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Chesapeake Utilities Corporation Reports First Quarter Results
"Despite significantly warmer weather, net income for the first quarter was only 3.5 percent lower than the same quarter in 2015, thanks to the continued growth and diversity of our businesses," stated
A more detailed discussion and analysis of the Company's results for each segment is provided in the following pages.
Comparative Results for the Quarters Ended
Operating income decreased by
Regulated Energy Segment
Regulated Energy operating income increased by
$1.9 million generated from natural gas transmission expansions completed in 2014 and 2015, as well as interim services to customers pending construction of facilities, which are more fully discussed in the "Major Projects and Initiatives" section below;$1.1 million generated by additional Gas Reliability Infrastructure Program ("GRIP") investments in theFlorida natural gas distribution operations; and$745,000 from customer growth in natural gas distribution and transmission services unrelated to recent service expansions.
The aforementioned increases were partially offset by
Unregulated Energy Segment
The Unregulated Energy segment reported operating income of
$4.3 million in decreased consumption of propane largely due to significantly warmer weather during the first quarter of 2016; and$1.8 million in lower retail propane margins reflecting an anticipated return to more normal margins principally in the Company's Delmarva retail propane distribution operations.
These decreases were partially offset by
The increase in other operating expenses was due primarily to
Matters discussed in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company's 2015 Annual Report on Form 10-K for further information on the risks and uncertainties related to the Company's forward-looking statements.
The discussions of the results use the term "gross margin," a non-Generally Accepted Accounting Principles ("GAAP") financial measure, which management uses to evaluate the performance of the Company's business segments. For an explanation of the calculation of "gross margin," see the footnote to the Financial Summary.
Unless otherwise noted, earnings per share is presented on a diluted basis.
Conference Call
About
Please note that
For more information, contact:
Beth W. Cooper
Senior Vice President & Chief Financial Officer
302.734.6799
Financial Summary | |||||||
(in thousands, except per share data) | |||||||
Three Months Ended | |||||||
| |||||||
2016 |
2015 | ||||||
Gross Margin (1) |
|||||||
Regulated Energy segment |
$ |
54,311 |
$ |
52,453 |
|||
Unregulated Energy segment |
23,101 |
25,319 |
|||||
Other businesses and eliminations |
(45) |
(54) |
|||||
Total Gross Margin |
$ |
77,367 |
$ |
77,718 |
|||
Operating Income |
|||||||
Regulated Energy segment |
$ |
24,319 |
$ |
22,182 |
|||
Unregulated Energy segment |
11,936 |
15,229 |
|||||
Other businesses and eliminations |
125 |
97 |
|||||
Total Operating Income |
36,380 |
37,508 |
|||||
Other (Expense) Income, net |
(34) |
133 |
|||||
Interest Charges |
2,650 |
2,448 |
|||||
Pre-tax Income |
33,696 |
35,193 |
|||||
Income Taxes |
13,329 |
14,084 |
|||||
Net Income |
$ |
20,367 |
$ |
21,109 |
|||
Earnings Per Share of Common Stock |
|||||||
Basic |
$ |
1.33 |
$ |
1.45 |
|||
Diluted |
$ |
1.33 |
$ |
1.44 |
|||
(1)"Gross margin" is determined by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electricity and propane and the cost of labor spent on direct revenue-producing activities. Gross margin should not be considered an alternative to operating income or net income, which are determined in accordance with GAAP. |
Financial Summary Highlights | ||||||||||||
Key variances for the three months ended | ||||||||||||
(in thousands, except per share data) |
Pre-tax |
Net |
Earnings | |||||||||
First Quarter of 2015 Reported Results |
$ |
35,193 |
$ |
21,109 |
$ |
1.44 |
||||||
Adjusting for Unusual Items: |
||||||||||||
Weather impact |
(6,656) |
(3,992) |
(0.27) |
|||||||||
(6,656) |
(3,992) |
(0.27) |
||||||||||
Increased (Decreased) Gross Margins: |
||||||||||||
Service expansions (See Major Projects and Initiatives table) |
1,947 |
1,168 |
0.08 |
|||||||||
Lower retail propane margins |
(1,837) |
(1,102) |
(0.07) |
|||||||||
GRIP |
1,108 |
665 |
0.05 |
|||||||||
Natural gas growth (excluding service expansions) |
745 |
447 |
0.03 |
|||||||||
1,963 |
1,178 |
0.09 |
||||||||||
Decreased (Increased) Other Operating Expenses: |
||||||||||||
Higher depreciation, asset removal and property tax costs due to recent capital investments |
(740) |
(444) |
(0.03) |
|||||||||
Decreased incentive compensation |
717 |
430 |
0.03 |
|||||||||
(23) |
(14) |
— |
||||||||||
Net contribution from Aspire Energy, including impact of shares issued |
2,633 |
1,676 |
0.06 |
|||||||||
Interest Charges |
(202) |
(121) |
(0.01) |
|||||||||
Net Other Changes |
788 |
531 |
0.02 |
|||||||||
First Quarter of 2016 Reported Results |
$ |
33,696 |
$ |
20,367 |
$ |
1.33 |
Major Projects and Initiatives | |||||||||||||||||||||||
The following table summarizes gross margin for the Company's major projects and initiatives completed and underway (dollars in thousands): | |||||||||||||||||||||||
Gross Margin for the Period | |||||||||||||||||||||||
Three Months Ended |
Total |
||||||||||||||||||||||
|
2015 |
Estimate for | |||||||||||||||||||||
2016 |
2015 |
Margin |
2016 |
2017 |
2018 | ||||||||||||||||||
Completed major projects |
$ |
11,445 |
$ |
4,149 |
$ |
25,270 |
$ |
40,791 |
$ |
42,350 |
$ |
44,846 |
|||||||||||
Major projects and |
— |
— |
— |
3,700 |
9,550 |
11,800 |
|||||||||||||||||
$ |
11,445 |
$ |
4,149 |
$ |
25,270 |
$ |
44,491 |
$ |
51,900 |
$ |
56,646 |
Completed Major Projects and Initiatives | ||||||||||||||||||||||||||||
The following table summarizes the Company's major projects and initiatives effected since 2014 (dollars in thousands): | ||||||||||||||||||||||||||||
Gross Margin for the Period |
||||||||||||||||||||||||||||
Three Months Ended |
Total |
|||||||||||||||||||||||||||
|
2015 |
Estimate for |
||||||||||||||||||||||||||
2016 |
2015 |
Variance |
Margin |
2016 |
2017 |
2018 |
||||||||||||||||||||||
Acquisition: |
||||||||||||||||||||||||||||
Aspire Energy |
$ |
4,241 |
$ |
— |
$ |
4,241 |
$ |
6,324 |
$ |
12,824 |
$ |
14,198 |
$ |
15,415 |
||||||||||||||
Natural Gas Transmission |
||||||||||||||||||||||||||||
Short-term contracts |
||||||||||||||||||||||||||||
|
$ |
760 |
$ |
968 |
$ |
(208) |
$ |
2,682 |
$ |
2,607 |
$ |
1,578 |
$ |
677 |
||||||||||||||
|
1,783 |
— |
1,783 |
2,270 |
6,951 |
— |
— |
|||||||||||||||||||||
Total short-term contracts |
$ |
2,543 |
$ |
968 |
$ |
1,575 |
$ |
4,952 |
$ |
9,558 |
$ |
1,578 |
$ |
677 |
||||||||||||||
Long-term contracts |
||||||||||||||||||||||||||||
|
$ |
455 |
$ |
463 |
$ |
(8) |
$ |
1,844 |
$ |
1,815 |
$ |
7,629 |
$ |
7,605 |
||||||||||||||
|
407 |
27 |
380 |
908 |
1,627 |
1,627 |
1,627 |
|||||||||||||||||||||
Total long-term contracts |
$ |
862 |
$ |
490 |
$ |
372 |
$ |
2,752 |
$ |
3,442 |
$ |
9,256 |
$ |
9,232 |
||||||||||||||
Total Expansions & Contracts |
$ |
3,405 |
$ |
1,458 |
$ |
1,947 |
$ |
7,704 |
$ |
13,000 |
$ |
10,834 |
$ |
9,909 |
||||||||||||||
Florida GRIP |
$ |
2,587 |
$ |
1,479 |
$ |
1,108 |
$ |
7,508 |
$ |
11,405 |
$ |
13,756 |
$ |
15,960 |
||||||||||||||
Florida Electric Rate Case |
$ |
1,212 |
$ |
1,212 |
$ |
— |
$ |
3,734 |
$ |
3,562 |
$ |
3,562 |
$ |
3,562 |
||||||||||||||
Total Completed Major Projects |
$ |
11,445 |
$ |
4,149 |
$ |
7,296 |
$ |
25,270 |
$ |
40,791 |
$ |
42,350 |
$ |
44,846 |
||||||||||||||
(1) In |
Aspire Energy
On
Aspire Energy generated
Service Expansions
In
On
On
Gas Reliability Infrastructure Program ("GRIP")
GRIP is a natural gas pipe replacement program approved by the Florida PSC, designed to expedite the replacement of qualifying distribution mains and services (any material other than coated steel or plastic) to enhance reliability and integrity of the Company's
Major Projects and Initiatives Underway
Eight
The following table summarizes estimated gross margin for the foregoing projects (dollars in thousands):
Estimated Margin for (1) | ||||||||||||
Project |
2016 |
2017 |
Annualized | |||||||||
|
$ |
— |
$ |
2,250 |
$ |
4,500 |
||||||
Eight Flags CHP plant in |
3,700 |
7,300 |
7,300 |
|||||||||
Total Major Projects and Initiatives Underway (2) |
$ |
3,700 |
$ |
9,550 |
$ |
11,800 |
||||||
(1)Estimated gross margin for these projects is based on current tariff or negotiated rates. | ||||||||||||
(2)This table excludes gross margin associated with the White Oak Mainline Expansion project. The gross margin for short-term OPT ≤ 90 Service contract in place through |
Other factors influencing gross margin
Weather and Consumption
Significantly warmer temperatures during the three months ended
HDD and CDD Information |
||||||||
Three Months Ended |
||||||||
|
||||||||
2016 |
2015 |
Variance | ||||||
Delmarva |
||||||||
Actual HDD |
2,094 |
2,822 |
(728) | |||||
10-Year Average HDD ("Delmarva Normal") |
2,400 |
2,372 |
28 | |||||
Variance from Delmarva Normal |
(306) |
450 |
||||||
|
||||||||
Actual HDD |
597 |
501 |
96 | |||||
10-Year Average HDD ("Florida Normal") |
534 |
533 |
1 | |||||
Variance from Florida Normal |
63 |
(32) |
||||||
|
||||||||
Actual HDD |
2,854 |
— |
N/A | |||||
10-Year Average HDD ("Ohio Normal") |
3,176 |
— |
N/A | |||||
Variance from Ohio Normal |
(322) |
— |
||||||
|
||||||||
Actual CDD |
186 |
122 |
64 | |||||
10-Year Average CDD ("Florida CDD Normal") |
77 |
73 |
4 | |||||
Variance from Florida CDD Normal |
109 |
49 |
||||||
Gross Margin Variance Attributed to Weather |
||||||||
(in thousands) |
Q1 2016 vs. |
Q1 2016 vs. |
Q1 2015 vs. | |||||
Delmarva |
||||||||
Regulated Energy segment |
$ |
(2,036) |
$ |
(866) |
$ |
1,088 | ||
Unregulated Energy segment |
(4,810) |
(2,985) |
1,185 | |||||
|
||||||||
Regulated Energy segment |
(4) |
(85) |
(448) | |||||
Unregulated Energy segment |
194 |
(109) |
122 | |||||
Total |
$ |
(6,656) |
$ |
(4,045) |
$ |
1,947 |
Propane prices
Lower retail margins per gallon reduced gross margin by
In
These market conditions, which are influenced by competition with other propane suppliers as well as the availability and price of alternative energy sources, may fluctuate based on changes in demand, supply and other energy commodity prices.
Other Natural Gas Growth - Distribution Operations
In addition to service expansions, the natural gas distribution operations on the
Capital Expenditures
The Company's capital expenditures for the three months ended
In order to fund the 2016 capital expenditures, the Company may further increase the level of borrowings during 2016 to supplement cash provided by operating activities. The Company's target ratio of equity to total capitalization, including short-term borrowings, is between 50 and 60 percent, and the Company has maintained a ratio of equity to total capitalization, including short-term borrowings, of between 52 and 54 percent during the past three years.
On
For larger capital projects, the Company will seek to align, as much as feasible, any such long-term debt or equity issuance(s) with the earnings associated with commencement of service on such projects. The exact timing of any long-term debt or equity issuance(s) will be based on market conditions.
Condensed Consolidated Statements of Income (Unaudited) (in thousands, except shares and per share data) | |||||||
Three Months Ended | |||||||
| |||||||
2016 |
2015 | ||||||
Operating Revenues |
|||||||
Regulated Energy |
$ |
89,216 |
$ |
109,582 |
|||
Unregulated Energy and other |
57,080 |
60,499 |
|||||
Total Operating Revenues |
146,296 |
170,081 |
|||||
Operating Expenses |
|||||||
Regulated Energy cost of sales |
34,905 |
57,129 |
|||||
Unregulated Energy and other cost of sales |
34,024 |
35,234 |
|||||
Operations |
27,159 |
26,945 |
|||||
Maintenance |
2,479 |
2,703 |
|||||
Depreciation and amortization |
7,503 |
6,975 |
|||||
Other taxes |
3,846 |
3,587 |
|||||
Total operating expenses |
109,916 |
132,573 |
|||||
Operating Income |
36,380 |
37,508 |
|||||
Other (expense) income, net |
(34) |
133 |
|||||
Interest charges |
2,650 |
2,448 |
|||||
Income Before Income Taxes |
33,696 |
35,193 |
|||||
Income taxes |
13,329 |
14,084 |
|||||
Net Income |
$ |
20,367 |
$ |
21,109 |
|||
Weighted Average Common Shares Outstanding: |
|||||||
Basic |
15,286,842 |
14,604,841 |
|||||
Diluted |
15,331,912 |
14,656,310 |
|||||
Earnings Per Share of Common Stock: |
|||||||
Basic |
$ |
1.33 |
$ |
1.45 |
|||
Diluted |
$ |
1.33 |
$ |
1.44 |
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
Assets |
|
| ||||||
(in thousands, except share and per share data) |
||||||||
Property, Plant and Equipment |
||||||||
Regulated Energy |
$ |
850,041 |
$ |
842,756 |
||||
Unregulated Energy |
147,221 |
145,734 |
||||||
Other businesses and eliminations |
19,430 |
18,999 |
||||||
Total property, plant and equipment |
1,016,692 |
1,007,489 |
||||||
Less: Accumulated depreciation and amortization |
(222,650) |
(215,313) |
||||||
Plus: Construction work in progress |
87,187 |
62,774 |
||||||
Net property, plant and equipment |
881,229 |
854,950 |
||||||
Current Assets |
||||||||
Cash and cash equivalents |
3,315 |
2,855 |
||||||
Accounts receivable (less allowance for uncollectible accounts of |
44,434 |
41,007 |
||||||
Accrued revenue |
12,331 |
12,452 |
||||||
Propane inventory, at average cost |
5,412 |
6,619 |
||||||
Other inventory, at average cost |
4,289 |
3,803 |
||||||
Regulatory assets |
6,451 |
8,268 |
||||||
Storage gas prepayments |
1,213 |
3,410 |
||||||
Income taxes receivable |
16,260 |
24,950 |
||||||
Prepaid expenses |
4,982 |
7,146 |
||||||
Mark-to-market energy assets |
— |
153 |
||||||
Other current assets |
1,688 |
1,044 |
||||||
Total current assets |
100,375 |
111,707 |
||||||
Deferred Charges and Other Assets |
||||||||
|
15,070 |
14,548 |
||||||
Other intangible assets, net |
2,128 |
2,222 |
||||||
Investments, at fair value |
3,674 |
3,644 |
||||||
Regulatory assets |
76,934 |
77,519 |
||||||
Receivables and other deferred charges |
2,574 |
2,831 |
||||||
Total deferred charges and other assets |
100,380 |
100,764 |
||||||
Total Assets |
$ |
1,081,984 |
$ |
1,067,421 |
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
Capitalization and Liabilities |
|
| ||||||
(in thousands, except share and per share data) |
||||||||
Capitalization |
||||||||
Stockholders' equity |
||||||||
Common stock, par value |
||||||||
(authorized 25,000,000 shares) |
$ |
7,449 |
$ |
7,432 |
||||
Additional paid-in capital |
190,389 |
190,311 |
||||||
Retained earnings |
182,165 |
166,235 |
||||||
Accumulated other comprehensive loss |
(5,751) |
(5,840) |
||||||
Deferred compensation obligation |
2,221 |
1,883 |
||||||
Treasury stock |
(2,221) |
(1,883) |
||||||
Total stockholders' equity |
374,252 |
358,138 |
||||||
Long-term debt, net of current maturities |
148,602 |
149,006 |
||||||
Total capitalization |
522,854 |
507,144 |
||||||
Current Liabilities |
||||||||
Current portion of long-term debt |
9,163 |
9,151 |
||||||
Short-term borrowing |
172,742 |
173,397 |
||||||
Accounts payable |
36,299 |
39,300 |
||||||
Customer deposits and refunds |
27,039 |
27,173 |
||||||
Accrued interest |
3,021 |
1,311 |
||||||
Dividends payable |
4,400 |
4,390 |
||||||
Accrued compensation |
4,107 |
10,014 |
||||||
Regulatory liabilities |
9,313 |
7,365 |
||||||
Mark-to-market energy liabilities |
423 |
433 |
||||||
Other accrued liabilities |
7,942 |
7,059 |
||||||
Total current liabilities |
274,449 |
279,593 |
||||||
Deferred Credits and Other Liabilities |
||||||||
Deferred income taxes |
197,416 |
192,600 |
||||||
Regulatory liabilities |
42,946 |
43,064 |
||||||
Environmental liabilities |
8,843 |
8,942 |
||||||
Other pension and benefit costs |
32,848 |
33,481 |
||||||
Deferred investment tax credits and other liabilities |
2,628 |
2,597 |
||||||
Total deferred credits and other liabilities |
284,681 |
280,684 |
||||||
Total Capitalization and Liabilities |
$ |
1,081,984 |
$ |
1,067,421 |
Distribution Utility Statistical Data (Unaudited) | ||||||||||||||||||||||||||||||||
For the Three Months Ended |
For the Three Months Ended | |||||||||||||||||||||||||||||||
Delmarva NG Distribution |
Chesapeake Utilities Florida NG Division |
FPU NG Distribution |
FPU Electric Distribution |
Delmarva NG Distribution |
Chesapeake Utilities Florida NG Division |
FPU NG Distribution |
FPU Electric Distribution | |||||||||||||||||||||||||
Operating Revenues (in thousands) |
||||||||||||||||||||||||||||||||
Residential |
$ |
21,267 |
$ |
1,571 |
$ |
9,287 |
$ |
11,307 |
$ |
36,606 |
$ |
1,510 |
$ |
8,641 |
$ |
12,410 |
||||||||||||||||
Commercial |
9,661 |
1,416 |
8,234 |
9,542 |
16,439 |
1,358 |
9,517 |
9,677 |
||||||||||||||||||||||||
Industrial |
1,920 |
1,637 |
5,533 |
817 |
2,131 |
1,496 |
4,374 |
982 |
||||||||||||||||||||||||
Other (1) |
653 |
917 |
(1,833) |
(2,133) |
628 |
765 |
(1,922) |
(2,651) |
||||||||||||||||||||||||
Total Operating |
$ |
33,501 |
$ |
5,541 |
$ |
21,221 |
$ |
19,533 |
$ |
55,804 |
$ |
5,129 |
$ |
20,610 |
$ |
20,418 |
||||||||||||||||
Volume (in Dts/MWHs) |
||||||||||||||||||||||||||||||||
Residential |
1,705,597 |
138,472 |
506,912 |
73,923 |
2,341,432 |
140,726 |
493,869 |
80,852 |
||||||||||||||||||||||||
Commercial |
1,398,890 |
1,447,747 |
692,331 |
68,115 |
1,817,691 |
1,391,090 |
831,642 |
70,723 |
||||||||||||||||||||||||
Industrial |
1,369,641 |
3,293,812 |
1,125,755 |
6,680 |
1,270,141 |
2,835,798 |
1,056,842 |
7,510 |
||||||||||||||||||||||||
Other |
13,504 |
— |
40,382 |
2,637 |
10,343 |
— |
2,807 |
|||||||||||||||||||||||||
Total |
4,487,632 |
4,880,031 |
2,365,380 |
151,355 |
5,439,607 |
4,367,614 |
2,385,160 |
159,085 |
||||||||||||||||||||||||
Average Customers |
||||||||||||||||||||||||||||||||
Residential |
66,083 |
15,242 |
53,044 |
24,167 |
64,426 |
14,794 |
51,651 |
23,918 |
||||||||||||||||||||||||
Commercial |
6,795 |
1,378 |
4,261 |
7,386 |
6,710 |
1,354 |
4,285 |
7,369 |
||||||||||||||||||||||||
Industrial |
122 |
72 |
1,716 |
2 |
116 |
67 |
1,522 |
2 |
||||||||||||||||||||||||
Other |
4 |
— |
— |
— |
6 |
— |
— |
— |
||||||||||||||||||||||||
Total |
73,004 |
16,692 |
59,021 |
31,555 |
71,258 |
16,215 |
57,458 |
31,289 |
||||||||||||||||||||||||
(1) Operating Revenues from "Other" sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/chesapeake-utilities-corporation-reports-first-quarter-results-300262392.html
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