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Chesapeake Utilities Corporation Reports Third Quarter 2018 Results

November 8, 2018 at 12:00 AM EST
- Third quarter net income totaled $5.5 million or $0.34 per share
- Eastern Shore Natural Gas Company ("Eastern Shore") and Peninsula Pipeline Company ("Peninsula Pipeline") expansions added $3.6 million in gross margin* for the quarter
- Continued growth in the natural gas transmission operations during the third quarter was offset by seasonality, slightly lower propane margins and lower results for Peninsula Energy Services Company, Inc. ("PESCO") as it continues to build its platform for future growth
- Year-to-date results continue to be strong as net income rose by $6.8 million ($0.40 per share) to $38.8 million or $2.36 per share
- Higher year-to-date earnings are a result of continued growth and expansion in natural gas operations, as well as growth in electric and propane operations and reduced federal income taxes for the unregulated energy businesses
- As a result of the Tax Cuts and Jobs Act ("TCJA"), the Company year-to-date has passed through approximately $7.5 million in lower federal income taxes to regulated energy customers

DOVER, Del., Nov. 8, 2018 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the "Company") today announced third quarter financial results. The Company's net income for the quarter ended September 30, 2018 was $5.5 million, compared to $6.8 million for the same quarter of 2017. Earnings per share ("EPS") for the quarter ended September 30, 2018 were $0.34, compared to $0.42 per share for the same quarter of 2017 although year-to-date performance remains strong (as discussed below). During the third quarter, continued growth in the natural gas transmission operations was offset by seasonality, lower propane margins and lower operating income for PESCO.

For the nine months ended September 30, 2018, the Company reported net income of $38.8 million, or $2.36 per share. This represents an increase of $6.8 million or $0.40 per share compared to the same period in 2017.  Higher year-to-date earnings reflect continued growth and expansion in the Company's natural gas operations, as well as growth in electric and propane operations and the benefit of the lower effective federal income tax rate from the TCJA on unregulated energy earnings. The results also reflect more normal weather during the nine months ended September 30, 2018. A detailed discussion of operating results begins on page 3.

"Our strong, disciplined capital investment strategy continues to expand the safe, clean, reliable energy services we provide to our customers and produce quarterly and year-to-date earnings growth in our Regulated Energy segment and year-to-date earnings growth in our Unregulated Energy segment's propane operations and natural gas supply services," stated Michael P. McMasters, President and Chief Executive Officer.  "Our outlook for the year remains in line with our beginning of the year guidance." Mr. McMasters added. "Our significant growth in 2018 and industry-leading growth over the past ten years result directly from our employees' persistent efforts to find and develop new regulated and unregulated energy opportunities for growth."

Significant Items Impacting Earnings
Results for the three and nine months ended September 30, 2018 were impacted by the following significant items:

For the period ended September 30,

Third quarter

 

Year-to-date

 

Net Income

 

EPS

 

Net Income

 

EPS

(in thousands, except per share data)

             

Reported (GAAP) Earnings

$

5,538

   

$

0.34

   

$

38,779

   

$

2.36

 

Less: Realized Mark-to-Market ("MTM") gain

   

   

(4,008)

   

(0.24)

 

Add: Non-recurring separation expenses associated with
a former executive

   

   

1,421

   

0.09

 

Adjusted (Non-GAAP) Earnings*

$

5,538

   

$

0.34

   

$

36,192

   

$

2.21

 

Excluding both the one-time separation expenses for a former executive and the realized MTM gain recorded by the Company's natural gas marketing subsidiary, PESCO, during the first quarter, which offsets a comparable MTM loss in the fourth quarter of 2017, EPS for the nine months ended September 30, 2018 would have been $2.21, an increase of 12.8 percent over EPS of $1.96 for the nine months ended September 30, 2017.

*This press release includes references to non-Generally Accepted Accounting Principles ("GAAP") financial measures, including gross margin, adjusted earnings and Adjusted EPS.  A "non-GAAP financial measure" is generally defined as a numerical measure of a company's historical or future performance that includes or excludes amounts, or that is subject to adjustments, so as to be different from the most directly comparable measure calculated or presented in accordance with GAAP.  Our management believes certain non-GAAP financial measures, when considered together with GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period.

The Company calculates "gross margin" 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 and excludes depreciation, amortization and accretion. Other companies may calculate gross margin in a different manner. Gross margin should not be considered an alternative to operating income or net income, both of which are determined in accordance with GAAP.  The Company believes that gross margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions.  It provides investors with information that demonstrates the profitability achieved by the Company under its allowed rates for regulated operations and under its competitive pricing structures for unregulated businesses.  The Company's management uses gross margin in measuring its business units' performance. This press release also includes gross margin that excludes the impact of unusual items, such as the pass-through to customers of lower federal income taxes resulting from TCJA. The Company calculates "adjusted earnings" by adjusting reported (GAAP) earnings to exclude the impact of certain significant non-cash items, including the impact of realized MTM gains (losses) and one-time charges, such as severance charges, and calculates "adjusted EPS" by dividing adjusted earnings by the weighted average common shares outstanding.

Operating Results for the Quarters Ended September 30, 2018 and 2017

Consolidated Results

 

Three Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin before the TCJA impact

$

65,111

   

$

60,076

   

$

5,035

   

8.4

%

Pass-through of lower taxes to regulated energy
customers

 

(1,993)

   

   

(1,993)

   

N/A

 

Gross margin

63,118

   

60,076

   

3,042

   

5.1

%

Depreciation, amortization and property taxes

14,702

   

13,181

   

1,521

   

11.5

%

Other operating expenses

36,380

   

32,263

   

4,117

   

12.8

%

Operating income

$

12,036

   

$

14,632

   

$

(2,596)

   

(17.7)

%

Operating income during the third quarter of 2018 decreased by $2.6 million, or 17.7 percent, compared to the same period in 2017. Pass-through of lower taxes to regulated energy customers as a result of the TCJA, reduced margin and operating income by approximately $2.0 million, and were offset by an equal reduction in income taxes.  Excluding the impact of the pass-through of lower taxes, operating income decreased by $603,000, or 4.1 percent. Gross margin before the effect of TCJA, increased by $5.0 million, or 8.4 percent, while other operating expenses increased by $5.6 million.

Regulated Energy Segment

 

Three Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin before the TCJA impact

$

53,262

   

$

46,909

   

$

6,353

   

13.5

%

Pass-through of lower taxes to regulated energy customers
 

(1,993)

   

   

(1,993)

   

N/A

 

Gross margin

51,269

   

46,909

   

4,360

   

9.3

%

Depreciation, amortization and property taxes

12,085

   

10,782

   

1,303

   

12.1

%

Other operating expenses

23,269

   

20,604

   

2,665

   

12.9

%

Operating income

$

15,915

   

$

15,523

   

$

392

   

2.5

%

Operating income for the Regulated Energy segment increased by $392,000, or 2.5 percent, in the third quarter of 2018 compared to the same period in 2017. This increase was driven by a $6.4 million increase in gross margin, before the impact of the TCJA pass-through discussed above, offset by $4.0 million in higher depreciation and other operating expenses associated with the margin growth. Third quarter gross margin and operating income were also impacted by customer refunds of $2.0 million, due to the pass-through of lower taxes to regulated energy customers as a result of the TCJA. This decrease in margin and operating income was offset by an equal reduction in income tax expense. Excluding the estimated pass-through to customers of lower taxes, operating income increased by $2.4 million, or 15.4 percent. This increase in operating income reflects continued growth in the natural gas and electric distribution operations, expansions at Peninsula Pipeline and Eastern Shore, as well as the implementation of new rates for Eastern Shore.

The key components of the increase in gross margin are shown below:

(in thousands)

Margin Impact

Eastern Shore and Peninsula Pipeline service expansions

$

3,616

Implementation of Eastern Shore settled rates

1,161

Natural gas growth (including customer and consumption growth, but excluding service expansions)

734

Florida electric reliability/modernization program

464

Gas Reliability and Infrastructure Program ("GRIP") in Florida

329

Other

49

Total

6,353

Less: Pass-through to regulated energy customers of lower taxes resulting from TCJA*

(1,993)

Quarter over quarter increase in gross margin

$

4,360

 

*As a result of the TCJA and ensuing directives by federal and state regulatory commissions, the Company reserved or refunded to customers of its regulated businesses an estimated $2.0 million during the third quarter of 2018. In some jurisdictions, refunds have been made to customers, while in other jurisdictions, the Company has established reserves until final agreements are approved and permanent changes are made to customer rates.  The reserves and lower customer rates are equal to the estimated reduction in federal income taxes due to the TCJA and have no material impact on after-tax earnings from the Regulated Energy segment.

The major components of the increase in other operating expenses are as follows:

(in thousands)

Other Operating Expenses

Outside services, facilities and maintenance costs to maintain system integrity and support growth

 

$

1,195

 

Depreciation, amortization and property taxes associated with recent capital projects

1,303

 

Benefits and other employee-related expenses(1)

530

 

Payroll expense (increased staffing and annual salary increases)

446

 

Early termination of facility lease due to consolidation of operations facilities

323

 

Other

171

 

Quarter over quarter increase in other operating expenses

$

3,968

 
 

(1) Since the Company self-insures for healthcare costs, benefits costs fluctuate depending upon filed claims.

As previously disclosed, the Company expects the current expense run rate to continue for the remainder of the year, with the exception of the early lease termination.  This expense reflects the payment of all remaining costs for one of the Company's former operations facilities, which has been replaced by the new Energy Lane Service Center, which opened during the third quarter of 2018.

Unregulated Energy Segment

 

Three Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin

$

11,933

   

$

13,272

   

$

(1,339)

   

(10.1)

%

Depreciation, amortization and property taxes

2,578

   

2,360

   

218

   

9.2

%

Other operating expenses

13,288

   

11,863

   

1,425

   

12.0

%

Operating income

$

(3,933)

   

$

(951)

   

$

(2,982)

   

(313.6)

%

Given the imbalance adjustments in the third quarter of 2018 and the increased infrastructure built for PESCO to support its growth and to ensure continued risk management, the Company is presenting PESCO's results separate from the rest of its Unregulated Energy segment:

(in thousands)

Unregulated Segment excluding PESCO

Three Months Ended September 30,

2018

 

2017

 

Change

 

Percent
Change

Gross margin

$

11,202

   

$

11,912

   

$

(710)

   

(6.0)

%

Depreciation, amortization and property taxes

2,424

   

2,281

   

143

   

6.3

%

Other operating expenses

11,567

   

10,519

   

1,048

   

10.0

%

Operating loss

$

(2,789)

   

$

(888)

   

$

(1,901)

   

(214.1)

%

Excluding PESCO, operating loss for the Unregulated Energy segment increased by $1.9 million for the three months ended September 30, 2018, compared to the same period in 2017. The increased operating loss was driven by a $710,000 decrease in gross margin, accompanied by $1.2 million in higher operating expenses. The reduction in margin is largely as a result of lower margins per gallon and the timing of deliveries for the Florida propane distribution operations as a result of accelerated deliveries of propane attributable to Hurricane Irma in the third quarter of 2017 and lower margins per gallon for the Mid-Atlantic propane distribution operations.

The major components of the decrease in gross margin (excluding PESCO results) are shown below:

(in thousands)

Margin Impact

Propane retail operations - decreased margins driven by lower prices per gallon

$

(469)

 

Unregulated Energy customer consumption decrease

(374)

 

Other

133

 

Quarter over quarter decrease in gross margin

$

(710)

 

Operating expenses were higher because of additional personnel, systems and outside services to support growth in these businesses, as well as higher incentive compensation associated with accruals for the year-to-date performance.

The major components of the increase in other operating expenses are as follows:

(in thousands)

Other Operating Expenses

Payroll expense (increased staffing and annual salary increases)

$

308

 

Outside services to support growth and facilities and maintenance costs as a result of ongoing compliance activities

275

 

Benefits and other employee-related expenses(1)

228

 

Incentive compensation costs (based on period-over-period results)

176

 

Depreciation, amortization and property tax costs due to new capital investments

144

 

Other

60

 

Quarter over quarter increase in other operating expenses

$

1,191

 
 

(1) Since the Company self-insures for healthcare costs, benefits costs fluctuate depending upon filed claims.

Many of the increased expenses highlighted above are fixed and; since third quarter margins are typically lower due to the seasonal nature of the Company's businesses, the increases have a more significant impact on quarterly operating losses. The Company expects the current expense run rate to continue for the remainder of the year.

PESCO results

 

Three Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin

$

731

   

$

1,360

   

$

(629)

   

(46.3)

%

Depreciation, amortization and property taxes

154

   

79

   

75

   

94.9

%

Other operating expenses

1,721

   

1,344

   

377

   

28.1

%

Operating loss

$

(1,144)

   

$

(63)

   

$

(1,081)

   

(1,715.9)

%

For the three months ended September 30, 2018, PESCO's gross margin was lower by $629,000 compared to the same period in 2017. The decreased margin reflected the impact of the timing and true-up of various imbalance positions with pipelines.  The increased operating expenses reflected additional planned expenses incurred to build out the staff, infrastructure and risk management systems as PESCO executes its growth strategy.

Operating Results for the Nine Months Ended September 30, 2018 and 2017

Consolidated Results

 

Nine Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin before the TCJA impact

$

229,208

   

$

204,649

   

$

24,559

   

12.0

%

Pass-through of lower taxes to regulated energy customers
 

(7,530)

   

   

(7,530)

   

N/A

 

Gross margin

221,678

   

204,649

   

17,029

   

8.3

%

Depreciation, amortization and property taxes

42,149

   

38,416

   

3,733

   

9.7

%

Non-recurring executive separation expenses

1,548

   

   

1,548

   

N/A

 

Other operating expenses

112,291

   

102,441

   

9,850

   

9.6

%

Operating income

$

65,690

   

$

63,792

   

$

1,898

   

3.0

%

Operating income, for the nine months ended September 30, 2018, increased by $1.9 million, or 3.0 percent, compared to the same period in 2017.  This increase was driven by a $24.6 million, or 12.0 percent, increase in gross margin, which was partially offset by a $3.7 million increase in depreciation, amortization and property taxes, a $9.9 million increase in other operating expenses and a $7.5 million pass-through to regulated energy customers of lower taxes associated with the TCJA, which were offset by an equivalent reduction in income tax expenses for the Regulated Energy segment. Excluding the estimated pass-through of lower taxes to customers, operating income increased by $9.4 million, or 14.8 percent.

Regulated Energy Segment

 

Nine Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin before the TCJA impact

$

170,456

   

$

151,147

   

$

19,309

   

12.8

%

Pass-through of lower taxes to regulated energy customers
 

(7,530)

   

   

(7,530)

   

N/A

 

Gross margin

162,926

   

151,147

   

11,779

   

7.8

%

Depreciation, amortization and property taxes

34,402

   

31,411

   

2,991

   

9.5

%

Other operating expenses

71,594

   

66,732

   

4,862

   

7.3

%

Operating income

$

56,930

   

$

53,004

   

$

3,926

   

7.4

%

Operating income for the Regulated Energy segment increased by $3.9 million, or 7.4 percent, for the nine months ended September 30, 2018 compared to the same period in 2017. This increase was driven by a $19.3 million increase in gross margin before the impact of the TCJA discussed above, which was partially offset by $7.9 million in higher depreciation and other operating expenses associated with gross margin growth.  Excluding the estimated pass-through of lower taxes to customers, operating income increased by $11.4 million, or 21.6 percent. This increase in operating income was generated from continued growth in the natural gas and electric distribution operations, expansions at Peninsula Pipeline and Eastern Shore, as well as the implementation of new rates for Eastern Shore and more normal weather conditions.

The key components of the increase in gross margin are shown below:

(in thousands)

Margin Impact

Implementation of Eastern Shore settled rates

$

6,256

 

Eastern Shore and Peninsula Pipeline service expansions

5,966

 

Natural gas growth (including customer and consumption growth but excluding service
expansions)

4,098

 

Return to more normal weather

1,498

 

Florida electric reliability/modernization program

1,231

 

Florida GRIP

931

 

Other

(671)

 

Total

19,309

 

Less: Pass-through of lower taxes to regulated energy customers*

(7,530)

 

Period-over-period increase in gross margin

$

11,779

 
 

*As a result of the TCJA and ensuing directives by federal and state regulatory commissions, the Company reserved or refunded to customers of its regulated businesses an estimated $7.5 million during the first nine months of 2018.  In some jurisdictions, refunds have been made to customers, while in other jurisdictions, the Company has established reserves until agreements are approved and permanent changes are made to customer rates.  The reserves and lower customer rates are equal to the estimated reduction in federal income taxes due to the TCJA and have no material impact on after-tax earnings from the Regulated Energy segment.

The major components of the increase in other operating expenses are as follows:

(in thousands)

Other Operating Expenses

Depreciation, amortization and property taxes associated with recent capital projects

$

2,991

 

Payroll expense (increased staffing and annual salary increases)

1,857

 

Facilities and maintenance costs to maintain system integrity

1,507

 

Regulatory expenses

 

(536)

 

Incentive compensation costs (based on period-over-period results)

401

 

Other operating expenses including vehicle, credit collections, other taxes, sales and advertising costs

356

 

Early termination of facility lease due to consolidation of operations facilities

323

 

Benefits and other employee-related expenses(1)

307

 

Other

647

 

Period-over-period increase in other operating expenses

$

7,853

 
 

(1) Since the Company self-insures for healthcare costs, benefits costs fluctuate depending upon filed claims.

Unregulated Energy Segment

 

Nine Months Ended
September 30,

       

(in thousands)

2018

 

2017

 

Change

 

Percent
Change

Gross margin

$

59,149

   

$

53,827

   

$

5,322

   

9.9

%

Depreciation, amortization and property taxes

7,637

   

6,884

   

753

   

10.9

%

Other operating expenses

41,271

   

36,317

   

4,954

   

13.6

%

Operating income

$

10,241

   

$

10,626

   

$

(385)

   

(3.6)

%

Given the impact of the MTM gain recorded by PESCO in the first quarter of 2018 and the increased infrastructure the Company has built for PESCO to support its growth and to ensure appropriate risk management, the Company is also presenting PESCO's year-to-date results separate from the rest of its Unregulated Energy segment:

(in thousands)

Unregulated Segment excluding PESCO

Nine Months Ended September 30,

2018

 

2017

 

Change

 

Percent
Change

Gross margin

$

54,637

   

$

48,078

   

$

6,559

   

13.6

%

Depreciation, amortization and property taxes

7,181

   

6,773

   

408

   

6.0

%

Other operating expenses

35,995

   

32,862

   

3,133

   

9.5

%

Operating income

$

11,461

   

$

8,443

   

$

3,018

   

35.7

%

Excluding PESCO, operating income for the Unregulated Energy segment increased by $3.0 million for the nine months ended September 30, 2018, compared to the same period in 2017. Gross margin increased by $6.6 million, or 13.6 percent, due primarily to more normal weather, improved margins and growth in the Company's propane operations and at Aspire Energy. This was offset by $3.1 million in higher operating expenses to support growth.

The major components of the increase in gross margin (excluding PESCO results) are shown below:

(in thousands)

Margin Impact

Propane delivery operations - additional customer consumption - (weather)

$

2,923

 

Propane delivery operations - increased margin driven by growth and other factors

1,552

 

Aspire Energy - customer consumption - (weather)

921

 

Aspire Energy - increased margin driven by growth and other factors

592

 

Growth in wholesale propane margins and sales

255

 

Other

316

 

Period-over-period increase in gross margin

$

6,559

 

The key components of the increase in other operating expenses (excluding PESCO expenses) are as follows:

(in thousands)

Other
Operating
Expenses

Payroll expense (increased staffing and annual salary increases)

$

1,430

 

Absence of Xeron Inc. ("Xeron") 2017 wind-down costs

(829)

 

Facilities and maintenance costs as a result of ongoing compliance activities

706

 

Other operating expenses including vehicle, credit collections, other taxes, sales and advertising
costs

654

 

Incentive compensation costs (based on period-over-period results)

645

 

Benefits and employee-related costs(1)

442

 

Depreciation, amortization and property taxes associated with recent capital investments

410

 

Other

(325)

 

Period over period increase in other operating expenses

$

3,133

 
 

(1) Since the Company self-insures for healthcare costs, benefits costs fluctuate depending upon filed claims

PESCO results

(in thousands)

PESCO

Nine Months Ended September 30,

2018

 

2017

 

Change

 

Percent
Change

Gross margin

$

4,512

   

$

5,748

   

$

(1,236)

   

(21.5)

%

Depreciation, amortization and property taxes

456

   

111

   

345

   

310.8

%

Other operating expenses

5,276

   

3,453

   

1,823

   

52.8

%

Operating (loss) income

$

(1,220)

   

$

2,184

   

$

(3,404)

   

(155.9)

%

For the nine months ended September 30, 2018, PESCO's gross margin was lower by $1.2 million compared to the same period in 2017. The decreased margin reflected the impact of imbalance adjustments, the change in margin contribution from various asset management contracts, and MTM adjustments primarily during the first quarter of 2018 which largely offset the extraordinary costs of meeting demand requirements in the Mid-Atlantic region due to pipeline capacity constraints associated with the 2018 Bomb Cyclone and other market conditions.  For the nine months ended September 30, 2018, PESCO's operating expenses increased by $1.8 million compared to the same period in 2017 including increased planned expenses to build out its staff, infrastructure and risk management systems to keep pace with its growth strategy and $596,000 in additional expenses related to its August 2017 acquisition of certain assets of ARM Energy Management, LLC ("ARM"), a natural gas supply and supply management company servicing customers in Western Pennsylvania.

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 2017 Annual Report on Form 10-K for further information on the risks and uncertainties related to the Company's forward-looking statements.

Unless otherwise noted, earnings per share are presented on a diluted basis.

Conference Call

Chesapeake Utilities will host a conference call on Monday, November 12, 2018 at 10:30 a.m. Eastern Time to discuss the Company's financial results for the quarter and nine months ended September 30, 2018.  To participate in this call, dial 855.801.6270 and reference Chesapeake Utilities' 2018 Third Quarter Results Conference Call.  To access the replay recording of this call, the accompanying transcript, and other pertinent quarterly information, use the link CPK - Conference Call Audio Replay, or visit the Investors/Events and Presentations section of Company's website at www.chpk.com/.

About Chesapeake Utilities Corporation

Chesapeake Utilities is a diversified energy company engaged in natural gas distribution, transmission, gathering and processing, and marketing; electricity generation and distribution; propane gas distribution; and other businesses. Information about Chesapeake Utilities and its family of businesses is available at www.chpk.com or through its Investor Relations (IR) App.

Please note that Chesapeake Utilities Corporation is not affiliated with Chesapeake Energy, an oil and natural gas exploration company headquartered in Oklahoma City, Oklahoma.

For more information, contact:

Beth W. Cooper
Senior Vice President and Chief Financial Officer
302.734.6799

Financial Summary
(in thousands, except per share data)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2018

 

2017

 

2018

 

2017

Gross Margin

             

  Regulated Energy segment

$

51,269

   

$

46,909

   

$

162,926

   

$

151,147

 

  Unregulated Energy segment

11,933

   

13,272

   

59,149

   

53,827

 

  Other businesses and eliminations

(84)

   

(105)

   

(397)

   

(325)

 

 Total Gross Margin

$

63,118

   

$

60,076

   

$

221,678

   

$

204,649

 
               

Operating Income

             

   Regulated Energy segment

$

15,915

   

$

15,523

   

$

56,930

   

$

53,004

 

   Unregulated Energy segment

(3,933)

   

(951)

   

10,241

   

10,626

 

   Other businesses and eliminations

54

   

60

   

(1,481)

   

162

 

 Total Operating Income

12,036

   

14,632

   

65,690

   

63,792

 
               

Other Expense, net

(11)

   

(154)

   

(204)

   

(1,855)

 

Interest Charges

4,430

   

3,321

   

11,976

   

9,133

 

Pre-tax Income

7,595

   

11,157

   

53,510

   

52,804

 

Income Taxes

2,057

   

4,324

   

14,731

   

20,781

 

 Net Income

$

5,538

   

$

6,833

   

$

38,779

   

$

32,023

 
               

Earnings Per Share of Common Stock

             

Basic

$

0.34

   

$

0.42

   

$

2.37

   

$

1.96

 

Diluted

$

0.34

   

$

0.42

   

$

2.36

   

$

1.96

 

 

Financial Summary Highlights

Key variances, between the three months ended September 30, 2017 and 2018, included:

(in thousands, except per share data)

 

Pre-tax
Income

 

Net
Income

 

Earnings
Per Share

Third Quarter of 2017 Reported Results

 

$

11,157

   

$

6,833

   

$

0.42

 
             

Increased (Decreased) Gross Margins:

           

Eastern Shore and Peninsula Pipeline service expansions*

 

3,616

   

2,636

   

0.16

 

Pass-through of lower taxes to regulated energy customers(1)

 

(1,993)

   

(1,454)

   

(0.09)

 

Implementation of Eastern Shore settled rates* (2)

 

1,161

   

847

   

0.05

 

Natural gas growth (excluding service expansions)

 

734

   

535

   

0.03

 

PESCO results (decrease primarily due to imbalance adjustments)
 

 

(629)

   

(459)

   

(0.03)

 

Retail margins per gallon

 

(469)

   

(342)

   

(0.02)

 

Florida electric reliability/modernization program*

 

464

   

339

   

0.02

 

Unregulated energy customer consumption

 

(374)

   

(273)

   

(0.02)

 

GRIP*

 

329

   

240

   

0.01

 
   

2,839

   

2,069

   

0.11

 
             

 Decreased (Increased) Other Operating Expenses:

           

Outside services and facilities maintenance costs (3)

 

(1,532)

   

(1,117)

   

(0.07)

 

Depreciation, asset removal and property tax costs due to new capital investments (3)

 

(1,447)

   

(1,055)

   

(0.06)

 

Benefits and other employee-related expenses (3)

 

(758)

   

(553)

   

(0.03)

 

Payroll expense (increased staffing and annual salary increases) (3)

 

(754)

   

(550)

   

(0.03)

 

Operating expenses to increase staffing, infrastructure and risk management systems
necessary to support growth for PESCO

 

(452)

   

(330)

   

(0.02)

 

Early termination of facility lease due to consolidation of operations facilities(3)

 

(423)

   

(309)

   

(0.02)

 
   

(5,366)

   

(3,914)

   

(0.23)

 
             

Interest charges

 

(1,109)

   

(809)

   

(0.04)

 

Income taxes - including TCJA impact - decreased effective tax rate for regulated energy

 

   

1,454

   

0.09

 

Income taxes  - including TCJA impact - change in effective tax rate for unregulated
energy and other operations

 

   

(151)

   

(0.01)

 

Net other changes

 

74

   

56

   

 
   

(1,035)

   

550

   

0.04

 
             

Third Quarter of 2018 Reported Results

 

$

7,595

   

$

5,538

   

$

0.34

 
 

 (1) "Pass-through of lower taxes to regulated energy customers" represents the amounts that have already been refunded to customers or reserves established for future refunds and/or lower rates to customers in 2018 as a result of lower taxes due to the TCJA, which are offset by the corresponding decrease in federal income taxes and are expected to have no impact on net income.

 

(2) Excluding pass-through of lower taxes to regulated energy customers associated with the TCJA, which are broken out separately and discussed in footnote 1.

 

(3) Excluding incremental operating expenses for PESCO.

*See the Major Projects and Initiatives table later in this press release.

Key variances, between the nine months ended September 30, 2017 and 2018, included:

(in thousands, except per share data)

 

Pre-tax
Income

 

Net
Income

 

Earnings
Per Share

Nine Months Ended September 30, 2017 Reported Results

 

$

52,804

   

$

32,023

   

$

1.96

 

Adjusting for unusual items:

           

One-time separation expenses associated with a former executive

 

(1,548)

   

(1,421)

   

(0.09)

 

Absence of Xeron expenses, including 2017 wind-down expenses

 

829

   

601

   

0.04

 
   

(719)

   

(820)

   

(0.05)

 

Increased (Decreased) Gross Margins:

           

Pass-through of lower taxes to regulated energy customers(1)
 

 

(7,530)

   

(5,457)

   

(0.33)

 

Implementation of Eastern Shore settled rates* (2)

 

6,256

   

4,534

   

0.28

 

Eastern Shore and Peninsula Pipeline service expansions*

 

5,966

   

4,323

   

0.26

 

Return to normal weather

 

5,342

   

3,872

   

0.24

 

Natural gas growth (including customer and consumption growth, but excluding
service expansions)

 

4,098

   

2,970

   

0.18

 

Unregulated energy growth excluding PESCO

 

1,704

   

1,234

   

0.08

 

Florida electric reliability/modernization program*

 

1,231

   

892

   

0.05

 

GRIP*

 

931

   

675

   

0.04

 

Non-recurring margin decrease at PESCO

 

(863)

   

(626)

   

(0.04)

 

Margin from PESCO operations

 

(373)

   

(271)

   

(0.02)

 
   

16,762

   

12,146

   

0.74

 

 Decreased (Increased) Other Operating Expenses:

           

Depreciation, asset removal and property tax costs due to new capital investments (3)

 

(3,401)

   

(2,465)

   

(0.15)

 

Payroll expense (increased staffing and annual salary increases)(3)

 

(3,287)

   

(2,382)

   

(0.15)

 

Facilities maintenance costs (3)

 

(2,275)

   

(1,649)

   

(0.10)

 

Operating expenses to increase staffing, infrastructure and risk management systems
necessary to support growth for PESCO

 

 

(2,167)

   

(1,571)

   

(0.10)

 

Incentive compensation costs (based on period-over-period results)(3)

 

(1,046)

   

(758)

   

(0.05)

 

Vehicle, credit collections, other taxes, sales and advertising costs (3)

 

(1,010)

   

(732)

   

(0.04)

 

Benefits and other employee-related expenses (3)

 

(749)

   

(543)

   

(0.03)

 

Regulatory costs (3)

 

536

   

389

   

0.02

 

Early termination of facility lease due to consolidation of operations facilities(3)

 

(423)

   

(306)

   

(0.02)

 
   

(13,822)

   

(10,017)

   

(0.62)

 
             

Interest charges

 

(2,843)

   

(2,060)

   

(0.13)

 

Income taxes - including TCJA impact - decreased effective tax rate for regulated energy

 

   

5,457

   

0.33

 

Income taxes - including TCJA impact - decreased effective tax rate for unregulated
energy and other operations

 

   

1,087

   

0.07

 

Net other changes

 

1,328

   

963

   

0.06

 
   

(1,515)

   

5,447

   

0.33

 
             

Nine Months Ended September 30, 2018 Reported Results

 

$

53,510

   

$

38,779

   

$

2.36

 
 

(1) "Pass-through of lower taxes to regulated energy customers" represents amounts that have already been refunded to customers or reserves established for future refunds and/or lower rates to customers in 2018 as a result of lower taxes due to the TCJA, which are offset by the corresponding decrease in federal income taxes and are expected to have no impact on net income.

 

(2) Excluding pass-through of lower taxes to regulated energy customers associated with the TCJA, which are broken out separately and discussed in footnote 1

 

(3) Excluding incremental operating expenses for PESCO.

*See the Major Projects and Initiatives table later in this press release.

Recently Completed and Ongoing Major Projects and Initiatives
The Company constantly seeks and develops additional projects and initiatives in order to further increase shareholder value and serve its customers. The following represent the major projects recently completed and currently underway. In the future, the Company will add new projects to this table as such projects are initiated.

 

Gross Margin for the Period

 

Three Months Ended

 

Nine Months Ended

 

Year Ended

 

Estimate for

 

September 30,

 

September 30,

 

December 31,

 

Fiscal

in thousands

2018

 

2017

 

2018

 

2017

 

2017

 

2018

 

2019

Florida GRIP

$

3,722

   

$

3,393

   

$

10,933

   

$

10,002

   

$

13,454

   

$

14,287

   

$

14,370

 

Eastern Shore Rate Case (1)

2,181

   

1,020

   

7,276

   

1,020

   

3,693

   

9,800

   

9,800

 

Florida Electric Reliability/Modernization Pilot Program (1)

464

   

   

1,231

   

   

94

   

1,558

   

1,558

 

New Smyrna Beach, Florida Project (1)

352

   

   

1,056

   

   

235

   

1,409

   

1,409

 

2017 Eastern Shore System Expansion Project - 
including interim services (1)

2,409

   

   

4,439

   

   

433

   

8,009

   

15,773

 

Northwest Florida Expansion Project (1)

1,307

   

   

2,177

   

   

   

3,484

   

6,500

 

(Palm Beach County) Belvedere, Florida Project (1)

   

   

   

   

   

   

2,023

 

Total

$

10,435

   

$

4,413

   

$

27,112

   

$

11,022

   

$

17,909

   

$

38,547

   

$

51,433

 
 

(1) Gross margin amounts included in this table have not been adjusted to reflect the impact of the TCJA.  Any refunds and/or rate reductions implemented in the Company's regulated businesses were or will be offset by lower federal income taxes due to the TCJA.

Ongoing Growth Initiatives

GRIP
GRIP is a natural gas pipe replacement program approved by the Florida Public Service Commission ("PSC") that allows automatic recovery in rates of capital related costs and a return on investment, associated with the replacement of mains and services. Since the program's inception in August 2012, we have invested $123.4 million to replace 261 miles of qualifying distribution mains, including $9.5 million during the first nine months of 2018. GRIP generated additional gross margin of $329,000 and $931,000 for the three and nine months ended September 30, 2018, respectively, compared to the same periods in 2017.

Regulatory Proceedings

Eastern Shore Rate Case/Settled Rates
Eastern Shore's rate case settlement agreement became final in April 2018, with settlement rates effective January 1, 2018. The final agreement increases Eastern Shore's annual operating income by $6.6 million, representing $9.8 million from increased rates, offset by $3.2 million in lower federal income taxes. For the three and nine months ended September 30, 2018, Eastern Shore recognized incremental gross margin of approximately $1.2 million and $6.3 million, respectively.  As of September 30, 2018, Eastern Shore refunded its customers a total of $2.5 million related to the decrease in federal income taxes as a result of the TCJA.

Florida Electric Reliability/Modernization Program
In December 2017, the Florida PSC approved a $1.6 million annualized rate increase, effective January 2018, for the recovery of a limited number of investments and costs related to reliability, safety and modernization for the Florida Public Utilities Company ("FPU") electric distribution system. This increase will continue through at least the last billing cycle of December 2019. For the three and nine months ended September 30, 2018, additional margin of $464,000 and $1.2 million, respectively, was generated.

Major Projects and Initiatives Currently Underway

New Smyrna Beach, Florida Project
In the fourth quarter of 2017, the Company commenced construction of a 14-mile gas transmission pipeline to provide additional capacity to serve current and planned customer growth in the Company's New Smyrna Beach service area. The project was partially placed into service at the end of 2017 and is expected to be fully in service during the fourth quarter of 2018.  For the three and nine months ended September 30, 2018, the project generated incremental gross margin of approximately $352,000 and $1.1 million, respectively, and is expected to generate $1.4 million annually.

2017 Eastern Shore System Expansion Project
In November 2017, Eastern Shore began construction of a $117.0 million system expansion that will increase its capacity by 26 percent once completed. The Company has invested $103.3 million through September 30, 2018 and expects to substantially complete the project during the remainder of 2018. The first phase of the project was placed into service in December 2017. Additional segments of the project were placed into service over the first nine months of 2018. The project generated $2.4 million and $4.4 million in incremental gross margin, including margin from interim services, during the three and nine months ended September 30, 2018, respectively.  The project is expected to produce approximately $15.8 million annually in gross margin once complete through 2022, and $13.2 million in annual gross margin thereafter.

Northwest Florida Expansion Project
In the Company's first expansion of natural gas service into Northwest Florida, Peninsula Pipeline has completed construction of transmission lines, and the Company's Florida natural gas division has completed construction of lateral distribution lines to serve several industrial customers. The project was placed into service in May 2018 and generated incremental gross margin of $1.3 million and $2.2 million for the three and nine months ended September 30, 2018, respectively.  The estimated annual gross margin from this project is $6.5 million.

(Palm Beach County) Belvedere, Florida Project
Peninsula Pipeline is constructing a transmission line to deliver natural gas to the Company's natural gas distribution system in West Palm Beach. The Company expects to complete this project by mid-2019 and estimates that the project will generate $2.0 million in annual gross margin.

Impact of Hurricane Michael
In October 2018, Hurricane Michael passed through the Company's electric distribution operation service territory in Northwest Florida. The hurricane caused widespread and severe damage to the Company's infrastructure resulting in 100% of its customers losing electrical service. The Company has restored power to those customers who are able to accept power following Hurricane Michael. Efforts to restore the severely damaged infrastructure will continue into the foreseeable future and the Company estimates that it will spend over $50.0 million towards these restoration and reliability efforts.  Consistent with past practices, at the appropriate time, FPU will seek a recovery of the associated storm related costs.  The Company has developed a preliminary range of the negative earnings impact on 2018's results, which is estimated at $0.01-$0.03 per share.

Future Projects not included in the Table above

Del-Mar Energy Pathway Project
In September 2018, Eastern Shore filed with the Federal Energy Regulatory Commission, an application to construct the Del-Mar Energy Pathway project.  The proposed project will provide an additional 14,300 dekatherms per day of capacity to four customers.  The benefits of this project include additional natural gas transmission pipeline infrastructure in eastern Sussex County, Delaware, and the initial extension of Eastern Shore's pipeline system into Somerset County, Maryland.  The estimated annual gross margin from this project is $5.1 million.

Other major factors influencing gross margin

Weather and Consumption
Weather did not materially impact results for the three months ended September 30, 2018.  For the nine months ended September 30, 2018, colder temperatures, as compared to the prior year period contributed $5.3 million in incremental gross margin. While temperatures during the first nine months of 2018 were colder than the same period in 2017, temperatures were still warmer than normal, as shown in the table below. The Company estimates that it would have generated an additional $2.2 million in gross margin if temperatures for the nine months ended September 30, 2018 had been normal.  The following table summarizes heating degree-days ("HDD") and cooling degree-days ("CDD") variances from the 10-year average HDD/CDD ("Normal") for the three and nine months ended September 30, 2018 and 2017.

HDD and CDD Information

 

Three Months Ended

     

Nine Months Ended

   
 

September 30,

     

September 30,

   
 

2018

 

2017

 

Variance

 

2018

 

2017

 

Variance

Delmarva

                     

Actual HDD

10

   

16

   

(6)

   

2,729

   

2,262

   

467

 

10-Year Average HDD ("Delmarva Normal")

61

   

61

   

   

2,846

   

2,850

   

(4)

 

Variance from Delmarva Normal

(51)

   

(45)

       

(117)

   

(588)

     

Florida

                     

Actual HDD

   

   

   

507

   

298

   

209

 

10-Year Average HDD ("Florida Normal")

   

   

   

533

   

555

   

(22)

 

Variance from Florida Normal

   

       

(26)

   

(257)

     

Ohio

                     

Actual HDD

55

   

80

   

(25)

   

3,707

   

3,070

   

637

 

10-Year Average HDD ("Ohio Normal")

91

   

92

   

(1)

   

3,774

   

3,866

   

(92)

 

Variance from Ohio Normal

(36)

   

(12)

       

(67)

   

(796)

     

Florida

                     

Actual CDD

1,613

   

1,526

   

87

   

2,704

   

2,606

   

98

 

10-Year Average CDD ("Florida CDD Normal")

1,535

   

1,542

   

(7)

   

2,593

   

2,579

   

14

 

Variance from Florida CDD Normal

78

   

(16)

       

111

   

27

     

Natural Gas Distribution Customer and Consumption Growth
The Company's natural gas distribution operations generated $734,000 and $4.1 million of additional margin for the three and nine months ended September 30, 2018, respectively.  The breakdown of the increased margin is as follows:

   

Three Months Ended

 

Nine Months Ended

(in thousands)

 

September 30, 2018

 

September 30, 2018

Customer growth:

       

Residential

 

$

309

   

$

1,171

 

Commercial and industrial, excluding new service in Northwest Florida

 

283

   

927

 

New service in Northwest Florida

 

305

   

652

 

Total customer growth

 

897

   

2,750

 
         

Volume growth:

       

Residential

 

(239)

   

613

 

Commercial and industrial

 

57

   

1,030

 

Other  - including unbilled revenue

 

19

   

(295)

 

Total volume growth

 

(163)

   

1,348

 
         

Total natural gas distribution growth

 

$

734

   

$

4,098

 

Customer growth for the Company's natural gas distribution operations generated $897,000 and $2.8 million in additional gross margin for the three and nine months ended September 30, 2018, respectively, compared to the same periods in 2017.  The additional margin was generated from an increase of approximately 3.9 percent in the average number of residential customers served, growth in volumes delivered to commercial and industrial customers on the Delmarva Peninsula and in Florida, and new service initiated to customers in Northwest Florida.

Lower consumption by natural gas distribution customers reduced margin by $163,000 during the third quarter of 2018 compared to the same period in 2017. The lower consumption was due primarily to a decline in residential consumption in Florida, as compared to the increased customer consumption due to Hurricane Irma in the prior year period. These businesses generated $1.3 million in additional gross margin for the nine months ended September 30, 2018, compared to the same period in 2017, from higher consumption by residential and commercial customers.

Propane Operations

Gross margin generated by the Company's propane operations decreased by $834,000 during the three months ended September 30, 2018, compared to the same period in 2017, as a result of lower retail margins per gallon and the timing of propane deliveries to customers. Customer consumption for the Company's Florida propane operations was higher during the third quarter of 2017 due to the impact of Hurricane Irma.

For the nine months ended September 30, 2018, the Company's propane operations generated $4.9 million in incremental margin compared to the same period in 2017. More normal temperatures accounted for $2.9 million of the margin increase during the nine months ended September 30, 2018.  The balance of the increase reflected increased customer growth, continued expansion of Alliance AutoGas through the addition of new customers, higher sales and revenues from service contracts and increased wholesale sales activities.

PESCO

PESCO's gross margin for the three and nine months ended September 30, 2018 decreased by $629,000 and $1.2 million, respectively, compared to the same periods in 2017. The following table summarizes the changes in PESCO'S year-over-year margin for the three and nine months ended September 30, 2018:

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2018

 

September 30, 2018

(in thousands)

     

2017 Gross margin

$

1,360

   

$

5,749

 

Imbalance positions and true up

(493)

   

(493)

 

Margin changes from growth and the acquisition of certain assets from
ARM in 2017

(136)

   

119

 

Non-recurring margin factors - change in gross margin contribution
from various asset management agreements, MTM impact, Bomb
Cyclone impact and other adjustments

 

   

(863)

 

2018 Gross margin

$

731

   

$

4,512

 

PESCO generated an operating loss of $1.1 million for the three months ended September 30, 2018, compared to a loss of $63,000 during the prior year period.  The quarter-over-quarter decreased results reflect lower gross margin growth accompanied by a $452,000 increase in planned operating expenses as a result of increased staffing, infrastructure and risk management system costs as PESCO executes its growth strategy.

For the nine months ended September 30, 2018, PESCO reported an operating loss of $1.2 million, compared to operating income of $2.2 million during the prior year period. The year-over-year operating loss primarily reflects increased expenses incurred for the reasons discussed in the paragraph above, $596,000 in additional expenses related to the acquisition of certain assets from ARM, as well as the impact of several non-recurring margin adjustments, largely during the first quarter of 2018.

Xeron

Xeron's operations were wound down during the second quarter of 2017.  Operating income for the Company's Unregulated Energy Segment for the nine months ended September 30, 2018, improved by $829,000, compared to the prior year period due to the absence of Xeron's 2017 wind-down expenses and operating losses.

Capital Investment Growth and Financing Plan

Capital expenditures totaled $176.1 million for the nine months ended September 30, 2018. The Company currently projects capital expenditures of approximately $216.4 million for 2018.  Forecasted capital expenditures by segment and business line are shown below:

 

2018

(dollars in thousands)

 

Regulated Energy:

 

Natural gas distribution

$

65,594

 

Natural gas transmission

110,813

 

Electric distribution

8,930

 

Total Regulated Energy

185,337

 

Unregulated Energy:

 

Propane distribution

13,359

 

Other unregulated energy

7,413

 

Total Unregulated Energy

20,772

 

Other:

 

Corporate and other businesses

10,289

 

Total Other

10,289

 

Total 2018 Forecasted Capital Expenditures

$

216,398

 

The Company's target equity to total capitalization ratio, including short-term borrowings, is between 50 and 60 percent. Over the past several years, the Company has been deploying increased amounts of capital on new projects, many of which have longer construction periods.  The Company seeks to align the permanent financing of these capital projects with their in-service dates to the extent feasible.

In 2017, the Company refinanced $70.0 million of short-term debt as 3.25 percent senior notes.  The Company previously executed a shelf agreement with New York Life Investors LLC, subsequently issued $50.0 million of unsecured senior notes in May 2018 and will issue an additional tranche by November 2018 at an average interest rate of 3.53 percent for 20 years.

In September 2018, the Company amended the shelf agreement with PGIM, Inc., formerly known as Prudential Investment Management Inc. ("Prudential"), pursuant to which the Company may request that Prudential purchase up to $150.0 million of the Company's unsecured debt over a three year period which expires in August 2021.  Following this amendment, in September 2018, Prudential accepted the Company's request to purchase $100.0 million of notes on or before August 20, 2019. The new notes will bear interest at the rate of 3.98% and have a maturity date not to exceed 20 years from the date of issuance.  The Company expects to access additional permanent capital to align the financing with new investments and to maintain a solid balance sheet to support future capital deployment.

 

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(in thousands, except shares and per share data)

 
 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2018

 

2017

 

2018

 

2017

Operating Revenues

             

Regulated Energy

$

72,770

   

$

69,703

   

$

252,667

   

$

238,353

 

Unregulated Energy and other

67,509

   

57,233

   

263,632

   

198,827

 

Total Operating Revenues

140,279

   

126,936

   

516,299

   

437,180

 

Operating Expenses

             

Regulated Energy cost of sales

21,501

   

22,794

   

89,741

   

87,206

 

Unregulated Energy and other cost of sales

55,660

   

44,066

   

204,880

   

145,325

 

Operations

32,821

   

29,274

   

101,804

   

91,778

 

Maintenance

3,208

   

2,737

   

10,419

   

9,370

 

Gain from a settlement

   

   

(130)

   

(130)

 

Depreciation and amortization

10,633

   

9,362

   

30,176

   

27,267

 

Other taxes

4,420

   

4,071

   

13,719

   

12,572

 

Total operating expenses

128,243

   

112,304

   

450,609

   

373,388

 

Operating Income

12,036

   

14,632

   

65,690

   

63,792

 

Other expense, net

(11)

   

(154)

   

(204)

   

(1,855)

 

Interest charges

4,430

   

3,321

   

11,976

   

9,133

 

Income Before Income Taxes

7,595

   

11,157

   

53,510

   

52,804

 

Income taxes

2,057

   

4,324

   

14,731

   

20,781

 

Net Income

$

5,538

   

$

6,833

   

$

38,779

   

$

32,023

 

Weighted Average Common Shares Outstanding:

             

Basic

16,378,545

   

16,344,442

   

16,366,608

   

16,334,210

 

Diluted

16,428,439

   

16,389,635

   

16,416,255

   

16,378,633

 

Earnings Per Share of Common Stock:

             

Basic

$

0.34

   

$

0.42

   

$

2.37

   

$

1.96

 

Diluted

$

0.34

   

$

0.42

   

$

2.36

   

$

1.96

 

 

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

 

Assets

 

September 30, 2018

 

December 31, 2017

(in thousands, except shares and per share data)

       

 Property, Plant and Equipment

       

Regulated Energy

 

$

1,242,840

   

$

1,073,736

 

Unregulated Energy

 

220,721

   

210,682

 

Other businesses and eliminations

 

34,975

   

27,699

 

 Total property, plant and equipment

 

1,498,536

   

1,312,117

 

 Less:  Accumulated depreciation and amortization

 

(295,449)

   

(270,599)

 

 Plus:  Construction work in progress

 

60,243

   

84,509

 

 Net property, plant and equipment

 

1,263,330

   

1,126,027

 

 Current Assets

       

Cash and cash equivalents

 

6,215

   

5,614

 

Trade and other receivables (less allowance for uncollectible accounts of $987
and $936, respectively)

 

52,660

   

77,223

 

Accrued revenue

 

12,352

   

22,279

 

Propane inventory, at average cost

 

7,444

   

8,324

 

Other inventory, at average cost

 

4,786

   

12,022

 

Regulatory assets

 

6,891

   

10,930

 

Storage gas prepayments

 

6,989

   

5,250

 

Income taxes receivable

 

8,725

   

14,778

 

Prepaid expenses

 

9,775

   

13,621

 

Derivative assets, at fair value

 

10,568

   

1,286

 

Other current assets

 

2,557

   

7,260

 

 Total current assets

 

128,962

   

178,587

 

 Deferred Charges and Other Assets

       

Goodwill

 

19,604

   

19,604

 

Other intangible assets, net

 

4,073

   

4,686

 

Investments, at fair value

 

7,951

   

6,756

 

Regulatory assets

 

76,343

   

75,575

 

Other assets

 

5,293

   

3,699

 

 Total deferred charges and other assets

 

113,264

   

110,320

 

Total Assets

 

$

1,505,556

   

$

1,414,934

 

 

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

 

Capitalization and Liabilities

 

September 30, 2018

 

December 31, 2017

(in thousands, except shares and per share data)

       

 Capitalization

       

 Stockholders' equity

       

Preferred stock, par value $0.01 per share (authorized 2,000,000 shares), no
shares issued and outstanding

 

$

   

$

 

Common stock, par value $0.4867 per share (authorized 50,000,000 shares)

 

7,971

   

7,955

 

 Additional paid-in capital

 

255,509

   

253,470

 

 Retained earnings

 

249,805

   

229,141

 

 Accumulated other comprehensive loss

 

(4,987)

   

(4,272)

 

 Deferred compensation obligation

 

3,818

   

3,395

 

 Treasury stock

 

(3,818)

   

(3,395)

 

 Total stockholders' equity

 

508,298

   

486,294

 

 Long-term debt, net of current maturities

 

241,597

   

197,395

 

 Total capitalization

 

749,895

   

683,689

 

 Current Liabilities

       

Current portion of long-term debt

 

9,613

   

9,421

 

Short-term borrowing

 

268,293

   

250,969

 

Accounts payable

 

60,228

   

74,688

 

Customer deposits and refunds

 

34,887

   

34,751

 

Accrued interest

 

3,969

   

1,742

 

Dividends payable

 

6,060

   

5,312

 

Accrued compensation

 

10,396

   

13,112

 

Regulatory liabilities

 

9,099

   

6,485

 

Derivative liabilities, at fair value

 

9,774

   

6,247

 

Other accrued liabilities

 

14,819

   

10,273

 

 Total current liabilities

 

427,138

   

413,000

 

 Deferred Credits and Other Liabilities

       

Deferred income taxes

 

146,814

   

135,850

 

Regulatory liabilities

 

141,840

   

140,978

 

Environmental liabilities

 

7,941

   

8,263

 

Other pension and benefit costs

 

28,839

   

29,699

 

Deferred investment tax credits and other liabilities

 

3,089

   

3,455

 

 Total deferred credits and other liabilities

 

328,523

   

318,245

 

Total Capitalization and Liabilities

 

$

1,505,556

   

$

1,414,934

 

 

 

Chesapeake Utilities Corporation and Subsidiaries

Distribution Utility Statistical Data (Unaudited)

 
   

For the Three Months Ended September 30, 2018

 

For the Three Months Ended September 30, 2017

   

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

 

$

5,497

   

$

1,290

   

$

5,601

   

$

13,991

   

$

5,705

   

$

1,247

   

$

6,544

   

$

14,112

 

  Commercial

 

4,961

   

1,424

   

5,354

   

11,245

   

5,888

   

1,344

   

6,070

   

11,701

 

  Industrial

 

1,722

   

3,068

   

4,723

   

361

   

1,700

   

1,524

   

5,025