Chesapeake Utilities Corporation Reports Third Quarter 2021 Results
Chesapeake Utilities Corporation (NYSE: CPK) reported strong financial results for Q3 2021, with a net income of $12.5 million ($0.71 per share), a significant increase from $9.3 million ($0.56 per share) in Q3 2020. Year-to-date net income reached $60.8 million ($3.45 per share), up from $49.1 million ($2.97 per share) in 2020. The growth was driven by natural gas distribution, improved propane margins, and contributions from recent acquisitions. The company expects continued growth with capital expenditure forecasts ranging from $750 million to $1 billion through 2025, alongside raised EPS guidance to $6.05-$6.25 for 2025.
- Q3 2021 net income increased 34.4% year-over-year to $12.5 million.
- Year-to-date net income rose to $60.8 million, a 23.9% increase compared to 2020.
- Strong margin growth from pipeline expansion and acquisitions contributed significantly to profits.
- First Renewable Natural Gas transportation project completed, enhancing sustainable energy initiatives.
- Sustainability-linked financing secured for future investments, indicating commitment to ESG.
- Gross margin for Q3 2021 was $79.971 million, a modest 0.6% increase from Q3 2020.
DOVER, Del., Nov. 3, 2021 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the "Company") today announced its financial results for the third quarter of 2021. The Company's net income for the quarter ended September 30, 2021 was
Higher earnings for the third quarter of 2021 reflected natural gas growth in the Company's transmission and distribution businesses, improved propane margins, contributions from the 2020 and 2021 acquisitions, as well as a return toward pre-pandemic consumption levels as states of emergencies have been gradually lifted in the Company's service territories.
On a year-to-date basis, earnings were impacted by the positive factors noted above, as well as a return toward more normal weather.
"Our team continued to deliver strong performance during the third quarter which, when added to their efforts for the first half of the year, positions us well for the final quarter of the year. Our double digit earnings for both the quarter and year-to-date was attributable to strong margin growth across the Company, generated from higher consumption as volumes resumed closer to pre-pandemic levels, new margin from pipeline expansion projects, organic natural gas distribution customer growth, contributions from Elkton Gas and Western Natural Gas, increased propane margins per gallon and margins from Aspire Energy and Marlin Gas Services. Not only is the third quarter typically the lowest contributing quarter of the year, but third quarter 2020 included a cumulative margin adjustment for the Hurricane Michael settlement. Even with this timing difference from 2020, our third quarter 2021 EPS was 26.8 percent higher than third quarter 2020 EPS," commented Jeff Householder, President and CEO. "We have also achieved two significant milestones because of our team's efforts, completing our first Renewable Natural Gas transportation project and securing our first sustainability linked financing. These projects are only a sample of the many sustainable energy delivery projects being pursued across the organization to drive increased shareholder value. Because of these opportunities, we believe that Chesapeake Utilities is uniquely positioned as we head into the final stretch of 2021 and beyond," Householder added.
In March 2020, the U.S. Centers for Disease Control and Prevention ("CDC") declared a national emergency due to the rapidly growing outbreak of COVID-19. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These restrictions significantly impacted economic conditions in the United States in 2020 which have continued throughout 2021. Chesapeake Utilities is considered an "essential business," which has allowed the Company to continue operational activities and construction projects while adhering to the safety procedures intended to limit the spread of the virus. At this time, restrictions continue to be lifted as vaccines have become widely available in the United States. For example, the state of emergency in Florida was terminated in May 2021 followed by Delaware and Maryland in July 2021, resulting in reduced restrictions. The expiration of the states of emergency in the Company's service territories has also concluded the ability to defer incremental pandemic related costs for consideration through the applicable regulatory process. Despite these positive state orders and in light of the continued emergence and growing prevalence of new variants of COVID-19, the Company continues to operate under its pandemic response plan, monitor developments affecting employees, customers, suppliers, stockholders and take all precautions warranted to operate safely and to comply with the CDC, and the Occupational Safety and Health Administration, in order to protect its employees, customers and the communities it serves.
Capital Expenditures Forecast and Earnings Guidance Update
In February 2021, the Company updated and extended its capital expenditures and EPS forecasts through 2025. The included initiating new five-year capital expenditures guidance from 2021 through 2025, of
Operating Results for the Quarters Ended September 30, 2021 and 2020
Consolidated Results
Three Months Ended | ||||||||||||||
September 30, | ||||||||||||||
(in thousands) | 2021 | 2020 | Change | Percent | ||||||||||
Gross margin | $ | 79,971 | $ | 79,508 | $ | 463 | 0.6 | % | ||||||
Depreciation, amortization and property taxes | 21,165 | 22,976 | (1,811) | (7.9) | % | |||||||||
Other operating expenses | 38,693 | 39,126 | (433) | (1.1) | % | |||||||||
Operating income | $ | 20,113 | $ | 17,406 | $ | 2,707 | 15.6 | % | ||||||
Operating income during the third quarter of 2021 was
Regulated Energy Segment
Three Months Ended | ||||||||||||||
September 30, | ||||||||||||||
(in thousands) | 2021 | 2020 | Change | Percent | ||||||||||
Gross margin | $ | 65,102 | $ | 66,491 | $ | (1,389) | (2.1) | % | ||||||
Depreciation, amortization and property taxes | 17,215 | 19,617 | (2,402) | (12.2) | % | |||||||||
Other operating expenses | 24,349 | 26,392 | (2,043) | (7.7) | % | |||||||||
Operating income | $ | 23,538 | $ | 20,482 | $ | 3,056 | 14.9 | % | ||||||
Operating income for the Regulated Energy segment for the third quarter of 2021 was
The key components of the decrease in gross margin are shown below:
(in thousands) | |||
Margin impact from the Hurricane Michael regulatory proceeding settlement (includes the | $ | (5,507) | |
Eastern Shore and Peninsula Pipeline service expansions | 795 | ||
Improved margin from electric operations | 653 | ||
Natural gas growth (excluding service expansions) | 620 | ||
Margin contribution from 2020 and 2021 acquisitions | 483 | ||
Florida GRIP | 475 | ||
Increased customer consumption - primarily due to a return toward pre-pandemic conditions | 314 | ||
Eastern Shore capital surcharge | 304 | ||
Other variances | 474 | ||
Quarter-over-quarter decrease in gross margin | $ | (1,389) | |
The major components of the decrease in other operating expenses are as follows:
(in thousands) | |||
Regulatory deferral of COVID-19 expenses per PSCs orders | $ | (2,437) | |
Net reduction in expenses associated with the COVID-19 pandemic | (546) | ||
Payroll, benefits and other employee-related expenses due to growth | 612 | ||
Operating expenses from the Elkton Gas acquisition | 204 | ||
Other variances | 124 | ||
Quarter-over-quarter decrease in other operating expenses | $ | (2,043) | |
Unregulated Energy Segment
Three Months Ended | ||||||||||||||
September 30, | ||||||||||||||
(in thousands) | 2021 | 2020 | Change | Percent | ||||||||||
Gross margin | $ | 14,897 | $ | 13,068 | $ | 1,829 | 14.0 | % | ||||||
Depreciation, amortization and property taxes | 3,921 | 3,326 | 595 | 17.9 | % | |||||||||
Other operating expenses | 13,859 | 12,834 | 1,025 | 8.0 | % | |||||||||
Operating income (loss) | $ | (2,883) | $ | (3,092) | $ | 209 | 6.8 | % | ||||||
Operating results for the Unregulated Energy segment for the third quarter of 2021 increased by
Higher operating results during the third quarter were driven by increased propane margins, contributions from the Company's acquisition of Western Natural Gas and margin improvement from Aspire Energy of Ohio ("Aspire Energy") as well as increased consumption in the propane businesses as volumes continue returning toward pre-pandemic levels. Increased operating results were partially offset by higher operating expenses, depreciation, amortization and property taxes related to recent capital investments, and expenses associated with Western Natural Gas.
The major components contributing to the change in gross margin are shown below:
(in thousands) | ||||
Propane Operations | ||||
Increased retail propane margins and service fees | $ | 751 | ||
Western Natural Gas acquisition (completed in October 2020) | 372 | |||
Increased wholesale propane margins | 243 | |||
Increased customer consumption - primarily due to a return toward pre-pandemic conditions | 222 | |||
Increased customer consumption - primarily weather related | 122 | |||
Aspire Energy | ||||
Increased margin including improvements from natural gas liquid processing | 320 | |||
Other variances | (201) | |||
Quarter-over-quarter increase in gross margin | $ | 1,829 | ||
The major components of the increase in other operating expenses are as follows:
(in thousands) | |||
Payroll, benefits and other employee-related expenses due to growth | $ | 427 | |
Operating expenses from the Western Natural Gas acquisition | 273 | ||
Net increase in operating expenses associated with a return toward pre-pandemic conditions | 123 | ||
Other variances | 202 | ||
Quarter-over-quarter increase in other operating expenses | $ | 1,025 | |
Operating Results for the Nine Months Ended September 30, 2021 and 2020
Consolidated Results
Nine Months Ended | ||||||||||||||
September 30, | ||||||||||||||
(in thousands) | 2021 | 2020 | Change | Percent | ||||||||||
Gross margin | $ | 281,241 | $ | 253,418 | $ | 27,823 | 11.0 | % | ||||||
Depreciation, amortization and property taxes | 62,407 | 57,103 | 5,304 | 9.3 | % | |||||||||
Other operating expenses | 124,546 | 118,797 | 5,749 | 4.8 | % | |||||||||
Operating income | $ | 94,288 | $ | 77,518 | $ | 16,770 | 21.6 | % | ||||||
Operating income during the first nine months of 2021 was
Regulated Energy Segment
Nine Months Ended | ||||||||||||||
September 30, | ||||||||||||||
(in thousands) | 2021 | 2020 | Change | Percent | ||||||||||
Gross margin | $ | 209,718 | $ | 191,745 | $ | 17,973 | 9.4 | % | ||||||
Depreciation, amortization and property taxes | 50,794 | 47,144 | 3,650 | 7.7 | % | |||||||||
Other operating expenses | 79,714 | 78,225 | 1,489 | 1.9 | % | |||||||||
Operating income | $ | 79,210 | $ | 66,376 | $ | 12,834 | 19.3 | % | ||||||
Operating income for the Regulated Energy segment for the first nine months of 2021 was
The key components of the increase in gross margin are shown below:
(in thousands) | |||
Eastern Shore and Peninsula Pipeline service expansions | $ | 6,037 | |
Margin contribution from 2020 and 2021 acquisitions | 2,624 | ||
Natural gas growth (excluding service expansions) | 2,237 | ||
Increased customer consumption - primarily due to a return toward pre-pandemic conditions | 2,112 | ||
Increased customer consumption - primarily weather related | 1,510 | ||
Florida GRIP | 1,408 | ||
Improved margin from electric operations | 931 | ||
Sandpiper Energy infrastructure rider associated with conversions | 624 | ||
Other variances | 490 | ||
Period-over-period increase in gross margin | $ | 17,973 | |
The major components of the increase in other operating expenses are as follows:
(in thousands) | |||
Payroll, benefits and other employee-related expenses due to growth | $ | 2,601 | |
Operating expenses from the Elkton Gas acquisition | 1,238 | ||
Net increase in operating expenses associated with a return toward pre-pandemic conditions | 853 | ||
Regulatory deferral of COVID-19 expenses per PSCs orders | (3,312) | ||
Other variances | 109 | ||
Period-over-period increase in other operating expenses | $ | 1,489 | |
Unregulated Energy Segment
Nine Months Ended | ||||||||||||||
September 30, | ||||||||||||||
(in thousands) | 2021 | 2020 | Change | Percent | ||||||||||
Gross margin | $ | 71,625 | $ | 61,883 | $ | 9,742 | 15.7 | % | ||||||
Depreciation, amortization and property taxes | 11,552 | 9,869 | 1,683 | 17.1 | % | |||||||||
Other operating expenses | 44,296 | 40,964 | 3,332 | 8.1 | % | |||||||||
Operating income | $ | 15,777 | $ | 11,050 | $ | 4,727 | 42.8 | % | ||||||
Operating income for the Unregulated Energy segment for the nine months ended September 30, 2021 was
The major components of the increase in gross margin are shown below:
(in thousands) | ||||
Propane Operations | ||||
Increased customer consumption - primarily weather related | $ | 3,823 | ||
Increased retail propane margins and service fees | 2,403 | |||
Western Natural Gas acquisition (completed in October 2020) | 1,312 | |||
Increased wholesale propane margins per gallon | 309 | |||
Marlin Gas Services | ||||
Increased demand for CNG services | 337 | |||
Aspire Energy | ||||
Increased customer consumption - primarily weather related | 1,152 | |||
Improved margin including natural gas liquid processing | 897 | |||
Other variances | (491) | |||
Period-over-period increase in gross margin | $ | 9,742 | ||
The major components of the increase in other operating expenses are as follows:
(in thousands) | |||
Payroll, benefits and other employee-related expenses due to growth | $ | 1,170 | |
Operating expenses from the Western Natural Gas acquisition | 880 | ||
Net increase in operating expenses associated with a return toward pre-pandemic conditions | 406 | ||
Insurance expense (non-health) | 404 | ||
Other variances | 472 | ||
Period-over-period increase in other operating expenses | $ | 3,332 | |
*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.
Environmental, Social and Governance Initiatives
Environmental, Social and Governance ("ESG") initiatives are embedded within Chesapeake Utilities culture and are an integral part of our strategy. ESG is at the core of our well-established culture and our informed business decisions. Over the years, we have reduced our greenhouse gas emissions, while responsibly growing our businesses. We have also helped to accelerate the reduction of emissions by many of our customers. Our combined efforts have enhanced the sustainability of our local communities. We look forward to publishing our inaugural Corporate Responsibility and Sustainability Report. Below we have highlighted several of Chesapeake Utilities initiatives in each area of ESG:
Advancing Environmental Initiatives
Our three-part action plan continues to make progress. We are pursuing a three-part action plan that supports decarbonization and a lower carbon energy future. First, we are taking actions that will continue to reduce our greenhouse gas emissions. For example, we have largely completed our Florida GRIP to replace older portions of our natural gas distribution system. The remaining capital expenditures associated with this program will be invested through 2022. Our Elkton Gas subsidiary also reached a settlement agreement with the Maryland PSC to accelerate its Aldyl-A pipeline replacement program and to recover the costs of the plan in the form of a fixed charge rider through a 5-year surcharge. Throughout our pipeline system, we have also implemented improved emission detection technology at our pipeline compressor stations.
The second component of our action plan is providing services and support to our customers who are reducing their greenhouse gas emissions. Our extension from Eastern Shore's Del-Mar Energy Pathway Project, which was recently completed, brings natural gas to our distribution system in Somerset County, Maryland for the first time. As part of this project, our services will support the conversion by two significant industrial customers in Somerset County from less environmentally friendly fuel sources, including in one case, wood chips. Similarly, several of our commercial customers continue to convert their vehicle fleet to compressed natural gas or propane, further reducing their greenhouse gas emissions and positively impacting the environment.
We continue to see significant demand for new natural gas service in both our Delmarva and Florida territories, with our growth rates more than double the industry's growth rates. In many of our local markets, natural gas is a cleaner fuel option than alternative energy sources. Natural gas is an important component of the country's energy transition and we are committed to responsibly expanding the infrastructure in our growing service areas.
These same markets are also presenting renewable natural gas ("RNG") opportunities with ongoing projects to transform landfill, food, dairy and poultry waste into usable energy. The development of several RNG projects is the third component of our action plan. Our participation in these projects extends from transporting the RNG to market by pipeline or our Marlin Gas Services compressed natural gas trailers, to potential investments in biogas plants and, in some cases, the solar energy facilities to provide electricity to the plants and significantly improve the RNG carbon intensity score. In October 2021, we completed construction of the Noble Road Landfill Renewable Natural Gas pipeline project. This is our first RNG transportation project and when combined with our previously announced projects will expand our ability to utilize RNG in our services territories. We are continuing to actively consider other renewable projects and the potential of increasing the number of RNG projects in our diversified energy portfolio. We are committed to remaining disciplined in our approach by pursuing projects that meet our return thresholds and strategic goals.
We also have several other initiatives underway, including plans to add additional small solar facilities along our system, and our participation in a pilot program to blend hydrogen into the natural gas distribution system that serves our Eight Flags combined heat and power plant. We are optimistic about this pilot program and believe that hydrogen will continue to gain in efficiency and become more price competitive over time.
To finance these projects, we are working with many of our key banking partners to utilize sustainable financing capacity at attractive pricing. Just recently, we secured
Advancing Social Initiatives
Promoting equity, diversity and inclusion ("EDI"). Our success is the direct result of our employees and our strong culture that fully engages our team and promotes equity, diversity, inclusion, integrity, accountability and reliability. During the third quarter, we were recognized as a Top Workplace in Delaware for the 10th consecutive year. This follows recognition as a Top Workplace nationally earlier in the year. These recognitions are a testament to our employees' commitment to excellence.
We believe that a combination of diverse team members and an inclusive culture contributes to the success of our Company and to enhanced societal advancement. During the third quarter, we were very excited to hire William Hughston as Vice President and Chief Human Resources Officer. Mr. Hughston brings tremendous EDI experience to the team, including drawing from his previous experiences and prior role as Chief Diversity Officer. Additionally, in October 2021, we announced the addition of our third female Director to our Board of Directors, Lisa Bisaccia. Ms. Bisaccia's addition continues our steady progress of gender and ethnic diversity that represents the communities we serve. Our Board of Directors includes, three female directors, an African American Director and a Director who is of Middle Eastern descent.
We established an EDI Council in 2020, complementing and broadening the work of the Women in Energy group started years ago. The Council oversees our efforts to improve diversity in recruitment, employee development and advancement, cultural awareness and related policies. These efforts are expanded through the broad reach of our six Employee Resource Groups and other partnerships we have in the community. Employees have access to communications and on-demand learning sessions on an array of topics, including equity, diversity and inclusion, through our "EDI Wise" webinars. We have also expanded our supplier diversity program to gather information that will enable us to further expand, measure and report on the diversity of our suppliers and associated spend.
Safety at the center of Chesapeake Utilities culture and the way we do business. There is nothing more important than the safety of our team, our customers and our communities. The importance of safety is exhibited throughout our organization, with the direction and tone set by the Board of Directors and our President and Chief Executive Officer. Employees are required to attend monthly safety meetings and incorporate safety moments at operational and other meetings. Thus far in 2021, four of our business units have been recognized with awards from the American Gas Association for their commitment to safety.
The achievement of superior safety performance is both an important short and long-term strategic initiative in managing our operations. Our new state-of-the-art training center, named 'Safety Town,' provides employees hands-on training and simulated on-the-job field experiences, further developing our team and enhancing the reliability and integrity of our systems. Safety Town has also expanded our community outreach by offering safety training to many regional first responders. Our second Safety Town facility will be located in Florida and is in the final stages of planning.
Advancing Governance Initiatives
Commitment to sound governance practices. Consistent with our culture of teamwork, the broad responsibility of ESG stewardship is supported across our organization by the dedication and efforts of the Board and its Committees, as well as the entrepreneurship and dedication of our team. As stewards of long-term enterprise value, the Board is committed to overseeing the sustainability of the Company. The Board and Corporate Governance Committee annually review our corporate governance documents and practices to ensure that they provide the appropriate framework under which we operate. In recent years, we have received national recognition as the Governance Team of the Year, and just this year were also recognized as Best for Corporate Governance Among North American Utilities by Ethical Boardroom magazine. To learn more about our corporate governance practices and transparency, stakeholder engagement, the experience and diversity of our Board members, and our Business Code of Ethics and Conduct, which highlights our commitment to the highest ethical standards and the importance of engaging in sustainable practices, please view our Proxy Statement filed with the Securities and Exchange Commission on March 22, 2021. Additionally, please view Chesapeake Utilities' news releases and historical quarterly earnings conference calls for additional discussions on ESG and our sustainability practices.
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 2020 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the third quarter of 2021, 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 Thursday, November 4, 2021 at 4:00 p.m. Eastern Time to discuss the Company's financial results for the three and nine ended September 30, 2021. To participate in this call, dial 877.224.1468 and reference Chesapeake Utilities' 2021 Third Quarter Results Conference Call. To access the replay recording of this call, the accompanying transcript, and other pertinent quarterly information, use the link CPK - Conference Call Audio Replay, or visit the Investors/Events and Presentations section of the Company's website at www.chpk.com.
About Chesapeake Utilities Corporation
Chesapeake Utilities is a diversified energy company engaged in natural gas transmission and distribution; electricity generation and distribution; propane gas distribution; mobile compressed natural gas services; and other businesses. Information about Chesapeake Utilities and its family of businesses is available at https://www.chpk.com.
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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Gross Margin | |||||||||||||||
Regulated Energy segment | $ | 65,102 | $ | 66,491 | $ | 209,718 | $ | 191,745 | |||||||
Unregulated Energy segment | 14,897 | 13,068 | 71,625 | 61,883 | |||||||||||
Other businesses and eliminations | (28) | (51) | (102) | (210) | |||||||||||
Total Gross Margin | $ | 79,971 | $ | 79,508 | $ | 281,241 | $ | 253,418 | |||||||
Operating Income | |||||||||||||||
Regulated Energy segment | $ | 23,538 | $ | 20,482 | $ | 79,210 | $ | 66,376 | |||||||
Unregulated Energy segment | (2,883) | (3,092) | 15,777 | 11,050 | |||||||||||
Other businesses and eliminations | (542) | 16 | (699) | 92 | |||||||||||
Total Operating Income | 20,113 | 17,406 | 94,288 | 77,518 | |||||||||||
Other income (expense), net | 339 | (40) | 2,180 | 2,997 | |||||||||||
Interest Charges | 4,975 | 4,584 | 15,134 | 15,452 | |||||||||||
Income from Continuing Operations Before Income Taxes | 15,477 | 12,782 | 81,334 | 65,063 | |||||||||||
Income Taxes on Continuing Operations | 2,993 | 3,502 | 20,563 | 16,082 | |||||||||||
Income from Continuing Operations | 12,484 | 9,280 | 60,771 | 48,981 | |||||||||||
Income (Loss) from Discontinued Operations, Net of Tax | (9) | (19) | (17) | 165 | |||||||||||
Net Income | $ | 12,475 | $ | 9,261 | $ | 60,754 | $ | 49,146 | |||||||
Basic Earnings Per Share of Common Stock | |||||||||||||||
Earnings from Continuing Operations | $ | 0.71 | $ | 0.56 | $ | 3.46 | $ | 2.97 | |||||||
Earnings from Discontinued Operations | — | — | — | 0.01 | |||||||||||
Basic Earnings Per Share of Common Stock | $ | 0.71 | $ | 0.56 | $ | 3.46 | $ | 2.98 | |||||||
Diluted Earnings Per Share of Common Stock | |||||||||||||||
Earnings from Continuing Operations | $ | 0.71 | $ | 0.56 | $ | 3.45 | $ | 2.96 | |||||||
Earnings from Discontinued Operations | — | — | — | 0.01 | |||||||||||
Diluted Earnings Per Share of Common Stock | $ | 0.71 | $ | 0.56 | $ | 3.45 | $ | 2.97 | |||||||
Financial Summary Highlights | ||||||||||||
Key variances in continuing operations, between the third quarter of 2021 and the third quarter of 2020, included: | ||||||||||||
(in thousands, except per share data) | Pre-tax Income | Net Income | Earnings Per Share | |||||||||
Third Quarter of 2020 Reported Results from Continuing Operations | $ | 12,782 | $ | 9,280 | $ | 0.56 | ||||||
Adjusting for Unusual Items: | ||||||||||||
Absence of timing of Hurricane Michael Settlement (first and second quarter | (1,933) | (1,444) | (0.08) | |||||||||
Regulatory deferral of COVID-19 expenses per PSCs orders | 2,437 | 1,821 | 0.10 | |||||||||
Favorable income tax impact associated the CARES Act recognized during the | — | 922 | 0.05 | |||||||||
504 | 1,299 | 0.07 | ||||||||||
Increased (Decreased) Gross Margins: | ||||||||||||
Increased retail propane margins and fees | 994 | 743 | 0.04 | |||||||||
Margin contributions from 2020 and 2021 acquisitions* | 855 | 638 | 0.04 | |||||||||
Eastern Shore and Peninsula Pipeline service expansions* | 795 | 594 | 0.03 | |||||||||
Improved margin from electric operations | 653 | 488 | 0.03 | |||||||||
Natural gas growth (excluding service expansions) | 620 | 463 | 0.03 | |||||||||
Increased customer consumption - primarily due to a return toward pre- | 536 | 400 | 0.02 | |||||||||
Florida GRIP* | 475 | 355 | 0.02 | |||||||||
4,928 | 3,681 | 0.21 | ||||||||||
(Increased) Decreased Operating Expenses (Excluding Cost of Sales): | ||||||||||||
Depreciation, amortization and property tax costs due to new capital | (1,715) | (1,281) | (0.07) | |||||||||
Payroll, benefits and other employee-related expenses | (1,317) | (984) | (0.06) | |||||||||
Operating expenses for Elkton Gas and Western Natural Gas acquisitions | (531) | (397) | (0.02) | |||||||||
Net reduction in expenses associated with the COVID-19 pandemic | 608 | 454 | 0.03 | |||||||||
(2,955) | (2,208) | (0.12) | ||||||||||
Other income tax effects | — | 269 | 0.02 | |||||||||
Net other changes | 218 | 163 | — | |||||||||
Change in shares outstanding due to 2020 and 2021 equity offerings | — | — | (0.03) | |||||||||
218 | 432 | (0.01) | ||||||||||
Third Quarter of 2021 Reported Results from Continuing Operations | $ | 15,477 | $ | 12,484 | $ | 0.71 | ||||||
*See the Major Projects and Initiatives table. |
Key variances in continuing operations, between the nine months ended September 30, 2021 and the nine months ended September 30, 2020, included:
(in thousands, except per share data) | Pre-tax Income | Net Income | Earnings Per Share | |||||||||
Nine Months Ended September 30, 2020 Reported Results from Continuing | $ | 65,063 | $ | 48,981 | $ | 2.96 | ||||||
Adjusting for Unusual Items: | ||||||||||||
Regulatory deferral of COVID-19 expenses per PSCs orders | 3,312 | 2,437 | 0.14 | |||||||||
Gains from sales of assets | (1,563) | (1,150) | (0.07) | |||||||||
Net impact of CARES Act items recognized during the second quarter of 2020 | — | (748) | (0.06) | |||||||||
1,749 | 539 | 0.01 | ||||||||||
Increased (Decreased) Gross Margins: | ||||||||||||
Increased customer consumption - primarily weather related | 6,485 | 4,772 | 0.27 | |||||||||
Eastern Shore and Peninsula Pipeline service expansions* | 6,037 | 4,442 | 0.25 | |||||||||
Margin contributions from 2020 and 2021 acquisitions* | 3,936 | 2,896 | 0.16 | |||||||||
Increased propane margins and fees | 2,712 | 1,995 | 0.11 | |||||||||
Increased customer consumption - primarily due to a return toward pre- | 2,280 | 1,677 | 0.10 | |||||||||
Natural gas growth (excluding service expansions) | 2,237 | 1,646 | 0.09 | |||||||||
Florida GRIP* | 1,408 | 1,036 | 0.06 | |||||||||
Improved margin from electric operations | 931 | 685 | 0.04 | |||||||||
Aspire Energy improved margin including natural gas liquid processing | 897 | 660 | 0.04 | |||||||||
Sandpiper infrastructure rider associated with conversions | 624 | 459 | 0.04 | |||||||||
27,547 | 20,268 | 1.16 | ||||||||||
(Increased) Decreased Operating Expenses (Excluding Cost of Sales): | ||||||||||||
Depreciation, amortization and property tax costs due to new capital | (5,802) | (4,269) | (0.24) | |||||||||
Payroll, benefits and other employee-related expenses due to growth | (4,679) | (3,443) | (0.20) | |||||||||
Operating expenses for Elkton Gas and Western Natural Gas acquisitions | (2,499) | (1,839) | (0.10) | |||||||||
Net increase in operating expenses associated with a return toward pre- | (969) | (713) | (0.04) | |||||||||
Insurance expense (non-health) | (420) | (309) | (0.02) | |||||||||
(14,369) | (10,573) | (0.60) | ||||||||||
Other income tax effects | — | 554 | 0.03 | |||||||||
Net other changes | 1,344 | 1,002 | 0.07 | |||||||||
Change in shares outstanding due to 2020 and 2021 equity offerings | — | — | (0.18) | |||||||||
1,344 | 1,556 | (0.08) | ||||||||||
Nine Months Ended September 30, 2021 Reported Results from Continuing | $ | 81,334 | $ | 60,771 | $ | 3.45 | ||||||
*See the Major Projects and Initiatives table. |
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 to increase shareholder value. The following table includes the major projects/initiatives recently completed and currently underway. Major projects and initiatives that have generated consistent year-over-year margin contributions are removed from the table. 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 | Nine Months Ended | Year Ended | Estimate for | |||||||||||||||||||||||||
Project/Initiative | September 30, | September 30, | December 31, | Fiscal | ||||||||||||||||||||||||
in thousands | 2021 | 2020 | 2021 | 2020 | 2020 | 2021 | 2022 | |||||||||||||||||||||
Pipeline Expansions: | ||||||||||||||||||||||||||||
Western Palm Beach County, | $ | 1,175 | $ | 1,020 | $ | 3,515 | $ | 2,988 | $ | 4,167 | $ | 4,811 | $ | 5,227 | ||||||||||||||
Del-Mar Energy Pathway (1) (2) | 1,049 | 924 | 2,854 | 1,565 | 2,462 | 4,578 | 6,708 | |||||||||||||||||||||
Callahan Intrastate Pipeline (2) (3) | 1,893 | 1,378 | 5,673 | 1,452 | 2,926 | 7,564 | 7,564 | |||||||||||||||||||||
Guernsey Power Station | 47 | — | 141 | — | — | 404 | 1,486 | |||||||||||||||||||||
Winter Haven Expansion | — | — | — | — | — | — | 658 | |||||||||||||||||||||
Beachside Pipeline Extension | — | — | — | — | — | — | — | |||||||||||||||||||||
Total Pipeline Expansions | 4,164 | 3,322 | 12,183 | 6,005 | 9,555 | 17,357 | 21,643 | |||||||||||||||||||||
CNG Transportation | 1,598 | 1,592 | 5,383 | 5,047 | 7,231 | 7,300 | 8,500 | |||||||||||||||||||||
RNG Transportation | — | — | — | — | — | 86 | 1,000 | |||||||||||||||||||||
Acquisitions: | ||||||||||||||||||||||||||||
Elkton Gas | 590 | 357 | 2,648 | 357 | 1,344 | 3,900 | 4,113 | |||||||||||||||||||||
Western Natural Gas | 372 | — | 1,312 | — | 389 | 2,066 | 2,251 | |||||||||||||||||||||
Escambia Meter Station | 250 | — | 333 | — | — | 583 | 1,000 | |||||||||||||||||||||
Total Acquisitions | 1,212 | 357 | 4,293 | 357 | 1,733 | 6,549 | 7,364 | |||||||||||||||||||||
Regulatory Initiatives: | ||||||||||||||||||||||||||||
Florida GRIP | 4,306 | 3,831 | 12,543 | 11,135 | 15,178 | 16,950 | 18,797 | |||||||||||||||||||||
Hurricane Michael regulatory | 3,264 | 8,261 | 8,984 | 8,261 | 10,864 | 11,014 | 11,014 | |||||||||||||||||||||
Capital Cost Surcharge Programs | 433 | 129 | 690 | 389 | 523 | 1,186 | 1,985 | |||||||||||||||||||||
Elkton Gas STRIDE Plan | — | — | — | — | — | 45 | 299 | |||||||||||||||||||||
Total Regulatory Initiatives | 8,003 | 12,221 | 22,217 | 19,785 | 26,565 | 29,195 | 32,095 | |||||||||||||||||||||
Total | $ | 14,977 | $ | 17,492 | $ | 44,076 | $ | 31,194 | $ | 45,084 | $ | 60,487 | $ | 70,602 | ||||||||||||||
(1) | Includes gross margin generated from interim services. |
(2) | Includes gross margin from natural gas distribution services. |
(3) | Prior quarter amounts have been revised to conform to the current period presentation. |
Detailed Discussion of Major Projects and Initiatives
Pipeline Expansions
West 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
Del-Mar Energy Pathway
In December 2019, the Federal Energy Regulatory Commission ("FERC") issued an order approving the construction of the Del-Mar Energy Pathway project. Eastern Shore recently completed this project. The new facilities will: (i) ensure an additional 14,300 Dekatherms per day ("Dts/d") of firm service to four customers, (ii) provide additional natural gas transmission pipeline infrastructure in eastern Sussex County, Delaware, and (iii) represent the first extension of Eastern Shore's pipeline system into Somerset County, Maryland. Construction of the project began in January 2020, and interim services in advance of this project generated additional gross margin of
Callahan Intrastate Pipeline
Peninsula Pipeline completed the construction of a jointly owned intrastate transmission pipeline with Seacoast Gas Transmission in Nassau County, Florida in June 2020. The 26-mile pipeline serves growing demand for energy in both Nassau and Duval Counties. For the three and nine months ended September 30, 2021, the project generated
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 firm natural gas transportation service to this facility. Guernsey Power Station commenced construction of the project in October 2019. In the second quarter of 2021, Aspire Energy Express commenced construction of the gas transmission facilities to provide the firm transportation service to the power generation facility. For the nine months ended September 30, 2021, the Company recognized approximately
Winter Haven Expansion
In May 2021, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with Central Florida Gas ("CFG") for an incremental 6,800 Dts/d of firm service in the Winter Haven, Florida, area. As part of this agreement, Peninsula Pipeline will construct a new interconnect with Florida Gas Transmission Company and a new regulator station for CFG. CFG will use the additional firm service to support new incremental load due to growth in the area, including providing service, most immediately, to a new can manufacturing facility, as well as reliability and operational benefits to CFG's existing distribution system in the area. In connection with Peninsula Pipeline's new regulator station, CFG is also extending its distribution system to connect to the new station. The Company expects this expansion to generate additional gross margin of
Beachside Pipeline Extension
In June 2021, Peninsula Pipeline and Florida City Gas entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support Florida City Gas' growth along the Indian River's barrier island. As part of this agreement, Peninsula Pipeline will construct approximately 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida, area east under the Intercoastal Waterway and southward on the barrier island. The Company expects this expansion to generate additional annual gross margin of
CNG Transportation
Marlin Gas Services provides CNG temporary hold services, contracted pipeline integrity services, emergency services for damaged pipelines and specialized gas services for customers who have unique requirements. Marlin Gas Services generated additional gross margin of
RNG Transportation
Noble Road Landfill RNG Project
In September 2020, Fortistar and Rumpke Waste & Recycling announced commencement of construction of the Noble Road Landfill RNG Project in Shiloh, Ohio. The project includes the construction of a new state-of-the-art facility that will utilize advanced, patented technology to treat landfill gas by removing carbon dioxide and other components to purify the gas and produce pipeline quality RNG. In October 2021, the Company announced that Aspire Energy had completed construction of its Noble Road Landfill RNG pipeline project, a 33.1-mile pipeline, which will transport RNG generated from the landfill to Aspire Energy's pipeline system, displacing conventionally produced natural gas. In conjunction with this expansion, Aspire Energy also upgraded an existing compressor station and installed two new metering and regulation sites. Once flowing, the RNG volume will represent nearly 10 percent of Aspire Energy's gas gathering volumes.
Bioenergy DevCo
In June 2020, the Company and Bioenergy DevCo ("BDC"), a developer of anaerobic digestion facilities that create renewable energy and healthy soil products from organic material, entered into an agreement related to a project to extract RNG from poultry production waste. BDC and the Company are collaborating on this project in addition to several other project sites where organic waste can be converted into a carbon-negative energy source.
Marlin Gas Services will transport the RNG source created from the organic waste from the BDC facility to an Eastern Shore interconnection, where the sustainable fuel will be introduced into the Company's transmission system and ultimately distributed to its natural gas customers.
CleanBay Project
In July 2020, the Company and CleanBay Renewables Inc. ("CleanBay") announced a new partnership to bring RNG to the Company's Delmarva natural gas operations. As part of this partnership, the Company will transport the RNG produced at CleanBay's planned Westover, Maryland bio-refinery, to the Company's natural gas infrastructure in the Delmarva Peninsula region. Eastern Shore and Marlin Gas Services, will transport the RNG from CleanBay to the Company's Delmarva natural gas distribution system where it is ultimately delivered to the Delmarva natural gas distribution end use customers.
At the present time, the Company expects to generate
Acquisitions
Elkton Gas
In July 2020, the Company closed on the acquisition of Elkton Gas, which provides natural gas distribution service to approximately 7,000 residential and commercial customers within a franchised area of Cecil County, Maryland. The purchase price was approximately
Western Natural Gas
In October 2020, Sharp acquired certain propane operating assets of Western Natural Gas, which provides propane distribution service throughout Jacksonville, Florida and the surrounding communities, for approximately
Escambia Meter Station
In June 2021, Peninsula Pipeline purchased the Escambia Meter Station from Florida Power and Light and entered into a Transportation Service Agreement with Gulf Power Company to provide up to 530,000 Dts/d of firm service from an interconnect with Florida Gas Transmission to Florida Power & Light's Crist Lateral pipeline. Florida Power & Light's Crist Lateral provides gas supply to their natural gas fired power facility in Pensacola, Florida. The Company generated
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
Hurricane Michael
In August 2019, FPU filed a limited proceeding requesting recovery of storm-related costs associated with Hurricane Michael (capital and expenses) through a change in base rates. In March 2020, FPU filed an update to the original filing to account for actual charges incurred through December 2019, revised the amortization period of the storm-related costs, and included costs related to Hurricane Dorian.
In September 2019, FPU filed a petition, with the Florida PSC, for approval of its consolidated electric depreciation rates. The petition was joined to the Hurricane Michael docket. The approved rates, which were part of the settlement agreement in September 2020 that is described below, were retroactively applied effective January 1, 2020.
In September 2020, the Florida PSC approved a settlement agreement between FPU and the Office of the Public Counsel regarding final cost recovery and rates associated with Hurricane Michael. Previously, the Florida PSC approved an interim rate increase, subject to refund, effective January 1, 2020, associated with the restoration effort following Hurricane Michael. FPU fully reserved these interim rates, pending a final resolution and settlement of the limited proceeding. The settlement agreement allowed FPU to: (a) refund the over-collection of interim rates through the fuel clause; (b) record regulatory assets for storm costs in the amount of
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||
(in thousands) | 2021 | 2020 (1) | 2021 | 2020 | |||||||||||
Gross Margin | $ | 3,264 | $ | 8,261 | $ | 8,984 | $ | 8,261 | |||||||
Depreciation | (305) | (883) | (913) | (883) | |||||||||||
Amortization of regulatory assets | 2,079 | 6,238 | 6,237 | 6,238 | |||||||||||
Operating income | 1,490 | 2,906 | 3,660 | 2,906 | |||||||||||
Amortization of liability associated with interest expense | (293) | (1,132) | (930) | (1,132) | |||||||||||
Pre-tax income | 1,783 | 4,038 | 4,590 | 4,038 | |||||||||||
Income tax expense | 451 | 1,106 | 1,213 | 1,106 | |||||||||||
Net income | $ | 1,332 | $ | 2,932 | $ | 3,377 | $ | 2,932 | |||||||
(1) | Amounts reflected for the quarter ended September 30, 2020 include the cumulative effect of the Hurricane Michael settlement dating back to January 1, 2020. |
Capital Cost Surcharge Programs
In December 2019, the FERC approved Eastern Shore's capital cost surcharge which became effective January 1, 2020. The surcharge, an approved item in the settlement of Eastern Shore's last general rate case, allows Eastern Shore to recover capital costs associated with mandated highway or railroad relocation projects that required the replacement of existing Eastern Shore facilities. Eastern Shore expects to produce gross margin of approximately
Elkton Gas STRIDE Plan
In March 2021, Elkton Gas filed a strategic infrastructure development and enhancement ("STRIDE") plan with the Maryland PSC. The STRIDE plan proposes to increase the speed of Elkton Gas' Aldyl-A pipeline replacement program and to recover the costs of the plan in the form of a fixed charge rider through a proposed 5-year surcharge. Under Elkton Gas' proposed STRIDE plan, the Aldyl-A pipelines would be replaced by 2023. In June 2021, the Company reached a settlement with the Maryland PSC Staff and the Maryland Office of the Peoples Counsel. The STRIDE plan is expected to go into service in the fourth quarter of 2021 and is expected to generate
COVID-19 Regulatory Proceeding
In October 2020, the Florida PSC approved a joint petition of the Company's natural gas and electric distribution utilities in Florida to establish a regulatory asset to record incremental expenses incurred due to COVID-19. The regulatory asset will allow the Company to seek recovery of these costs in the next base rate proceedings. In November 2020, the Office of Public Counsel filed a protest to the order approving the establishment of this regulatory asset treatment, contending that the order should be reversed or modified and to request a hearing on the protest. The Company's Florida regulated business units reached a settlement with the Office of Public Counsel in June 2021. The settlement allowed the business units to establish a regulatory asset of
Other major factors influencing gross margin
Weather Impact
Weather was not a significant factor in the third quarter. For the nine-month period, weather conditions accounted for
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2021 | 2020 | Variance | 2021 | 2020 | Variance | ||||||||||||
Delmarva Peninsula | |||||||||||||||||
Actual HDD | 9 | 43 | (34) | 2,595 | 2,416 | 179 | |||||||||||
10-Year Average HDD ("Normal") | 47 | 48 | (1) | 2,736 | 2,797 | (61) | |||||||||||
Variance from Normal | (38) | (5) | (141) | (381) | |||||||||||||
Florida | |||||||||||||||||
Actual HDD | 1 | 2 | (1) | 573 | 412 | 161 | |||||||||||
10-Year Average HDD ("Normal") | 1 | — | 1 | 550 | 613 | (63) | |||||||||||
Variance from Normal | — | 2 | 23 | (201) | |||||||||||||
Ohio | |||||||||||||||||
Actual HDD | 41 | 86 | (45) | 3,489 | 3,383 | 106 | |||||||||||
10-Year Average HDD ("Normal") | 78 | 79 | (1) | 3,660 | 3,691 | (31) | |||||||||||
Variance from Normal | (37) | 7 | (171) | (308) | |||||||||||||
Florida | |||||||||||||||||
Actual CDD | 1,330 | 1,365 | (35) | 2,340 | 2,637 | (297) | |||||||||||
10-Year Average CDD ("Normal") | 1,402 | 1,416 | (14) | 2,563 | 2,559 | 4 | |||||||||||
Variance from Normal | (72) | (51) | (223) | 78 | |||||||||||||
Natural Gas Distribution Margin Growth
Customer growth for the Company's natural gas distribution operations, as a result of the addition of new customers (excluding acquisitions) and the conversion of customers from alternative fuel sources to natural gas service, generated
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2021 | September 30, 2021 | ||||||||||||||
(in thousands) | Delmarva | Florida | Delmarva | Florida | |||||||||||
Customer Growth: | |||||||||||||||
Residential | $ | 226 | $ | 208 | $ | 1,049 | $ | 788 | |||||||
Commercial and industrial | 84 | 102 | 183 | 217 | |||||||||||
Total Customer Growth | $ | 310 | $ | 310 | $ | 1,232 | $ | 1,005 | |||||||
Capital Investment Growth and Associated Financing Plans
The Company's capital expenditures were
2021 | |||||||
(dollars in thousands) | Low | High | |||||
Regulated Energy: | |||||||
Natural gas distribution | $ | 76,000 | $ | 79,000 | |||
Natural gas transmission | 58,000 | 63,000 | |||||
Electric distribution | 8,000 | 8,000 | |||||
Total Regulated Energy | 142,000 | 150,000 | |||||
Unregulated Energy: | |||||||
Propane distribution | 11,000 | 12,000 | |||||
Energy transmission | 16,000 | 20,000 | |||||
Other unregulated energy | 13,000 | 15,000 | |||||
Total Unregulated Energy | 40,000 | 47,000 | |||||
Other: | |||||||
Corporate and other businesses | 3,000 | 3,000 | |||||
Total Other | 3,000 | 3,000 | |||||
Total 2021 Forecasted Capital Expenditures | $ | 185,000 | $ | 200,000 | |||
The capital expenditure forecast 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, capital delays because of COVID-19 that are greater than currently anticipated, customer growth in existing areas, regulation, new growth or acquisition opportunities and availability of capital. Historically, actual capital expenditures have typically lagged behind the forecasted amounts.
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 51 percent as of September 30, 2021.
The Company may utilize more temporary short-term debt, when the financing cost is attractive, as a bridge to permanent long-term financing, or if the equity markets are more volatile. The Company currently maintains a multi-tranche
The 364-day tranche of the Revolver expires in August 2022 and the five-year tranche expires in August 2026; both tranches are available to provide funds for the Company's short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of the Company's capital expenditures. As of September 30, 2021, the pricing under the 364-day tranche of the Revolver does not include an unused commitment fee and maintains an interest rate of 0.70 percent over LIBOR. As of September 30, 2021, the pricing under the five-year tranche of the Revolver included an unused commitment fee of 0.09 percent and an interest rate of 0.95 percent over LIBOR. The Company's total available credit under the Revolver at September 30, 2021 was
In the fourth quarter of 2020, the Company entered into two
In regards to long-term debt capital, on August 25, 2021, the Company entered into a Note Purchase Agreement with multiple lenders to issue
In terms of equity capital, the Company maintains an effective shelf registration statement with the Securities and Exchange Commission for the issuance of shares under its Dividend Reinvestment and Direct Stock Purchase Plan (the "DRIP"). In June 2020, the Company also filed a shelf registration statement with the Securities and Exchange Commission, which provides for the issuance of shares of its common stock via a variety of offering types. In August 2020, the Company filed a prospectus supplement under the shelf registration statement for an At-the-Market ("ATM") program under which the Company may issue and sell shares of common stock up to an aggregate offering price of
Depending on the Company's capital needs and subject to market conditions, in addition to other debt and equity offerings, the Company may consider, as necessary in the future, issuing additional shares under the direct stock purchase component of the DRIP, the ATM program, or pursuant to its shelf registration statement. More information about financing activities is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and the Company's Third Quarter 2021 Form 10-Q.
Chesapeake Utilities Corporation and Subsidiaries | |||||||||||||||
Condensed Consolidated Statements of Income (Unaudited) | |||||||||||||||
(in thousands, except shares and per share data) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Operating Revenues | |||||||||||||||
Regulated Energy | $ | 80,396 | $ | 82,762 | $ | 282,503 | $ | 259,235 | |||||||
Unregulated Energy and other | 26,939 | 18,657 | 127,101 | 91,925 | |||||||||||
Total Operating Revenues | 107,335 | 101,419 | 409,604 | 351,160 | |||||||||||
Operating Expenses | |||||||||||||||
Regulated Energy cost of sales | 15,294 | 16,271 | 72,785 | 67,490 | |||||||||||
Unregulated Energy and other cost of sales | 12,072 | 5,640 | 55,578 | 30,250 | |||||||||||
Operations | 34,075 | 34,959 | 109,886 | 105,516 | |||||||||||
Maintenance | 4,267 | 3,717 | 12,568 | 11,695 | |||||||||||
Gain from settlement | — | — | — | (130) | |||||||||||
Depreciation and amortization | 15,798 | 18,293 | 46,460 | 42,793 | |||||||||||
Other taxes | 5,716 | 5,133 | 18,039 | 16,028 | |||||||||||
Total operating expenses | 87,222 | 84,013 | 315,316 | 273,642 | |||||||||||
Operating Income | 20,113 | 17,406 | 94,288 | 77,518 | |||||||||||
Other income (expense), net | 339 | (40) | 2,180 | 2,997 | |||||||||||
Interest charges | 4,975 | 4,584 | 15,134 | 15,452 | |||||||||||
Income from Continuing Operations Before | 15,477 | 12,782 | 81,334 | 65,063 | |||||||||||
Income Taxes on Continuing Operations | 2,993 | 3,502 | 20,563 | 16,082 | |||||||||||
Income from Continuing Operations | 12,484 | 9,280 | 60,771 | 48,981 | |||||||||||
Income (Loss) from Discontinued Operations, Net of Tax | (9) | (19) | (17) | 165 | |||||||||||
Net Income | $ | 12,475 | $ | 9,261 | $ | 60,754 | $ | 49,146 | |||||||
Weighted Average Common Shares Outstanding: | |||||||||||||||
Basic | 17,582,115 | 16,533,748 | 17,538,461 | 16,466,106 | |||||||||||
Diluted | 17,659,643 | 16,592,842 | 17,610,158 | 16,523,200 | |||||||||||
Basic Earnings Per Share of Common Stock: | |||||||||||||||
Earnings from Continuing Operations | $ | 0.71 | $ | 0.56 | $ | 3.46 | $ | 2.97 | |||||||
Earnings from Discontinued Operations | — | — | — | 0.01 | |||||||||||
Basic Earnings Per Share of Common Stock | $ | 0.71 | $ | 0.56 | $ | 3.46 | $ | 2.98 | |||||||
Diluted Earnings Per Share of Common Stock: | |||||||||||||||
Earnings from Continuing Operations | $ | 0.71 | $ | 0.56 | $ | 3.45 | $ | 2.96 | |||||||
Earnings from Discontinued Operations | — | — | — | 0.01 | |||||||||||
Diluted Earnings Per Share of Common Stock | $ | 0.71 | $ | 0.56 | $ | 3.45 | $ | 2.97 | |||||||
Chesapeake Utilities Corporation and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
Assets | September 30, 2021 | December 31, 2020 | ||||||
(in thousands, except shares and per share data) | ||||||||
Property, Plant and Equipment | ||||||||
Regulated Energy | $ | 1,688,938 | $ | 1,577,576 | ||||
Unregulated Energy | 324,083 | 300,647 | ||||||
Other businesses and eliminations | 35,183 | 30,769 | ||||||
Total property, plant and equipment | 2,048,204 | 1,908,992 | ||||||
Less: Accumulated depreciation and amortization | (405,263) | (368,743) | ||||||
Plus: Construction work in progress | 56,773 | 60,929 | ||||||
Net property, plant and equipment | 1,699,714 | 1,601,178 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | 5,886 | 3,499 | ||||||
Trade and other receivables | 47,570 | 61,675 | ||||||
Less: Allowance for credit losses | (2,980) | (4,785) | ||||||
Trade and other receivables, net | 44,590 | 56,890 | ||||||
Accrued revenue | 11,318 | 21,527 | ||||||
Propane inventory, at average cost | 6,917 | 5,906 | ||||||
Other inventory, at average cost | 6,716 | 5,539 | ||||||
Regulatory assets | 12,021 | 10,786 | ||||||
Storage gas prepayments | 4,663 | 2,455 | ||||||
Income taxes receivable | 12,702 | 12,885 | ||||||
Prepaid expenses | 15,555 | 13,239 | ||||||
Derivative assets, at fair value | 12,185 | 3,269 | ||||||
Other current assets | 440 | 436 | ||||||
Total current assets | 132,993 | 136,431 | ||||||
Deferred Charges and Other Assets | ||||||||
Goodwill | 38,803 | 38,731 | ||||||
Other intangible assets, net | 7,298 | 8,292 | ||||||
Investments, at fair value | 11,490 | 10,776 | ||||||
Operating lease right-of-use assets | 9,602 | 11,194 | ||||||
Regulatory assets | 107,872 | 113,806 | ||||||
Receivables and other deferred charges | 14,056 | 12,079 | ||||||
Total deferred charges and other assets | 189,121 | 194,878 | ||||||
Total Assets | $ | 2,021,828 | $ | 1,932,487 | ||||
Chesapeake Utilities Corporation and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
Capitalization and Liabilities | September 30, 2021 | December 31, 2020 | ||||||
(in thousands, except shares and per share data) | ||||||||
Capitalization | ||||||||
Stockholders' equity | ||||||||
Preferred stock, par value | $ | — | $ | — | ||||
Common stock, par value | 8,560 | 8,499 | ||||||
Additional paid-in capital | 361,066 | 348,482 | ||||||
Retained earnings | 378,897 | 342,969 | ||||||
Accumulated other comprehensive income (loss) | 2,439 | (2,865) | ||||||
Deferred compensation obligation | 7,186 | 5,679 | ||||||
Treasury stock | (7,186) | (5,679) | ||||||
Total stockholders' equity | 750,962 | 697,085 | ||||||
Long-term debt, net of current maturities | 505,459 | 508,499 | ||||||
Total capitalization | 1,256,421 | 1,205,584 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt | 16,206 | 13,600 | ||||||
Short-term borrowing | 192,026 | 175,644 | ||||||
Accounts payable | 53,026 | 60,253 | ||||||
Customer deposits and refunds | 35,782 | 33,302 | ||||||
Accrued interest | 4,783 | 2,905 | ||||||
Dividends payable | 8,442 | 7,683 | ||||||
Accrued compensation | 13,497 | 13,994 | ||||||
Regulatory liabilities | 5,357 | 6,284 | ||||||
Derivative liabilities, at fair value | 1,969 | 127 | ||||||
Other accrued liabilities | 23,454 | 15,240 | ||||||
Total current liabilities | 354,542 | 329,032 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred income taxes | 225,448 | 205,388 | ||||||
Regulatory liabilities | 143,164 | 142,736 | ||||||
Environmental liabilities | 3,709 | 4,299 | ||||||
Other pension and benefit costs | 28,113 | 30,673 | ||||||
Operating lease - liabilities | 8,380 | 9,872 | ||||||
Deferred investment tax credits and other liabilities | 2,051 | 4,903 | ||||||
Total deferred credits and other liabilities | 410,865 | 397,871 | ||||||
Environmental and other commitments and contingencies (1) | ||||||||
Total Capitalization and Liabilities | $ | 2,021,828 | $ | 1,932,487 | ||||
(1) | Refer to Note 6 and 7 in the Company's Quarterly Report on Form 10-Q for further information. |
Chesapeake Utilities Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||
Distribution Utility Statistical Data (Unaudited) | ||||||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2021 | For the Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||
Delmarva NG | Chesapeake | FPU NG | FPU Electric | Delmarva NG | Chesapeake | FPU NG | FPU Electric | |||||||||||||||||||||||||
Operating Revenues (in thousands) | ||||||||||||||||||||||||||||||||
Residential | $ | 6,891 | $ | 1,511 | $ | 5,889 | $ | 11,575 | $ | 6,722 | $ | 1,412 | $ | 5,749 | $ | 16,055 | ||||||||||||||||
Commercial | 6,060 | 1,917 | 5,553 | 10,218 | 5,321 | 1,517 | 4,983 | 11,642 | ||||||||||||||||||||||||
Industrial | 1,769 | 3,643 | 7,639 | 618 | 1,982 | 3,235 | 6,028 | 646 | ||||||||||||||||||||||||
Other (1) | 29 | 944 | 2,931 | 710 | (45) | 1,145 | 3,175 | 708 | ||||||||||||||||||||||||
Total Operating Revenues | $ | 14,749 | $ | 8,015 | $ | 22,012 | $ | 23,121 | $ | 13,980 | $ | 7,309 | $ | 19,935 | $ | 29,051 | ||||||||||||||||
Volume (in Dts for natural gas and KWHs for electric) | ||||||||||||||||||||||||||||||||
Residential | 224,510 | 63,778 | 249,830 | 95,004 | 210,787 | 56,754 | 243,255 | 101,555 | ||||||||||||||||||||||||
Commercial | 556,708 | 1,073,177 | 334,276 | 95,689 | 508,172 | 1,047,271 | 302,504 | 88,250 | ||||||||||||||||||||||||
Industrial | 1,366,112 | 7,060,313 | 1,168,458 | 1,851 | 1,144,210 | 5,999,386 | 1,080,078 | 1,596 | ||||||||||||||||||||||||
Other | 69,337 | — | 826,780 | — | 53,093 | — | 738,191 | — | ||||||||||||||||||||||||
Total | 2,216,667 | 8,197,268 | 2,579,344 | 192,544 | 1,916,262 | 7,103,411 | 2,364,028 | 191,401 | ||||||||||||||||||||||||
Average Customers | ||||||||||||||||||||||||||||||||
Residential | 87,685 | 18,625 | 63,324 | 25,408 | 84,343 | 17,930 | 60,353 | 25,104 | ||||||||||||||||||||||||
Commercial | 7,751 | 1,606 | 4,070 | 7,347 | 7,740 | 1,583 | 4,017 | 7,282 | ||||||||||||||||||||||||
Industrial | 209 | 16 | 2,531 | 2 | 204 | 16 | 2,494 | 2 | ||||||||||||||||||||||||
Other | 5 | — | 6 | — | 21 | — | 5 | — | ||||||||||||||||||||||||
Total | 95,650 | 20,247 | 69,931 | 32,757 | 92,308 | 19,529 | 66,869 | 32,388 | ||||||||||||||||||||||||
For the Nine Months Ended September 30, 2021 | For the Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||
Delmarva NG | Chesapeake | FPU NG | FPU Electric | Delmarva NG | Chesapeake | FPU NG | FPU Electric | |||||||||||||||||||||||||
Operating Revenues (in thousands) | ||||||||||||||||||||||||||||||||
Residential | $ | 56,616 | $ | 5,281 | $ | 26,607 | $ | 29,483 | $ | 49,472 | $ | 4,773 | $ | 23,857 | $ | 30,973 | ||||||||||||||||
Commercial | 28,833 | 6,018 | 20,726 | 26,295 | 23,190 | 4,791 | 17,811 | 25,716 | ||||||||||||||||||||||||
Industrial | 6,200 | 11,240 | 23,900 | 1,477 | 6,444 | 9,754 | 19,323 | 956 | ||||||||||||||||||||||||
Other (1) | (4,156) | 2,878 | 799 | 3,314 | (4,534) | 3,700 | 3,886 | 1,327 | ||||||||||||||||||||||||
Total Operating Revenues | $ | 87,493 | $ | 25,417 | $ | 72,032 | $ | 60,569 | $ | 74,572 | $ | 23,018 | $ | 64,877 | $ | 58,972 | ||||||||||||||||
Volume (in Dts for natural gas and KWHs for electric) | ||||||||||||||||||||||||||||||||
Residential | 3,557,168 | 295,564 | 1,242,872 | 238,458 | 2,867,349 | 269,273 | 1,136,539 | 235,283 | ||||||||||||||||||||||||
Commercial | 3,225,803 | 3,453,636 | 1,237,492 | 232,873 | 2,730,931 | 3,270,286 | 1,119,081 | 220,238 | ||||||||||||||||||||||||
Industrial | 4,495,793 | 21,687,034 | 3,676,442 | 8,691 | 3,667,782 | 21,015,935 | 3,466,115 | 13,978 | ||||||||||||||||||||||||
Other | 228,666 | — | 2,364,525 | — | 196,076 | — | 2,000,351 | — | ||||||||||||||||||||||||
Total | 11,507,430 | 25,436,234 | 8,521,331 | 480,022 | 9,462,138 | 24,555,494 | 7,722,086 | 469,499 | ||||||||||||||||||||||||
Average Customers | ||||||||||||||||||||||||||||||||
Residential | 87,211 | 18,622 | 62,640 | 25,351 | 83,752 | 17,784 | 59,638 | 24,983 | ||||||||||||||||||||||||
Commercial | 7,816 | 1,604 | 4,089 | 7,336 | 7,766 | 1,582 | 3,982 | 7,268 | ||||||||||||||||||||||||
Industrial | 209 | 16 | 2,507 | 2 | 203 | 16 | 2,511 | 2 | ||||||||||||||||||||||||
Other | 6 | — | 6 | — | 18 | — | 14 | — | ||||||||||||||||||||||||
Total | 95,242 | 20,242 | 69,242 | 32,689 | 91,739 | 19,382 | 66,145 | 32,253 | ||||||||||||||||||||||||
(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. |
(2) | Prior period numbers have been changed to confirm to current presentation |
View original content:https://www.prnewswire.com/news-releases/chesapeake-utilities-corporation-reports-third-quarter-2021-results-301415795.html
SOURCE Chesapeake Utilities Corporation
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