Chesapeake Utilities Corporation Reports Third Quarter 2020 Results

·14 min read

- Earnings per share ("EPS")* was $0.56 for the third quarter of 2020 compared to $0.34 for the third quarter of 2019

- Year-to-date EPS increased to $2.97 from $2.59 , for the prior year period

- Third quarter and year-to-date EPS from continuing operations increased $0.18 and $0.29 , respectively, over the corresponding periods in 2019

- In September 2020, the Florida Public Service Commission approved a settlement agreement regarding final cost recovery and rates associated with Hurricane Michael, which generated $2.9 million in incremental year-to-date earnings

- Strong performance for the first nine months of 2020 driven by continued growth in the Company's businesses, the addition of the Boulden and Elkton Gas acquisitions, expense management and gains from two property sales overcame milder weather and the net impact of COVID-19

- Milder weather reduced 2020 year-to-date earnings by $2.2 million , or $0.14 per share, compared to the same period of 2019

- Through September 2020, the COVID-19 pandemic has reduced net income by $1.9 million or $0.12 per share

- An At-The-Market ("ATM") equity program was established to issue new equity as the Company continues to manage its capital structure

DOVER, Del. , Nov. 4, 2020 /PRNewswire/ -- Chesapeake Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the "Company") today announced its financial results for the third quarter of 2020. The Company's net income for the quarter ended September 30, 2020 was $9.3 million , or $0.56 per share, compared to $5.6 million or $0.34 per share, for the same quarter of 2019. Net income for the nine months ended September 30, 2020 was $49.1 million , or $2.97 per share, compared to $42.6 million , or $2.59 per share, for the same period in 2019, representing an increase of 14.7 percent. In terms of continuing operations, the Company's EPS for the quarter ended September 30, 2020 totaled $0.56 per share, an increase of $0.18 per share over the same quarter of 2019. For the nine months ended September 30, 2020 , EPS from continuing operations totaled $2.96 per share, an increase of $0.29 per share or 10.9 percent, over the same period in 2019.

Earnings for the third quarter of 2020 reflect increased earnings from the approval of the Hurricane Michael regulatory settlement by the Florida Public Service Commission ("PSC"), pipeline expansion projects, organic growth in the natural gas distribution operations and increased margin from Marlin Gas Services, LLC ("Marlin Gas Services"). These increases were offset by lower customer consumption driven primarily by weather and the unfavorable net impact of the coronavirus ("COVID-19") pandemic.

Year-to-date earnings were impacted by the factors noted above as well as higher retail propane margins, and contributions from the acquisitions of Boulden, Inc. ("Boulden") and Elkton Gas Company ("Elkton Gas") and by gains from two property sales totaling $2.3 million on an after tax basis. The property sales were made possible due to changes in the consolidation of certain operations. 

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 have continued to significantly impact economic conditions in the United States . Chesapeake Utilities is considered an "essential business," which allows the Company to continue its operational activities and construction projects while the social distancing restrictions remain in place. In response to the COVID-19 pandemic and related restrictions, the Company implemented its pandemic response plan, which includes having all employees who can work remotely do so in order to promote social distancing and providing personal protective equipment to field employees and others to reduce the spread of COVID-19. For the three and nine months ended September 30, 2020 , the estimated impacts that COVID-19 had on the Company's earnings were approximately $0.7 million and $1.9 million , respectively, primarily driven by reduced consumption of energy largely in the commercial and industrial sectors, higher bad debt expenses and incremental expenses associated with COVID-19, including personal protective equipment and premium pay for field personnel. The additional operating expenses the Company has incurred support the ongoing delivery of our essential services during these unprecedented times. As the COVID-19 pandemic is still ongoing, the Company is continuing to assess recoverability and to date, has not established regulatory assets associated with the incremental net expense impacts, as currently authorized by the Delaware , Maryland and Florida PSCs. The Company is committed to communicating timely updates and will continue to monitor developments affecting its employees, customers, suppliers, and stockholders and take additional precautions as warranted to operate safely and to comply with the CDC, Occupational Safety and Health Administration, state and local requirements in order to protect its employees, customers and the communities.

"Our Company delivered strong third quarter results and is well positioned to achieve solid performance for the year, despite the challenges created by the COVID-19 pandemic.  We also remain on track to achieve results within our stated 2022 EPS guidance range.  The Company's performance to date has been driven by a myriad of growth initiatives across the enterprise.  Since our second quarter earnings release, we have announced several key accomplishments, most notably the settlement of the Hurricane Michael regulatory proceeding, which had a significant impact on our third quarter and year-to-date results.  The purchase of Elkton Gas at the end of July immediately created a solid foundation for our growing footprint in the Cecil County, Maryland area," stated Jeffrey Householder , President and Chief Executive Officer of Chesapeake Utilities Corporation.  "Across all businesses, our dedicated team continued to execute, generating additional margin growth from expansions of our pipelines and Marlin Gas Services' suite of services, organic growth, key regulatory initiatives, and further integration of our strategic acquisitions.  Just recently, we announced several new projects that will add to our earnings trajectory in 2021 and beyond, including several renewable natural gas projects and the acquisition of Western Natural Gas Company, a propane company in a growing market adjacent to our northern Florida service territory.  Because of new growth opportunities like these, Chesapeake Utilities remains poised to further expand our delivery of essential services that our customers expect from us and to drive increased shareholder value over the coming years."

Capital Expenditures Forecast and Earnings Guidance Update

In February 2020 , the Company reaffirmed its capital expenditures projection of $750 million - $1 billion of capital expenditures from 2018-2022.  Additionally, the Company updated its previous EPS guidance by increasing the forecasted range for 2022 to $4.70 to $4.90 given the investments already made, those underway and the growth prospects included in the Company's strategic growth plan. The Company expects EPS to grow at an average annual rate of 7.75 percent to 9.50 percent.

The Company has continued to review its projections and remains supportive of this guidance, after taking into consideration its strategic plan, the expected impact of COVID-19 and the anticipated regulatory relief and opportunities for continued collaboration across the enterprise. The Company has historically achieved an average earnings growth at or above this range, and 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 Quarters Ended September 30, 2020 and 2019

Consolidated Results


Three Months Ended






September 30,





(in thousands)

2020


2019


Change


Percent
Change

Gross margin

$

79,508



$

67,298



$

12,210



18.1

%

Depreciation, amortization and property taxes

22,976



16,010



6,966



43.5

%

Other operating expenses

39,126



36,931



2,195



5.9

%

Operating income

$

17,406



$

14,357



$

3,049



21.2

%

Operating income for the three months ended September 30, 2020 increased by $3.0 million , or 21.2 percent, compared to the same period in 2019. The increase in operating income was largely driven by the settlement of the Hurricane Michael regulatory proceeding which improved operating income by $2.9 million , including $1.9 million in operating income that was previously billed under interim rates during the first half of 2020.  Operating income for the quarter was also reduced by an estimated $1.9 million due to unfavorable impacts of COVID-19. For additional details on the Hurricane Michael regulatory proceeding, see the Major Projects and Initiatives discussion below. 

Further contributing to the improved performance for the quarter was margin growth from the Company's organic growth projects, increased margins from investments in Florida Gas Reliability Infrastructure Program ("GRIP") and increased demand for Marlin Gas Services' compressed natural gas ("CNG") transportation services. These increases were partially offset by higher operating expenses related to growth initiatives.

Regulated Energy Segment


Three Months Ended






September 30,





(in thousands)

2020


2019


Change


Percent
Change

Gross margin

$

66,491



$

54,961



$

11,530



21.0

%

Depreciation, amortization and property taxes

19,617



13,076



6,541



50.0

%

Other operating expenses

26,392



24,345



2,047



8.4

%

Operating income

$

20,482



$

17,540



$

2,942



16.8

%

Operating income for the Regulated Energy segment increased by $2.9 million for the three months ended September 30, 2020 compared to 2019, or 16.8 percent.  Higher operating income was a result of the settlement of the Hurricane Michael regulatory proceeding, which included recognizing the first and second quarter rate impacts associated with the settlement, expansion projects completed and underway by Eastern Shore Natural Gas Company ("Eastern Shore") and Peninsula Pipeline Company, Inc. ("Peninsula Pipeline"), organic growth in the Company's natural gas distribution businesses and margin from increased investments in the Florida GRIP. These increases were partially offset by higher depreciation, amortization and property taxes including amortization of the regulatory asset associated with the Hurricane Michael regulatory proceeding settlement and higher other operating expenses. Operating income for the quarter was reduced by an estimated $1.5 million due to unfavorable impacts of COVID-19, which included an increase in bad debt expense of $1.3 million compared to the third quarter 2019.

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

(in thousands)


Margin contribution from Hurricane Michael regulatory proceeding settlement (1)

$

8,261


Eastern Shore and Peninsula Pipeline service expansions

2,677


Natural gas growth (excluding service expansions)

797


Florida GRIP

685


 Margin contribution from Elkton Gas (acquisition completed in July 2020)

357


Decreased customer consumption - weather related

(1,013)


Other variances

(234)


Quarter-over-quarter increase in gross margin

$

11,530



(1)  This amount includes $5.5 million of gross margin previously invoiced under interim rates that was not recognized in revenue during the first and second quarters of 2020.

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

(in thousands)


Unfavorable COVID-19 impacts (primarily bad debt expense)

$

1,334


Payroll, Benefits and other employee-related expenses

447


Operating expenses from Elkton Gas acquisition (completed July 2020)

276


Other variances

(10)


Quarter-over-quarter increase in other operating expenses

$

2,047


Unregulated Energy Segment


Three Months Ended






September 30,





(in thousands)

2020


2019


Change


Percent
Change

Gross margin

$

13,068



$

12,418



$

650



5.2

%

Depreciation, amortization and property taxes

3,326



2,901



425



14.7

%

Other operating expenses

12,834



12,686



148



1.2

%

Operating loss

$

(3,092)



$

(3,169)



$

77



2.4

%

Operating results for the Unregulated Energy segment increased by $0.1 million for the third quarter, as compared to the third quarter of 2019.  Excluding the estimated COVID-19 impacts of $0.3 million , operating income increased by $0.4 million driven by margin growth from Marlin Gas Services and incremental margin from the Boulden assets. These increases were partially offset by higher depreciation, amortization and property taxes and higher other operating expenses.

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

(in thousands)



Marlin Gas Services - increased gross margin from demand for CNG transportation services


$

599


Boulden acquisition (assets acquired in December 2019)


327


Unfavorable COVID-19 impacts on gross margin


(399)


Other variances


123


Quarter-over-quarter increase in gross margin


$

650


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

(in thousands)


Operating expenses from Boulden acquisition (completed December 2019)

$

290


Payroll, Benefits and other employee-related expenses

(202)


Other variances

60


Quarter-over-quarter increase in other operating expenses

$

148


Operating Results for the Nine Months Ended September 30, 2020 and 2019

Consolidated Results


Nine Months Ended
September 30,





(in thousands)

2020


2019


Change


Percent
Change

Gross margin

$

253,418



$

236,203



$

17,215



7.3

%

Depreciation, amortization and property taxes

57,103



47,337



9,766



20.6

%

Other operating expenses

118,797



112,221



6,576



5.9

%

Operating income

$

77,518



$

76,645



$

873



1.1

%

Operating income for the nine months ended September 30, 2020 increased by $0.9 million compared to the same period in 2019. Operating income for the period was reduced by an estimated $6.7 million due to unfavorable impacts of COVID-19, inclusive of an increase in bad debt expense of $1.9 million compared to the same period in 2019.  Excluding this impact, operating income for the period increased by $7.6 million which included operating income of $2.9 million from the settlement of the Hurricane Michael regulatory proceeding, higher operating income from organic growth projects, gross margin contributions from the Boulden and Elkton Gas asset acquisitions completed in December 2019 and July 2020 , respectively, and higher retail propane margins per gallon, partially offset by decreased margin from customer consumption associated with milder weather during 2020.

Regulated Energy Segment


Nine Months Ended
September 30,





(in thousands)

2020


2019


Change


Percent
Change

Gross margin

$

191,745



$

177,149



$

14,596



8.2

%

Depreciation, amortization and property taxes

47,144



38,694



8,450



21.8

%

Other operating expenses

78,225



73,145



5,080



6.9

%

Operating income

$

66,376



$

65,310



$

1,066



1.6

%

Operating income for the Regulated Energy segment for the nine months ended September 30, 2020 was $66.4 million , an increase of $1.1 million , compared to the same period in 2019. Excluding the estimated unfavorable COVID-19 impacts of $4.8 million , which included an increase in bad debt expense of $1.9 million , operating income increased $5.9 million as a result of the Hurricane Michael regulatory proceeding settlement, higher gross margin from expansion projects completed by Eastern Shore and Peninsula Pipeline and organic growth in the Company's natural gas distribution businesses. These increases were offset by higher depreciation, amortization and property taxes, including amortization of the regulatory asset associated with the Hurricane Michael regulatory proceeding settlement and higher other operating expenses.

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

(in thousands)


Margin Contribution from Hurricane Michael regulatory proceeding settlement

$

8,261


Eastern Shore and Peninsula Pipeline service expansions

5,485


Natural gas distribution - customer growth (excluding service expansions)

2,497


Eastern Shore margin from capital improvements and non-service expansion projects

793


Florida GRIP

678


 Margin contribution from Elkton Gas acquisition (completed July 2020)

357


Unfavorable COVID-19 impacts on gross margin

(2,634)


Absence of Florida tax savings (net of GRIP refunds) recorded in the first quarter of 2019 for 2018

(910)


Decreased customer consumption - weather related

(863)


Other variances

932


Period-over-period increase in gross margin

$

14,596


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

(in thousands)


Unfavorable COVID-19 impacts (largely higher bad debt expense)

$

2,194


Insurance expense (non-health) - both insured and self-insured

1,377


Payroll, benefits and other employee-related expenses

1,029


Facilities maintenance and outside services costs

777


Operating expenses from Elkton acquisition (completed July 2020)

276


Other variances

(573)


Period-over-period increase in other operating expenses

$

5,080


Unregulated Energy Segment


Nine Months Ended
September 30,





(in thousands)

2020


2019


Change


Percent
Change

Gross margin

$

61,883



$

59,340



$

2,543



4.3

%

Depreciation, amortization and property taxes

9,869



8,543



1,326



15.5

%

Other operating expenses

40,964



39,480



1,484



3.8

%

Operating income

$

11,050



$

11,317



$

(267)



(2.4)

%

Operating income for the Unregulated Energy segment decreased by $0.3 million for the nine months ended September 30, 2020, compared to the same period in 2019. Excluding the estimated COVID-19 impacts of $1.6 million, operating income increased $1.3 million as a result of incremental gross margin from the acquisition of the Boulden propane assets, higher retail propane margins per gallon and increased demand for Marlin Gas Services' CNG transportation services. These increases were partially offset by reduced gross margins from overall warmer temperatures, expenses associated with recent acquisitions, and increased insurance expense.

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

(in thousands)



Propane Operations



Boulden acquisition (assets acquired in December 2019)


$

2,763


Increased retail propane margins per gallon driven by favorable market conditions and supply management


1,892


Decreased customer consumption - primarily weather related


(1,540)


Marlin Gas Services



Increased demand for CNG services


694


Aspire Energy



Decreased customer consumption - primarily weather related


(687)


Higher margins from negotiated rate increases


443


Unfavorable COVID-19 impacts on gross margin


(1,145)


Other variances


123


Period-over-period increase in gross margin


$

2,543


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

(in thousands)


Operating expenses from Boulden acquisition (completed in December 2019)

$

939


Insurance expense (non-health) - both insured and self-insured

523


Unfavorable COVID-19 impacts (higher operating and bad debt expenses)

417


Other variances

(395)


Period-over-period increase in other operating expenses

$

1,484


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 2019 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the third quarter of 2020 for further information on the risks and uncertainties related to the Company's forward-looking statements. In addition, to the risks and uncertainties identified in the Company's 2019 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q for the first, second and third quarters of 2020, risks and uncertainties related to the COVID-19 pandemic could cause actual future results to differ materially from those expressed in any forward-looking statements, including, but not limited to, the duration and scope of the COVID-19 pandemic and impact on the demand for our services; our ability to obtain needed materials and components from our suppliers; actions governments, business, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; our customers' ability to make payments for our services; and general economic uncertainty in the United States and global markets and a continuation or worsening of economic conditions in the United States or low levels of economic growth.

Conference Call

Chesapeake Utilities will host a conference call on Thursday, November 5, 2020 at 4:00 p.m. Eastern Time to discuss the Company's financial results for the three and nine ended September 30, 2020. To participate in this call, dial 877.224.1468 and reference Chesapeake Utilities' 2020 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 or through its Investor Relations (IR) App.

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

For more information, contact:

Beth W. Cooper
Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary
302.734.6799

Financial Summary

(in thousands, except per share data)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2020


2019


2020


2019

Gross Margin








Regulated Energy segment

$

66,491



$

54,961



$

191,745



$

177,149


Unregulated Energy segment

13,068



12,418



61,883



59,340


Other businesses and eliminations

(51)



(81)



(210)



(286)


Total Gross Margin

$

79,508



$

67,298



$

253,418



$

236,203










Operating Income








Regulated Energy segment

$

20,482



$

17,540



$

66,376



$

65,310


Unregulated Energy segment

(3,092)



(3,169)



11,050



11,317


Other businesses and eliminations

16



(14)



92



18


Total Operating Income

17,406



14,357



77,518



76,645


Other income (expense), net

(40)



(351)



2,997



(731)


Interest Charges

4,584



5,403



15,452



16,583


Income from Continuing Operations Before Income Taxes

12,782



8,603



65,063



59,331


Income Taxes on Continuing Operations

3,502



2,352



16,082



15,354


Income from Continuing Operations

9,280



6,251



48,981



43,977


Income (loss) from Discontinued Operations, Net of Tax

(19)



(630)



165



(1,388)


Net Income

$

9,261



$

5,621



$

49,146



$

42,589










Basic Earnings Per Share of Common Stock








Earnings from Continuing Operations

$

0.56



$

0.38



$

2.97



$

2.68


Earnings (loss) from Discontinued Operations



(0.04)



0.01



(0.08)


Basic Earnings Per Share of Common Stock

$

0.56



$

0.34



$

2.98



$

2.60










Diluted Earnings Per Share of Common Stock








Earnings from Continuing Operations

$

0.56



$

0.38



$

2.96



$

2.67


Earnings (loss) from Discontinued Operations



(0.04)



0.01



(0.08)


Diluted Earnings Per Share of Common Stock

$

0.56



$

0.34



$

2.97



$

2.59



Financial Summary Highlights
Key variances in continuing operations, between the third quarter of 2020 and the third quarter of 2019, included:

(in thousands, except per share data)


Pre-tax
Income


Net
Income


Earnings
Per Share

Third Quarter of 2019 Reported Results from Continuing Operations


$

8,603



$

6,251



$

0.38


Adjusting for Unusual Items:







Hurricane Michael (net impact of the first and second quarter of 2020)(1)


2,705



1,964



0.12


Unfavorable COVID-19 impacts


(1,023)



(742)



(0.04)


Decreased customer consumption - primarily weather related


(1,005)



(729)



(0.05)




677



493



0.03









Increased (Decreased) Gross Margins:







Margin contribution from the Hurricane Michael regulatory proceeding settlement*


2,754



1,999



0.12


Eastern Shore and Peninsula Pipeline service expansions*


2,677



1,943



0.12


Natural gas growth (excluding service expansions)


797



578



0.03


Florida GRIP*


685



498



0.03


Margin contributions from Boulden and Elkton Gas acquisitions (completed July
2020 and December 2019, respectively)*


684



496



0.03


Increased demand for CNG services for Marlin Gas Services*


599



435



0.03




8,196



5,949



0.36









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







Depreciation and amortization associated with Hurricane Michael regulatory proceeding settlement


(1,781)



(1,293)



(0.08)


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


(1,312)



(952)



(0.06)


Operating expenses from Elkton Gas and Boulden acquisitions (completed July
2020 and December 2019, respectively)


(867)



(630)



(0.04)


Facilities, maintenance and outside services costs


(414)



(301)



(0.02)


Insurance expense (non-health) - both insured and self-insured


(323)



(234)



(0.01)




(4,697)



(3,410)



(0.21)









Interest charges


(841)



(611)



(0.04)


Lower pension expense


388



282



0.02


Net other changes


456



326



0.02




3



(3)











Third Quarter of 2020 Reported Results from Continuing Operations


$

12,782



$

9,280



$

0.56



*See the Major Projects and Initiatives table.

(1)

Includes amortization of regulatory liability associated with interest expense of $0.8 million related to the Hurricane Michael regulatory proceeding settlement.

Key variances in continuing operations, between the nine months ended 2020 and the nine months ended 2019, included:

(in thousands, except per share data)


Pre-tax
Income


Net
Income


Earnings
Per Share

Nine Months Ended September 30, 2019 Reported Results from Continuing Operations:


$

59,331



$

43,977



$

2.67









Adjusting for Unusual Items:







Unfavorable COVID-19 impacts


(4,933)



(3,587)



(0.22)


Decreased customer consumption - primarily weather related


(3,090)



(2,247)



(0.14)


Absence of Florida tax savings (net of GRIP refunds) recorded in first quarter of 2019 for
2018


(910)



(667)



(0.04)


Gains from sales of assets


3,162



2,317



0.14


Favorable income tax impact associated with net operating loss carryback




1,669



0.10




(5,771)



(2,515)



(0.16)









Increased (Decreased) Gross Margins:







Margin contribution from the Hurricane Michael regulatory proceeding settlement*


8,261



6,007



0.36


Eastern Shore and Peninsula Pipeline service expansions*


5,485



3,988



0.24


Margin contribution from Elkton Gas and Boulden acquisitions (completed July 2020 and
December 2019, respectively)*


3,120



2,269



0.14


Natural gas growth (excluding service expansions)


2,497



1,816



0.11


Increased retail propane margins per gallon


1,892



1,375



0.08


Eastern Shore margin from capital improvements and capital surcharge increases


793



576



0.04


Increased demand for CNG services for Marlin Gas Services*


694



505



0.03


Florida GRIP*


678



493



0.03


Aspire Energy rate increases


443



322



0.02




23,863



17,351



1.05









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







Depreciation and amortization associated with Hurricane Michael regulatory proceeding settlement


(5,355)



(3,894)



(0.24)


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


(3,732)



(2,714)



(0.16)


Insurance expense (non-health) - both insured and self-insured


(1,900)



(1,382)



(0.08)


Operating expenses from Elkton Gas and Boulden acquisitions (completed July 2020 and
December 2019, respectively)


(1,900)



(1,382)



(0.08)


Facilities maintenance and outside services costs


(1,294)



(941)



(0.06)




(14,181)



(10,313)



(0.62)









Other income tax effects




(914)



(0.06)


Lower pension expense


1,131



822



0.05


Interest charges (1)


(852)



(620)



(0.04)


Net other changes


1,542



1,193



0.07




1,821



481



0.02









Nine Months Ended September 30, 2020 Reported Results from Continuing Operations


$

65,063



$

48,981



$

2.96



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

(1)

Interest charges includes amortization of a regulatory liability of $1.1 million related to the Hurricane Michael regulatory proceeding settlement.

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 represent 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


2020


2019


2020


2019


2019


2020


2021

Pipeline Expansions















West Palm Beach County, Florida Expansion (1)


$

1,020



$

745



$

2,988



$

1,068



$

2,139



$

4,076



$

4,984


Del-Mar Energy Pathway (1)


925



189



1,565



542



731



2,398



4,100


Auburndale


170



113



509



113



283



679



679


Callahan Intrastate Pipeline (including related
natural gas distribution services)


1,609





2,146







4,039



6,437


Guernsey Power Station














514


Total Pipeline Expansions


3,724



1,047



7,208



1,723



3,153



11,192



16,714

















Virtual Pipeline Growth















Compressed Natural Gas Transportation


1,592



993



5,047



4,353



5,410



7,000



8,000


Renewable Natural Gas Transportation














1,000


Total Virtual Pipeline Growth


1,592



993



5,047



4,353



5,410



7,000



9,000

















Acquisitions















Boulden Propane


327





2,763





329



4,000



4,200


Elkton Gas


357





357







1,365



3,992


Western Natural Gas Company












250



1,800


Total Acquisitions


684





3,120





329



5,615



9,992

















Regulatory Initiatives















Florida GRIP


3,831



3,146



11,135



10,457



13,939



14,976



16,739


Hurricane Michael regulatory proceeding (2)


8,261





8,261







11,014



11,014


Total Regulatory Initiatives


12,092



3,146



19,396



10,457



13,939



25,990



27,753

















Total


$

18,092



$

5,186



$

34,771



$

16,533



$

22,831



$

49,797



$

63,459




(1)

Includes margin generated from interim services.

(2)

This amount includes $5.5 million of gross margin previously invoiced under interim rates that was not recognized in revenue during the first and second quarters of 2020.

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 $0.3 million and $1.9 million in additional gross margin for the three and nine months ended September 30, 2020, respectively. The Company expects to complete the remainder of the project in phases through the second quarter of 2021, and estimates that the project will generate gross margin of $4.1 million in 2020 and $5.0 million annually thereafter.

Del-Mar Energy Pathway
In December 2019, the Federal Energy Regulatory Commission 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: (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 on the project began in January 2020, and interim services in advance of this project generated $0.9 million and $1.6 million in margin for the three and nine months ended September 30, 2020, respectively. The estimated gross margin from this project is approximately $2.4 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 has completed the construction of pipeline facilities in Polk County, Florida. Peninsula Pipeline provides 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 $0.2 million and $0.5 million for the three and nine months ended September 30, 2020, respectively, 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 with Seacoast Gas Transmission in Nassau County, Florida. The 26-mile pipeline will serve growing demand in both Nassau and Duval Counties. This project was placed in service in June 2020, one month earlier than initially forecasted, and generated $1.6 million and $2.1 million in additional gross for the three and nine months ended September 30, 2020, respectively. Peninsula Pipeline expects to generate gross margin of $4.0 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 firm natural gas transportation service to this facility. Guernsey Power Station commenced construction of the project in October 2019. Aspire Energy Express is expected to commence construction of the gas transmission facilities in the fourth quarter of 2021. This project is expected to produce gross margin of approximately $0.5 million in 2021 and $1.5 million for 2022 and beyond.

Virtual Pipeline Growth

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. For the three and nine months ended September 30, 2020, Marlin Gas Services generated additional gross margin of $0.6 million and $0.7 million, respectively. We estimate that Marlin Gas Services will generate annual gross margin of approximately $7.0 million in 2020 and $8.0 million in 2021, with the potential for additional growth in future years. Marlin Gas Services continues to actively expand the territories it serves, as well as leverage its patented technology to serve other markets, including pursuing liquefied natural gas transportation opportunities and most recently, announcing its expansion into the transportation of renewable natural gas from diverse supply sources to various pipeline interconnection points, as further outlined below.

Renewable Natural Gas Transportation

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 remove excess organics from poultry waste and convert it into renewable natural gas. BDC and the Company's affiliates are collaborating on this project in addition to several other project sites where organic waste can be converted into a carbon-negative energy source. This project provides the opportunity for the Company to maintain the green attributes of the renewable natural gas as it is distributed to its natural gas distribution customers.

The resources generated from organic material at BDC's anaerobic digestion facilities in Delaware, will be processed by the Company and Eastern Shore and Marlin Gas Services will facilitate the transportation and receipt of renewable natural gas for multiple suppliers through its interconnect facility and equipment. Marlin Gas Services will transport the sustainable fuel to Eastern Shore, where it will be introduced to the Company's own distribution 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 renewable natural gas to its Delmarva natural gas operations. As part of this partnership, the Company will transport the renewable natural gas produced at CleanBay's planned Westover, Maryland bio-refinery, to the Company's natural gas infrastructure in the Delmarva region. Eastern Shore and Marlin Gas Services, will transport the renewable natural gas 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 has disclosed that it expects to generate at least $1.0 million in 2021 in incremental margin from renewable natural gas transportation services beginning in 2021. The Company continues to finalize contract terms associated with some of these projects. Additional information will be provided regarding incremental margin on these projects at a future time, as contracts are finalized.

Acquisitions

Boulden Propane
In December 2019, Sharp Energy, Inc. ("Sharp"), the Company's wholly-owned subsidiary, 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 and $2.8 million of incremental gross margin for the three and nine months ended September 30, 2020, respectively. The Company estimates that this acquisition will generate annual 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 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 is approximately $15.6 million, which included $0.6 million of working capital. Elkton Gas' territory is contiguous to the Company's franchised service territory in Cecil County, Maryland. The Company generated $0.4 million in additional gross margin from Elkton Gas and estimates that this acquisition will generate gross margin of approximately $1.4 million in 2020 and $4.0 million in 2021.

Western Natural Gas Company
In October 2020, Sharp acquired certain propane operating assets of Western Natural Gas Company, which provides propane distribution service throughout Jacksonville, Florida and the surrounding communities, for approximately $6.7 million, net of cash acquired. The acquisition will be accounted for as a business combination within the Unregulated Energy segment beginning in the fourth quarter of 2020. Sharp estimates that this acquisition will generate gross margin of approximately of $0.3 million in 2020 and $1.8 million in 2021.

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, we have invested $160.1 million of capital expenditures to replace 322 miles of qualifying distribution mains, including $16.1 million of new pipes during the first nine months of 2020. The Company expects to generate annual gross margin of approximately $15.0 million in 2020, and $16.7 million in 2021.

Hurricane Michael
In October 2018, Hurricane Michael passed through FPU's electric distribution operation's 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.

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. FPU also requested treatment and recovery of certain storm-related costs as regulatory assets for items currently not allowed to be recovered through the storm reserve as well as the recovery of capital replaced as a result of the storm. Recovery of these costs included a component of an overall return on capital additions and regulatory assets. 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 from 30 years as originally requested to 10 years, and included costs related to Hurricane Dorian of approximately $1.2 million in this filing.

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) record regulatory assets for storm costs in the amount of $45.8 million including interest which will be amortized over six years; (b) recover these storm costs through a surcharge for a total of $7.7 million annually; and (c) collect an annual increase in revenue of $3.3 million to recover capital costs associated with new plant and a regulatory asset for the cost of removal and undepreciated plant. The new base rates and storm surcharge were effective on November 1, 2020. The following table summarizes the impact of Hurricane Michael regulatory proceeding for the three and nine months ended September 30, 2020:


Three Months Ended


Nine Months Ended

(in thousands)

September 30, 2020(1)


September 30, 2020

Gross Margin

$

2,754



$

8,261


Depreciation

(298)



(883)


Amortization of regulatory assets

2,079



6,238


Operating income

973



2,906


Amortization of liability associated with interest expense

(360)



(1,132)


Pre-tax income

1,333



4,038


Income tax expense

365



1,106


Net income

$

968



$

2,932







(1) The Hurricane Michael impact for the three months ended September 30, 2020, is presented for comparison purposes.

Other major factors influencing gross margin

Weather and Consumption
Weather conditions accounted for a $1.0 million decrease in gross margin during the third quarter of 2020, compared to the same period in 2019, due to a 17 percent decrease in Cooling Degree-Days ("CDDs") in Florida that resulted in reduced customer consumption for our electric operations. Compared to normal temperatures, as detailed below, gross margin was $0.5 million lower due to a lower number of CDDs in the Company's Florida service territory. For the nine-month period, overall milder temperatures decreased gross margin by $3.1 million compared to the same period in 2019 and $3.2 million compared to normal temperatures. The following table summarizes Heading Degree-Days ("HDD") and CDD variances from the 10-year average HDD/CDD ("Normal") for the three and nine months ended September 30, 2020 and 2019.


Three Months Ended




Nine Months Ended




September 30,




September 30,




2020


2019


Variance


2020


2019


Variance

Delmarva












Actual HDD

43



7



36



2,416



2,576



(160)


10-Year Average HDD ("Normal")

48



61



(13)



2,797



2,846



(49)


Variance from Normal

(5)



(54)





(381)



(270)




Florida












Actual HDD







343



379



(36)


10-Year Average HDD ("Normal")







508



532



(24)


Variance from Normal







(165)



(153)




Ohio












Actual HDD

86



2



84



3,383



3,533



(150)


10-Year Average HDD ("Normal")

79



90



(11)



3,691



3,742



(51)


Variance from Normal

7



(88)





(308)



(209)




Florida












Actual CDD

1,337



1,620



(283)



2,412



2,840



(428)


10-Year Average CDD ("Normal")

1,573



1,553



20



2,666



2,625



41


Variance from Normal

(236)



67





(254)



215




Natural Gas Distribution Margin Growth
Customer growth for the Company's natural gas distribution operations, as a result of the addition of new customers and the conversion of customers from alternative fuel sources to natural gas service, generated $0.8 million and $2.5 million for the three and nine months ended September 30, 2020, respectively. The average number of residential customers served on the Delmarva Peninsula and in Florida increased by 4.9 percent and 3.9 percent, respectively, during the third quarter of 2020 and 4.0 percent and 3.8 percent, respectively for the nine months ended September 30, 2020. On the Delmarva Peninsula, a larger percentage of the margin growth was generated from residential growth given the expansion of gas into new communities and conversions to natural gas as our distribution infrastructure continues to build out. In Florida, as gas heating is not a significant portion of residential use, the incremental margin is split more even among the sectors with 50-percent coming from each of the sectors on a year-to-date basis. The details for the three and nine months ended September 30, 2020 are provided in the following table:



Three Months Ended


Nine Months Ended



September 30, 2020


September 30, 2020

(in thousands)


Delmarva Peninsula

Florida


Delmarva Peninsula

Florida

Customer Growth:







Residential


$

302


$

166



$

1,069


$

560


Commercial and industrial


78


251



302


566


Total Customer Growth


$

380


$

417



$

1,371


$

1,126


Capital Investment Growth and Associated Financing Plans
The Company's capital expenditures were $143.9 million for the nine months ended September 30, 2020. The following table shows a range of the expected 2020 capital expenditures by segment and by business line:


2020

(dollars in thousands)

Low


High

Regulated Energy:




Natural gas distribution

$

77,000



$

85,000


Natural gas transmission

70,000



74,000


Electric distribution

3,000



5,000


Total Regulated Energy

150,000



164,000


Unregulated Energy:




Propane distribution

14,000



16,000


Energy transmission

17,000



18,000


Other unregulated energy

12,000



14,000


Total Unregulated Energy

43,000



48,000


Other:




Corporate and other businesses

2,000



3,000


Total Other

2,000



3,000


Total 2020 Expected Capital Expenditures

$

195,000



$

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, 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 budgeted amounts.

Management reaffirms its capital expenditure guidance of between $750 million and $1 billion for the five-year period between 2018 and 2022. From January 1, 2018 through September 30, 2020, the Company has invested $625.7 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 45 percent as of September 30, 2020. The Company may utilize more temporary short-term debt, when the financing cost is attractive, as a bridge to the permanent long-term financing, or if the equity markets are more volatile. The Company also 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 filed a shelf registration statement with the Securities and Exchange Commission, which provides for the issuance of shares of its common stock in a variety of offering types. On August 17, 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 $75.0 million. In September 2020, the Company issued 0.2 million shares of common stock and received net proceeds of approximately $19.2 million, for the DRIP and ATM issuances, which were added to its general corporate funds. In October 2020, the Company issued an additional 0.7 million shares and received approximately $63.8 million in net proceeds, for the DRIP and ATM issuances. As a result of issuing additional equity in October 2020, the Company's equity to total capitalization ratio including short-term borrowings was approximately 50 percent at October 31, 2020, which is at the low end of its target range.

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.

In September 2020, the Company entered into a $375.0 million syndicated revolving line of credit (the "Revolver"), with six participating lenders. The Revolver expires on September 29, 2021 and has a tiered commitment fee and interest rate schedule, based upon a pre-determined spread over LIBOR, depending upon the Company's total capitalization. As of September 30, 2020, when pricing was established fourth quarter of 2020, the applicable commitment fee represented 0.175 percent and the spread over LIBOR for the interest rate represented 1.125 percent. As a result of entering into the Revolver, in September 2020, the Company terminated and paid outstanding balances for all previously existing bilateral lines of credit and its previous revolving credit facility. The Company's available credit under the new Revolver at September 30, 2020 was $154.7 million. More information about the Company's new revolving line of credit as well as the renewal of several debt private placement shelf agreements is included in the Company's Quarterly Report on Form 10-Q for the third quarter of 2020.

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,


2020


2019


2020


2019

Operating Revenues








Regulated Energy

$

82,762



$

74,580



$

259,235



$

251,601


Unregulated Energy and other

18,657



18,046



91,925



96,029


Total Operating Revenues

101,419



92,626



351,160



347,630


Operating Expenses








Regulated Energy cost of sales

16,271



19,619



67,490



74,452


Unregulated Energy and other cost of sales

5,640



5,709



30,250



36,975


Operations

34,959



32,614



105,516



99,558


Maintenance

3,717



3,920



11,695



11,200


Gain from a settlement





(130)



(130)


Depreciation and amortization

18,293



11,220



42,793



33,612


Other taxes

5,133



5,187



16,028



15,318


Total operating expenses

84,013



78,269



273,642



270,985


Operating Income

17,406



14,357



77,518



76,645


Other income (expense), net

(40)



(351)



2,997



(731)


Interest charges

4,584



5,403



15,452



16,583


Income from Continuing Operations Before Income Taxes

12,782



8,603



65,063



59,331


Income Taxes on Continuing Operations

3,502



2,352



16,082



15,354


Income from Continuing Operations

9,280



6,251



48,981



43,977


Income (loss) from Discontinued Operations, Net of Tax

(19)



(630)



165



(1,388)


Net Income

$

9,261



$

5,621



$

49,146



$

42,589


Weighted Average Common Shares Outstanding:








Basic

16,533,748



16,403,776



16,466,106



16,396,646


Diluted

16,592,842



16,453,867



16,523,200



16,444,231


Basic Earnings Per Share of Common Stock:








Earnings from Continuing Operations

$

0.56



$

0.38



$

2.97



$

2.68


Earnings (loss) from Discontinued Operations



(0.04)



0.01



(0.08)


Basic Earnings Per Share of Common Stock

$

0.56



$

0.34



$

2.98



$

2.60










Diluted Earnings Per Share of Common Stock:








Earnings from Continuing Operations

$

0.56



$

0.38



$

2.96



$

2.67


Earnings (loss) from Discontinued Operations



(0.04)



0.01



(0.08)


Diluted Earnings Per Share of Common Stock

$

0.56



$

0.34



$

2.97



$

2.59


Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


Assets


September 30, 2020


December 31, 2019

(in thousands, except shares and per share data)





Property, Plant and Equipment





Regulated Energy


$

1,564,420



$

1,441,473


Unregulated Energy


278,897



265,209


Other businesses and eliminations


30,365



39,850


Total property, plant and equipment


1,873,682



1,746,532


Less: Accumulated depreciation and amortization


(358,851)



(336,876)


Plus: Construction work in progress


52,519



54,141


Net property, plant and equipment


1,567,350



1,463,797


Current Assets





Cash and cash equivalents


3,056



6,985


Trade and other receivables


53,132



50,899


Less: Allowance for credit losses


(4,130)



(1,337)


Trade receivables, net


49,002



49,562


Accrued revenue


11,545



20,846


Propane inventory, at average cost


4,099



5,824


Other inventory, at average cost


5,583



6,067


Regulatory assets


10,372



5,144


Storage gas prepayments


2,971



3,541


Income taxes receivable


15,156



20,050


Prepaid expenses


14,817



13,928


Derivative assets, at fair value


1,967




Other current assets


753



2,879


Total current assets


119,321



134,826


Deferred Charges and Other Assets





Goodwill


36,930



32,668


Other intangible assets, net


7,215



8,129


Investments, at fair value


9,680



9,229


Operating lease right-of-use assets


11,077



11,563


Regulatory assets


112,650



73,407


Receivables and other deferred charges


23,865



49,579


Total deferred charges and other assets


201,417



184,575


Total Assets


$

1,888,088



$

1,783,198


Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


Capitalization and Liabilities


September 30, 2020


December 31, 2019

(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)


8,126



7,984


Additional paid-in capital


283,836



259,253


Retained earnings


328,357



300,607


Accumulated other comprehensive loss


(3,629)



(6,267)


Deferred compensation obligation


5,634



4,543


Treasury stock


(5,634)



(4,543)


Total stockholders' equity


616,690



561,577


Long-term debt, net of current maturities


519,971



440,168


Total capitalization


1,136,661



1,001,745


Current Liabilities





Current portion of long-term debt


15,600



45,600


Short-term borrowing


216,388



247,371


Accounts payable


46,492



54,068


Customer deposits and refunds


32,635



30,939


Accrued interest


5,231



2,554


Dividends payable


7,293



6,644


Accrued compensation


10,903



16,236


Regulatory liabilities


6,460



5,991


Derivative liabilities, at fair value


439



1,844


Other accrued liabilities


18,531



12,077


Total current liabilities


359,972



423,324


Deferred Credits and Other Liabilities





Deferred income taxes


202,649



180,656


Regulatory liabilities


142,280



127,744


Environmental liabilities


4,447



6,468


Other pension and benefit costs


27,462



30,569


Operating lease - liabilities


9,681



9,896


Deferred investment tax credits and other liabilities


4,936



2,796


Total deferred credits and other liabilities


391,455



358,129


Environmental and other commitments and contingencies (1)





Total Capitalization and Liabilities


$

1,888,088



$

1,783,198



(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, 2020


For the Three Months Ended September 30, 2019



Delmarva NG
Distribution (2)


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


$

6,722



$

1,412



$

6,380



$

11,308



$

7,314



$

1,349



$

5,671



$

14,460


Commercial


5,321



1,517



4,985



9,077



3,812



1,471



5,588



11,216


Industrial


1,982



3,235



6,028



414



1,678



3,063



5,707



591


Other (1)


(45)



1,146



3,174



3



456



827



942



(2,093)


Total Operating Revenues


$

13,980



$

7,310



$

20,567



$

20,802



$

13,260



$

6,710



$

17,908



$

24,174



















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













Residential


210,787



56,754



243,255



101,555



183,998



52,805



214,521



97,537


Commercial


508,172



1,047,271



302,504



88,250



483,382



1,045,666



344,727



92,571


Industrial


1,144,210



5,999,386



1,080,078



1,596



1,233,019



7,019,573



1,114,359



7,460


Other


53,093





738,191





59,635





583,267