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Chesapeake Utilities Corporation Reports Second Quarter 2019 Results

Source: 
PR Newswire

DOVER, Del., Aug. 8, 2019 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the "Company") today announced second quarter financial results. The Company's net income for the quarter ended June 30, 2019 was $8.3 million, compared to $6.4 million for the same quarter of 2018. Earnings per share ("EPS") for the quarter ended June 30, 2019 were $0.50, compared to $0.39 per share for the same quarter of 2018.  Higher earnings for the second quarter primarily reflect contributions from recently completed and ongoing pipeline expansion projects, organic growth in the natural gas distribution operations and lower operating expenses.  These increases were partially offset by lower results from Peninsula Energy Services Company, Inc. ("PESCO") and higher interest expense. The absence of a one-time non-recurring severance charge recorded in the second quarter of 2018, was offset by the impact of warmer weather in the second quarter of 2019.

For the six months ended June 30, 2019, the Company reported net income of $37.0 million, or $2.25 per share. This represents an increase of $3.7 million or $0.22 per share compared to the same period in 2018. Year-to-date earnings were impacted by the factors noted above, along with incremental margin from the acquisition of certain assets of Marlin Gas Transport, Inc. ("Marlin Gas Transport") and R. F. Ohl Fuel Oil, Inc. ("Ohl"), a Florida Public Service Commission ("PSC") regulatory order that enabled the Company to retain tax savings associated with lower federal tax rates resulting from the United States Tax Cuts and Jobs Act ("TCJA") in several natural gas distribution operations and continued growth in gross margin from Aspire Energy of Ohio ("Aspire Energy"). These increases were partially offset by lower results for PESCO, lower energy consumption due to warmer weather in the Company's service territories, and higher interest expense.  A detailed discussion of operating results begins on page 3.

"In the first half of 2019, we have delivered strong financial results to our shareholders driven by our organic growth initiatives and increased margin from the Marlin Gas Transport and Ohl assets we acquired at the end of 2018.  The unwavering commitment of our employees to provide safe, clean, reliable energy services while growing the footprint of our businesses and continually generating increased financial results is truly impressive," stated Jeffry M. Householder, President and Chief Executive Officer.  "As we move into the second half of 2019, I'm excited to continue working with such a determined group of employees in further expanding the footprint of our existing businesses and realizing new investment opportunities like the West Palm Beach expansion, Del-Mar Energy Pathway and our recently announced Callahan Intrastate Pipeline project," added Mr. Householder.

Significant Items Impacting Earnings

Results for the three and six months ended June 30, 2019 and 2018 were impacted by the following significant items:

For the Three Months Ended June 30,

2019


 

2018

(in thousands, except per share data)

Net Income


 

EPS


 

Net Income


 

EPS

Reported (GAAP) Earnings

$

8,304


 

 

$

0.50


 

 

$

6,387


 

 

$

0.39


 

Change in unrealized mark-to-market ("MTM") activity

(41)


 

 


 

 

(251)


 

 

(0.02)


 

Nonrecurring separation expenses associated with a former executive


 

 


 

 

1,421


 

 

0.09


 

Adjusted (Non-GAAP) Earnings**

$

8,263


 

 

$

0.50


 

 

$

7,557


 

 

$

0.46


 

Adjusted earnings for the second quarter of 2019 were $8.3 million, or $0.50 per share, an increase of 8.7 percent compared to $7.6 million, or $0.46 per share, for the second quarter of 2018.

For the Six Months Ended June 30,

2019


 

2018

(in thousands, except per share data)

Net Income


 

EPS


 

Net Income


 

EPS

Reported (GAAP) Earnings

$

36,968


 

 

$

2.25


 

 

$

33,241


 

 

$

2.03


 

Change in unrealized MTM activity

38


 

 


 

 

(4,229)


 

 

(0.26)


 

2018 portion of the retained tax savings for certain Florida natural gas distribution operations associated with the TCJA income tax rate reduction

(990)


 

 

(0.06)


 

 


 

 


 

Nonrecurring separation expenses associated with a former executive


 

 


 

 

1,421


 

 

0.09


 

Adjusted (Non-GAAP) Earnings

$

36,016


 

 

$

2.19


 

 

$

30,433


 

 

$

1.86


 

For the six months ended June 30, 2019, adjusted earnings were $36.0 million, or $2.19 per share, an increase of 17.7 percent compared to $30.4 million, or $1.86 per share, for the six months ended June 30, 2018.

*Unless otherwise noted, earnings per share information is presented on a diluted basis.

**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. The Company calculates "adjusted earnings" by adjusting reported (GAAP) earnings to exclude the impact of certain significant non-cash items, including the impact of unrealized MTM gains (losses) and one-time charges, such as severance charges, and any prior year tax savings retained by our regulated businesses as a result of current year regulatory authorizations.  The Company calculates "adjusted EPS" by dividing adjusted earnings by the weighted average common shares outstanding.

 

 

 

Operating Results for the Quarters Ended June 30, 2019 and 2018


 

Consolidated Results


 

 

 

 

 

 

 

Three Months Ended

June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

70,110


 

 

$

67,261


 

 

$

2,849


 

 

4.2

%

Depreciation, amortization and property taxes

16,124


 

 

13,749


 

 

2,375


 

 

17.3

%

Other operating expenses

36,550


 

 

40,264


 

 

(3,714)


 

 

(9.2)

%

Operating income

$

17,436


 

 

$

13,248


 

 

$

4,188


 

 

31.6

%

Operating income during the second quarter of 2019 increased by $4.2 million, or 31.6 percent, compared to the same period in 2018. The increase in operating income primarily reflects strong performance by the Company's natural gas transmission and distribution operations and a $2.2 million decrease in operating expenses which excludes the one-time nonrecurring severance charge recorded in 2018 associated with a former company executive.  A $1.8 million decrease in operating income at PESCO partially offset these gains.  In addition, the absence of the one-time nonrecurring severance charge recorded in 2018 associated with a former company executive, largely offset lower gross margin due to the impact of warmer weather on the Delmarva Peninsula and Ohio operations.

 

Regulated Energy Segment


 

 

 

 

 

 

 

Three Months Ended

June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

55,086


 

 

$

50,494


 

 

$

4,592


 

 

9.1

%

Depreciation, amortization and property taxes

13,087


 

 

11,161


 

 

1,926


 

 

17.3

%

Other operating expenses

23,247


 

 

25,029


 

 

(1,782)


 

 

(7.1)

%

Operating income

$

18,752


 

 

$

14,304


 

 

$

4,448


 

 

31.1

%

Operating income for the Regulated Energy segment for the three months ended June 30, 2019 was $18.8 million, an increase of $4.4 million compared to the same period in 2018.  The increased operating income resulted primarily from increased gross margin of $4.6 million.  Depreciation, amortization, and property taxes expense increased by $1.9 million, and was offset by a decrease of $1.8 million in other operating expenses.

 

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

(in thousands)


 

Eastern Shore and Peninsula Pipeline service expansions (including related Florida natural gas distribution operation expansions)

$

3,680


 

Natural gas distribution growth (excluding service expansions)

867


 

Electric operations consumption growth

316


 

Florida Gas Reliability and Infrastructure Program ("GRIP")

310


 

TCJA impact primarily from retained tax savings from Florida natural gas distribution operations

255


 

Sandpiper Energy, Inc.'s (Sandpiper) margin from natural gas conversions

231


 

Decreased customer consumption - primarily due to warmer weather

(1,159)


 

Other variances

92


 

Quarter-over-quarter increase in gross margin

$

4,592


 

 

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

(in thousands)


 

Outside services, regulatory, facilities and maintenance costs

$

(1,466)


 

Incentive compensation costs (including timing of accruals)

(328)


 

Payroll, benefits and other employee-related expenses(1)

(257)


 

Other variances

269


 

Quarter-over-quarter decrease in other operating expenses

$

(1,782)


 

 

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

 

Unregulated Energy Segment


 

 

 

 

 

 

 

Three Months Ended

June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

15,121


 

 

$

16,915


 

 

$

(1,794)


 

 

(10.6)

%

Depreciation, amortization and property taxes

3,003


 

 

2,553


 

 

450


 

 

17.6

%

Other operating expenses

13,466


 

 

13,872


 

 

(406)


 

 

(2.9)

%

Operating (loss) income

$

(1,348)


 

 

$

490


 

 

$

(1,838)


 

 

NMF


 

 

Non-Meaningful Figure (NMF)

 

Given the impact of PESCO on the Unregulated Energy segment, the Company continues to present the segment excluding PESCO's results:

 

 

Unregulated Energy Segment, excluding PESCO


 

 

 

 

 

 

 

Three Months Ended

June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

14,380


 

 

$

14,309


 

 

$

71


 

 

0.5

%

Depreciation, amortization and property taxes

2,850


 

 

2,399


 

 

451


 

 

18.8

%

Other operating expenses

11,805


 

 

12,108


 

 

(303)


 

 

(2.5)

%

Operating loss

$

(275)


 

 

$

(198)


 

 

$

(77)


 

 

38.9

%

Excluding PESCO, operating loss for the Unregulated Energy segment increased by $0.1 million for the three months ended June 30, 2019, compared to the same period in 2018. The increased operating loss was driven by $0.5 million in higher depreciation, amortization and property taxes, partially offset by a $0.1 million increase in gross margin and $0.3 million in lower other operating expenses.  While Marlin Gas Services, LLC ("Marlin Gas Services"), the Company's newly created subsidiary, generated an additional $1.0 million of margin for the segment, this was largely offset by warmer weather during the quarter which decreased customer consumption in the propane operations and Aspire Energy.

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

(in thousands)


 

 

Marlin Gas Services (assets acquired in December 2018)


 

$

1,030


 

Propane Operations


 

 

Ohl acquisition (assets acquired in December 2018)


 

112


 

Decreased customer consumption - primarily due to warmer weather


 

(818)


 

Decrease in retail and wholesale propane margins


 

(166)


 

Aspire Energy


 

 

Rate increases


 

203


 

Decreased customer consumption - primarily due to warmer weather


 

(104)


 

Other variances


 

(186)


 

Quarter-over-quarter increase in gross margin


 

$

71


 

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

(in thousands)


 

Operating expenses for Marlin Gas Services and Ohl (Assets acquired in December 2018) including costs to expand the future growth prospects for the businesses (1)

$

835


 

Outside services and facilities maintenance costs

(469)


 

Payroll, benefits and other employee-related expenses(2)

(361)


 

Incentive compensation costs (including timing of accruals)

(239)


 

Other variances

(69)


 

Quarter-over-quarter decrease in other operating expenses

$

(303)


 

 

(1) The Ohl and Marlin Gas Services other operating expenses have been aggregated and are excluded from the expense changes shown in the remainder of the table.

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

 

 

PESCO


 

 

 

 

 

 

 

Three Months Ended

June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

741


 

 

$

2,606


 

 

$

(1,865)


 

 

(71.6)

%

Depreciation, amortization and property taxes

153


 

 

154


 

 

(1)


 

 

(0.6)

%

Other operating expenses

1,661


 

 

1,764


 

 

(103)


 

 

(5.8)

%

Operating (loss) income

$

(1,073)


 

 

$

688


 

 

$

(1,761)


 

 

NMF


 

Operating income for PESCO decreased by $1.8 million for the three months ended June 30, 2019, compared to the same period in 2018.  The decline in operating income was driven by a $1.9 million decrease in PESCO's gross margin compared to the same period in 2018 resulting from the following:

(in thousands)


 

Increased supply costs

$

(742)


 

Absence of nonrecurring margin in 2018 associated with the Southeast portfolio

(642)


 

Net impact of PESCO's MTM activity

(302)


 

Other variances

(179)


 

Quarter-over-quarter decrease in gross margin for PESCO

$

(1,865)


 

 

 

Operating Results for the Six Months Ended June 30, 2019 and 2018


 

Consolidated Results


 

 

 

 

 

 

 

Six Months Ended June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

171,507


 

 

$

158,560


 

 

$

12,947


 

 

8.2

%

Depreciation, amortization and property taxes

31,628


 

 

27,447


 

 

4,181


 

 

15.2

%

Other operating expenses

78,450


 

 

77,459


 

 

991


 

 

1.3

%

Operating income

$

61,429


 

 

$

53,654


 

 

$

7,775


 

 

14.5

%

Operating income during the six months ended June 30, 2019 increased by $7.8 million, or 14.5 percent, compared to the same period in 2018.  The increase in operating income reflects continued strong growth across the Company, generated by organic growth within existing businesses, recent expansion investments, regulatory initiatives and rate/pricing mechanisms, the successful integration of the Ohl acquisition and strong performance of Marlin Gas Services.

 

 

Regulated Energy Segment


 

 

 

 

 

 

 

Six Months Ended June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

122,188


 

 

$

111,656


 

 

$

10,532


 

 

9.4

%

Depreciation, amortization and property taxes

25,618


 

 

22,317


 

 

3,301


 

 

14.8

%

Other operating expenses

48,801


 

 

48,324


 

 

477


 

 

1.0

%

Operating income

$

47,769


 

 

$

41,015


 

 

$

6,754


 

 

16.5

%

Operating income for the Regulated Energy segment for the six months ended June 30, 2019 was $47.8 million, an increase of $6.8 million or 16.5 percent, compared to the same period in 2018.  The increase in operating income resulted from $10.5 million in additional gross margin, offset by $3.3 million in higher depreciation, amortization and property taxes and a $0.5 million increase in other operating expenses. On February 25, 2019, the Florida PSC issued a final order regarding the treatment of the TCJA, allowing us to retain the savings associated with lower federal tax rates for certain of our natural gas distribution operations.  As a result, $1.3 million in reserves for customer refunds, recorded in 2018, were reversed in the first quarter of 2019.  Excluding the impact of the reversal, gross margin and operating income for the six months ended June 30, 2019 increased by $9.2 million and $5.4 million, or 8.2 percent and 13.2 percent, respectively.

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

(in thousands)


 

Eastern Shore and Peninsula Pipeline service expansions (including related Florida natural gas distribution operation expansions)

$

8,140


 

Natural gas distribution - customer growth (excluding service expansions)

2,253


 

2018 retained tax savings for certain Florida natural gas distribution operations

1,321


 

TCJA impact - primarily from the 2019 retained tax savings for certain Florida natural gas operations

810


 

Sandpiper's margin from natural gas conversions

614


 

Florida GRIP

534


 

Decreased customer consumption - primarily due to warmer weather

(2,841)


 

Other variances

(299)


 

Period-over-period increase in gross margin

$

10,532


 

 

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

(in thousands)


 

Payroll, benefits and other employee-related expenses(1)

$

1,619


 

Incentive compensation costs (including timing of accruals)

331


 

Outside services and regulatory costs

(1,070)


 

Facilities maintenance costs

(1,005)


 

Other variances

602


 

Period-over-period increase in other operating expenses

$

477


 

 

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

 

 

Unregulated Energy Segment


 

 

 

 

 

 

 

Six Months Ended June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

49,523


 

 

$

47,216


 

 

$

2,307


 

 

4.9

%

Depreciation, amortization and property taxes

5,942


 

 

5,059


 

 

883


 

 

17.5

%

Other operating expenses

29,953


 

 

27,983


 

 

1,970


 

 

7.0

%

Operating income

$

13,628


 

 

$

14,174


 

 

$

(546)


 

 

(3.9)

%

 

The Company continues to present the Unregulated Energy segment excluding PESCO's results:

 

Unregulated Energy Segment, excluding PESCO


 

 

 

 

 

 

 

Six Months Ended June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

46,922


 

 

$

43,435


 

 

$

3,487


 

 

8.0

%

Depreciation, amortization and property taxes

5,641


 

 

4,757


 

 

884


 

 

18.6

%

Other operating expenses

26,048


 

 

24,428


 

 

1,620


 

 

6.6

%

Operating income

$

15,233


 

 

$

14,250


 

 

$

983


 

 

6.9

%

 

Excluding PESCO, operating income for the Unregulated Energy segment increased by $1.0 million for the six months ended June 30, 2019, compared to the same period in 2018. The increase in operating income was driven by $3.5 million in additional gross margin, partially offset by $1.6 million in higher operating expenses and $0.9 million in higher depreciation and taxes.

The major components of the $3.5 million increase in gross margin are shown below:

(in thousands)


 

 

Marlin Gas Services (acquired assets of Marlin Gas Transport in December 2018)


 

$

3,359


 

Propane Operations


 

 

Increased retail margins per gallon


 

1,159


 

Ohl acquisition (assets acquired in December 2018)


 

588


 

Decrease in customer consumption due to the absence of the 2018 Bomb Cyclone and warmer weather in 2019


 

(1,623)


 

Lower wholesale propane margins and sales


 

(534)


 

Aspire Energy


 

 

Rate increases


 

892


 

Customer consumption growth


 

200


 

Other variances


 

(554)


 

Period-over-period increase in gross margin


 

$

3,487


 

 

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

(in thousands)


 

Operating expenses for Marlin Gas Services and Ohl (Assets acquired in December 2018) including costs to expand the future growth prospects for the businesses (1)

$

1,689


 

Incentive compensation costs (including timing of accruals)

255


 

Outside services

117


 

Facilities maintenance costs

(336)


 

Payroll, benefits and other employee-related expenses(2)

(39)


 

Other variances

(66)


 

Period-over-period increase in other operating expenses

$

1,620


 

 

(1) The Ohl and Marlin Gas Services other operating expenses have been aggregated and are excluded from the expense changes shown in the remainder of the table.

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

 

 

PESCO


 

 

 

 

 

 

 

Six Months Ended June 30,


 

 

 

 

(in thousands)

2019


 

2018


 

Change


 

Percent Change

Gross margin

$

2,601


 

 

$

3,781


 

 

$

(1,180)


 

 

(31.2)

%

Depreciation, amortization and property taxes

301


 

 

302


 

 

(1)


 

 

(0.3)

%

Other operating expenses

3,905


 

 

3,555


 

 

350


 

 

9.8

%

Operating loss

$

(1,605)


 

 

$

(76)


 

 

$

(1,529)


 

 

NMF


 

 

For the six months ended June 30, 2019, PESCO's gross margin decreased by $1.2 million compared to the same period in 2018.  Lower gross margin from PESCO for the six months ended June 30, 2019 resulted from the following:

(in thousands)


 

Net impact of extraordinary costs associated with the 2018 Bomb Cyclone for the Mid-Atlantic wholesale portfolio (1)

$

5,545


 

Net impact of PESCO's MTM activity

(5,892)


 

Absence of nonrecurring margin in 2018 associated with the Southeast portfolio

(642)


 

Other variances

(191)


 

Period-over-period decrease in gross margin for PESCO

$

(1,180)


 

 

(1) The 2018 Bomb Cyclone refers to the high-intensity winter storms in early January 2018 that impacted the Mid-Atlantic region and had a residual impact on our businesses through the month of February.  The exceedingly high demand and associated impacts on pipeline capacity and gas supply in the Mid-Atlantic region created significant, unusual costs for PESCO. While such concerted impacts are not expected to occur frequently, our management revisited and refined its risk management strategies and implemented additional controls.

 

Forward-Looking Statements

Matters included 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 2018 Annual Report on Form 10-K for further information on the risks and uncertainties related to the Company's forward-looking statements.

Conference Call

Chesapeake Utilities will host a conference call on Friday, August 9, 2019 at 10:30 a.m. Eastern Time to discuss the Company's financial results for the three and six months ended June 30, 2019.  To participate in this call, dial 855.801.6270 and reference Chesapeake Utilities' 2019 Second 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 and marketing; electricity generation and distribution; propane gas distribution; and other businesses. Information about Chesapeake Utilities and its family of businesses is available at http://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

Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary

302.734.6799

 

 

Financial Summary

(in thousands, except per share data)


 

 

 

 

 

Three Months Ended


 

Six Months Ended


 

June 30,


 

June 30,


 

2019


 

2018


 

2019


 

2018

Gross Margin


 

 

 

 

 

 

 

  Regulated Energy segment

$

55,086


 

 

$

50,494


 

 

$

122,188


 

 

$

111,656


 

  Unregulated Energy segment

15,121


 

 

16,915


 

 

49,523


 

 

47,216


 

  Other businesses and eliminations

(97)


 

 

(148)


 

 

(204)


 

 

(312)


 

 Total Gross Margin

$

70,110


 

 

$

67,261


 

 

$

171,507


 

 

$

158,560


 

 

 

 

 

 

 

 

 

Operating Income (Loss)


 

 

 

 

 

 

 

   Regulated Energy segment

$

18,752


 

 

$

14,304


 

 

$

47,769


 

 

$

41,015


 

   Unregulated Energy segment

(1,348)


 

 

490


 

 

13,628


 

 

14,174


 

   Other businesses and eliminations

32


 

 

(1,546)


 

 

32


 

 

(1,535)


 

 Total Operating Income (Loss)

17,436


 

 

13,248


 

 

61,429


 

 

53,654


 

 

 

 

 

 

 

 

 

Other expense, net

(316)


 

 

(262)


 

 

(361)


 

 

(194)


 

Interest Charges

5,655


 

 

3,881


 

 

11,365


 

 

7,545


 

Pre-tax Income

11,465


 

 

9,105


 

 

49,703


 

 

45,915


 

Income Taxes

3,161


 

 

2,718


 

 

12,735


 

 

12,674


 

 Net Income

$

8,304


 

 

$

6,387


 

 

$

36,968


 

 

$

33,241


 

 

 

 

 

 

 

 

 

Earnings Per Share of Common Stock


 

 

 

 

 

 

 

Basic

$

0.51


 

 

$

0.39


 

 

$

2.26


 

 

$

2.03


 

Diluted

$

0.50


 

 

$

0.39


 

 

$

2.25


 

 

$

2.03


 

 

 

 

Financial Summary Highlights

Key variances, between the three months ended June 30, 2018 and 2019, included:


 

 

 

 

 

 

 

(in thousands, except per share data)


 

Pre-tax

Income


 

Net

Income


 

Earnings

Per Share

Second Quarter of 2018 Reported Results


 

$

9,105


 

 

$

6,387


 

 

$

0.39


 

 

 

 

 

 

 

 

Adjusting for Unusual Items:


 

 

 

 

 

 

Nonrecurring separation expenses associated with a former executive


 

1,548


 

 

1,421


 

 

0.09


 

Decreased customer consumption - primarily due to warmer weather


 

(2,081)


 

 

(1,507)


 

 

(0.09)


 

Net impact of PESCO's MTM activity


 

(302)


 

 

(210)


 

 

(0.02)


 

 

 

(835)


 

 

(296)


 

 

(0.02)


 

 

 

 

 

 

 

 

Increased (Decreased) Gross Margins:


 

 

 

 

 

 

Eastern Shore and Peninsula Pipeline service expansions (including related Florida natural gas distribution operation expansions)*


 

3,680


 

 

2,666


 

 

0.16


 

Margin contribution from Marlin Gas Services (acquired assets of Marlin Gas Transport in December 2018) and Ohl acquisition (assets acquired in December 2018)*


 

1,142


 

 

827


 

 

0.05


 

Natural gas distribution growth (excluding service expansions)


 

867


 

 

628


 

 

0.04


 

Florida GRIP*


 

310


 

 

225


 

 

0.01


 

TCJA impact - primarily from the 2019 retained tax savings for certain Florida natural gas operations*


 

255


 

 

185


 

 

0.01


 

Sandpiper's margin from natural gas conversions


 

231


 

 

167


 

 

0.01


 

Aspire Energy rate increases


 

203


 

 

147


 

 

0.01


 

Other margin change for PESCO operations


 

(1,563)


 

 

(1,132)


 

 

(0.07)


 

 

 

5,125


 

 

3,713


 

 

0.22


 

 

 

 

 

 

 

 

 (Increased) Decreased Operating Expenses (Excluding Cost of Sales):


 

 

 

 

 

 

Depreciation, asset removal and property tax costs due to growth investments


 

(2,055)


 

 

(1,488)


 

 

(0.09)


 

Operating expenses for Marlin Gas Services and Ohl (Assets acquired in December 2018) including costs to expand the future growth prospects for the businesses


 

(1,155)


 

 

(837)


 

 

(0.05)


 

Outside services, regulatory, and facilities maintenance costs


 

1,866


 

 

1,351


 

 

0.08


 

Payroll, benefits and other employee-related expenses


 

678


 

 

491


 

 

0.03


 

Incentive compensation costs (including timing of accruals)


 

512


 

 

371


 

 

0.03


 

 

 

(154)


 

 

(112)


 

 


 

 

 

 

 

 

 

 

Change in effective tax rate


 


 

 

(100)


 

 

(0.01)


 

Interest charges


 

(1,774)


 

 

(1,285)


 

 

(0.08)


 

Net other changes


 

(2)


 

 

(3)


 

 


 

 

 

(1,776)


 

 

(1,388)


 

 

(0.09)


 

 

 

 

 

 

 

 

Second Quarter of 2019 Reported Results


 

$

11,465


 

 

$

8,304


 

 

$

0.50


 

 

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

 

 

  Key variances, between the six months ended June 30, 2018 and 2019, included:

(in thousands, except per share data)


 

Pre-tax

Income


 

Net

Income


 

Earnings

Per Share

Six Month Ended June 30, 2018 Reported Results


 

$

45,915


 

 

$

33,241


 

 

$

2.03


 

 

 

 

 

 

 

 

Adjusting for Unusual Items:


 

 

 

 

 

 

Nonrecurring separation expenses associated with a former executive


 

1,548


 

 

1,421


 

 

0.09


 

2018 retained tax savings for certain Florida natural gas operations*


 

1,321


 

 

990


 

 

0.06


 

Net impact of PESCO's MTM activity


 

(5,892)


 

 

(4,267)


 

 

(0.26)


 

Decreased customer consumption - primarily due to warmer weather


 

(4,264)


 

 

(3,171)


 

 

(0.19)


 

 

 

(7,287)


 

 

(5,027)


 

 

(0.30)


 

Increased (Decreased) Gross Margins:


 

 

 

 

 

 

Eastern Shore and Peninsula Pipeline service expansions (including new service in Northwest Florida for related Florida natural gas distribution operations)*


 

8,140


 

 

6,055


 

 

0.37


 

Absence of the 2018 Bomb Cyclone and capacity constraints cost for PESCO


 

5,545


 

 

4,124


 

 

0.25


 

Margin contribution from Marlin Gas Services (acquired assets of Marlin Gas Transport) and Ohl acquisition (assets acquired in December 2018)*


 

3,947


 

 

2,936


 

 

0.18


 

Natural gas distribution growth (excluding service expansions)


 

2,253


 

 

1,675


 

 

0.10


 

Higher propane retail margins per gallon


 

1,159


 

 

862


 

 

0.05


 

Aspire Energy rate increases


 

892


 

 

664


 

 

0.04


 

TCJA impact - primarily from the 2019 retained tax savings for certain Florida natural gas operations*


 

810


 

 

602


 

 

0.04


 

Sandpiper's margin from natural gas conversions


 

614


 

 

456


 

 

0.03


 

Florida GRIP*


 

534


 

 

397


 

 

0.02


 

Other margin change for PESCO operations


 

(832)


 

 

(619)


 

 

(0.04)


 

Wholesale propane margins and sales


 

(534)


 

 

(398)


 

 

(0.02)


 

 

 

22,528


 

 

16,754


 

 

1.02


 

(Increased) Decreased Other Operating Expenses (Excluding Cost of Sales):


 

 

 

 

 

 

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


 

(3,559)


 

 

(2,647)


 

 

(0.16)


 

Operating expenses for Marlin Gas Services and Ohl (Assets acquired in December 2018) including costs to expand the future growth prospects for the businesses


 

(2,312)


 

 

(1,720)


 

 

(0.10)


 

Payroll, benefits and other employee-related expenses


 

(1,568)


 

 

(1,166)


 

 

(0.07)


 

Incentive compensation costs (including timing of accruals)


 

(578)


 

 

(430)


 

 

(0.03)


 

Operating expenses to support PESCO


 

(349)


 

 

(259)


 

 

(0.02)


 

Facilities maintenance costs


 

1,201


 

 

893


 

 

0.05


 

Outside services and regulatory costs


 

952


 

 

708


 

 

0.04


 

 

 

(6,213)


 

 

(4,621)


 

 

(0.29)


 

 

 

 

 

 

 

 

Change in effective tax rate


 

 

516


 

 

0.03


 

Interest Charges


 

(3,820)


 

 

(2,841)


 

 

(0.17)


 

Net other changes


 

(1,420)


 

 

(1,054)


 

 

(0.07)


 

 

 

(5,240)


 

 

(3,379)


 

 

(0.21)


 

 

 

 

 

 

 

 

Six Month Ended June 30, 2019 Reported Results


 

$

49,703


 

 

$

36,968


 

 

$

2.25


 

 

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

 

 

Recently Completed and Ongoing Major Projects and Initiatives

The Company constantly pursues and develops additional projects and initiatives to serve existing and new customers, further grow its businesses and earnings, with the intention to increase shareholder value. The following represent the major projects/initiatives recently completed and currently underway. In the future, the Company will add new projects and initiatives to this table once negotiations are substantially final and the associated earnings can be estimated.


 

 

Gross Margin for the Period


 

 

Three Months Ended


 

Six Months Ended


 

Year Ended


 

Estimate for

Project/Initiative


 

June 30,


 

June 30,


 

December 31,


 

Fiscal

in thousands


 

2019


 

2018


 

2019


 

2018


 

2018


 

2019


 

2020

Florida GRIP (1)


 

$

3,530


 

 

$

3,220


 

 

$

6,904


 

 

$

6,370


 

 

$

13,323


 

 

$

14,172


 

 

$

15,491


 

2017 Eastern Shore System Expansion -  including interim services


 

3,645


 

 

859


 

 

8,445


 

 

3,117


 

 

9,103


 

 

16,183


 

 

15,799


 

Northwest Florida Expansion (including related natural gas distribution services)


 

1,691


 

 

1,147


 

 

3,289


 

 

1,152


 

 

4,350


 

 

6,500


 

 

6,500


 

Western Palm Beach County, Florida Expansion


 

161


 

 


 

 

322


 

 


 

 

54


 

 

676


 

 

4,581


 

Marlin Gas Services


 

1,030


 

 


 

 

3,359


 

 


 

 

110


 

 

5,400


 

 

6,300


 

Ohl Propane Acquisition


 

112


 

 


 

 

588


 

 


 

 


 

 

1,200


 

 

1,236


 

Del-Mar Energy Pathway - including interim services


 

189


 

 


 

 

353


 

 


 

 


 

 

725


 

 

3,039


 

Callahan Intrastate Pipeline


 


 

 


 

 


 

 


 

 


 

 


 

 

2,250


 

Tax benefit retained by certain Florida entities(2)


 

249


 

 


 

 

2,329


 

 


 

 


 

 

3,039


 

 

1,879


 

Total


 

$

10,607


 

 

$

5,226


 

 

$

25,589


 

 

$

10,639


 

 

$

26,940


 

 

$

47,895


 

 

$

57,075


 

 

(1) All periods shown have been adjusted to reflect the lower customer rates as a result of the TCJA.  Lower customer rates are offset by the corresponding decrease in federal income tax expense and have no negative impact on net income.

(2) The amount disclosed for the six months ended 2019 includes tax savings of $1.3 million for the year ended December 31, 2018.  The tax savings were recorded in the first quarter of 2019 due to an order by the Florida PSC allowing reversal of a TCJA refund reserve, recorded in 2018, which increased gross margin for the six months ended by that amount.

 

Major Projects and Initiatives

Florida GRIP

Florida GRIP is a natural gas pipe replacement program approved by the Florida PSC that allows automatic recovery, through rates, of costs associated with the replacement of mains and services. Since the program's inception in August 2012, the Company has invested $135.2 million of capital expenditures to replace 298 miles of qualifying distribution mains, including $7.9 million of new pipes during the first six months of 2019. GRIP generated additional gross margin of $0.3 million and $0.5 million for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.

2017 Eastern Shore System Expansion

Eastern Shore has substantially completed the construction of a system expansion project that increased its capacity by 26 percent. Two remaining segments are expected to be placed into service in various phases during the third quarter of 2019. The project generated $2.8 million and $5.3 million in incremental gross margin during the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018.  The project is expected to produce gross margin of approximately $16.2 million in 2019; $15.8 million annually from 2020 through 2022; and $13.2 million annually thereafter based on current customer capacity commitments.

Northwest Florida Expansion

In May 2018, Peninsula Pipeline completed construction of transmission lines, and our Florida natural gas division completed construction of lateral distribution lines, to serve customers in Northwest Florida. The project generated incremental gross margin of $0.5 million and $2.1 million for the three and six months ended June 30, 2019, respectively, compared to the same periods in 2018. The estimated annual gross margin from this project is $6.5 million for 2019 and beyond, with the opportunity for additional margin as the remaining capacity is sold.

Western Palm Beach County, Florida Expansion

Peninsula Pipeline is constructing four transmission lines to bring natural gas to the Company's distribution system in West Palm Beach, Florida. The first phase of this project was placed into service in December 2018 and generated $0.2 million and $0.3 million in additional gross margin for the three and six months ended June 30, 2019, respectively. The Company expects to complete the remainder of the project in phases through early 2020, and estimates that it will generate gross margin of $0.7 million in 2019 and $4.6 million annually thereafter.

Marlin Gas Services

In December 2018, the Company acquired certain operating assets of Marlin Gas Transport, a supplier of mobile compressed natural gas distribution and pipeline solutions, and created Marlin Gas Services, a new subsidiary which offers compressed natural gas solutions to supply interruption scenarios and provides other unique applications where pipeline supplies are unavailable or inadequate to meet customer requirements. Marlin Gas Services generated $1.0 million and $3.4 million of gross margin for the three and six months ended June 30, 2019, respectively.  The Company estimates that Marlin Gas Services will generate additional gross margin of approximately $5.4 million in 2019 and $6.3 million in 2020, and expects gross margin to grow beyond 2020 as Marlin Gas Services continues to actively expand the territories it serves as well as leverages its patented technology to potentially serve liquefied natural gas transportation needs.

Ohl Propane Acquisition

In December 2018, Sharp acquired certain propane customers and operating assets of Ohl.  Located between two of Sharp's existing districts, Ohl provided propane distribution service to approximately 2,500 residential and commercial customers in Pennsylvania.  The customers and assets acquired from Ohl have been assimilated into Sharp. The operations acquired from Ohl generated $0.1 million and $0.6 million of incremental gross margin for the three and six months ended June 30, 2019, respectively.  The Company estimates that this acquisition will generate additional gross margin of approximately $1.2 million for Sharp in 2019, with the potential for additional growth in future years.

Del-Mar Energy Pathway

In September 2018, Eastern Shore filed for FERC authorization to construct the Del-Mar Energy Pathway project to provide an additional 14,300 dekatherms per day of capacity to four customers.  The project will provide additional natural gas transmission pipeline infrastructure in eastern Sussex County, Delaware, and it will represent the first extension of Eastern Shore's pipeline system into Somerset County, Maryland. Interim services in advance of this project generated $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively.  The estimated annual gross margin from this project is approximately $0.7 million in 2019, $3.0 million in 2020, $4.6 million in 2021 and $5.1 million annually thereafter.  Eastern Shore anticipates that this project will be fully in-service by mid-2021, contingent upon FERC issuing authorization for the project in the third quarter of 2019.

Callahan Intrastate Pipeline

In May 2018, Peninsula Pipeline announced its plan to construct a jointly owned intrastate transmission pipeline with Seacoast Gas Transmission in Nassau County, Florida.  The 26-mile pipeline, having an initial capacity of 148,000 dekatherms per day, will serve growing demand in both Nassau and Duval counties, Florida.  The project is expected to be placed in-service during the third quarter of 2020 and will generate gross margin for Peninsula Pipeline of $2.3 million in 2020 and $6.0 million annually thereafter.

Regulatory Initiatives

Florida Tax Savings Related to TCJA

In February 2019, the Florida PSC issued orders authorizing certain of the Company's natural gas distribution operations to retain a portion of the tax savings associated with the lower federal tax rates resulting from the TCJA.  In accordance with the PSC orders, the Company recognized $1.3 million in margin during the first quarter of 2019, reflecting the reversal of reserves recorded during 2018.  The Company expects the annual savings beginning in 2019 to continue in future years, and recognized additional margin of $0.2 million and $1.0 million during the three and six months ended June 30, 2019, respectively.

Other major factors influencing gross margin

Weather and Consumption

Weather conditions accounted for a $2.1 million decrease in gross margin during the second quarter of 2019, compared to the same period in 2018.  For the second quarter, period-over-period heating degree-days ("HDD") declined 42 percent on the Delmarva Peninsula and 19 percent in the Company's Ohio service territory.  For the six months ended June 30, 2019, weather conditions accounted for a $4.3 million decrease in gross margin.  Lower period-over-period HDD's in all of our service territories and extreme conditions due to the "Bomb Cyclone" in early 2018 reduced consumption in the first six months of 2019 compared to the same period in 2018 impacting both our Regulated and Unregulated Energy segments.  The following table summarizes HDD and cooling degree day ("CDD") variances from the 10-year average HDD/CDD ("Normal") for the three and six months ended June 30, 2019 and 2018.

 


 

Three Months Ended


 

 

 

Six Months Ended


 

 

 

June 30,


 

 

 

June 30,


 

 

 

2019


 

2018


 

Variance


 

2019


 

2018


 

Variance

Delmarva


 

 

 

 

 

 

 

 

 

 

 

Actual HDD

247


 

 

424


 

 

(177)


 

 

2,569


 

 

2,719


 

 

(150)


 

10-Year Average HDD ("Normal")

400


 

 

423


 

 

(23)


 

 

2,749


 

 

2,785


 

 

(36)


 

Variance from Normal

(153)


 

 

1


 

 

 

 

(180)


 

 

(66)


 

 

 

Florida


 

 

 

 

 

 

 

 

 

 

 

Actual HDD

18


 

 

17


 

 

1


 

 

379


 

 

507


 

 

(128)


 

10-Year Average HDD ("Normal")

14


 

 

16


 

 

(2)


 

 

532


 

 

533


 

 

(1)


 

Variance from Normal

4


 

 

1


 

 

 

 

(153)


 

 

(26)


 

 

 

Ohio


 

 

 

 

 

 

 

 

 

 

 

Actual HDD

535


 

 

662


 

 

(127)


 

 

3,531


 

 

3,652


 

 

(121)


 

10-Year Average HDD ("Normal")

607


 

 

614


 

 

(7)


 

 

3,652


 

 

3,683


 

 

(31)


 

Variance from Normal

(72)


 

 

48


 

 

 

 

(121)


 

 

(31)


 

 

 

Florida


 

 

 

 

 

 

 

 

 

 

 

Actual CDD

1,086


 

 

952


 

 

134


 

 

1,220


 

 

1,091


 

 

129


 

10-Year Average CDD ("Normal")

975


 

 

969


 

 

6


 

 

1,072


 

 

1,058


 

 

14


 

Variance from Normal

111


 

 

(17)


 

 

 

 

148


 

 

33


 

 

 

Natural Gas Distribution Margin Growth

New customer growth in the Company's natural gas distribution operations generated $0.9 million and $2.3 million of additional margin for the three and six months ended June 30, 2019, respectively.  The details for the three and six months ended June 30, 2019 are provided in the following table:

 


 

 

Three Months Ended


 

Six Months Ended

(in thousands)


 

June 30, 2019


 

June 30, 2019

Customer Growth:


 

 

 

 

Residential


 

$

446


 

 

$

1,085


 

Commercial and industrial


 

421


 

 

1,168


 

Total Customer Growth


 

$

867


 

 

$

2,253


 

 

The additional margin from new customers reflects an increase of approximately 3.7 percent and 3.8 percent for the three and six months ended June 30, 2019, respectively, in the average number of residential customers served on the Delmarva Peninsula, and approximately 3.8 percent and 3.5 percent growth in new residential customers served in Florida as well as an increase in the number of commercial and industrial customers served.

Capital Investment Growth and Financing

The Company's capital expenditures were $72.9 million for the six months ended June 30, 2019.  The following table shows the 2019 capital expenditure forecast of $177.8 million by segment and by business line:


 

2019

(dollars in thousands)


 

Regulated Energy:


 

Natural gas distribution

$

64,143


 

Natural gas transmission

66,787


 

Electric distribution

5,949


 

Total Regulated Energy

136,879


 

Unregulated Energy:


 

Propane distribution

11,870


 

Energy transmission

8,345


 

Other unregulated energy

11,000


 

Total Unregulated Energy

31,215


 

Other:


 

Corporate and other businesses

9,705


 

Total Other

9,705


 

Total 2019 Forecasted Capital Expenditures

$

177,799


 

 

The capital expenditure projection is subject to continuous review and modification. Actual capital requirements may vary from the above estimates due to a number of factors, including changing economic conditions, customer growth in existing areas, regulation, new growth or acquisition opportunities and availability of capital. Historically, actual capital expenditures have typically lagged behind the budgeted amounts.

Impact of Hurricane Michael

In October 2018, Hurricane Michael passed through Florida Public Utilities Company's ("FPU") electric distribution service territory in Northwest Florida. The hurricane caused widespread and severe damage to FPU's infrastructure, resulting in 100 percent of its Northwest Florida customers losing electrical service. FPU, after exerting extraordinary hurricane restoration efforts, restored service to those customers who were able to accept it.  FPU expended more than $65.0 million to restore service, which has been recorded as new plant and equipment, charged against FPU's accumulated depreciation or charged against FPU's storm reserve. In conjunction with the hurricane-related expenditures, the Company executed two 13-month unsecured term loans as temporary financing, each in the amount of $30.0 million. The interest cost associated with these loans is LIBOR plus 75 basis points. One of the term loans was executed in December 2018; the other was executed in January 2019. While there is a short-term negative impact, the storm is not expected to have a significant impact going forward, assuming recovery is granted through the regulatory process.  On August 7, 2019, the Company filed the necessary regulatory filings seeking recovery of the restoration costs incurred, including eligible financing costs.  FPU's results for the six months ended June 30, 2019 included interest expense of $0.5 million, or $0.4 million on an after-tax basis, associated with the intermediate term loans discussed above.

The Company's target ratio of equity to total capitalization, including short-term borrowings, is between 50 and 60 percent. The Company's equity to total capitalization ratio, including short term borrowings, was 45 percent as of June 30, 2019. Excluding the funds expended for Hurricane Michael restoration activities, the Company's equity to total capitalization ratio, including short-term borrowings, would have been approximately 48 percent.  The Company seeks to align permanent financing with the in-service dates of its capital projects.  The Company may utilize more temporary short-term debt, when the financing cost is attractive, as a bridge to the permanent long-term financing.

 

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(in thousands, except shares and per share data)


 

Three Months Ended


 

Six Months Ended


 

June 30,


 

June 30,


 

2019


 

2018


 

2019


 

2018

Operating Revenues


 

 

 

 

 

 

 

Regulated Energy

$

73,403


 

 

$

70,504


 

 

$

177,021


 

 

$

179,897


 

Unregulated Energy and other

57,500


 

 

66,160


 

 

181,498


 

 

196,123


 

Total Operating Revenues

130,903


 

 

136,664


 

 

358,519


 

 

376,020


 

Operating Expenses


 

 

 

 

 

 

 

Regulated Energy cost of sales

18,317


 

 

20,010


 

 

54,833


 

 

68,241


 

Unregulated Energy and other cost of sales

42,476


 

 

49,393


 

 

132,179


 

 

149,219


 

Operations

32,696


 

 

36,281


 

 

69,839


 

 

68,983


 

Maintenance

3,600


 

 

3,619


 

 

7,280


 

 

7,211


 

Gain from a settlement

(130)


 

 

(130)


 

 

(130)


 

 

(130)


 

Depreciation and amortization

11,609


 

 

9,839


 

 

22,684


 

 

19,543


 

Other taxes

4,899


 

 

4,404


 

 

10,405


 

 

9,299


 

Total operating expenses

113,467


 

 

123,416


 

 

297,090


 

 

322,366


 

Operating Income

17,436


 

 

13,248


 

 

61,429


 

 

53,654


 

Other expense, net

(316)


 

 

(262)


 

 

(361)


 

 

(194)


 

Interest charges

5,655


 

 

3,881


 

 

11,365


 

 

7,545


 

Income Before Income Taxes

11,465


 

 

9,105


 

 

49,703


 

 

45,915


 

Income taxes

3,161


 

 

2,718


 

 

12,735


 

 

12,674


 

Net Income

$

8,304


 

 

$

6,387


 

 

$

36,968


 

 

$

33,241


 

Weighted Average Common Shares Outstanding:


 

 

 

 

 

 

 

Basic

16,401,028


 

 

16,369,641


 

 

16,393,022


 

 

16,360,540


 

Diluted

16,445,743


 

 

16,417,082


 

 

16,439,333


 

 

16,410,061


 

Earnings Per Share of Common Stock:


 

 

 

 

 

 

 

Basic

$

0.51


 

 

$

0.39


 

 

$

2.26


 

 

$

2.03


 

Diluted

$

0.50


 

 

$

0.39


 

 

$

2.25


 

 

$

2.03


 

 

 

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

 

Assets


 

June 30, 2019


 

December 31, 2018

(in thousands, except shares and per share data)


 

 

 

 

 Property, Plant and Equipment


 

 

 

 

Regulated Energy


 

$

1,380,591


 

 

$

1,297,416


 

Unregulated Energy


 

245,738


 

 

237,682


 

Other businesses and eliminations


 

30,347


 

 

34,585


 

 Total property, plant and equipment


 

1,656,676


 

 

1,569,683


 

 Less:  Accumulated depreciation and amortization


 

(321,284)


 

 

(294,295)


 

 Plus:  Construction work in progress


 

85,630


 

 

108,584


 

 Net property, plant and equipment


 

1,421,022


 

 

1,383,972


 

 Current Assets


 

 

 

 

Cash and cash equivalents


 

7,254


 

 

6,089


 

Trade and other receivables (less allowance for uncollectible accounts of $1,190 and $1,108, respectively)


 

48,908


 

 

85,404


 

Accrued revenue


 

12,724


 

 

27,499


 

Propane inventory, at average cost


 

5,143


 

 

9,791


 

Other inventory, at average cost


 

7,778


 

 

7,127


 

Regulatory assets


 

6,842


 

 

4,796


 

Storage gas prepayments


 

4,143


 

 

6,603


 

Income taxes receivable


 

10,984


 

 

15,300


 

Prepaid expenses


 

5,873


 

 

10,079


 

Derivative assets, at fair value


 

10,571


 

 

13,165


 

Other current assets


 

4,022


 

 

5,684


 

 Total current assets


 

124,242


 

 

191,537


 

 Deferred Charges and Other Assets


 

 

 

 

Goodwill


 

25,785


 

 

25,837


 

Other intangible assets, net


 

5,611


 

 

6,207


 

Investments, at fair value


 

8,821


 

 

6,711


 

Operating lease right-of-use assets (1)


 

12,404


 

 


 

Regulatory assets


 

76,945


 

 

72,422


 

Other assets


 

6,212


 

 

6,985


 

 Total deferred charges and other assets


 

135,778


 

 

118,162


 

Total Assets


 

$

1,681,042


 

 

$

1,693,671


 

 

(1) During the first quarter of 2019, the Company adopted a new lease accounting standard, resulting in additional assets and liabilities (both current and non-current portions) which total $12.4 million at June 30, 2019.

 

 

 

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities


 

June 30, 2019


 

December 31, 2018

(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)


 

7,984


 

 

7,971


 

 Additional paid-in capital


 

256,385


 

 

255,651


 

 Retained earnings


 

285,762


 

 

261,530


 

 Accumulated other comprehensive loss


 

(5,747)


 

 

(6,713)


 

 Deferred compensation obligation


 

4,694


 

 

3,854


 

 Treasury stock


 

(4,694)


 

 

(3,854)


 

 Total stockholders' equity


 

544,384


 

 

518,439


 

 Long-term debt, net of current maturities


 

275,924


 

 

316,020


 

 Total capitalization


 

820,308


 

 

834,459


 

 Current Liabilities


 

 

 

 

Current portion of long-term debt


 

75,600


 

 

11,935


 

Short-term borrowing


 

301,226


 

 

294,458


 

Accounts payable


 

50,645


 

 

129,804


 

Customer deposits and refunds


 

29,839


 

 

34,155


 

Accrued interest


 

2,073


 

 

2,317


 

Dividends payable


 

6,644


 

 

6,060


 

Accrued compensation


 

8,699


 

 

13,923


 

Regulatory liabilities


 

10,168


 

 

7,883


 

Derivative liabilities, at fair value


 

10,994


 

 

14,871


 

Other accrued liabilities (1)


 

16,527


 

 

12,828


 

 Total current liabilities


 

512,415


 

 

528,234


 

 Deferred Credits and Other Liabilities


 

 

 

 

Deferred income taxes


 

164,421


 

 

156,820


 

Regulatory liabilities


 

133,858


 

 

135,039


 

Environmental liabilities


 

6,994


 

 

7,638


 

Other pension and benefit costs


 

29,675


 

 

28,513


 

Operating lease - liabilities (1)


 

10,710


 

 


 

Deferred investment tax credits and other liabilities


 

2,661


 

 

2,968


 

 Total deferred credits and other liabilities


 

348,319


 

 

330,978


 

Total Capitalization and Liabilities


 

$

1,681,042


 

 

$

1,693,671


 

 

(1) During the first quarter of 2019, the Company adopted a new lease accounting standard, resulting in additional assets and liabilities (both current and non-current portions) which total $12.4 million at June 30, 2019.

 

 

Chesapeake Utilities Corporation and Subsidiaries

Distribution Utility Statistical Data (Unaudited)


 

 

For the Three Months Ended June 30, 2019


 

For the Three Months Ended June 30, 2018


 

 

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


 

$

10,444


 

 

$

1,511


 

 

$

7,457


 

 

$

10,801


 

 

$

14,007


 

 

$

1,459


 

 

$

7,713


 

 

$

9,814


 

  Commercial


 

6,353


 

 

1,587


 

 

6,633


 

 

9,807


 

 

7,752


 

 

1,524


 

 

6,809


 

 

9,709


 

  Industrial


 

1,773


 

 

3,122


 

 

6,062


 

 

416


 

 

1,987


 

 

2,854


 

 

5,218


 

 

371


 

  Other (1)


 

(3,647)


 

 

795


 

 

(1,489)


 

 

(560)


 

 

(3,496)


 

 

480


 

 

(1,459)


 

 

(1,532)


 

Total Operating Revenues


 

$

14,923


 

 

$

7,015


 

 

$

18,663


 

 

$

20,464


 

 

$

20,250


 

 

$

6,317


 

 

$

18,281


 

 

$

18,362


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (in Dts for natural gas and KWHs for electric)


 

 

 

 

 

 

 

 

 

 

 

 

  Residential


 

558,159


 

 

83,315


 

 

317,025


 

 

72,358


 

 

759,202


 

 

85,526


 

 

329,284


 

 

66,682


 

  Commercial


 

673,689


 

 

1,143,877


 

 

426,555


 

 

79,540


 

 

711,690


 

 

1,134,555


 

 

432,192


 

 

73,276


 

  Industrial


 

1,216,120


 

 

7,065,699


 

 

1,226,774


 

 

3,173


 

 

1,308,129


 

 

7,024,154


 

 

1,245,950


 

 

3,540


 

  Other


 

60,515


 

 


 

 

634,071


 

 


 

 

17,759


 

 


 

 

463,846


 

 

1,907


 

Total


 

2,508,483


 

 

8,292,891


 

 

2,604,425


 

 

155,071


 

 

2,796,780


 

 

8,244,235


 

 

2,471,272


 

 

145,405


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Customers


 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Residential


 

73,666


 

 

17,205


 

 

57,504


 

 

24,530


 

 

71,038


 

 

16,391


 

 

55,580


 

 

24,714


 

  Commercial(2)


 

7,085


 

 

1,544


 

 

3,937


 

 

7,228


 

 

6,994


 

 

1,517


 

 

3,932


 

 

7,493


 

  Industrial(2)


 

168


 

 

17


 

 

2,435


 

 

2


 

 

155


 

 

16


 

 

2,284


 

 

2


 

  Other


 

16


 

 


 

 

12


 

 


 

 

4


 

 


 

 

11


 

 


 

Total


 

80,935


 

 

18,766


 

 

63,888


 

 

31,760


 

 

78,191


 

 

17,924


 

 

61,807


 

 

32,209


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

For the Six Months Ended June 30, 2019


 

For the Six Months Ended June 30, 2018


 

 

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


 

$

40,414


 

 

$

3,297


 

 

$

18,177


 

 

$

20,661


 

 

$

49,321


 

 

$

3,219


 

 

$

18,888


 

 

$

21,346


 

  Commercial


 

19,494


 

 

3,325


 

 

14,336


 

 

17,622


 

 

23,582


 

 

3,246


 

 

15,135


 

 

18,866


 

  Industrial


 

4,162


 

 

6,387


 

 

12,060


 

 

1,026


 

 

4,293


 

 

4,725


 

 

11,590


 

 

771


 

  Other (1)


 

(4,468)


 

 

1,906


 

 

(2,123)


 

 

(4,467)


 

 

(5,239)


 

 

990


 

 

(4,119)


 

 

(3,880)


 

Total Operating Revenues


 

$

59,602


 

 

$

14,915


 

 

$

42,450


 

 

$

34,842


 

 

$

71,957


 

 

$

12,180


 

 

$

41,494


 

 

$

37,103


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume (in Dts for natural gas and KWHs for electric)


 

 

 

 

 

 

 

 

 

 

 

 

  Residential


 

2,778,534


 

 

216,187


 

 

822,351


 

 

137,869


 

 

2,999,757


 

 

226,285


 

 

852,346


 

 

145,210


 

  Commercial


 

2,327,009


 

 

2,392,641


 

 

930,601


 

 

141,369


 

 

2,417,116


 

 

2,374,462


 

 

967,736


 

 

141,015


 

  Industrial


 

2,727,428


 

 

14,399,549


 

 

2,574,011


 

 

10,923


 

 

2,817,168


 

 

10,089,859


 

 

2,550,480


 

 

8,060


 

  Other


 

78,374


 

 


 

 

1,189,462


 

 


 

 

30,292


 

 


 

 

984,353


 

 

3,803


 

Total


 

7,911,345


 

 

17,008,377


 

 

5,516,425


 

 

290,161


 

 

8,264,333


 

 

12,690,606


 

 

5,354,915


 

 

298,088


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Customers


 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Residential


 

73,821


 

 

17,097


 

 

57,166


 

 

24,455


 

 

71,136


 

 

16,307


 

 

55,430


 

 

24,679


 

  Commercial(2)


 

7,116


 

 

1,537


 

 

3,917


 

 

7,230


 

 

7,009


 

 

1,509


 

 

3,930


 

 

7,487


 

  Industrial(2)


 

168


 

 

17


 

 

2,425


 

 

2


 

 

154


 

 

16


 

 

2,268


 

 

2


 

  Other


 

12


 

 


 

 

12


 

 


 

 

5


 

 


 

 

14


 

 


 

Total


 

81,117


 

 

18,651


 

 

63,520


 

 

31,687


 

 

78,304


 

 

17,832


 

 

61,642


 

 

32,168


 

 

(1)  Operating Revenues from "Other" sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for billing services provided to third parties, and adjustments or changes in taxes, such as the TCJA, which are passed through to customers. This amount also includes the reserve for estimated customer refunds associated with the TCJA.

(2)  Certain volumes and customers have been reclassified when compared to the prior year for consistency with current year presentation.

 

Cision View original content:http://www.prnewswire.com/news-releases/chesapeake-utilities-corporation-reports-second-quarter-2019-results-300898579.html

SOURCE Chesapeake Utilities Corporation

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