DOVER, Del., Feb. 26, 2020
/PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK)
("Chesapeake Utilities" or the "Company") today announced financial
results for the year and the fourth quarter ended December 31,
2019. Net income for 2019 was $65.2 million, or $3.96 per share compared to $56.6 million, or $3.45 per share for 2018. Fourth
quarter 2019 net income was $22.6
million, or $1.37 per share
compared to $17.8 million, or
$1.08 per share in 2018.
In the fourth quarter of 2019, the Company completed the
previously announced sales of the assets and contracts of its
natural gas marketing subsidiary, Peninsula Energy Services
Company, Inc. (PESCO) and recorded a pre-tax gain of $7.3 million ($5.4
million after tax). As a result, PESCO's results for all
periods presented have been separately reported as discontinued
operations and its assets and liabilities have been reclassified as
held for sale where applicable. There are no other items
included in discontinued operations. Additional details on
the transactions to sell PESCO's assets and contracts are included
on page 7 of this press release.
The Company's net income from continuing operations for 2019 was
$61.1 million, or $3.72 per
share. This represents an increase of $4.3
million or $0.25 per share compared to 2018. Higher
earnings for 2019 reflect increased gross margin from recently
completed and ongoing pipeline expansion projects, incremental
margin from the acquisition of certain assets of Marlin Gas
Transport, Inc. ("Marlin Gas Transport"), R. F. Ohl Fuel Oil, Inc.
("Ohl") and Boulden Inc. ("Boulden"), organic growth in the natural
gas distribution operations and higher retail propane margins. 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") also
contributed to higher earnings growth in 2019. These increases were
partially offset by higher operating expenses and interest expense
to support the Company's growth initiatives, a one-time pension
settlement expense of $0.5 million
associated with de-risking the Chesapeake Utilities Corporation
Pension Plan (included with Other expense, net on the condensed
consolidated statement of income) as well as $4.9 million in lower gross margin due to a
decline in customer consumption as a result of warmer weather in
2019 compared to 2018.
The Company's net income from continuing operations for the
quarter ended December 31, 2019 was $17.2 million, compared to $17.8 million for the same quarter of 2018.
Earnings from continuing operations for the quarter ended
December 31, 2019 were $1.04 per
share compared to $1.08 per share for
the same quarter of 2018. Slightly lower earnings for the fourth
quarter of 2019 were largely the result of higher interest,
increased stock compensation expense associated with leadership
transitions during 2019, increased insurance expense and the
pension settlement expense mentioned above.
"2019 was a remarkable year, whether measured by our record
earnings and superior growth, the initiatives we completed, those
we set into motion or by how effectively our employee team worked
together to drive efficiency, increase collaboration and achieve
continuous improvement across the organization," stated
Jeffry M. Householder, President and
Chief Executive Officer. "When I stepped into the role of CEO
at the beginning of 2019, I was energized by the Company's
prospects and our employees' commitment to our shareholders,
customers and the communities we serve. My excitement grew
over 2019 given the effort and accomplishments of our team.
We reported record earnings on operating income that exceeded
$100 million for the first time in
our history, and compound annual growth in earnings has exceeded
8.5% for multiple trailing periods including the 10 years ended
2019. Strategically, we successfully and profitably exited
the natural gas marketing business, completed seamless integrations
of Marlin Gas Transport and Ohl, while acquiring Boulden and
announcing the purchase of Elkton Gas - all while continuing to
harvest organic growth, expanding our pipeline and distribution
service capacity and ensuring safe, reliable and clean energy
service to our customers. In recognition of our team's
success, we have updated our financial guidance and increased our
expectations for earnings through 2022."
Increasing Earnings Guidance
The Company previously provided guidance that its EPS should
grow at an average annual rate of 7.75 percent to 9.50 percent
through 2022, from a base level of $2.89 per share (2017 adjusted, diluted
EPS). That guidance suggested 2022 EPS of $4.20 to $4.55. Given the investments already made,
those underway and the growth prospects included in the Company's
strategic growth plan, Management is updating EPS guidance and
increasing the forecasted range for 2022 to $4.70 to $4.90 per
share. The Company has historically achieved an average
earnings growth at or above this range and therefore continues to
view its long-term growth prospects as comparable to its historical
growth.
*Unless otherwise noted, EPS information is presented on a
diluted basis.
**This press release includes references to non-Generally
Accepted Accounting Principles ("GAAP") financial measures,
including gross margin. 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.
Operating Results for the Years Ended December 31, 2019 and 2018
Consolidated Results
|
Year Ended
December 31,
|
|
|
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
325,104
|
|
|
$
|
300,146
|
|
|
$
|
24,958
|
|
|
8.3
|
%
|
Depreciation,
amortization and property taxes
|
45,423
|
|
|
40,220
|
|
|
5,203
|
|
|
12.9
|
%
|
Other operating
expenses
|
173,394
|
|
|
165,083
|
|
|
8,311
|
|
|
5.0
|
%
|
Operating
income
|
$
|
106,287
|
|
|
$
|
94,843
|
|
|
$
|
11,444
|
|
|
12.1
|
%
|
Operating income, for the year ended December 31, 2019
increased by $11.4 million, or 12.1
percent, compared to the same period in 2018. The increase in
operating income reflects higher earnings across the Company
generated by recent expansion investments, additional earnings from
acquisitions completed in 2018 and 2019, organic growth within
existing businesses, higher retail propane margins, regulatory
initiatives and rate/pricing mechanisms, and the absence of a
one-time non-recurring severance charge recorded in 2018. These
increases were partially offset by higher operating expenses to
support the Company's growth initiatives and lower gross margin due
to a decline in customer consumption as a result of warmer weather
in 2019 compared to 2018.
Regulated Energy Segment
|
Year Ended
December 31,
|
|
|
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
240,203
|
|
|
$
|
223,453
|
|
|
$
|
16,750
|
|
|
7.5
|
%
|
Depreciation,
amortization and property taxes
|
51,683
|
|
|
46,523
|
|
|
5,160
|
|
|
11.1
|
%
|
Other operating
expenses
|
101,936
|
|
|
97,715
|
|
|
4,221
|
|
|
4.3
|
%
|
Operating
income
|
$
|
86,584
|
|
|
$
|
79,215
|
|
|
$
|
7,369
|
|
|
9.3
|
%
|
Operating income for the Regulated Energy segment increased by
$7.4 million, or 9.3 percent, for the
year ended December 31, 2019 compared to the same period in
2018. Higher operating income resulted from increased gross margin
of $16.8 million, offset by
$5.2 million in higher depreciation,
amortization and property taxes and $4.2
million in higher other operating expenses. In February 2019, the Florida PSC issued a final
order regarding the treatment of the TCJA impact, 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 2019 increased by $15.5 million and $6.1
million, or 6.9 percent and 7.7 percent, respectively.
The key components of the increase in gross margin are shown
below:
(in
thousands)
|
|
|
Eastern Shore Natural
Gas Company ("Eastern Shore") and Peninsula Pipeline Company
("Peninsula Pipeline") service expansions (including related
Florida natural gas distribution operation expansions)
|
|
$
|
12,600
|
|
Natural gas
distribution - customer growth (excluding service
expansions)
|
|
4,718
|
|
2018 retained tax
savings for certain Florida natural gas distribution
operations
|
|
1,321
|
|
Retained tax savings
for certain Florida natural gas operations in 2019 associated with
TCJA
|
|
1,023
|
|
Sandpiper Energy,
Inc.'s ("Sandpiper") margin primarily from natural gas
conversions
|
|
983
|
|
Florida Gas
Reliability Infrastructure Program ("GRIP")
(1)
|
|
508
|
|
Decreased customer
consumption - primarily due to warmer weather
|
|
(3,295)
|
|
Other
variances
|
|
(1,108)
|
|
Period-over-period
increase in gross margin
|
|
$
|
16,750
|
|
(1)
|
In 2019, the Company
recorded a reduction in depreciation expense totaling $1.3 million
as a result of a Florida PSC approved depreciation study that
lowered annual depreciation rates. The Company also recorded $0.6
million in lower GRIP margin due to a concurrent reduction in
surcharges collected from customers as a result of the reduced
depreciation rates.
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
Payroll, benefits and
other employee-related expenses
|
$
|
3,705
|
|
Insurance
(non-health) expense - both insured and self-insured
components
|
1,847
|
|
Stock compensation
expense associated with leadership transitions during
2019
|
908
|
|
Vehicle expenses due
to additional fleet to support growth
|
268
|
|
Timing of excavation
and inspection activities in 2018 to comply with the Company's
integrity management program
|
(1,733)
|
|
Facilities and
maintenance costs due to consolidation of facilities
|
(542)
|
|
Other
variances
|
(232)
|
|
Period-over-period
increase in other operating expenses
|
$
|
4,221
|
|
Unregulated Energy Segment
|
Year Ended
December 31,
|
|
|
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
85,266
|
|
|
$
|
77,196
|
|
|
$
|
8,070
|
|
|
10.5
|
%
|
Depreciation,
amortization and property taxes
|
10,129
|
|
|
8,263
|
|
|
1,866
|
|
|
22.6
|
%
|
Other operating
expenses
|
55,198
|
|
|
51,809
|
|
|
3,389
|
|
|
6.5
|
%
|
Operating
income
|
$
|
19,939
|
|
|
$
|
17,124
|
|
|
$
|
2,815
|
|
|
16.4
|
%
|
Operating income for the Unregulated Energy segment increased by
$2.8 million in 2019 compared to
2018. Gross margin increased by $8.1
million, or 10.5 percent, partially offset by other
operating expenses increasing by $3.4
million and an increase of $1.9
million in depreciation, amortization and property
taxes.
The key components of the increase in gross margin are shown
below:
(in
thousands)
|
|
Margin
Impact
|
Marlin Gas Services
(acquired assets of Marlin Gas Transport in December
2018)
|
|
$
|
5,300
|
|
Propane
Operations:
|
|
|
Increased retail
propane margins per gallon driven by favorable market conditions
and supply management
|
|
3,229
|
|
Ohl acquisition
(assets acquired in December 2018)
|
|
1,200
|
|
Boulden acquisition
(assets acquired in December 2019)
|
|
329
|
|
Decrease in customer
consumption due primarily to the absence of the 2018 Bomb
Cyclone
|
|
(1,800)
|
|
Lower wholesale
propane margins due to non-recurring impact of the 2018 Bomb
Cyclone
|
|
(866)
|
|
Aspire Energy -
higher margins from rate increases
|
|
518
|
|
Higher Eight Flags
margin from increased production
|
|
418
|
|
Other
variances
|
|
(258)
|
|
Period-over-period
increase in gross margin
|
|
$
|
8,070
|
|
The key components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
Operating expenses
for Unregulated Energy acquisitions
|
$
|
3,314
|
|
Insurance expense
(non-health) - both insured and self-insured components
|
415
|
|
Other
variances
|
(340)
|
|
Period-over-period
increase in other operating expenses
|
$
|
3,389
|
|
Operating Results for the Quarters Ended December 31,
2019 and 2018
Consolidated Results
|
Three Months
Ended
December 31,
|
|
|
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
88,900
|
|
|
$
|
82,981
|
|
|
$
|
5,919
|
|
|
7.1
|
%
|
Depreciation,
amortization and property taxes
|
11,812
|
|
|
10,481
|
|
|
1,331
|
|
|
12.7
|
%
|
Other operating
expenses
|
47,446
|
|
|
43,627
|
|
|
3,819
|
|
|
8.8
|
%
|
Operating
income
|
$
|
29,642
|
|
|
$
|
28,873
|
|
|
$
|
769
|
|
|
2.7
|
%
|
Operating income during the fourth quarter of 2019 increased by
$0.8 million, or 2.7 percent,
compared to the same period in 2018. The increase in
operating income reflects a $5.9
million increase in gross margin, offset by $1.3 million in higher depreciation, amortization
and property taxes and $3.8 million
in higher other operating expenses to support the Company's growth
initiatives and recognition of stock compensation expense
associated with leadership transitions during 2019.
Regulated Energy Segment
|
Three Months
Ended
December 31,
|
|
|
|
|
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
63,054
|
|
|
$
|
60,528
|
|
|
$
|
2,526
|
|
|
4.2
|
%
|
Depreciation,
amortization and property taxes
|
12,989
|
|
|
12,121
|
|
|
868
|
|
|
7.2
|
%
|
Other operating
expenses
|
28,791
|
|
|
26,122
|
|
|
2,669
|
|
|
10.2
|
%
|
Operating
income
|
$
|
21,274
|
|
|
$
|
22,285
|
|
|
$
|
(1,011)
|
|
|
(4.5)
|
%
|
Operating income for the Regulated Energy segment decreased by
$1.0 million in the fourth quarter of
2019 compared to the same period in 2018. This decrease was driven
by a $2.7 million increase in other
operating expenses which were impacted by the recognition during
the quarter of stock compensation expense associated with
leadership transitions that occurred during 2019, higher insurance
(non-health) expenses and a $0.9
million increase in depreciation, amortization and property
taxes. Higher expenses during the quarter offset a
$2.5 million increase in gross
margin.
The key components of the increase in gross margin are shown
below:
(in
thousands)
|
Margin
Impact
|
Eastern Shore and
Peninsula Pipeline service expansions (including related Florida
natural gas distribution operation expansions)
|
$
|
2,128
|
|
Natural gas
distribution - customer growth (excluding service
expansions)
|
875
|
|
Increased margin
primarily from the storm recovery surcharge (associated with
Hurricanes Irma and Matthew) for Florida electric distribution
operations
|
596
|
|
Florida GRIP
(1)
|
118
|
|
Other
variances
|
(1,191)
|
|
Quarter-over-quarter increase in gross
margin
|
$
|
2,526
|
|
(1)
|
In 2019, the Company
recorded a reduction in depreciation expense totaling $0.5 million
as a result of a Florida PSC approved depreciation study that
lowered annual depreciation rates. The Company also recorded $0.2
million in lower GRIP margin due to a concurrent reduction in
surcharges collected from customers as a result of the reduced
depreciation rates.
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
Other
Operating
Expenses
|
Payroll, benefits and
other employee-related expenses
|
$
|
1,406
|
|
Stock compensation
expense associated with leadership transitions during
2019
|
908
|
|
Insurance expense
(non-health) - both insured and self-insured components
|
872
|
|
Timing of excavation
and inspection activities in 2018 to comply with the Company's
integrity management program
|
(733)
|
|
Other
variances
|
216
|
|
Quarter-over-quarter increase in other operating
expenses
|
$
|
2,669
|
|
Unregulated Energy Segment
|
Three Months
Ended
December 31,
|
|
|
|
|
(in
thousands)
|
2019
|
|
2018
|
|
Change
|
|
Percent
Change
|
Gross
margin
|
$
|
25,926
|
|
|
$
|
22,560
|
|
|
$
|
3,366
|
|
|
14.9
|
%
|
Depreciation,
amortization and property taxes
|
3,056
|
|
|
2,496
|
|
|
560
|
|
|
22.4
|
%
|
Other operating
expenses
|
14,249
|
|
|
13,459
|
|
|
790
|
|
|
5.9
|
%
|
Operating
income
|
$
|
8,621
|
|
|
$
|
6,605
|
|
|
$
|
2,016
|
|
|
30.5
|
%
|
Operating income for the Unregulated Energy segment increased by
$2.0 million for the three months
ended December 31, 2019, compared to the same period in 2018.
The increase in operating income reflects a $3.4 million increase in gross margin offset by
$0.8 million in higher other
operating expenses and $0.6 million
in higher depreciation, amortization and property taxes.
The major components of the increase in gross margin are shown
below:
(in
thousands)
|
|
Margin
Impact
|
Marlin Gas Services
(acquired assets of Marlin Gas Transport in December
2018)
|
|
$
|
947
|
|
Propane
Operations:
|
|
|
Increased retail
margins per gallon for certain customer classes
|
|
1,513
|
|
Ohl acquisition
(assets acquired in December 2018)
|
|
517
|
|
Boulden acquisition
(assets acquired in December 2019)
|
|
329
|
|
Other
variances
|
|
60
|
|
Quarter-over-quarter increase in gross
margin
|
|
$
|
3,366
|
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
Other
Operating
Expenses
|
Operating expenses
for Unregulated Energy acquisitions
|
|
$
|
859
|
|
Other
variances
|
|
(69)
|
|
Quarter-over-quarter increase in other operating
expenses
|
|
$
|
790
|
|
Divestiture of PESCO
During the fourth quarter of 2019, the Company sold PESCO's
assets and contracts in four separate transactions and accordingly,
has exited the natural gas marketing business. As a result of the
sales agreements, the Company began to report PESCO as discontinued
operations during the third quarter of 2019 and excluded PESCO's
performance from continuing operations for all periods presented
and classified its assets and liabilities as held for sale where
applicable.
The Company received a total of $22.9
million in cash consideration from the buyers inclusive of
working capital of $8.0 million. The
Company recognized a pre-tax gain of $7.3
million ($5.4 million after
tax) in connection with the closing of these transactions during
the fourth quarter of 2019. The final working capital true up, and
the sale of certain contracts, is expected to be completed in the
first quarter of 2020.
Conference Call
Chesapeake Utilities will host a conference call on Thursday,
February 27, 2020 at 4:15 p.m. Eastern
Time to discuss the Company's financial results for the year
and quarter ended December 31, 2019. To participate in
this call, dial 855.801.6270 and reference Chesapeake Utilities
Corporation's 2019 Financial 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 and transmission; electricity generation
and distribution; propane gas operations; and other businesses.
Information about Chesapeake Utilities and its family of businesses
is available at www.chpk.com or through its Investor
Relations 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)
|
|
|
|
|
|
|
|
|
|
Year
Ended
|
|
Quarter
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Gross
Margin
|
|
|
|
|
|
|
|
|
Regulated
Energy segment
|
|
$
|
240,203
|
|
|
$
|
223,453
|
|
|
$
|
63,054
|
|
|
$
|
60,528
|
|
Unregulated
Energy segment
|
|
85,266
|
|
|
77,196
|
|
|
25,926
|
|
|
22,560
|
|
Other
businesses and eliminations
|
|
(365)
|
|
|
(503)
|
|
|
(80)
|
|
|
(107)
|
|
Total Gross
Margin
|
|
$
|
325,104
|
|
|
$
|
300,146
|
|
|
$
|
88,900
|
|
|
$
|
82,981
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
|
|
|
|
|
|
Regulated
Energy segment
|
|
$
|
86,584
|
|
|
$
|
79,215
|
|
|
$
|
21,274
|
|
|
$
|
22,285
|
|
Unregulated
Energy segment
|
|
19,939
|
|
|
17,124
|
|
|
8,621
|
|
|
6,605
|
|
Other
businesses and eliminations
|
|
(236)
|
|
|
(1,496)
|
|
|
(253)
|
|
|
(17)
|
|
Total
Operating Income
|
|
$
|
106,287
|
|
|
$
|
94,843
|
|
|
$
|
29,642
|
|
|
$
|
28,873
|
|
Other expense,
net
|
|
(1,830)
|
|
|
(603)
|
|
|
(1,108)
|
|
|
(434)
|
|
Interest
Charges
|
|
22,224
|
|
|
16,146
|
|
|
5,642
|
|
|
4,383
|
|
Income from
Continuing Operations Before Income Taxes
|
|
82,233
|
|
|
78,094
|
|
|
22,892
|
|
|
24,056
|
|
Income Taxes on
Continuing Operations
|
|
21,091
|
|
|
21,232
|
|
|
5,723
|
|
|
6,260
|
|
Income from
Continuing Operations
|
|
61,142
|
|
|
56,862
|
|
|
17,169
|
|
|
17,796
|
|
Income/(Loss) from
Discontinued Operations, Net of tax
|
|
(1,391)
|
|
|
(282)
|
|
|
(9)
|
|
|
5
|
|
Gain on sale of
Discontinued Operations, Net of tax
|
|
5,402
|
|
|
—
|
|
|
5,402
|
|
|
—
|
|
Net
Income
|
|
$
|
65,153
|
|
|
$
|
56,580
|
|
|
$
|
22,562
|
|
|
$
|
17,801
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share of Common Stock:
|
|
|
|
|
|
|
|
|
Earnings
Per Share from Continuing Operations
|
|
$
|
3.73
|
|
|
$
|
3.48
|
|
|
$
|
1.05
|
|
|
$
|
1.09
|
|
Earnings/(Loss) Per Share from Discontinued Operations
|
|
0.24
|
|
|
(0.02)
|
|
|
0.33
|
|
|
—
|
|
Basic Earnings per
Share of Common Stock
|
|
$
|
3.97
|
|
|
$
|
3.46
|
|
|
$
|
1.38
|
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share of Common Stock:
|
|
|
|
|
|
|
|
|
Earnings Per Share
from Continuing Operations
|
|
$
|
3.72
|
|
|
$
|
3.47
|
|
|
$
|
1.04
|
|
|
$
|
1.08
|
|
Earnings/(Loss) Per
Share from Discontinued Operations
|
|
0.24
|
|
|
(0.02)
|
|
|
0.33
|
|
|
—
|
|
Diluted Earnings Per
Share of Common Stock
|
|
$
|
3.96
|
|
|
$
|
3.45
|
|
|
$
|
1.37
|
|
|
$
|
1.08
|
|
Financial Summary
Highlights
|
|
|
|
|
|
|
|
|
|
|
|
Key variances in
continuing operations for the year ended December 31, 2019
included:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands,
except per share data)
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
Year ended
December 31, 2018 Reported Results from Continuing
Operations
|
$
|
78,094
|
|
|
$
|
56,862
|
|
|
$
|
3.47
|
|
Adjusting for
unusual items:
|
|
|
|
|
|
Decreased customer
consumption - primarily due to warmer weather
|
(4,852)
|
|
|
(3,607)
|
|
|
(0.22)
|
|
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
|
|
Lower wholesale
propane margins due to non-recurring impact of the 2018
Bomb Cyclone
|
(866)
|
|
|
(644)
|
|
|
(0.04)
|
|
Pension settlement
expense associated with the de-risking of the Chesapeake
Utilities Pension Plan (1)
|
(693)
|
|
|
(515)
|
|
|
(0.03)
|
|
|
(3,542)
|
|
|
(2,355)
|
|
|
(0.14)
|
|
Increased
(Decreased) Gross Margins:
|
|
|
|
|
|
Eastern Shore and
Peninsula Pipeline service expansions (including related
Florida natural gas distribution operation expansions)*
|
12,600
|
|
|
9,369
|
|
|
0.57
|
|
Margin contribution
from Unregulated Energy acquisitions*
|
6,830
|
|
|
5,078
|
|
|
0.31
|
|
Natural gas
distribution growth (excluding service expansions)
|
4,718
|
|
|
3,508
|
|
|
0.21
|
|
Increased retail
propane margins
|
3,229
|
|
|
2,401
|
|
|
0.15
|
|
Retained tax savings
for certain Florida natural gas operations in 2019
associated with TCJA*
|
1,023
|
|
|
760
|
|
|
0.05
|
|
Sandpiper's margin
primarily from natural gas conversions
|
983
|
|
|
731
|
|
|
0.04
|
|
Higher Aspire Energy
margins from rate increases
|
518
|
|
|
385
|
|
|
0.02
|
|
Florida
GRIP*
|
508
|
|
|
378
|
|
|
0.02
|
|
Higher Eight Flags
margin from increased production
|
418
|
|
|
311
|
|
|
0.02
|
|
|
30,827
|
|
|
22,921
|
|
|
1.39
|
|
(Increased)
Decreased Other Operating Expenses (Excluding Cost of
Sales):
|
|
|
|
|
|
Depreciation,
amortization and property tax costs due to new capital
investments
|
(5,727)
|
|
|
(4,258)
|
|
|
(0.26)
|
|
Operating expenses
for Unregulated Energy acquisitions
|
(4,636)
|
|
|
(3,447)
|
|
|
(0.21)
|
|
Payroll, benefits and
other employee-related expenses
|
(4,204)
|
|
|
(3,126)
|
|
|
(0.19)
|
|
Insurance expense
(non-health) - both insured and self-insured components
|
(2,267)
|
|
|
(1,685)
|
|
|
(0.10)
|
|
Stock compensation
expense associated with leadership transitions during
2019
|
(1,114)
|
|
|
(828)
|
|
|
(0.05)
|
|
Vehicle expenses due
to additional fleet to support growth
|
(309)
|
|
|
(230)
|
|
|
(0.01)
|
|
Timing of excavation
and inspection activities in 2018 to comply with the
Company's integrity management program
|
1,733
|
|
|
1,289
|
|
|
0.08
|
|
Facilities and
maintenance costs due to consolidation of facilities
|
581
|
|
|
432
|
|
|
0.03
|
|
|
(15,943)
|
|
|
(11,853)
|
|
|
(0.71)
|
|
Other income tax
effects
|
—
|
|
|
816
|
|
|
0.05
|
|
Interest
Charges
|
(6,078)
|
|
|
(4,519)
|
|
|
(0.27)
|
|
Net Other
Changes
|
(1,125)
|
|
|
(730)
|
|
|
(0.07)
|
|
Year ended
December 31, 2019 Reported Results from Continuing
Operations
|
$
|
82,233
|
|
|
$
|
61,142
|
|
|
$
|
3.72
|
|
(1)
|
In the fourth quarter
of 2019, the Company executed a de-risking strategy for its Pension
Plan. This amount reflects a portion of the cost of the pension
settlement that was charged to expense as it was deemed not
recoverable through the regulatory process.
|
|
|
*
|
See the Major
Projects and Initiatives table later in this press
release.
|
Key variances in
continuing operations for the fourth quarter ended
December 31, 2019 included:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands,
except per share)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
Fourth Quarter
2018 Reported Results from Continuing Operations
|
|
$
|
24,056
|
|
|
$
|
17,796
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
Adjusting for
Unusual items:
|
|
|
|
|
|
|
Pension settlement
expense associated with the de-risking of the Chesapeake
Utilities Pension Plan (1)
|
|
(693)
|
|
|
(520)
|
|
|
(0.03)
|
|
|
|
|
|
|
|
|
Increased
(Decreased) Gross Margins:
|
|
|
|
|
|
|
Eastern Shore and
Peninsula Pipeline service expansions (including new service in
Northwest Florida for related Florida natural gas distribution
operations)*
|
|
2,128
|
|
|
1,596
|
|
|
0.10
|
|
Margin contributions
from Unregulated Energy acquisitions*
|
|
1,794
|
|
|
1,345
|
|
|
0.08
|
|
Increased retail
propane margins
|
|
1,513
|
|
|
1,135
|
|
|
0.07
|
|
Natural gas growth
(excluding service expansions)
|
|
875
|
|
|
656
|
|
|
0.04
|
|
Increased margin
primarily from the storm recovery surcharge (associated with
Hurricanes Irma and Matthew) for Florida electric distribution
operations
|
|
596
|
|
|
447
|
|
|
0.03
|
|
Florida
GRIP*
|
|
118
|
|
|
88
|
|
|
0.01
|
|
|
|
7,024
|
|
|
5,267
|
|
|
0.33
|
|
(Increased)
Decreased Other Operating Expenses (Excluding Cost of
Sales):
|
|
|
|
|
|
|
Payroll, benefits and
other employee-related expenses
|
|
(1,829)
|
|
|
(1,371)
|
|
|
(0.08)
|
|
Operating expenses
for Unregulated Energy acquisitions
|
|
(1,269)
|
|
|
(952)
|
|
|
(0.06)
|
|
Stock compensation
expense associated with leadership transitions during
2019
|
|
(1,114)
|
|
|
(836)
|
|
|
(0.05)
|
|
Insurance expense
(non-health) - both insured and self-insured components
|
|
(1,044)
|
|
|
(783)
|
|
|
(0.05)
|
|
Depreciation,
amortization and property tax costs due to new capital
investments
|
|
(1,016)
|
|
|
(762)
|
|
|
(0.05)
|
|
Timing of excavation
and inspection activities in 2018 to comply with the
Company's integrity management program
|
|
733
|
|
|
550
|
|
|
0.03
|
|
|
|
(5,539)
|
|
|
(4,154)
|
|
|
(0.26)
|
|
Interest
Charges
|
|
(1,259)
|
|
|
(944)
|
|
|
(0.06)
|
|
Other income tax
effects
|
|
—
|
|
|
83
|
|
|
0.01
|
|
Net Other
Changes
|
|
(697)
|
|
|
(359)
|
|
|
(0.03)
|
|
Fourth Quarter
2019 Reported Results from Continuing Operations
|
|
$
|
22,892
|
|
|
$
|
17,169
|
|
|
$
|
1.04
|
|
(1)
|
In the fourth quarter
of 2019, the Company executed a de-risking strategy for its Pension
Plan. This amount reflects a portion of the cost of the pension
settlement that was charged to expense as it was deemed not
recoverable through the regulatory process.
|
|
|
*
|
See the Major
Projects and Initiatives table later in this press
release.
|
The following information highlights certain key factors
contributing to the Company's results for the year and quarter
ended December 31, 2019:
Recently Completed and Ongoing Major Projects and
Initiatives
The Company constantly pursues and develops
additional projects and initiatives to serve existing and new
customers, and to further grow its businesses and earnings, with
the intention of increasing 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 substantially finalized
and the associated earnings can be estimated.
|
Gross Margin for
the Period
|
|
Year Ended
December 31,
|
|
Estimate for
Fiscal
|
(in
thousands)
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
Expansions:
|
|
|
|
|
|
|
|
2017 Eastern Shore
System Expansion -
including interim services
|
$
|
9,103
|
|
|
$
|
16,434
|
|
|
$
|
15,799
|
|
|
$
|
15,799
|
|
Northwest Florida
Expansion (including related
natural gas distribution services)
|
4,350
|
|
|
6,516
|
|
|
6,500
|
|
|
6,500
|
|
Western Palm Beach
County, Florida Expansion
|
54
|
|
|
2,139
|
|
|
5,047
|
|
|
5,227
|
|
Del-Mar Energy
Pathway - including interim services
|
—
|
|
|
731
|
|
|
2,512
|
|
|
4,100
|
|
Auburndale
|
—
|
|
|
283
|
|
|
679
|
|
|
679
|
|
Callahan Intrastate
Pipeline
|
—
|
|
|
—
|
|
|
3,219
|
|
|
6,400
|
|
Guernsey Power
Station
|
—
|
|
|
—
|
|
|
—
|
|
|
1,400
|
|
Total
Expansions
|
13,507
|
|
|
26,103
|
|
|
33,756
|
|
|
40,105
|
|
Acquisitions:
|
|
|
|
|
|
|
|
Marlin Gas
Services
|
110
|
|
|
5,410
|
|
|
6,400
|
|
|
7,000
|
|
Ohl
Propane
|
—
|
|
|
1,200
|
|
|
1,236
|
|
|
1,250
|
|
Boulden
Propane
|
—
|
|
|
329
|
|
|
4,000
|
|
|
4,200
|
|
Elkton Gas
Company
|
—
|
|
|
—
|
|
|
TBD
(4)
|
|
|
TBD
|
|
Total
Acquisitions
|
110
|
|
|
6,939
|
|
|
11,636
|
|
|
12,450
|
|
Regulatory
Initiatives:
|
|
|
|
|
|
|
|
Florida GRIP(1)
(2)
|
13,020
|
|
|
13,528
|
|
|
14,858
|
|
|
15,831
|
|
Tax benefit retained
by certain Florida entities(3)
|
—
|
|
|
2,740
|
|
|
1,400
|
|
|
1,500
|
|
Hurricane Michael
regulatory proceeding
|
—
|
|
|
—
|
|
|
TBD
|
|
|
TBD
|
|
Total Regulatory
Initiatives
|
13,020
|
|
|
16,268
|
|
|
16,258
|
|
|
17,331
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
26,637
|
|
|
$
|
49,310
|
|
|
$
|
61,650
|
|
|
$
|
69,886
|
|
(1)
|
All periods shown
have been adjusted to reflect 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)
|
For the year ended
December 31, 2019, the Company recorded a reduction in depreciation
expense totaling $1.3 million as a result of a Florida PSC approved
depreciation study that lowered annual depreciation rates. For the
year ended December 31, 2019, the Company also recorded $0.6
million in lower GRIP margin due to a concurrent reduction in
surcharge collected from customers as a result of the reduced
depreciation rates.
|
(3)
|
The amount disclosed
for the year ended December 31, 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 year ended December 31,
2019 by that amount.
|
(4)
|
The amount of margin
to be generated by Elkton Gas Company in 2020 will depend, largely,
on the date the acquisition closes. Further guidance will be
provided during 2020 as the timing becomes certain.
|
Detailed Discussion of Major Projects and
Initiatives
Expansions
2017 Eastern Shore System Expansion
Eastern
Shore has completed the construction of a system expansion project
that increased its capacity by 26 percent. The project generated
$7.3 million in incremental gross
margin for the year ended December 31, 2019 compared 2018. The
project is expected to produce gross margin of approximately
$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 the Company's Florida natural gas division completed
construction of lateral distribution lines, to serve customers in
Northwest Florida. The project
generated incremental gross margin of $2.2
million for the year ended December 31, 2019 compared
to 2018. The estimated annual gross margin from this project is
$6.5 million for 2020 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 additional 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 incremental gross
margin of $2.1 million for the year
ended December 31, 2019 compared to 2018. The Company
expects to complete the remainder of the project in phases through
early 2020, and estimates that the project will generate gross
margin of $5.0 million in 2020 and
$5.2 million annually thereafter.
Del-Mar Energy Pathway
In December 2019, the FERC issued an order approving
the construction of the Del-Mar Energy Pathway project. Eastern
Shore anticipates that this project will be fully in-service by the
beginning of the fourth quarter of 2021. The new facilities will
provide an additional 14,300 Dekatherms per day ("Dts/d") of firm
service to four customers, will provide additional natural gas
transmission pipeline infrastructure in eastern Sussex County, Delaware, and will represent
the first extension of Eastern Shore's pipeline system into
Somerset County, Maryland. Interim
services in advance of this project generated gross margin of
$0.7 million for the year ended
December 31, 2019. The estimated annual gross margin
from this project is approximately $2.5
million in 2020, $4.1 million
in 2021 and $5.1 million annually
thereafter.
Auburndale
In
August 2019, the Florida PSC approved
Peninsula Pipeline's Transportation Service Agreement with the
Florida Division of Chesapeake Utilities. Peninsula Pipeline
purchased an existing pipeline owned by the Florida Division of
Chesapeake Utilities and Calpine and constructed pipeline
facilities in Polk County,
Florida. Peninsula Pipeline will provide transportation
service to the Florida Division of Chesapeake Utilities increasing
both delivery capacity and downstream pressure as well as
introducing a secondary source of natural gas for the Florida
Division of Chesapeake Utilities' distribution system. Peninsula
Pipeline generated gross margin from this project of $0.3 million for the year ended December 31,
2019 and expects to generate annual gross margin of $0.7 million in 2020 and beyond.
Callahan Intrastate Pipeline
In May 2018, Peninsula Pipeline announced a plan to
construct a jointly owned intrastate transmission pipeline in
Nassau County, Florida with
Seacoast Gas Transmission. The 26-mile pipeline, having an
initial capacity of 148,000 Dts/d, 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 is expected to generate gross margin for Peninsula Pipeline of
$3.2 million in 2020 and $6.4 million annually thereafter.
Guernsey Power Station
Guernsey Power Station,
LLC ("Guernsey Power Station") and the Company's affiliate, Aspire
Energy Express, LLC ("Aspire Energy Express"), entered into a
precedent firm transportation capacity agreement whereby Guernsey
Power Station will construct a power generation facility and Aspire
Energy Express will provide natural gas transportation service to
this facility. Guernsey Power Station, LLC commenced
construction of the project in October 2019. Aspire Energy
Express is expected to commence construction of the gas
transmission facilities to provide the firm transportation service
to the power generation facility in the third quarter of
2020. This project is expected to produce gross margin of
approximately $1.4 million annually
once placed into service in the first quarter of 2021.
Acquisitions
Marlin Gas Services
In December 2018, Marlin Gas Services, the Company's
wholly-owned subsidiary, acquired certain operating assets of
Marlin Gas Transport, a supplier of mobile compressed natural gas
and pipeline solutions, primarily to utilities and pipelines.
Marlin Gas Services provides temporary hold services, pipeline
integrity services, emergency services for damaged pipelines and
specialized gas services for customers who have unique
requirements. Marlin Gas Services generated incremental gross
margin of $5.3 million for the year
ended December 31, 2019 compared to 2018. The Company
estimates that Marlin Gas Services will generate annual gross
margin of approximately $6.4 million
in 2020 and $7.0 million in 2021 and
beyond. Marlin Gas Services continues to actively expand the
territories it serves, as well as leverage its patented technology
to serve liquefied natural gas transportation needs and to aid in
the transportation of renewable natural gas from the supply sources
to various pipeline interconnection points.
Ohl Propane
In December
2018, Sharp Energy, Inc. ("Sharp") acquired 2,500
residential and commercial propane customers and operating assets
located between two of Sharp's existing districts in Pennsylvania from Ohl. These
customers and assets have been assimilated into Sharp and generated
$1.2 million of incremental gross
margin for the year ended December 31, 2019 compared to
2018.
Boulden Propane
In December 2019, Sharp acquired certain propane
customers and operating assets of Boulden which provides propane
distribution service to approximately 5,200 customers in
Delaware, Maryland and Pennsylvania. The customers and assets
acquired from Boulden have been assimilated into Sharp. The
operations acquired from Boulden generated $0.3 million of incremental gross margin for the
year ended December 31, 2019.
The Company estimates that this acquisition will generate
additional gross margin of approximately $4.0 million in 2020, and $4.2 million in 2021, with the potential for
additional growth in future years.
Elkton Gas Company
In December 2019, the Company entered into an
agreement with South Jersey Industries, Inc., to acquire Elkton Gas
Company, which provides natural gas distribution service to
approximately 7,000 residential and commercial customers in
Cecil County, Maryland contiguous
to Chesapeake's existing franchise
territory in Cecil County. The acquisition is expected to
close in the second half of 2020, subject to approval by the
Maryland PSC.
Regulatory 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
$143.9 million of capital
expenditures to replace 303 miles of qualifying distribution mains,
including $16.7 million and
$13.3 million of new pipes during
2019 and 2018, respectively. GRIP generated additional gross
margin of $0.5 million for the year
ended 2019 compared to 2018.
For the year ended December 31, 2019, the Company recorded
a reduction in depreciation expense totaling $1.3 million as a result of a Florida PSC
approved depreciation study that lowered annual depreciation rates.
For the year ended December 31, 2019, the Company also
recorded $0.6 million in lower GRIP
margin due to a concurrent reduction in surcharges collected from
customers as a result of the reduced depreciation rates.
Florida Tax Savings Related to the 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 $1.0
million for the year ended December 31, 2019.
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 customers in the Northwest Florida service territory losing
electrical service. FPU expended more than $65.0 million to restore service as quickly as
possible, which has been recorded as new plant and equipment,
charged against FPU's accumulated depreciation or charged against
FPU's storm reserve. Additionally, amounts currently being reviewed
by the Florida PSC for regulatory asset treatment have been
recorded as receivables and other deferred charges.
In August 2019, FPU filed a
limited proceeding requesting recovery of storm-related costs
associated with Hurricane Michael (plant investment and expenses)
through a change in base rates. FPU also requested treatment and
recovery of certain storm-related costs as a regulatory asset for
items currently not allowed to be recovered through the storm
reserve as well as the recovery of plant investment replaced as a
result of the storm. The Company has proposed an overall return
component on both the plant additions and regulatory assets. In the
fourth quarter of 2019, FPU along with the Office of Public Counsel
in Florida, filed a joint motion
with the Florida PSC to approve an interim rate increase, subject
to refund, pending the final ruling on the recovery of the
restoration costs incurred. The petition was approved by the
Florida PSC in November 2019 and
interim rate increases were implemented effective January
2020. FPU continues to work with the Florida PSC and expects
to reach a final ruling in the second half of 2020.
Weather and Consumption
Weather did not have a
material impact on fourth quarter 2019 results, compared to the
fourth quarter of 2018. For the full year, weather conditions
accounted for decreased gross margin of $4.9
million in 2019 compared to 2018 and $3.4 million compared to Normal temperatures as
defined below. The following table summarizes heating degree
day ("HDD") and cooling degree day ("CDD") variances from the
10-year average HDD/CDD ("Normal") for the year and quarter ended
December 31, 2019 compared to the
same periods in 2018.
HDD and CDD Information
|
For the Years
Ended
December 31,
|
|
For the Quarters
Ended
December 31,
|
|
2019
|
|
2018
|
|
Variance
|
|
2019
|
|
2018
|
|
Variance
|
Delmarva
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
4,089
|
|
|
4,251
|
|
|
(162)
|
|
|
1,513
|
|
|
1,522
|
|
|
(9)
|
|
10-Year Average HDD
("Normal")
|
4,323
|
|
|
4,379
|
|
|
(56)
|
|
|
1,519
|
|
|
1,533
|
|
|
(14)
|
|
Variance from
Normal
|
(234)
|
|
|
(128)
|
|
|
|
|
(6)
|
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
619
|
|
|
780
|
|
|
(161)
|
|
|
240
|
|
|
273
|
|
|
(33)
|
|
10-Year Average HDD
("Normal")
|
792
|
|
|
800
|
|
|
(8)
|
|
|
260
|
|
|
267
|
|
|
(7)
|
|
Variance from
Normal
|
(173)
|
|
|
(20)
|
|
|
|
|
(20)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ohio
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
5,498
|
|
|
5,845
|
|
|
(347)
|
|
|
1,967
|
|
|
2,138
|
|
|
(171)
|
|
10-Year Average HDD
("Normal")
|
5,983
|
|
|
5,823
|
|
|
160
|
|
|
2,133
|
|
|
2,048
|
|
|
85
|
|
Variance from
Normal
|
(485)
|
|
|
22
|
|
|
|
|
(166)
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
Actual CDD
|
3,200
|
|
|
3,105
|
|
|
95
|
|
|
360
|
|
|
401
|
|
|
(41)
|
|
10-Year Average CDD
("Normal")
|
2,939
|
|
|
2,889
|
|
|
50
|
|
|
314
|
|
|
296
|
|
|
18
|
|
Variance from
Normal
|
261
|
|
|
216
|
|
|
|
|
46
|
|
|
105
|
|
|
|
Natural Gas Distribution Growth
New customer
growth for the Company's natural gas distribution operations
generated $4.7 million of additional
margin for the year ended December 31,
2019 compared to 2018. The average number of
residential customers served on the Delmarva Peninsula and in
Florida increased by approximately
3.7 percent during 2019. Growth in commercial and industrial
customers also contributed additional margin during 2019. The
details are provided in the following table:
|
Gross Margin
Increase
|
(in
thousands)
|
For the Year Ended
December 31, 2019
|
|
Delmarva
Peninsula
|
|
Florida
|
Customer
growth:
|
|
|
|
Residential
|
$
|
1,179
|
|
|
$
|
769
|
|
Commercial and
industrial, excluding the impact of the Northwest Florida expansion
project
|
664
|
|
|
2,106
|
|
Total customer
growth
|
$
|
1,843
|
|
|
$
|
2,875
|
|
Capital Investment Growth and Associated Financing
Plans
The Company's capital expenditures were $199.0 million (including the purchase of certain
propane assets of Boulden) for 2019. The following table
shows total capital expenditures for the year ended
December 31, 2019 by segment and by business line:
|
|
For the Year
Ended
December 31,
|
(dollars in
thousands)
|
|
2019
|
Regulated
Energy:
|
|
|
Natural gas
distribution
|
|
$
|
62,744
|
|
Natural gas
transmission
|
|
62,000
|
|
Electric
distribution
|
|
5,860
|
|
Total Regulated
Energy
|
|
130,604
|
|
Unregulated
Energy:
|
|
|
Propane distribution
(1)
|
|
38,347
|
|
Energy
transmission
|
|
11,206
|
|
Other unregulated
energy
|
|
10,481
|
|
Total Unregulated
Energy
|
|
60,034
|
|
Other:
|
|
|
Corporate and other
businesses
|
|
8,348
|
|
Total 2019 Capital
Expenditures
|
|
$
|
198,986
|
|
(1)
|
This amount includes
$24.5 million for the acquisition of certain propane operating
assets of Boulden completed in December 2019.
|
The following table shows a range of the expected 2020 capital
expenditures by segment and by business line:
|
Estimate for
Fiscal 2020
|
(dollars in
thousands)
|
Low
|
|
High
|
Regulated
Energy:
|
|
|
|
Natural gas
distribution
|
$
|
72,000
|
|
|
$
|
83,000
|
|
Natural gas
transmission
|
83,000
|
|
|
96,000
|
|
Electric
distribution
|
5,000
|
|
|
7,000
|
|
Total Regulated
Energy
|
160,000
|
|
|
186,000
|
|
Unregulated
Energy:
|
|
|
|
Propane
distribution
|
10,000
|
|
|
11,000
|
|
Energy
transmission
|
6,000
|
|
|
6,000
|
|
Other unregulated
energy
|
6,000
|
|
|
8,000
|
|
Total Unregulated
Energy
|
22,000
|
|
|
25,000
|
|
Other:
|
|
|
|
Corporate and other
businesses
|
3,000
|
|
|
4,000
|
|
Total 2020
Expected Capital Expenditures
|
$
|
185,000
|
|
|
$
|
215,000
|
|
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.
Management reaffirms its capital expenditure guidance of
$750 million to $1 billion for 2018 to 2022. Through the first
two years of the five-year forecast period, the Company has
invested $482 million in new capital
expenditures.
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 43 percent as of December 31, 2019. 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)
For the Periods
Ended December 31, 2019 and 2018
(in thousands,
except shares and per share data)
|
|
|
|
Year
Ended
|
|
Fourth
Quarter
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Operating
Revenues
|
|
|
|
|
|
|
|
|
Regulated
Energy
|
|
$
|
343,006
|
|
|
$
|
345,281
|
|
|
$
|
91,405
|
|
|
$
|
92,614
|
|
Unregulated
Energy
|
|
154,150
|
|
|
161,904
|
|
|
45,903
|
|
|
55,886
|
|
Other businesses and
eliminations
|
|
(17,552)
|
|
|
(16,869)
|
|
|
(5,335)
|
|
|
(14,286)
|
|
Total Operating
Revenues
|
|
479,604
|
|
|
490,316
|
|
|
131,973
|
|
|
134,214
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Regulated energy cost
of sales
|
|
102,803
|
|
|
121,828
|
|
|
28,351
|
|
|
32,086
|
|
Unregulated energy
and other cost of sales
|
|
51,697
|
|
|
68,342
|
|
|
14,722
|
|
|
19,147
|
|
Operations
|
|
137,844
|
|
|
132,523
|
|
|
38,284
|
|
|
34,833
|
|
Maintenance
|
|
15,679
|
|
|
14,387
|
|
|
4,479
|
|
|
3,968
|
|
Gain from a
settlement
|
|
(130)
|
|
|
(130)
|
|
|
—
|
|
|
—
|
|
Depreciation
and amortization
|
|
45,423
|
|
|
40,220
|
|
|
11,812
|
|
|
10,481
|
|
Other
taxes
|
|
20,001
|
|
|
18,303
|
|
|
4,683
|
|
|
4,826
|
|
Total operating
expenses
|
|
373,317
|
|
|
395,473
|
|
|
102,331
|
|
|
105,341
|
|
Operating
Income
|
|
106,287
|
|
|
94,843
|
|
|
29,642
|
|
|
28,873
|
|
Other expense,
net
|
|
(1,830)
|
|
|
(603)
|
|
|
(1,108)
|
|
|
(434)
|
|
Interest
charges
|
|
22,224
|
|
|
16,146
|
|
|
5,642
|
|
|
4,383
|
|
Income from
Continuing Operations Before Income Taxes
|
|
82,233
|
|
|
78,094
|
|
|
22,892
|
|
|
24,056
|
|
Income Taxes on
Continuing Operations
|
|
21,091
|
|
|
21,232
|
|
|
5,723
|
|
|
6,260
|
|
Income from
Continuing Operations
|
|
61,142
|
|
|
56,862
|
|
|
17,169
|
|
|
17,796
|
|
Income/(Loss) from
Discontinued Operations, Net of tax
|
|
(1,391)
|
|
|
(282)
|
|
|
(9)
|
|
|
5
|
|
Gain on sale of
Discontinued Operations, Net of tax
|
|
5,402
|
|
|
—
|
|
|
5,402
|
|
|
—
|
|
Net
Income
|
|
$
|
65,153
|
|
|
$
|
56,580
|
|
|
$
|
22,562
|
|
|
$
|
17,801
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
16,398,443
|
|
|
16,369,616
|
|
|
16,403,776
|
|
|
16,378,545
|
|
Diluted
|
|
16,448,486
|
|
|
16,419,870
|
|
|
16,461,112
|
|
|
16,430,594
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per
Share of Common Stock:
|
|
|
|
|
|
|
|
|
Earnings
Per Share from Continuing Operations
|
|
$
|
3.73
|
|
|
$
|
3.48
|
|
|
$
|
1.05
|
|
|
$
|
1.09
|
|
Earnings/(Loss) from Discontinued Operations
|
|
0.24
|
|
|
(0.02)
|
|
|
0.33
|
|
|
—
|
|
Basic Earnings per
Share of Common Stock
|
|
$
|
3.97
|
|
|
$
|
3.46
|
|
|
$
|
1.38
|
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings
Per Share of Common Stock:
|
|
|
|
|
|
|
|
|
Earnings Per Share
from Continuing Operations
|
|
$
|
3.72
|
|
|
$
|
3.47
|
|
|
$
|
1.04
|
|
|
$
|
1.08
|
|
Earnings/(Loss) Per
Share from Discontinued Operations
|
|
0.24
|
|
|
(0.02)
|
|
|
0.33
|
|
|
—
|
|
Diluted Earnings Per
Share of Common Stock
|
|
$
|
3.96
|
|
|
$
|
3.45
|
|
|
$
|
1.37
|
|
|
$
|
1.08
|
|
Chesapeake
Utilities Corporation and Subsidiaries
Consolidated
Balance Sheets (Unaudited)
|
|
|
|
As of December
31,
|
Assets
|
|
2019
|
|
2018
|
(in thousands,
except shares and per share data)
|
|
|
|
|
Property,
Plant and Equipment
|
|
|
|
|
Regulated
energy
|
|
$
|
1,441,473
|
|
|
$
|
1,297,416
|
|
Unregulated
energy
|
|
265,209
|
|
|
236,440
|
|
Other
|
|
39,850
|
|
|
34,585
|
|
Total property, plant
and equipment
|
|
1,746,532
|
|
|
1,568,441
|
|
Less:
Accumulated depreciation and amortization
|
|
(336,876)
|
|
|
(294,089)
|
|
Plus:
Construction work in progress
|
|
54,141
|
|
|
79,168
|
|
Net property, plant
and equipment
|
|
1,463,797
|
|
|
1,353,520
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
6,985
|
|
|
6,089
|
|
Accounts receivable
(less allowance for uncollectible
accounts of $1,337 and $1,058, respectively)
|
|
49,562
|
|
|
53,837
|
|
Accrued
revenue
|
|
20,846
|
|
|
22,640
|
|
Propane inventory, at
average cost
|
|
5,824
|
|
|
9,791
|
|
Other inventory, at
average cost
|
|
6,067
|
|
|
7,127
|
|
Regulatory
assets
|
|
5,144
|
|
|
4,796
|
|
Storage gas
prepayments
|
|
3,541
|
|
|
3,433
|
|
Income taxes
receivable
|
|
20,050
|
|
|
15,300
|
|
Prepaid
expenses
|
|
13,928
|
|
|
10,079
|
|
Derivative assets, at
fair value
|
|
—
|
|
|
82
|
|
Other current
assets
|
|
2,879
|
|
|
5,682
|
|
Current assets held
for sale
|
|
—
|
|
|
52,681
|
|
Total current
assets
|
|
134,826
|
|
|
191,537
|
|
Deferred Charges
and Other Assets
|
|
|
|
|
Goodwill
|
|
32,668
|
|
|
21,568
|
|
Other intangible
assets, net
|
|
8,129
|
|
|
3,850
|
|
Investments, at fair
value
|
|
9,229
|
|
|
6,711
|
|
Operating lease
right-of-use assets
|
|
11,563
|
|
|
—
|
|
Regulatory
assets
|
|
73,407
|
|
|
72,422
|
|
Receivables and other
deferred charges
|
|
49,579
|
|
|
36,401
|
|
Noncurrent assets
held for sale
|
|
—
|
|
|
7,662
|
|
Total deferred
charges and other assets
|
|
184,575
|
|
|
148,614
|
|
Total
Assets
|
|
$
|
1,783,198
|
|
|
$
|
1,693,671
|
|
Chesapeake
Utilities Corporation and Subsidiaries
Consolidated
Balance Sheets (Unaudited)
|
|
|
|
As of December
31,
|
Capitalization and
Liabilities
|
|
2019
|
|
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
|
|
259,253
|
|
|
255,651
|
|
Retained
earnings
|
|
300,607
|
|
|
261,530
|
|
Accumulated other
comprehensive loss
|
|
(6,267)
|
|
|
(6,713)
|
|
Deferred compensation
obligation
|
|
4,543
|
|
|
3,854
|
|
Treasury
stock
|
|
(4,543)
|
|
|
(3,854)
|
|
Total stockholders'
equity
|
|
561,577
|
|
|
518,439
|
|
Long-term debt, net
of current maturities
|
|
440,168
|
|
|
316,020
|
|
Total
capitalization
|
|
1,001,745
|
|
|
834,459
|
|
Current
Liabilities
|
|
|
|
|
Current portion of
long-term debt
|
|
45,600
|
|
|
11,935
|
|
Short-term
borrowing
|
|
247,371
|
|
|
294,458
|
|
Accounts
payable
|
|
54,068
|
|
|
98,681
|
|
Customer deposits and
refunds
|
|
30,939
|
|
|
32,620
|
|
Accrued
interest
|
|
2,554
|
|
|
2,317
|
|
Dividends
payable
|
|
6,644
|
|
|
6,060
|
|
Accrued
compensation
|
|
16,236
|
|
|
13,923
|
|
Regulatory
liabilities
|
|
5,991
|
|
|
7,883
|
|
Derivative
liabilities, at fair value
|
|
1,844
|
|
|
1,604
|
|
Other accrued
liabilities
|
|
12,077
|
|
|
10,081
|
|
Current
liabilities held for sale
|
|
—
|
|
|
48,672
|
|
Total current
liabilities
|
|
423,324
|
|
|
528,234
|
|
Deferred Credits
and Other Liabilities
|
|
|
|
|
Deferred income
taxes
|
|
180,656
|
|
|
156,820
|
|
Regulatory
liabilities
|
|
127,744
|
|
|
135,039
|
|
Environmental
liabilities
|
|
6,468
|
|
|
7,638
|
|
Other pension and
benefit costs
|
|
30,569
|
|
|
28,513
|
|
Operating lease -
liabilities
|
|
9,896
|
|
|
—
|
|
Deferred investment
tax credits and other liabilities
|
|
2,796
|
|
|
2,968
|
|
Total deferred
credits and other liabilities
|
|
358,129
|
|
|
330,978
|
|
Environmental and
other commitments and contingencies (1)
|
|
|
|
|
Total
Capitalization and Liabilities
|
|
$
|
1,783,198
|
|
|
$
|
1,693,671
|
|
(1)
|
Refer to Note 20 and
21 in the Company's Annual Report on Form 10-K for further
information.
|
Chesapeake
Utilities Corporation and Subsidiaries
Distribution
Utility Statistical Data (Unaudited)
|
|
|
For the Three
Months Ended December 31, 2019
|
|
For the Three
Months Ended December 31, 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
|
|
$
|
15,569
|
|
|
$
|
1,587
|
|
|
$
|
8,169
|
|
|
$
|
10,618
|
|
|
$
|
15,647
|
|
|
$
|
1,313
|
|
|
$
|
5,846
|
|
|
$
|
9,450
|
|
Commercial
|
|
8,087
|
|
|
1,622
|
|
|
6,784
|
|
|
9,416
|
|
|
8,260
|
|
|
1,566
|
|
|
6,491
|
|
|
8,711
|
|
Industrial
|
|
2,300
|
|
|
3,232
|
|
|
6,753
|
|
|
511
|
|
|
2,274
|
|
|
3,117
|
|
|
5,995
|
|
|
411
|
|
Other
(1)
|
|
5,425
|
|
|
769
|
|
|
356
|
|
|
(2,145)
|
|
|
5,426
|
|
|
883
|
|
|
3,901
|
|
|
298
|
|
Total Operating
Revenues
|
|
$
|
31,381
|
|
|
$
|
7,210
|
|
|
$
|
22,062
|
|
|
$
|
18,400
|
|
|
$
|
31,607
|
|
|
$
|
6,879
|
|
|
$
|
22,233
|
|
|
$
|
18,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (in Dts
for natural gas and KWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
918,892
|
|
|
92,584
|
|
|
355,510
|
|
|
71,039
|
|
|
962,407
|
|
|
90,091
|
|
|
327,226
|
|
|
65,844
|
|
Commercial
|
|
977,449
|
|
|
1,157,869
|
|
|
439,246
|
|
|
76,916
|
|
|
947,924
|
|
|
1,192,733
|
|
|
417,254
|
|
|
69,464
|
|
Industrial
|
|
1,410,990
|
|
|
7,095,966
|
|
|
1,280,375
|
|
|
9,546
|
|
|
1,518,671
|
|
|
6,577,922
|
|
|
1,220,219
|
|
|
3,350
|
|
Other
|
|
82,532
|
|
|
—
|
|
|
802,196
|
|
|
|
|
23,313
|
|
|
—
|
|
|
919,192
|
|
|
1,686
|
|
Total
|
|
3,389,863
|
|
|
8,346,419
|
|
|
2,877,327
|
|
|
157,501
|
|
|
3,452,315
|
|
|
7,860,746
|
|
|
2,883,891
|
|
|
140,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
74,884
|
|
|
17,511
|
|
|
58,280
|
|
|
24,759
|
|
|
72,219
|
|
|
16,703
|
|
|
56,181
|
|
|
24,573
|
|
Commercial
|
|
7,112
|
|
|
1,556
|
|
|
3,959
|
|
|
7,271
|
|
|
6,992
|
|
|
1,550
|
|
|
3,893
|
|
|
7,508
|
|
Industrial
|
|
169
|
|
|
16
|
|
|
2,455
|
|
|
2
|
|
|
162
|
|
|
17
|
|
|
2,380
|
|
|
2
|
|
Other
|
|
19
|
|
|
—
|
|
|
12
|
|
|
|
|
4
|
|
|
—
|
|
|
12
|
|
|
|
Total
|
|
82,184
|
|
|
19,083
|
|
|
64,706
|
|
|
32,032
|
|
|
79,377
|
|
|
18,270
|
|
|
62,466
|
|
|
32,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31, 2019
|
|
For the Year Ended
December 31, 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
|
|
$
|
62,708
|
|
|
$
|
6,232
|
|
|
$
|
32,016
|
|
|
$
|
45,738
|
|
|
$
|
70,466
|
|
|
$
|
5,086
|
|
|
$
|
30,334
|
|
|
$
|
44,788
|
|
Commercial
|
|
33,070
|
|
|
6,418
|
|
|
26,708
|
|
|
38,254
|
|
|
36,916
|
|
|
6,236
|
|
|
26,993
|
|
|
39,442
|
|
Industrial
|
|
8,314
|
|
|
12,682
|
|
|
24,520
|
|
|
2,128
|
|
|
8,289
|
|
|
10,911
|
|
|
22,296
|
|
|
1,543
|
|
Other
(1)
|
|
152
|
|
|
3,153
|
|
|
(826)
|
|
|
(8,704)
|
|
|
928
|
|
|
3,108
|
|
|
1,494
|
|
|
(5,970)
|
|
Total Operating
Revenues
|
|
$
|
104,244
|
|
|
$
|
28,485
|
|
|
$
|
82,418
|
|
|
$
|
77,416
|
|
|
$
|
116,599
|
|
|
$
|
25,341
|
|
|
$
|
81,117
|
|
|
$
|
79,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (in Dts
for natural gas and KWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
3,871,032
|
|
|
352,104
|
|
|
1,392,382
|
|
|
306,445
|
|
|
4,142,567
|
|
|
369,067
|
|
|
1,393,785
|
|
|
307,269
|
|
Commercial
|
|
3,776,388
|
|
|
4,475,776
|
|
|
1,714,574
|
|
|
310,856
|
|
|
3,792,220
|
|
|
4,719,725
|
|
|
1,722,081
|
|
|
302,687
|
|
Industrial
|
|
5,358,474
|
|
|
27,768,125
|
|
|
4,968,745
|
|
|
27,929
|
|
|
5,549,387
|
|
|
19,858,336
|
|
|
4,900,998
|
|
|
15,160
|
|
Other
|
|
220,541
|
|
|
—
|
|
|
2,574,925
|
|
|
—
|
|
|
80,254
|
|
|
—
|
|
|
2,338,815
|
|
|
7,402
|
|
Total
|
|
13,226,435
|
|
|
32,596,005
|
|
|
10,650,626
|
|
|
645,230
|
|
|
13,564,428
|
|
|
24,947,128
|
|
|
10,355,679
|
|
|
632,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
73,995
|
|
|
17,262
|
|
|
57,653
|
|
|
24,573
|
|
|
71,322
|
|
|
16,450
|
|
|
55,701
|
|
|
24,686
|
|
Commercial
|
|
7,097
|
|
|
1,546
|
|
|
3,932
|
|
|
7,243
|
|
|
6,979
|
|
|
1,519
|
|
|
3,915
|
|
|
7,497
|
|
Industrial
|
|
169
|
|
|
17
|
|
|
2,436
|
|
|
2
|
|
|
157
|
|
|
16
|
|
|
2,312
|
|
|
2
|
|
Other
|
|
15
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
11
|
|
|
|
Total
|
|
81,276
|
|
|
18,825
|
|
|
64,033
|
|
|
31,818
|
|
|
78,463
|
|
|
17,985
|
|
|
61,939
|
|
|
32,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 for pass-through taxes.
|
View original
content:http://www.prnewswire.com/news-releases/chesapeake-utilities-corporation-reports-record-results-for-fiscal-year-2019-and-updates-earnings-guidance-301012067.html
SOURCE Chesapeake Utilities Corporation