.9) | $(918.2) | | Cash Flows from Financing Activities | $536.2 | $607.1 | [Evergy Kansas Central, Inc. Financial Statements](index=14&type=section&id=Evergy%20Kansas%20Central%2C%20Inc.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Evergy Kansas Central, Inc., including balance sheets, income statements, and cash flow statements Evergy Kansas Central, Inc. Key Financials (Q2 2022 vs Q2 2021) | Metric | Q2 2022 (millions) | Q2 2021 (millions) | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $724.0 | $598.5 | +20.9% | | Income from Operations | $147.5 | $120.5 | +22.4% | | Net Income Attributable to Evergy Kansas Central, Inc. | $87.5 | $76.6 | +14.2% | [Evergy Metro, Inc. Financial Statements](index=19&type=section&id=Evergy%20Metro%2C%20Inc.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Evergy Metro, Inc., including balance sheets, income statements, and cash flow statements Evergy Metro, Inc. Key Financials (Q2 2022 vs Q2 2021) | Metric | Q2 2022 (millions) | Q2 2021 (millions) | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $500.1 | $438.7 | +14.0% | | Income from Operations | $136.3 | $131.1 | +4.0% | | Net Income | $88.4 | $88.1 | +0.3% | [Combined Notes to Unaudited Consolidated Financial Statements](index=24&type=section&id=Combined%20Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited consolidated financial statements, covering accounting policies, regulatory matters, and specific financial items - The February 2021 winter weather event resulted in total incurred net fuel and purchased power costs of **$367.9 million** for Evergy as of June 30, 2022. These costs were primarily driven by Evergy Missouri West (**$296.6 million**) and Evergy Kansas Central (**$134.3 million**), offset by net wholesale revenues at Evergy Metro (**$63.0 million**)[99](index=99&type=chunk) - Evergy recorded a pre-tax loss of **$16.3 million** year-to-date related to an equity investment in an early-stage energy solutions company, which was sold in March 2022[87](index=87&type=chunk)[106](index=106&type=chunk) - The KCC approved annual retail revenue increases for Evergy Kansas Central (**$20.4 million**) and Evergy Metro (**$7.9 million**) to reflect updated transmission costs, effective April and May 2022, respectively[118](index=118&type=chunk)[120](index=120&type=chunk) - Evergy Missouri West filed a petition to finance approximately **$306.1 million** in extraordinary costs from the February 2021 winter weather event through the issuance of securitized bonds, with a decision from the MPSC expected by October 2022[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - The company faces potential material costs from various environmental regulations, including the EPA's rules on Greenhouse Gases (GHG), Regional Haze, water discharges (ELG), and Coal Combustion Residuals (CCRs)[213](index=213&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[221](index=221&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results, highlighting an increase in Q2 2022 net income due to higher retail sales and transmission revenue, but a decrease in year-to-date income compared to 2021, which benefited from non-regulated marketing margins during the February 2021 winter storm. The discussion covers operational performance, regulatory proceedings, liquidity, and capital resources for Evergy, Inc. and its key subsidiaries, Evergy Kansas Central and Evergy Metro [Executive Summary](index=53&type=section&id=Executive%20Summary) This section provides an overview of Evergy's financial performance, including net income and diluted EPS, with a reconciliation of GAAP to adjusted earnings Evergy, Inc. Earnings Overview | Metric | Q2 2022 | Q2 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Evergy, Inc. (millions) | $194.5 | $185.3 | $317.0 | $376.9 | | Diluted EPS | $0.84 | $0.81 | $1.38 | $1.65 | - The year-to-date decrease in net income was primarily due to non-regulated energy marketing margins recognized in 2021 related to the February 2021 winter weather event, which were not repeated in 2022[262](index=262&type=chunk) Reconciliation of GAAP Earnings to Adjusted Earnings (non-GAAP) | (millions, except per share) | YTD June 30, 2022 | YTD June 30, 2021 | | :--- | :--- | :--- | | **Net income attributable to Evergy, Inc. (GAAP)** | **$317.0** | **$376.9** | | Non-regulated energy marketing margin (pre-tax) | - | $(95.0) | | Restricted equity investment losses (pre-tax) | $16.3 | - | | Other adjustments (net) | $(1.1) | $21.3 | | Income tax effect | $(4.2) | $17.3 | | **Adjusted earnings (non-GAAP)** | **$332.2** | **$320.5** | | **Diluted EPS (GAAP)** | **$1.38** | **$1.65** | | **Adjusted EPS (non-GAAP)** | **$1.44** | **$1.40** | [Evergy Results of Operations](index=57&type=section&id=EVERGY%20RESULTS%20OF%20OPERATIONS) This section details Evergy's operational performance, focusing on changes in utility gross margin and operating expenses - Utility gross margin for Q2 2022 increased by **$72.4 million** YoY, driven by higher retail sales (**$53.2M**) from favorable weather and demand, and increased transmission revenue (**$10.6M**)[285](index=285&type=chunk) - Year-to-date utility gross margin increased by only **$1.2 million**, as higher retail and transmission revenues were almost entirely offset by the **$95.0 million** non-regulated energy marketing margin recognized in 2021 from the winter storm[286](index=286&type=chunk) - Operating and maintenance expense for Q2 2022 increased by **$22.9 million** YoY, primarily due to higher plant maintenance (**$9.4M**), transmission and distribution costs (**$9.4M**), and credit loss expense (**$8.0M**)[287](index=287&type=chunk)[289](index=289&type=chunk) - Depreciation and amortization increased by **$16.6 million** year-to-date due to higher capital additions[291](index=291&type=chunk) [Liquidity and Capital Resources](index=62&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses Evergy's financial liquidity, borrowing capacity, and cash flow activities, including capital expenditures - As of June 30, 2022, Evergy had **$1.0 billion** of available borrowing capacity under its **$2.5 billion** master credit facility[301](index=301&type=chunk) - In February 2022, Evergy entered into a **$500.0 million** unsecured Term Loan Facility, which was fully borrowed as of June 30, 2022[302](index=302&type=chunk) - Year-to-date cash from operating activities increased significantly to **$588.9 million** from **$224.6 million** in the prior year, primarily because 2021 was negatively impacted by **$371.6 million** in cash payments for net fuel and purchased power costs during the February 2021 winter weather event[307](index=307&type=chunk) - Cash used in investing activities increased by **$210.7 million** year-to-date, driven by a **$225.3 million** increase in capital expenditures for grid resiliency and infrastructure improvements[312](index=312&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports that its exposure to market risk has not materially changed since the end of the previous fiscal year, as detailed in the 2021 Form 10-K - Evergy's exposure to market risk has not changed materially since December 31, 2021[345](index=345&type=chunk) [Item 4. Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management for Evergy, Inc., Evergy Kansas Central, and Evergy Metro concluded that their respective disclosure controls and procedures were effective as of the end of the reporting period. There were no material changes in internal control over financial reporting during the quarter - The chief executive officer and chief financial officer of Evergy, Evergy Kansas Central, and Evergy Metro have concluded that their respective disclosure controls and procedures were effective at a reasonable assurance level[346](index=346&type=chunk)[348](index=348&type=chunk)[350](index=350&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[347](index=347&type=chunk)[349](index=349&type=chunk)[353](index=353&type=chunk) [Part II - Other Information](index=69&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, equity security sales, and other miscellaneous information [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The company is party to various lawsuits and regulatory proceedings in the ordinary course of business, with further details on material items provided in Notes 4 and 10 of the financial statements - For information regarding material lawsuits and proceedings, the report refers to Notes 4 (Rate Matters and Regulation) and 10 (Commitments and Contingencies) to the consolidated financial statements[354](index=354&type=chunk) [Item 1A. Risk Factors](index=69&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since the filing of the 2021 Form 10-K - There have been no material changes with regards to risk factors since the filing of the 2021 Form 10-K for each of Evergy, Evergy Kansas Central and Evergy Metro[355](index=355&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the second quarter of 2022, Evergy purchased a total of 1,335 shares of its equity securities. These purchases were not part of a publicly announced plan or program Issuer Purchases of Equity Securities (Q2 2022) | Month | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | 51 | $69.06 | | May 2022 | 135 | $68.10 | | June 2022 | 1,149 | $70.01 | | **Total** | **1,335** | **$69.78** | [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - None[357](index=357&type=chunk) [Item 4. Mine Safety Disclosures](index=70&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[359](index=359&type=chunk) [Item 5. Other Information](index=70&type=section&id=Item%205.%20Other%20Information) This section provides standard information on where investors can access the company's SEC filings and other material financial information, primarily through the SEC's website and the company's investor relations website - The company directs investors to its website (investors.evergy.com) and SEC filings for material financial information[360](index=360&type=chunk)[361](index=361&type=chunk) [Item 6. Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including officer certifications (Rule 13a-14(a)/15d-14(a) and Section 1350) and XBRL data files - The report includes CEO and CFO certifications for Evergy, Evergy Metro, and Evergy Kansas Central, as well as XBRL data files, as exhibits[363](index=363&type=chunk)