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FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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C
HESAPEAKE
U
TILITIES
C
ORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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51-0064146
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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I
TEM
1.
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I
TEM
2.
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I
TEM
3.
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I
TEM
4.
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I
TEM
1.
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I
TEM
1
A
.
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I
TEM
2.
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||
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I
TEM
3.
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I
TEM
5.
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I
TEM
6.
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Three Months Ended
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Nine Months Ended
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||||||||||||
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September 30,
|
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September 30,
|
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||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
||||||||
(in thousands, except shares and per share data)
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenues
|
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
|
$
|
70,019
|
|
|
$
|
63,796
|
|
|
$
|
226,630
|
|
|
$
|
235,438
|
|
|
Unregulated Energy and other
|
|
38,329
|
|
|
28,117
|
|
|
130,356
|
|
|
119,238
|
|
|
||||
Total Operating Revenues
|
|
108,348
|
|
|
91,913
|
|
|
356,986
|
|
|
354,676
|
|
|
||||
Operating Expenses
|
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy cost of sales
|
|
24,644
|
|
|
23,161
|
|
|
81,184
|
|
|
101,414
|
|
|
||||
Unregulated Energy and other cost of sales
|
|
28,183
|
|
|
17,959
|
|
|
85,142
|
|
|
73,465
|
|
|
||||
Operations
|
|
30,126
|
|
|
26,388
|
|
|
85,370
|
|
|
79,522
|
|
|
||||
Maintenance
|
|
3,542
|
|
|
2,603
|
|
|
8,925
|
|
|
8,033
|
|
|
||||
Gain from a settlement
|
|
—
|
|
|
—
|
|
|
(130
|
)
|
|
(1,500
|
)
|
|
||||
Depreciation and amortization
|
|
8,209
|
|
|
7,636
|
|
|
23,493
|
|
|
22,155
|
|
|
||||
Other taxes
|
|
3,488
|
|
|
3,257
|
|
|
10,725
|
|
|
10,000
|
|
|
||||
Total Operating Expenses
|
|
98,192
|
|
|
81,004
|
|
|
294,709
|
|
|
293,089
|
|
|
||||
Operating Income
|
|
10,156
|
|
|
10,909
|
|
|
62,277
|
|
|
61,587
|
|
|
||||
Other (expense) income, net
|
|
(28
|
)
|
|
36
|
|
|
(68
|
)
|
|
(3
|
)
|
|
||||
Interest charges
|
|
2,722
|
|
|
2,492
|
|
|
7,996
|
|
|
7,425
|
|
|
||||
Income Before Income Taxes
|
|
7,406
|
|
|
8,453
|
|
|
54,213
|
|
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54,159
|
|
|
||||
Income taxes
|
|
2,990
|
|
|
3,334
|
|
|
21,401
|
|
|
21,638
|
|
|
||||
Net Income
|
|
$
|
4,416
|
|
|
$
|
5,119
|
|
|
$
|
32,812
|
|
|
$
|
32,521
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
15,372,413
|
|
|
15,258,819
|
|
|
15,324,932
|
|
|
15,035,569
|
|
|
||||
Diluted
|
|
15,412,783
|
|
|
15,306,843
|
|
|
15,365,955
|
|
|
15,083,641
|
|
|
||||
Earnings Per Share of Common Stock:
|
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
0.29
|
|
|
$
|
0.34
|
|
|
$
|
2.14
|
|
|
$
|
2.16
|
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|
Diluted
|
|
$
|
0.29
|
|
|
$
|
0.33
|
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$
|
2.14
|
|
|
$
|
2.16
|
|
|
Cash Dividends Declared Per Share of Common Stock
|
|
$
|
0.3050
|
|
|
$
|
0.2875
|
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|
$
|
0.8975
|
|
|
$
|
0.8450
|
|
|
|
|
Three Months Ended
|
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Nine Months Ended
|
||||||||||||
|
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September 30,
|
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
4,416
|
|
|
$
|
5,119
|
|
|
$
|
32,812
|
|
|
$
|
32,521
|
|
Other Comprehensive Income (Loss), net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Employee Benefits, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Amortization of prior service cost, net of tax of $(8), $(7), $(23) and $(20), respectively
|
|
(12
|
)
|
|
(10
|
)
|
|
(37
|
)
|
|
(30
|
)
|
||||
Net gain, net of tax of $66, $62, $200 and $187, respectively
|
|
100
|
|
|
93
|
|
|
300
|
|
|
278
|
|
||||
Cash Flow Hedges, net of tax:
|
|
|
|
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|
|
|
|
||||||||
Unrealized gain (loss) on commodity contract cash flow hedges, net of tax of $38, $(51), $360 and $(29), respectively
|
|
51
|
|
|
(75
|
)
|
|
548
|
|
|
(43
|
)
|
||||
Total Other Comprehensive Income
|
|
139
|
|
|
8
|
|
|
811
|
|
|
205
|
|
||||
Comprehensive Income
|
|
$
|
4,555
|
|
|
$
|
5,127
|
|
|
$
|
33,623
|
|
|
$
|
32,726
|
|
Assets
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Property, Plant and Equipment
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
908,822
|
|
|
$
|
842,756
|
|
Unregulated Energy
|
|
194,743
|
|
|
145,734
|
|
||
Other businesses and eliminations
|
|
20,835
|
|
|
18,999
|
|
||
Total property, plant and equipment
|
|
1,124,400
|
|
|
1,007,489
|
|
||
Less: Accumulated depreciation and amortization
|
|
(237,434
|
)
|
|
(215,313
|
)
|
||
Plus: Construction work in progress
|
|
49,082
|
|
|
62,774
|
|
||
Net property, plant and equipment
|
|
936,048
|
|
|
854,950
|
|
||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
1,536
|
|
|
2,855
|
|
||
Accounts receivable (less allowance for uncollectible accounts of $792 and $909, respectively)
|
|
47,103
|
|
|
41,007
|
|
||
Accrued revenue
|
|
9,506
|
|
|
12,452
|
|
||
Propane inventory, at average cost
|
|
4,106
|
|
|
6,619
|
|
||
Other inventory, at average cost
|
|
3,867
|
|
|
3,803
|
|
||
Regulatory assets
|
|
6,045
|
|
|
8,268
|
|
||
Storage gas prepayments
|
|
8,192
|
|
|
3,410
|
|
||
Income taxes receivable
|
|
13,178
|
|
|
24,950
|
|
||
Prepaid expenses
|
|
7,603
|
|
|
7,146
|
|
||
Mark-to-market energy assets
|
|
477
|
|
|
153
|
|
||
Other current assets
|
|
543
|
|
|
1,044
|
|
||
Total current assets
|
|
102,156
|
|
|
111,707
|
|
||
Deferred Charges and Other Assets
|
|
|
|
|
||||
Goodwill
|
|
15,070
|
|
|
14,548
|
|
||
Other intangible assets, net
|
|
1,938
|
|
|
2,222
|
|
||
Investments, at fair value
|
|
4,630
|
|
|
3,644
|
|
||
Regulatory assets
|
|
76,343
|
|
|
77,519
|
|
||
Receivables and other deferred charges
|
|
4,325
|
|
|
2,831
|
|
||
Total deferred charges and other assets
|
|
102,306
|
|
|
100,764
|
|
||
Total Assets
|
|
$
|
1,140,510
|
|
|
$
|
1,067,421
|
|
Capitalization and Liabilities
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
(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 25,000,000 shares)
|
|
7,932
|
|
|
7,432
|
|
||
Additional paid-in capital
|
|
250,202
|
|
|
190,311
|
|
||
Retained earnings
|
|
185,195
|
|
|
166,235
|
|
||
Accumulated other comprehensive loss
|
|
(5,029
|
)
|
|
(5,840
|
)
|
||
Deferred compensation obligation
|
|
2,476
|
|
|
1,883
|
|
||
Treasury stock
|
|
(2,476
|
)
|
|
(1,883
|
)
|
||
Total stockholders’ equity
|
|
438,300
|
|
|
358,138
|
|
||
Long-term debt, net of current maturities
|
|
143,525
|
|
|
149,006
|
|
||
Total capitalization
|
|
581,825
|
|
|
507,144
|
|
||
Current Liabilities
|
|
|
|
|
||||
Current portion of long-term debt
|
|
12,087
|
|
|
9,151
|
|
||
Short-term borrowing
|
|
154,490
|
|
|
173,397
|
|
||
Accounts payable
|
|
41,297
|
|
|
39,300
|
|
||
Customer deposits and refunds
|
|
26,858
|
|
|
27,173
|
|
||
Accrued interest
|
|
3,119
|
|
|
1,311
|
|
||
Dividends payable
|
|
4,678
|
|
|
4,390
|
|
||
Accrued compensation
|
|
7,823
|
|
|
10,014
|
|
||
Regulatory liabilities
|
|
2,412
|
|
|
7,365
|
|
||
Mark-to-market energy liabilities
|
|
29
|
|
|
433
|
|
||
Other accrued liabilities
|
|
10,260
|
|
|
7,059
|
|
||
Total current liabilities
|
|
263,053
|
|
|
279,593
|
|
||
Deferred Credits and Other Liabilities
|
|
|
|
|
||||
Deferred income taxes
|
|
205,562
|
|
|
192,600
|
|
||
Regulatory liabilities
|
|
43,354
|
|
|
43,064
|
|
||
Environmental liabilities
|
|
8,682
|
|
|
8,942
|
|
||
Other pension and benefit costs
|
|
32,501
|
|
|
33,481
|
|
||
Deferred investment tax credits and other liabilities
|
|
5,533
|
|
|
2,597
|
|
||
Total deferred credits and other liabilities
|
|
295,632
|
|
|
280,684
|
|
||
Environmental and other commitments and contingencies (Note 5 and 6)
|
|
|
|
|
||||
Total Capitalization and Liabilities
|
|
$
|
1,140,510
|
|
|
$
|
1,067,421
|
|
|
|
Nine Months Ended
|
||||||
|
|
September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
(in thousands)
|
|
|
|
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
32,812
|
|
|
$
|
32,521
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
23,493
|
|
|
22,155
|
|
||
Depreciation and accretion included in other costs
|
|
5,357
|
|
|
5,280
|
|
||
Deferred income taxes, net
|
|
12,004
|
|
|
(1,155
|
)
|
||
Realized gain on commodity contracts/sale of assets/investments
|
|
(405
|
)
|
|
(411
|
)
|
||
Unrealized (gain) loss on investments/commodity contracts
|
|
(243
|
)
|
|
60
|
|
||
Employee benefits and compensation
|
|
1,217
|
|
|
901
|
|
||
Share-based compensation
|
|
1,887
|
|
|
1,445
|
|
||
Other, net
|
|
42
|
|
|
13
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable and accrued revenue
|
|
(3,835
|
)
|
|
21,898
|
|
||
Propane inventory, storage gas and other inventory
|
|
(2,179
|
)
|
|
3,166
|
|
||
Regulatory assets/liabilities, net
|
|
(3,326
|
)
|
|
6,467
|
|
||
Prepaid expenses and other current assets
|
|
485
|
|
|
(159
|
)
|
||
Accounts payable and other accrued liabilities
|
|
3,679
|
|
|
(9,897
|
)
|
||
Income taxes receivable
|
|
14,897
|
|
|
14,883
|
|
||
Customer deposits and refunds
|
|
(314
|
)
|
|
(1,177
|
)
|
||
Accrued compensation
|
|
(2,293
|
)
|
|
(1,406
|
)
|
||
Other assets and liabilities, net
|
|
(1,053
|
)
|
|
(652
|
)
|
||
Net cash provided by operating activities
|
|
82,225
|
|
|
93,932
|
|
||
Investing Activities
|
|
|
|
|
||||
Property, plant and equipment expenditures
|
|
(106,851
|
)
|
|
(97,299
|
)
|
||
Proceeds from sales of assets
|
|
119
|
|
|
109
|
|
||
Acquisitions, net of cash acquired
|
|
—
|
|
|
(20,930
|
)
|
||
Environmental expenditures
|
|
(260
|
)
|
|
(113
|
)
|
||
Net cash used in investing activities
|
|
(106,992
|
)
|
|
(118,233
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Common stock dividends
|
|
(12,964
|
)
|
|
(11,725
|
)
|
||
Issuance of stock for Dividend Reinvestment Plan
|
|
600
|
|
|
633
|
|
||
Stock issuance
|
|
57,306
|
|
|
—
|
|
||
Change in cash overdrafts due to outstanding checks
|
|
2,466
|
|
|
2,964
|
|
||
Net (repayment) borrowing under line of credit agreements
|
|
(21,379
|
)
|
|
35,898
|
|
||
Repayment of long-term debt and capital lease obligation
|
|
(2,581
|
)
|
|
(4,262
|
)
|
||
Net cash provided by financing activities
|
|
23,448
|
|
|
23,508
|
|
||
Net Decrease in Cash and Cash Equivalents
|
|
(1,319
|
)
|
|
(793
|
)
|
||
Cash and Cash Equivalents—Beginning of Period
|
|
2,855
|
|
|
4,574
|
|
||
Cash and Cash Equivalents—End of Period
|
|
$
|
1,536
|
|
|
$
|
3,781
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(in thousands, except shares and per
share data)
|
Number of
Shares
(1)
|
|
Par
Value
|
|
Additional Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated Other Comprehensive
Loss
|
|
Deferred
Compensation
|
|
Treasury
Stock
|
|
Total
(2)
|
|||||||||||||||
Balance at December 31, 2014
|
14,588,711
|
|
|
$
|
7,100
|
|
|
$
|
156,581
|
|
|
$
|
142,317
|
|
|
$
|
(5,676
|
)
|
|
$
|
1,258
|
|
|
$
|
(1,258
|
)
|
|
$
|
300,322
|
|
Net income
|
|
|
—
|
|
|
—
|
|
|
41,140
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,140
|
|
||||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|||||||
Dividend declared ($1.1325 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,222
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17,222
|
)
|
|||||||
Retirement savings plan and dividend reinvestment plan
|
43,275
|
|
|
21
|
|
|
2,214
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,235
|
|
|||||||
Common stock issued in acquisition
|
592,970
|
|
|
289
|
|
|
29,876
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,165
|
|
|||||||
Share-based compensation and tax benefit
(4) (5)
|
45,703
|
|
|
22
|
|
|
1,640
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,662
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
625
|
|
|
(625
|
)
|
|
—
|
|
|||||||
Balance at December 31, 2015
|
15,270,659
|
|
|
7,432
|
|
|
190,311
|
|
|
166,235
|
|
|
(5,840
|
)
|
|
1,883
|
|
|
(1,883
|
)
|
|
358,138
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
32,812
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,812
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
811
|
|
|
—
|
|
|
—
|
|
|
811
|
|
|||||||
Dividend declared ($0.8975 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,852
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,852
|
)
|
|||||||
Retirement savings plan and dividend reinvestment plan
|
30,041
|
|
|
15
|
|
|
1,859
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,874
|
|
|||||||
Stock issuance
(3)
|
960,488
|
|
|
467
|
|
|
56,839
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,306
|
|
|||||||
Share-based compensation and tax benefit
(4)
(5)
|
36,099
|
|
|
18
|
|
|
1,193
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,211
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
593
|
|
|
(593
|
)
|
|
—
|
|
|||||||
Balance at September 30, 2016
|
16,297,287
|
|
|
$
|
7,932
|
|
|
$
|
250,202
|
|
|
$
|
185,195
|
|
|
$
|
(5,029
|
)
|
|
$
|
2,476
|
|
|
$
|
(2,476
|
)
|
|
$
|
438,300
|
|
(1)
|
Includes
80,024
and
70,631
shares at
September 30, 2016
and
December 31, 2015
, respectively, held in a Rabbi Trust related to our Deferred Compensation Plan.
|
(2)
|
2,000
shares of preferred stock at
$0.00001
par value has been authorized. None has been issued or is outstanding; accordingly, no information has been included in the statements of stockholders’ equity.
|
(3)
|
On September 22, 2016, we completed a public offering of
960,488
shares of our common stock at a price per share of
$62.26
. The net proceeds from the sale of common stock, after deducting underwriting commissions and expenses, were approximately
$57.3 million
.
|
(4)
|
Includes amounts for shares issued for Directors’ compensation.
|
(5)
|
The shares issued under the SICP are net of shares withheld for employee taxes.
For the nine months ended September 30, 2016
, and for the year ended
December 31, 2015
, we withheld
12,031
and
12,620
shares, respectively, for taxes.
|
2.
|
Calculation of Earnings Per Share
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
(in thousands, except shares and per share data)
|
|
|
|
|
|
|
|
|
||||||||
Calculation of Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
4,416
|
|
|
$
|
5,119
|
|
|
$
|
32,812
|
|
|
$
|
32,521
|
|
Weighted average shares outstanding
|
|
15,372,413
|
|
|
15,258,819
|
|
|
15,324,932
|
|
|
15,035,569
|
|
||||
Basic Earnings Per Share
|
|
$
|
0.29
|
|
|
$
|
0.34
|
|
|
$
|
2.14
|
|
|
$
|
2.16
|
|
|
|
|
|
|
|
|
|
|
||||||||
Calculation of Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
4,416
|
|
|
$
|
5,119
|
|
|
32,812
|
|
|
32,521
|
|
||
Reconciliation of Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted shares outstanding—Basic
|
|
15,372,413
|
|
|
15,258,819
|
|
|
15,324,932
|
|
|
15,035,569
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Share-based compensation
|
|
40,370
|
|
|
48,024
|
|
|
41,023
|
|
|
48,072
|
|
||||
Adjusted denominator—Diluted
|
|
15,412,783
|
|
|
15,306,843
|
|
|
15,365,955
|
|
|
15,083,641
|
|
||||
Diluted Earnings Per Share
|
|
$
|
0.29
|
|
|
$
|
0.33
|
|
|
$
|
2.14
|
|
|
$
|
2.16
|
|
3.
|
Acquisitions
|
(in thousands)
|
Net Purchase Price
|
||
Chesapeake Utilities common stock
|
$
|
30,164
|
|
Cash
|
27,494
|
|
|
Acquired debt
|
1,696
|
|
|
Aggregate amount paid in the acquisition
|
59,354
|
|
|
Less: cash acquired
|
(6,806
|
)
|
|
Net amount paid in the acquisition
|
$
|
52,548
|
|
|
Purchase price
|
||
(in thousands)
|
Allocation
|
||
Purchase price
|
$
|
57,658
|
|
|
|
||
Property plant and equipment
|
53,203
|
|
|
Cash
|
6,806
|
|
|
Accounts receivable
|
3,629
|
|
|
Income taxes receivable
|
3,163
|
|
|
Other assets
|
425
|
|
|
Total assets acquired
|
67,226
|
|
|
|
|
||
Long-term debt
|
1,696
|
|
|
Deferred income taxes
|
13,409
|
|
|
Accounts payable
|
3,837
|
|
|
Other current liabilities
|
745
|
|
|
Total liabilities assumed
|
19,687
|
|
|
Net identifiable assets acquired
|
47,539
|
|
|
Goodwill
|
$
|
10,119
|
|
4.
|
Rates and Other Regulatory Activities
|
6.
|
Other Commitments and Contingencies
|
7.
|
Segment Information
|
•
|
Regulated Energy
. The Regulated Energy segment includes natural gas distribution, natural gas transmission and electric distribution operations. All operations in this segment are regulated, as to their rates and services, by the PSC having jurisdiction in each operating territory or by the FERC in the case of Eastern Shore.
|
•
|
Unregulated Energy.
The Unregulated Energy segment includes propane distribution and wholesale marketing operations, and natural gas marketing operations, which are unregulated as to their rates and services. Effective April 1, 2015, this segment includes Aspire Energy, whose services include natural gas gathering, processing, transportation and supply (See Note 3,
Acquisitions
, regarding the merger with Gatherco). Effective June 2016, this segment includes electricity and steam generation through Eight Flags' CHP plant. Also included in this segment are other unregulated energy services, such as energy-related merchandise sales and heating, ventilation and air conditioning, plumbing and electrical services.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenues, Unaffiliated Customers
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy segment
|
|
$
|
68,899
|
|
|
$
|
63,526
|
|
|
$
|
224,382
|
|
|
$
|
234,608
|
|
Unregulated Energy segment
|
|
39,449
|
|
|
28,387
|
|
|
132,604
|
|
|
120,068
|
|
||||
Total operating revenues, unaffiliated customers
|
|
$
|
108,348
|
|
|
$
|
91,913
|
|
|
$
|
356,986
|
|
|
$
|
354,676
|
|
Intersegment Revenues
(1)
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy segment
|
|
$
|
1,120
|
|
|
$
|
270
|
|
|
$
|
2,248
|
|
|
$
|
830
|
|
Unregulated Energy segment
|
|
2,593
|
|
|
1,222
|
|
|
3,759
|
|
|
3,095
|
|
||||
Other businesses
|
|
240
|
|
|
220
|
|
|
705
|
|
|
660
|
|
||||
Total intersegment revenues
|
|
$
|
3,953
|
|
|
$
|
1,712
|
|
|
$
|
6,712
|
|
|
$
|
4,585
|
|
Operating Income
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy segment
|
|
$
|
13,115
|
|
|
$
|
11,828
|
|
|
$
|
52,660
|
|
|
$
|
47,616
|
|
Unregulated Energy segment
|
|
(3,080
|
)
|
|
(1,022
|
)
|
|
9,267
|
|
|
13,666
|
|
||||
Other businesses and eliminations
|
|
121
|
|
|
103
|
|
|
350
|
|
|
305
|
|
||||
Total operating income
|
|
10,156
|
|
|
10,909
|
|
|
62,277
|
|
|
61,587
|
|
||||
Other (expense) income, net
|
|
(28
|
)
|
|
36
|
|
|
(68
|
)
|
|
(3
|
)
|
||||
Interest
|
|
2,722
|
|
|
2,492
|
|
|
7,996
|
|
|
7,425
|
|
||||
Income before Income Taxes
|
|
7,406
|
|
|
8,453
|
|
|
54,213
|
|
|
54,159
|
|
||||
Income taxes
|
|
2,990
|
|
|
3,334
|
|
|
21,401
|
|
|
21,638
|
|
||||
Net Income
|
|
$
|
4,416
|
|
|
$
|
5,119
|
|
|
$
|
32,812
|
|
|
$
|
32,521
|
|
(1)
|
All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.
|
(in thousands)
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Identifiable Assets
|
|
|
|
|
||||
Regulated Energy segment
|
|
$
|
921,682
|
|
|
$
|
872,065
|
|
Unregulated Energy segment
|
|
207,083
|
|
|
171,840
|
|
||
Other businesses and eliminations
|
|
11,745
|
|
|
23,516
|
|
||
Total identifiable assets
|
|
$
|
1,140,510
|
|
|
$
|
1,067,421
|
|
8.
|
Accumulated Other Comprehensive Loss
|
|
|
Defined Benefit
|
|
Commodity
|
|
|
||||||
|
|
Pension and
|
|
Contracts
|
|
|
||||||
|
|
Postretirement
|
|
Cash Flow
|
|
|
||||||
|
|
Plan Items
|
|
Hedges
|
|
Total
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
As of December 31, 2015
|
|
$
|
(5,580
|
)
|
|
$
|
(260
|
)
|
|
$
|
(5,840
|
)
|
Other comprehensive gain before reclassifications
|
|
—
|
|
|
641
|
|
|
641
|
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
263
|
|
|
(93
|
)
|
|
170
|
|
|||
Net current-period other comprehensive income
|
|
263
|
|
|
548
|
|
|
811
|
|
|||
As of September 30, 2016
|
|
$
|
(5,317
|
)
|
|
$
|
288
|
|
|
$
|
(5,029
|
)
|
|
|
Defined Benefit
|
|
Commodity
|
|
|
||||||
|
|
Pension and
|
|
Contracts
|
|
|
||||||
|
|
Postretirement
|
|
Cash Flow
|
|
|
||||||
|
|
Plan Items
|
|
Hedges
|
|
Total
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
As of December 31, 2014
|
|
$
|
(5,643
|
)
|
|
$
|
(33
|
)
|
|
$
|
(5,676
|
)
|
Other comprehensive loss before reclassifications
|
|
—
|
|
|
(76
|
)
|
|
(76
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
248
|
|
|
33
|
|
|
281
|
|
|||
Net prior-period other comprehensive income
|
|
248
|
|
|
(43
|
)
|
|
205
|
|
|||
As of September 30, 2015
|
|
$
|
(5,395
|
)
|
|
$
|
(76
|
)
|
|
$
|
(5,471
|
)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Amortization of defined benefit pension and postretirement plan items:
|
|
|
|
|
|
|
|
|
||||||||
Prior service cost
(1)
|
|
$
|
20
|
|
|
$
|
17
|
|
|
$
|
60
|
|
|
$
|
50
|
|
Net loss
(1)
|
|
(166
|
)
|
|
(155
|
)
|
|
(500
|
)
|
|
(465
|
)
|
||||
Total before income taxes
|
|
(146
|
)
|
|
(138
|
)
|
|
(440
|
)
|
|
(415
|
)
|
||||
Income tax benefit
|
|
58
|
|
|
55
|
|
|
177
|
|
|
167
|
|
||||
Net of tax
|
|
$
|
(88
|
)
|
|
$
|
(83
|
)
|
|
$
|
(263
|
)
|
|
$
|
(248
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Gains and losses on commodity contracts cash flow hedges
|
|
|
|
|
|
|
|
|
||||||||
Propane swap agreements
(2)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(322
|
)
|
|
$
|
—
|
|
Call options
(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
||||
Natural gas futures
(2)
|
|
105
|
|
|
—
|
|
|
464
|
|
|
—
|
|
||||
Total before income taxes
|
|
105
|
|
|
—
|
|
|
142
|
|
|
(55
|
)
|
||||
Income tax benefit (expense)
|
|
(41
|
)
|
|
—
|
|
|
(49
|
)
|
|
22
|
|
||||
Net of tax
|
|
64
|
|
|
—
|
|
|
93
|
|
|
(33
|
)
|
||||
Total reclassifications for the period
|
|
$
|
(24
|
)
|
|
$
|
(83
|
)
|
|
$
|
(170
|
)
|
|
$
|
(281
|
)
|
9.
|
Employee Benefit Plans
|
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
||||||||||||||||||||||||||||||
For the Three Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Interest cost
|
|
$
|
105
|
|
|
$
|
102
|
|
|
$
|
635
|
|
|
$
|
626
|
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
14
|
|
|
$
|
15
|
|
Expected return on plan assets
|
|
(131
|
)
|
|
(135
|
)
|
|
(625
|
)
|
|
(777
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(20
|
)
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
103
|
|
|
91
|
|
|
133
|
|
|
114
|
|
|
22
|
|
|
25
|
|
|
16
|
|
|
17
|
|
|
—
|
|
|
2
|
|
||||||||||
Net periodic cost (benefit)
|
|
77
|
|
|
58
|
|
|
143
|
|
|
(37
|
)
|
|
45
|
|
|
50
|
|
|
7
|
|
|
9
|
|
|
14
|
|
|
17
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
191
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||||||||
Total periodic cost
|
|
$
|
77
|
|
|
$
|
58
|
|
|
$
|
334
|
|
|
$
|
154
|
|
|
$
|
45
|
|
|
$
|
50
|
|
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
16
|
|
|
$
|
19
|
|
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
||||||||||||||||||||||||||||||
For the Nine Months Ended September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Interest cost
|
|
$
|
315
|
|
|
$
|
306
|
|
|
$
|
1,894
|
|
|
$
|
1,877
|
|
|
$
|
68
|
|
|
$
|
68
|
|
|
$
|
32
|
|
|
$
|
33
|
|
|
$
|
41
|
|
|
$
|
45
|
|
Expected return on plan assets
|
|
(392
|
)
|
|
(405
|
)
|
|
(2,027
|
)
|
|
(2,330
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
(60
|
)
|
|
(58
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
309
|
|
|
272
|
|
|
389
|
|
|
341
|
|
|
66
|
|
|
74
|
|
|
51
|
|
|
53
|
|
|
—
|
|
|
5
|
|
||||||||||
Net periodic cost (benefit)
|
|
232
|
|
|
173
|
|
|
256
|
|
|
(112
|
)
|
|
134
|
|
|
150
|
|
|
23
|
|
|
28
|
|
|
41
|
|
|
50
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
571
|
|
|
571
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
||||||||||
Total periodic cost
|
|
$
|
232
|
|
|
$
|
173
|
|
|
$
|
827
|
|
|
$
|
459
|
|
|
$
|
134
|
|
|
$
|
150
|
|
|
$
|
23
|
|
|
$
|
28
|
|
|
$
|
47
|
|
|
$
|
56
|
|
For the Three Months Ended September 30, 2016
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
Net loss
|
|
103
|
|
|
133
|
|
|
22
|
|
|
16
|
|
|
—
|
|
|
274
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
103
|
|
|
$
|
133
|
|
|
$
|
22
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
254
|
|
Recognized from accumulated other comprehensive loss
(1)
|
|
$
|
103
|
|
|
$
|
25
|
|
|
$
|
22
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
146
|
|
Recognized from regulatory asset
|
|
—
|
|
|
108
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
108
|
|
||||||
Total
|
|
$
|
103
|
|
|
$
|
133
|
|
|
$
|
22
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
254
|
|
For the Three Months Ended September 30, 2015
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
(19
|
)
|
|
$
|
—
|
|
|
$
|
(17
|
)
|
Net loss
|
|
91
|
|
|
114
|
|
|
25
|
|
|
17
|
|
|
2
|
|
|
249
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
91
|
|
|
$
|
114
|
|
|
$
|
27
|
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
232
|
|
Recognized from accumulated other comprehensive loss
(1)
|
|
$
|
91
|
|
|
$
|
22
|
|
|
$
|
27
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
138
|
|
Recognized from regulatory asset
|
|
—
|
|
|
92
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
94
|
|
||||||
Total
|
|
$
|
91
|
|
|
$
|
114
|
|
|
$
|
27
|
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
232
|
|
For the Nine Months Ended September 30, 2016
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(60
|
)
|
|
$
|
—
|
|
|
$
|
(60
|
)
|
Net loss
|
|
309
|
|
|
389
|
|
|
66
|
|
|
51
|
|
|
—
|
|
|
$
|
815
|
|
|||||
Total recognized in net periodic benefit cost
|
|
$
|
309
|
|
|
$
|
389
|
|
|
$
|
66
|
|
|
$
|
(9
|
)
|
|
$
|
—
|
|
|
$
|
755
|
|
Recognized from accumulated other comprehensive loss
(1)
|
|
$
|
309
|
|
|
$
|
74
|
|
|
$
|
66
|
|
|
$
|
(9
|
)
|
|
$
|
—
|
|
|
$
|
440
|
|
Recognized from regulatory asset
|
|
—
|
|
|
315
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
315
|
|
||||||
Total
|
|
$
|
309
|
|
|
$
|
389
|
|
|
$
|
66
|
|
|
$
|
(9
|
)
|
|
$
|
—
|
|
|
$
|
755
|
|
For the Nine Months Ended September 30, 2015
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
(58
|
)
|
|
$
|
—
|
|
|
$
|
(50
|
)
|
Net loss
|
|
272
|
|
|
341
|
|
|
74
|
|
|
53
|
|
|
5
|
|
|
745
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
272
|
|
|
$
|
341
|
|
|
$
|
82
|
|
|
$
|
(5
|
)
|
|
$
|
5
|
|
|
$
|
695
|
|
Recognized from accumulated other comprehensive loss
(1)
|
|
$
|
272
|
|
|
$
|
65
|
|
|
$
|
82
|
|
|
$
|
(5
|
)
|
|
$
|
1
|
|
|
$
|
415
|
|
Recognized from regulatory asset
|
|
—
|
|
|
276
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
280
|
|
||||||
Total
|
|
$
|
272
|
|
|
$
|
341
|
|
|
$
|
82
|
|
|
$
|
(5
|
)
|
|
$
|
5
|
|
|
$
|
695
|
|
(1)
|
See Note 8
, Accumulated Other Comprehensive Loss
.
|
10.
|
Investments
|
|
|
||||||
(in thousands)
|
September 30,
2016 |
|
December 31,
2015 |
||||
Rabbi trust (associated with the Deferred Compensation Plan)
|
$
|
4,609
|
|
|
$
|
3,626
|
|
Investments in equity securities
|
21
|
|
|
18
|
|
||
Total
|
$
|
4,630
|
|
|
3,644
|
|
11.
|
Share-Based Compensation
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Awards to non-employee directors
|
|
$
|
135
|
|
|
$
|
165
|
|
|
$
|
445
|
|
|
$
|
475
|
|
Awards to key employees
|
|
488
|
|
|
334
|
|
|
1,442
|
|
|
970
|
|
||||
Total compensation expense
|
|
623
|
|
|
499
|
|
|
1,887
|
|
|
1,445
|
|
||||
Less: tax benefit
|
|
(251
|
)
|
|
(201
|
)
|
|
(760
|
)
|
|
(582
|
)
|
||||
Share-based compensation amounts included in net income
|
|
$
|
372
|
|
|
$
|
298
|
|
|
$
|
1,127
|
|
|
$
|
863
|
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value
|
|||
Outstanding— December 31, 2015
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
8,577
|
|
|
$
|
62.90
|
|
Vested
|
|
(8,577
|
)
|
|
$
|
62.90
|
|
Outstanding— September 30, 2016
|
|
—
|
|
|
$
|
—
|
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value
|
|||
Outstanding— December 31, 2015
|
|
110,398
|
|
|
$
|
38.34
|
|
Granted
|
|
46,571
|
|
|
$
|
67.90
|
|
Vested
|
|
(39,553
|
)
|
|
$
|
31.79
|
|
Expired
|
|
(2,325
|
)
|
|
$
|
42.25
|
|
Outstanding— September 30, 2016
|
|
115,091
|
|
|
$
|
52.36
|
|
12.
|
Derivative Instruments
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
(in thousands)
|
|
|
September 30, 2016
(1)
|
|
September 30, 2016
(1)
|
||||
Commodity contracts
|
|
$
|
—
|
|
|
$
|
(233
|
)
|
|
Fair value adjustment for natural gas inventory designated as the hedged item
|
|
—
|
|
|
681
|
|
|||
Total increase in purchased gas cost
|
|
$
|
—
|
|
|
$
|
448
|
|
|
|
|
|
|
|
|
||||
The increase in purchased gas cost is comprised of the following:
|
|
|
|
|
|||||
Basis ineffectiveness
|
|
$
|
—
|
|
|
$
|
(83
|
)
|
|
Timing ineffectiveness
|
|
—
|
|
|
531
|
|
|||
Total ineffectiveness
|
|
$
|
—
|
|
|
$
|
448
|
|
(1)
|
There were no natural gas futures commodity contracts designated as fair value hedges in 2015.
|
|
|
Asset Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Forward & Future contracts
|
|
Mark-to-market energy assets
|
|
$
|
—
|
|
|
$
|
1
|
|
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
||||
Put options
|
|
Mark-to-market energy assets
|
|
—
|
|
|
152
|
|
||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Mark-to-market energy assets
|
|
240
|
|
|
—
|
|
||
Propane swap agreements
|
|
Mark-to-market energy assets
|
|
237
|
|
|
—
|
|
||
Total asset derivatives
|
|
|
|
$
|
477
|
|
|
$
|
153
|
|
|
|
Liability Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Forward contracts
|
|
Mark-to-market energy liabilities
|
|
$
|
—
|
|
|
$
|
1
|
|
Natural gas futures contracts
|
|
Mark-to-market energy liabilities
|
|
29
|
|
|
—
|
|
||
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Mark-to-market energy liabilities
|
|
—
|
|
|
—
|
|
||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Propane swap agreements
|
|
Mark-to-market energy liabilities
|
|
—
|
|
|
323
|
|
||
Natural gas futures contracts
|
|
Mark-to-market energy liabilities
|
|
—
|
|
|
109
|
|
||
Total liability derivatives
|
|
|
|
$
|
29
|
|
|
$
|
433
|
|
|
|
|
|
Amount of Gain (Loss) on Derivatives:
|
||||||||||||||
|
|
Location of Gain
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in thousands)
|
|
(Loss) on Derivatives
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
||||||||
Realized gain (loss) on forward contracts
(1)
|
|
Revenue
|
|
$
|
(231
|
)
|
|
$
|
187
|
|
|
$
|
44
|
|
|
$
|
393
|
|
Unrealized gain (loss) on forward contracts
(1)
|
|
Revenue
|
|
(2
|
)
|
|
(7
|
)
|
|
—
|
|
|
71
|
|
||||
Natural gas futures contracts
|
|
Cost of sales
|
|
205
|
|
|
—
|
|
|
205
|
|
|
—
|
|
||||
Propane swap agreements
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
||||
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Put /Call options
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
73
|
|
|
506
|
|
||||
Put /Call options
(2)
|
|
Propane Inventory
|
|
—
|
|
|
(46
|
)
|
|
—
|
|
|
(79
|
)
|
||||
Natural gas futures contracts
|
|
Natural Gas Inventory
|
|
—
|
|
|
—
|
|
|
(233
|
)
|
|
—
|
|
||||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Propane swap agreements
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
(364
|
)
|
|
—
|
|
||||
Propane swap agreements
|
|
Other Comprehensive Gain (Loss)
|
|
213
|
|
|
(126
|
)
|
|
559
|
|
|
(128
|
)
|
||||
Call options
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(81
|
)
|
||||
Natural gas futures contracts
|
|
Cost of sales
|
|
105
|
|
|
—
|
|
|
464
|
|
|
—
|
|
||||
Natural gas futures contracts
|
|
Other Comprehensive Gain (Loss)
|
|
(123
|
)
|
|
—
|
|
|
349
|
|
|
—
|
|
||||
Total
|
|
|
|
$
|
167
|
|
|
$
|
8
|
|
|
$
|
1,097
|
|
|
$
|
700
|
|
(1)
|
All of the realized and unrealized gain (loss) on forward contracts represents the effect of trading activities on our condensed consolidated statements of income.
|
(2)
|
As a fair value hedge with no ineffective portion, the unrealized gains and losses associated with this call option are recorded in cost of sales, offset by the corresponding change in the value of propane inventory (hedged item), which is also recorded in cost of sales. The amounts in cost of sales offset to zero, and the unrealized gains and losses of this put option effectively changed the value of propane inventory.
|
13.
|
Fair Value of Financial Instruments
|
|
|
|
|
Fair Value Measurements Using:
|
||||||||||||
As of September 30, 2016
|
|
Fair Value
|
|
Quoted- Prices- in
Active Markets
(Level 1)
|
|
Significant- Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Investments—equity securities
|
|
$
|
21
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investments—guaranteed income fund
|
|
$
|
485
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
485
|
|
Investments—mutual funds and other
|
|
$
|
4,124
|
|
|
$
|
4,124
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mark-to-market energy assets, incl. put options and swap agreements
|
|
$
|
477
|
|
|
$
|
—
|
|
|
$
|
477
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Mark-to-market energy liabilities incl. swap agreements
|
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
Nine Months Ended
September 30, |
||||||
|
2016
|
|
2015
|
||||
(in thousands)
|
|
|
|
||||
Beginning Balance
|
$
|
279
|
|
|
$
|
287
|
|
Purchases and adjustments
|
120
|
|
|
(11
|
)
|
||
Transfers
|
88
|
|
|
(3
|
)
|
||
Distribution
|
(8
|
)
|
|
—
|
|
||
Investment income
|
6
|
|
|
3
|
|
||
Ending Balance
|
$
|
485
|
|
|
$
|
276
|
|
14.
|
Long-Term Debt
|
|
|
September 30,
|
|
December 31,
|
||||
(in thousands)
|
|
2016
|
|
2015
|
||||
FPU secured first mortgage bonds
(1)
:
|
|
|
|
|
||||
9.08% bond, due June 1, 2022
|
|
$
|
7,976
|
|
|
$
|
7,973
|
|
Uncollateralized senior notes:
|
|
|
|
|
||||
6.64% note, due October 31, 2017
|
|
5,455
|
|
|
5,455
|
|
||
5.50% note, due October 12, 2020
|
|
10,000
|
|
|
10,000
|
|
||
5.93% note, due October 31, 2023
|
|
22,500
|
|
|
24,000
|
|
||
5.68% note, due June 30, 2026
|
|
29,000
|
|
|
29,000
|
|
||
6.43% note, due May 2, 2028
|
|
7,000
|
|
|
7,000
|
|
||
3.73% note, due December 16, 2028
|
|
20,000
|
|
|
20,000
|
|
||
3.88% note, due May 15, 2029
|
|
50,000
|
|
|
50,000
|
|
||
Promissory notes
|
|
168
|
|
|
238
|
|
||
Capital lease obligation
|
|
3,814
|
|
|
4,824
|
|
||
Total long-term debt
|
|
155,913
|
|
|
158,490
|
|
||
Less: current maturities
|
|
(12,087
|
)
|
|
(9,151
|
)
|
||
Less: debt issuance costs
|
|
(301
|
)
|
|
(333
|
)
|
||
Total long-term debt, net of current maturities
|
|
$
|
143,525
|
|
|
$
|
149,006
|
|
15.
|
Short-Term Borrowing
|
•
|
state and federal legislative and regulatory initiatives (including deregulation) that affect cost and investment recovery, have an impact on rate structures and affect the speed at, and the degree to, which competition enters the electric and natural gas industries;
|
•
|
the outcomes of regulatory, tax, environmental and legal matters, including whether pending matters are resolved within current estimates and whether the costs associated with such matters are adequately covered by insurance or recoverable in rates;
|
•
|
the weather and other natural phenomena, including the economic, operational and other effects of hurricanes, ice storms and other damaging weather events;
|
•
|
industrial, commercial and residential growth or contraction in our markets or service territories;
|
•
|
the timing and extent of changes in commodity prices and interest rates;
|
•
|
the capital-intensive nature of our regulated energy businesses;
|
•
|
the extent of our success in connecting natural gas and electric supplies to transmission systems and in expanding natural gas and electric markets;
|
•
|
the results of financing efforts, including our ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general economic conditions;
|
•
|
the ability to establish and maintain new key supply sources;
|
•
|
changes in environmental and other laws and regulations to which we are subject and environmental conditions of property that we now or may in the future own or operate;
|
•
|
general economic conditions, including any potential effects arising from terrorist attacks and any hostilities or other external factors over which we have no control;
|
•
|
conditions of the capital markets and equity markets during the periods covered by the forward-looking statements;
|
•
|
the ability to continue to hire, train and retain appropriately qualified personnel;
|
•
|
the creditworthiness of counterparties with which we are engaged in transactions;
|
•
|
the effect of spot, forward and future market prices on our various energy businesses;
|
•
|
the ability to construct facilities at or below estimated costs;
|
•
|
possible increased federal, state and local regulation of the safety of our operations;
|
•
|
the ability to successfully execute, manage and integrate merger, acquisition or divestiture plans, regulatory or other limitations imposed as a result of a merger, acquisition or divestiture, and the success of the business following a merger, acquisition or divestiture;
|
•
|
the inherent hazards and risks involved in our energy businesses;
|
•
|
risks related to cyber-attacks that could disrupt our business operations or result in failure of information technology systems.
|
•
|
the effect of competition on our businesses;
|
•
|
the impact on our cost and funding obligations under our pension and other post-retirement benefit plans of potential downturns in the financial markets, lower discount rates, and costs associated with the Patient Protection and Affordable Care Act;
|
•
|
the effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
|
•
|
the timing of regulatory and other governmental approvals, authorizations, and permits; and
|
•
|
the loss of customers due to a government-mandated sale of our utility distribution facilities.
|
•
|
executing a capital investment program in pursuit of organic growth opportunities that generate returns equal to or greater than our cost of capital;
|
•
|
expanding the regulated energy distribution and transmission businesses into new geographic areas and providing new services in our current service territories;
|
•
|
expanding the propane distribution business in existing and new markets through leveraging our community gas system services, our vehicular fuel offerings and our bulk delivery capabilities;
|
•
|
expanding both our regulated and unregulated energy businesses through strategic acquisitions;
|
•
|
utilizing our expertise across our various businesses to improve overall performance;
|
•
|
pursuing and entering new unregulated energy markets and business lines that will complement our existing strategy and operating units;
|
•
|
enhancing marketing channels to attract new customers;
|
•
|
providing reliable and responsive customer service to existing customers so they become our best promoters;
|
•
|
engaging our customers through a distinctive service excellence initiative;
|
•
|
developing and retaining a high-performing team that advances our goals;
|
•
|
empowering and engaging our employees at all levels to live our brand and vision;
|
•
|
demonstrating community leadership and engaging our local communities and governments in a cooperative and mutually beneficial way;
|
•
|
maintaining a capital structure that enables us to access capital as needed;
|
•
|
continuing to build a branded culture that drives a shared mission, vision, and values;
|
•
|
maintaining a consistent and competitive dividend for stockholders; and
|
•
|
creating and maintaining a diversified customer base, energy portfolio and utility foundation.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
September 30,
|
|
Increase
|
||||||||
|
|
2016
|
|
2015
|
|
(decrease)
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy segment
|
|
$
|
13,115
|
|
|
$
|
11,828
|
|
|
$
|
1,287
|
|
Unregulated Energy segment
|
|
(3,080
|
)
|
|
(1,022
|
)
|
|
(2,058
|
)
|
|||
Other businesses and eliminations
|
|
121
|
|
|
103
|
|
|
18
|
|
|||
Operating Income
|
|
$
|
10,156
|
|
|
$
|
10,909
|
|
|
$
|
(753
|
)
|
Other (expense) income, net
|
|
(28
|
)
|
|
36
|
|
|
(64
|
)
|
|||
Interest charges
|
|
2,722
|
|
|
2,492
|
|
|
230
|
|
|||
Pre-tax Income
|
|
7,406
|
|
|
8,453
|
|
|
(1,047
|
)
|
|||
Income taxes
|
|
2,990
|
|
|
3,334
|
|
|
(344
|
)
|
|||
Net Income
|
|
$
|
4,416
|
|
|
$
|
5,119
|
|
|
$
|
(703
|
)
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.29
|
|
|
$
|
0.34
|
|
|
$
|
(0.05
|
)
|
Diluted
|
|
$
|
0.29
|
|
|
$
|
0.33
|
|
|
$
|
(0.04
|
)
|
(in thousands, except per share data)
|
|
Pre-tax
Income |
|
Net
Income |
|
Earnings
Per Share |
||||||
Third Quarter of 2015 Reported Results
|
|
$
|
8,453
|
|
|
$
|
5,119
|
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
||||||
Increased (Decreased) Gross Margins:
|
|
|
|
|
|
|
||||||
Eight Flags*
|
|
2,033
|
|
|
1,212
|
|
|
0.08
|
|
|||
Service expansions*
|
|
1,577
|
|
|
940
|
|
|
0.06
|
|
|||
Natural gas growth (excluding service expansions)
|
|
943
|
|
|
562
|
|
|
0.04
|
|
|||
GRIP*
|
|
920
|
|
|
549
|
|
|
0.04
|
|
|||
Implementation of Delaware Division interim rates*
|
|
469
|
|
|
280
|
|
|
0.02
|
|
|||
Lower retail propane margins
|
|
(414
|
)
|
|
(247
|
)
|
|
(0.02
|
)
|
|||
Lower margins for Xeron
|
|
(413
|
)
|
|
(246
|
)
|
|
(0.02
|
)
|
|||
Aspire Energy*
|
|
(407
|
)
|
|
(243
|
)
|
|
(0.02
|
)
|
|||
|
|
4,708
|
|
|
2,807
|
|
|
0.18
|
|
|||
Decreased (Increased) Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Higher payroll and benefits costs
|
|
(1,830
|
)
|
|
(1,091
|
)
|
|
(0.07
|
)
|
|||
Eight Flags operating expenses
|
|
(1,065
|
)
|
|
(635
|
)
|
|
(0.04
|
)
|
|||
Higher outside services costs
|
|
(928
|
)
|
|
(553
|
)
|
|
(0.04
|
)
|
|||
Higher facility maintenance
|
|
(601
|
)
|
|
(358
|
)
|
|
(0.02
|
)
|
|||
Higher depreciation, asset removal and property tax costs
|
|
(466
|
)
|
|
(278
|
)
|
|
(0.02
|
)
|
|||
|
|
(4,890
|
)
|
|
(2,915
|
)
|
|
(0.19
|
)
|
|||
Interest charges
|
|
(230
|
)
|
|
(137
|
)
|
|
(0.01
|
)
|
|||
Net Other Changes
|
|
(635
|
)
|
|
(458
|
)
|
|
(0.02
|
)
|
|||
Third Quarter of 2016 Reported Results
|
|
$
|
7,406
|
|
|
$
|
4,416
|
|
|
$
|
0.29
|
|
|
|
Nine Months Ended
|
|
Increase
|
||||||||
|
|
September 30,
|
|
(decrease)
|
||||||||
|
|
2016
|
|
2015
|
|
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy segment
|
|
$
|
52,660
|
|
|
$
|
47,616
|
|
|
$
|
5,044
|
|
Unregulated Energy segment
|
|
9,267
|
|
|
13,666
|
|
|
(4,399
|
)
|
|||
Other businesses and eliminations
|
|
350
|
|
|
305
|
|
|
45
|
|
|||
Operating Income
|
|
$
|
62,277
|
|
|
$
|
61,587
|
|
|
690
|
|
|
Other (expense) income, net
|
|
(68
|
)
|
|
(3
|
)
|
|
(65
|
)
|
|||
Interest charges
|
|
7,996
|
|
|
7,425
|
|
|
571
|
|
|||
Pre-tax Income
|
|
54,213
|
|
|
54,159
|
|
|
54
|
|
|||
Income taxes
|
|
21,401
|
|
|
21,638
|
|
|
(237
|
)
|
|||
Net Income
|
|
$
|
32,812
|
|
|
$
|
32,521
|
|
|
$
|
291
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
2.14
|
|
|
$
|
2.16
|
|
|
$
|
(0.02
|
)
|
Diluted
|
|
$
|
2.14
|
|
|
$
|
2.16
|
|
|
$
|
(0.02
|
)
|
(in thousands, except per share data)
|
|
Pre-tax Income
|
|
Net Income
|
|
Earnings Per Share
|
||||||
Nine months ended September 30, 2015 Reported Results
|
|
$
|
54,159
|
|
|
$
|
32,521
|
|
|
$
|
2.16
|
|
Adjusting for Unusual Items:
|
|
|
|
|
|
|
||||||
Weather impact, primarily in the first quarter
|
|
(7,548
|
)
|
|
(4,533
|
)
|
|
(0.31
|
)
|
|||
Net gain from settlement agreement associated with customer billing system
|
|
(1,367
|
)
|
|
(821
|
)
|
|
(0.06
|
)
|
|||
|
|
(8,915
|
)
|
|
(5,354
|
)
|
|
(0.37
|
)
|
|||
Increased (Decreased) Gross Margins:
|
|
|
|
|
|
|
||||||
Service expansions*
|
|
5,516
|
|
|
3,312
|
|
|
0.22
|
|
|||
GRIP*
|
|
3,069
|
|
|
1,843
|
|
|
0.12
|
|
|||
Natural gas growth (excluding service expansions)
|
|
2,630
|
|
|
1,579
|
|
|
0.11
|
|
|||
Eight Flags*
|
|
2,581
|
|
|
1,550
|
|
|
0.10
|
|
|||
Lower retail propane margins
|
|
(2,204
|
)
|
|
(1,324
|
)
|
|
(0.09
|
)
|
|||
Implementation of Delaware Division interim rates*
|
|
1,350
|
|
|
811
|
|
|
0.05
|
|
|||
Natural gas marketing
|
|
1,062
|
|
|
638
|
|
|
0.04
|
|
|||
Sandpiper SIR
|
|
618
|
|
|
371
|
|
|
0.03
|
|
|||
|
|
14,622
|
|
|
8,780
|
|
|
0.58
|
|
|||
Decreased (Increased) Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Higher payroll and benefits costs
|
|
(2,144
|
)
|
|
(1,287
|
)
|
|
(0.09
|
)
|
|||
Higher depreciation, asset removal and property tax costs
|
|
(1,705
|
)
|
|
(1,024
|
)
|
|
(0.07
|
)
|
|||
Eight Flags operating expenses
|
|
(1,136
|
)
|
|
(682
|
)
|
|
(0.05
|
)
|
|||
Higher outside services costs
|
|
(1,100
|
)
|
|
(661
|
)
|
|
(0.04
|
)
|
|||
Higher facility maintenance
|
|
(787
|
)
|
|
(473
|
)
|
|
(0.03
|
)
|
|||
Lower bad debt, sales and advertising
|
|
427
|
|
|
256
|
|
|
0.02
|
|
|||
|
|
(6,445
|
)
|
|
(3,871
|
)
|
|
(0.26
|
)
|
|||
Net contribution from Aspire Energy, including impact of shares issued*
|
|
2,069
|
|
|
1,274
|
|
|
0.08
|
|
|||
Interest Charges
|
|
(571
|
)
|
|
(343
|
)
|
|
(0.02
|
)
|
|||
Net Other Changes
|
|
(706
|
)
|
|
(195
|
)
|
|
(0.03
|
)
|
|||
Nine months ended September 30, 2016 Reported Results
|
|
$
|
54,213
|
|
|
$
|
32,812
|
|
|
$
|
2.14
|
|
|
Gross Margin for the Period
|
||||||||||||||||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
|
Total
|
|
|
|
|
||||||||||||||||||||||
|
September 30,
|
|
September 30,
|
|
2015
|
|
Estimate for
|
||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Margin
|
|
2016
|
|
2017
|
|
2018
|
||||||||||||||||
Major projects and initiatives completed since 2014
|
$
|
12,083
|
|
|
$
|
7,490
|
|
|
$
|
34,086
|
|
|
$
|
17,030
|
|
|
$
|
25,270
|
|
|
$
|
47,603
|
|
|
$
|
54,258
|
|
|
$
|
54,727
|
|
Major projects and initiatives underway
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,255
|
|
|
20,238
|
|
||||||||
|
$
|
12,083
|
|
|
$
|
7,490
|
|
|
$
|
34,086
|
|
|
$
|
17,030
|
|
|
$
|
25,270
|
|
|
$
|
47,603
|
|
|
$
|
59,513
|
|
|
$
|
74,965
|
|
|
Gross Margin for the Period
|
|||||||||||||||||||||||||||||||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
Total
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
September 30,
|
|
September 30,
|
2015
|
|
Estimate for
|
||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
Variance
|
|
2016
|
|
2015
|
|
Variance
|
Margin
|
|
2016
|
|
2017
|
|
2018
|
||||||||||||||||||||
Acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Aspire Energy
|
$
|
1,630
|
|
|
$
|
2,037
|
|
|
$
|
(407
|
)
|
|
$
|
8,203
|
|
|
$
|
3,661
|
|
|
$
|
4,542
|
|
$
|
6,324
|
|
|
$
|
12,674
|
|
|
$
|
13,376
|
|
|
$
|
14,302
|
|
Natural Gas Transmission Expansions and Contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Short-term contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
New Castle County, Delaware
|
$
|
664
|
|
|
$
|
507
|
|
|
$
|
157
|
|
|
$
|
2,040
|
|
|
$
|
1,998
|
|
|
$
|
42
|
|
$
|
2,682
|
|
|
$
|
2,910
|
|
|
$
|
2,275
|
|
|
$
|
714
|
|
Kent County, Delaware
|
2,416
|
|
|
1,055
|
|
|
1,361
|
|
|
6,231
|
|
|
1,453
|
|
|
4,778
|
|
2,270
|
|
|
7,982
|
|
|
1,377
|
|
|
—
|
|
||||||||||
Total short-term contracts
|
$
|
3,080
|
|
|
$
|
1,562
|
|
|
$
|
1,518
|
|
|
$
|
8,271
|
|
|
$
|
3,451
|
|
|
$
|
4,820
|
|
$
|
4,952
|
|
|
$
|
10,892
|
|
|
$
|
3,652
|
|
|
$
|
714
|
|
Long-term contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Kent County, Delaware
|
455
|
|
|
463
|
|
|
(8
|
)
|
|
1,366
|
|
|
1,389
|
|
|
(23
|
)
|
1,844
|
|
|
1,815
|
|
|
7,629
|
|
|
7,605
|
|
||||||||||
Polk County, Florida
|
407
|
|
|
340
|
|
|
67
|
|
|
1,221
|
|
|
501
|
|
|
720
|
|
908
|
|
|
1,627
|
|
|
1,627
|
|
|
1,627
|
|
||||||||||
Total long-term contracts
|
$
|
862
|
|
|
$
|
803
|
|
|
$
|
59
|
|
|
$
|
2,587
|
|
|
$
|
1,890
|
|
|
$
|
697
|
|
$
|
2,752
|
|
|
$
|
3,442
|
|
|
$
|
9,256
|
|
|
$
|
9,232
|
|
Total Expansions & Contracts
|
$
|
3,942
|
|
|
$
|
2,365
|
|
|
$
|
1,577
|
|
|
$
|
10,858
|
|
|
$
|
5,341
|
|
|
$
|
5,517
|
|
$
|
7,704
|
|
|
$
|
14,334
|
|
|
$
|
12,908
|
|
|
$
|
9,946
|
|
Florida GRIP
|
$
|
2,987
|
|
|
$
|
2,067
|
|
|
$
|
920
|
|
|
$
|
8,383
|
|
|
$
|
5,314
|
|
|
$
|
3,069
|
|
$
|
7,508
|
|
|
$
|
11,405
|
|
|
$
|
13,756
|
|
|
$
|
15,960
|
|
Florida Electric Rate Case
|
$
|
1,021
|
|
|
$
|
1,021
|
|
|
$
|
—
|
|
|
$
|
2,714
|
|
|
$
|
2,714
|
|
|
$
|
—
|
|
$
|
3,734
|
|
|
$
|
3,562
|
|
|
$
|
3,562
|
|
|
$
|
3,562
|
|
Delaware Division Rate Case
|
$
|
469
|
|
|
$
|
—
|
|
|
$
|
469
|
|
|
$
|
1,347
|
|
|
$
|
—
|
|
|
$
|
1,347
|
|
$
|
—
|
|
|
$
|
2,164
|
|
|
$
|
2,500
|
|
|
$
|
2,500
|
|
Eight Flags CHP Plant
|
$
|
2,034
|
|
|
$
|
—
|
|
|
$
|
2,034
|
|
|
$
|
2,581
|
|
|
$
|
—
|
|
|
$
|
2,581
|
|
$
|
—
|
|
|
$
|
3,464
|
|
|
$
|
8,156
|
|
|
$
|
8,457
|
|
Total Completed Major Projects and Initiatives
|
$
|
12,083
|
|
|
$
|
7,490
|
|
|
$
|
4,593
|
|
|
$
|
34,086
|
|
|
$
|
17,030
|
|
|
$
|
17,056
|
|
$
|
25,270
|
|
|
$
|
47,603
|
|
|
$
|
54,258
|
|
|
$
|
54,727
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
||||||||||
|
September 30,
|
|
|
|
September 30,
|
|
|
||||||||||
|
2016
|
|
2015
|
|
Variance
|
|
2016
|
|
2015
|
|
Variance
|
||||||
Delmarva
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
11
|
|
|
41
|
|
|
(30
|
)
|
|
2,590
|
|
|
3,249
|
|
|
(659
|
)
|
10-Year Average HDD ("Delmarva Normal")
|
65
|
|
|
65
|
|
|
—
|
|
|
2,919
|
|
|
2,908
|
|
|
11
|
|
Variance from Delmarva Normal
|
(54
|
)
|
|
(24
|
)
|
|
|
|
(329
|
)
|
|
341
|
|
|
|
||
Florida
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
—
|
|
|
—
|
|
|
—
|
|
|
646
|
|
|
501
|
|
|
145
|
|
10-Year Average HDD ("Florida Normal")
|
—
|
|
|
—
|
|
|
—
|
|
|
553
|
|
|
557
|
|
|
(4
|
)
|
Variance from Florida Normal
|
—
|
|
|
—
|
|
|
|
|
93
|
|
|
(56
|
)
|
|
|
||
Ohio
(1)
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
65
|
|
|
78
|
|
|
(13
|
)
|
|
3,747
|
|
|
710
|
|
|
3,037
|
|
10-Year Average HDD ("Ohio Normal")
|
137
|
|
|
143
|
|
|
(6
|
)
|
|
3,979
|
|
|
811
|
|
|
3,168
|
|
Variance from Ohio Normal
|
(72
|
)
|
|
(65
|
)
|
|
|
|
(232
|
)
|
|
(101
|
)
|
|
|
||
Florida
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual CDD
|
1,523
|
|
|
1,591
|
|
|
(68
|
)
|
|
2,737
|
|
|
2,827
|
|
|
(90
|
)
|
10-Year Average CDD ("Florida CDD Normal")
|
1,523
|
|
|
1,524
|
|
|
(1
|
)
|
|
2,548
|
|
|
2,506
|
|
|
42
|
|
Variance from Florida CDD Normal
|
—
|
|
|
67
|
|
|
|
|
189
|
|
|
321
|
|
|
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
September 30,
|
|
Increase
|
||||||||
|
|
2016
|
|
2015
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
70,019
|
|
|
$
|
63,796
|
|
|
$
|
6,223
|
|
Cost of sales
|
|
24,644
|
|
|
23,161
|
|
|
1,483
|
|
|||
Gross margin
|
|
45,375
|
|
|
40,635
|
|
|
4,740
|
|
|||
Operations & maintenance
|
|
22,912
|
|
|
19,882
|
|
|
3,030
|
|
|||
Depreciation & amortization
|
|
6,346
|
|
|
6,129
|
|
|
217
|
|
|||
Other taxes
|
|
3,002
|
|
|
2,796
|
|
|
206
|
|
|||
Other operating expenses
|
|
32,260
|
|
|
28,807
|
|
|
3,453
|
|
|||
Operating income
|
|
$
|
13,115
|
|
|
$
|
11,828
|
|
|
$
|
1,287
|
|
•
|
$901,000
attributable to
$1.9 million
from the short-term OPT ≤ 90 Service that commenced in December 2015 to an electric power generator in Kent County, Delaware and offset by a
$1.0 million
decrease in gross margin from the conclusion of the interruptible service Eastern Shore provided this customer in 2015. The short-term OPT ≤ 90 Service is expected to be replaced by a 20-year OPT ≤ 90 Service in the first quarter of 2017.
|
•
|
$617,000
from short-term firm service that commenced in March 2016, following certain measurement and related improvements to Eastern Shore's interconnect with TETLP that increased its natural gas receipt capacity from TETLP by 53,000 Dts/d, for a total capacity of 160,000 Dts/d. This service will generate approximately
$1.4 million
in additional gross margin in 2016. The remaining capacity is available for firm or interruptible service.
|
•
|
$368,000
from Eastern Shore interruptible service provided to customers;
|
•
|
$350,000
from Florida natural gas customer growth due primarily to new services to commercial and industrial customers; and
|
•
|
$253,000
from a
4.2 percent
increase in the average number of residential customers in the Delmarva natural gas distribution operations, as well as growth in the number of commercial and industrial customers.
|
•
|
$1.3 million
in higher payroll and benefits costs for additional personnel to support growth;
|
•
|
$702,000
in higher outside services costs primarily associated with growth and ongoing compliance activities;
|
•
|
$517,000
in higher facilities costs to support growth; and
|
•
|
$401,000
in higher depreciation, asset removal and property tax costs associated with recent capital investments to support growth and system integrity.
|
|
|
Nine Months Ended
|
|
|
||||||||
|
|
September 30,
|
|
Increase
|
||||||||
|
|
2016
|
|
2015
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
226,630
|
|
|
$
|
235,438
|
|
|
$
|
(8,808
|
)
|
Cost of sales
|
|
81,184
|
|
|
101,414
|
|
|
(20,230
|
)
|
|||
Gross margin
|
|
145,446
|
|
|
134,024
|
|
|
11,422
|
|
|||
Operations & maintenance
|
|
64,673
|
|
|
59,648
|
|
|
5,025
|
|
|||
Depreciation & amortization
|
|
18,909
|
|
|
18,109
|
|
|
800
|
|
|||
Other taxes
|
|
9,204
|
|
|
8,650
|
|
|
554
|
|
|||
Other operating expenses
|
|
92,786
|
|
|
86,407
|
|
|
6,379
|
|
|||
Operating income
|
|
$
|
52,660
|
|
|
$
|
47,617
|
|
|
$
|
5,043
|
|
•
|
$4.3 million
attributable to
$5.6 million
from the short-term OPT ≤ 90 Service that commenced in December 2015 to an electric power generator in Kent County, Delaware and offset by a
$1.3 million
decrease in gross margin from the conclusion of the interruptible service Eastern Shore provided this customer in 2015. The short-term OPT ≤ 90 Service is expected to be replaced by a 20-year OPT ≤ 90 Service in the first quarter of 2017.
|
•
|
$744,000
from short-term firm service that commenced in March 2016, following certain measurement and related improvements to Eastern Shore's interconnect with TETLP that increased its natural gas receipt capacity from TETLP by 53,000 Dts/d, for a total capacity of 160,000 Dts/d. This service will generate approximately
$1.4 million
in additional gross margin in 2016. The remaining capacity is available for firm or interruptible service.
|
•
|
$720,000
from natural gas transmission service as part of the major expansion initiative in Polk County, Florida.
|
•
|
The foregoing gross margin increases were offset by a gross margin decrease of
$243,000
resulting from a reduction in rates for a long-term firm service to an industrial customer in New Castle County, Delaware.
|
•
|
$1.1 million
from a
3.5 percent
increase in the average number of residential customers in the Delmarva natural gas distribution operations, as well as growth in the number of commercial and industrial customers.
|
•
|
$1.1 million
from Florida natural gas customer growth due primarily to new services to commercial and industrial customers.
|
•
|
$348,000
from Eastern Shore interruptible service provided to other customers.
|
•
|
$2.0 million
in higher payroll and benefits costs for additional personnel to support growth;
|
•
|
$1.4 million
due to the absence of a
$1.5 million
gain from a customer billing system settlement, recorded in 2015, which was partially offset by an associated gain of
$130,000
during the third quarter of 2016, representing an additional current portion of the contingent settlement recovery;
|
•
|
$1.4 million
in higher depreciation, asset removal and property tax costs associated with recent capital investments to support growth and system integrity; and
|
•
|
$817,000
in higher outside services costs primarily associated with growth and ongoing compliance activities.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
September 30,
|
|
Increase
|
||||||||
|
|
2016
|
|
2015
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
42,042
|
|
|
$
|
29,609
|
|
|
$
|
12,433
|
|
Cost of sales
|
|
31,840
|
|
|
19,402
|
|
|
12,438
|
|
|||
Gross margin
|
|
10,202
|
|
|
10,207
|
|
|
(5
|
)
|
|||
Operations & maintenance
|
|
10,975
|
|
|
9,305
|
|
|
1,670
|
|
|||
Depreciation & amortization
|
|
1,840
|
|
|
1,483
|
|
|
357
|
|
|||
Other taxes
|
|
467
|
|
|
441
|
|
|
26
|
|
|||
Other operating expenses
|
|
13,282
|
|
|
11,229
|
|
|
2,053
|
|
|||
Operating Loss
|
|
$
|
(3,080
|
)
|
|
$
|
(1,022
|
)
|
|
$
|
(2,058
|
)
|
•
|
$1.1 million
in other operating expenses incurred by the Eight Flags CHP plant;
|
•
|
$545,000
in higher payroll and benefits costs for additional personnel to support growth; and
|
•
|
$225,000
in higher outside services costs primarily associated with growth and ongoing compliance activities.
|
|
|
Nine Months Ended
|
|
|
||||||||
|
|
September 30,
|
|
Increase
|
||||||||
|
|
2016
|
|
2015
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
136,361
|
|
|
123,164
|
|
|
$
|
13,197
|
|
|
Cost of sales
|
|
90,981
|
|
|
77,235
|
|
|
13,746
|
|
|||
Gross margin
|
|
45,380
|
|
|
45,929
|
|
|
(549
|
)
|
|||
Operations & maintenance
|
|
30,136
|
|
|
26,993
|
|
|
3,143
|
|
|||
Depreciation & amortization
|
|
4,512
|
|
|
3,973
|
|
|
539
|
|
|||
Other taxes
|
|
1,465
|
|
|
1,297
|
|
|
168
|
|
|||
Other operating expenses
|
|
36,113
|
|
|
32,263
|
|
|
3,850
|
|
|||
Operating Income
|
|
$
|
9,267
|
|
|
$
|
13,666
|
|
|
$
|
(4,399
|
)
|
•
|
$2.5 million
in other operating expenses incurred by Aspire Energy, given the additional quarter's results included in 2016, compared to only six months of results in the nine months ended September 30, 2015; and
|
•
|
$1.1 million
in other operating expenses incurred by Eight Flags, which commenced operations in June 2016
.
|
|
Low
|
|
High
|
||||
(dollars in thousands)
|
|
|
|
||||
Regulated Energy:
|
|
|
|
||||
Natural gas distribution
|
$
|
60,000
|
|
|
$
|
65,000
|
|
Natural gas transmission
|
55,000
|
|
|
60,000
|
|
||
Electric distribution
|
10,000
|
|
|
13,000
|
|
||
Total Regulated Energy
|
125,000
|
|
|
138,000
|
|
||
Unregulated Energy:
|
|
|
|
||||
Propane distribution
|
10,000
|
|
|
12,000
|
|
||
Other unregulated energy
|
10,000
|
|
|
13,000
|
|
||
Total Unregulated Energy
|
20,000
|
|
|
25,000
|
|
||
|
|
|
|
||||
Other
|
5,000
|
|
|
7,000
|
|
||
|
|
|
|
||||
Total 2016 capital expenditures
|
$
|
150,000
|
|
|
$
|
170,000
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Long-term debt, net of current maturities
|
|
$
|
143,525
|
|
|
25
|
%
|
|
$
|
149,006
|
|
|
29
|
%
|
Stockholders’ equity
|
|
438,300
|
|
|
75
|
%
|
|
358,138
|
|
|
71
|
%
|
||
Total capitalization, excluding short-term debt
|
|
$
|
581,825
|
|
|
100
|
%
|
|
$
|
507,144
|
|
|
100
|
%
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Short-term debt
|
|
$
|
154,490
|
|
|
20
|
%
|
|
$
|
173,397
|
|
|
25
|
%
|
Long-term debt, including current maturities
|
|
155,612
|
|
|
21
|
%
|
|
158,157
|
|
|
23
|
%
|
||
Stockholders’ equity
|
|
438,300
|
|
|
59
|
%
|
|
358,138
|
|
|
52
|
%
|
||
Total capitalization, including short-term debt
|
|
$
|
748,402
|
|
|
100
|
%
|
|
$
|
689,692
|
|
|
100
|
%
|
|
|
Nine Months Ended
|
||||||
|
|
September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
(in thousands)
|
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
82,225
|
|
|
$
|
93,932
|
|
Investing activities
|
|
(106,992
|
)
|
|
(118,233
|
)
|
||
Financing activities
|
|
23,448
|
|
|
23,508
|
|
||
Net decrease in cash and cash equivalents
|
|
(1,319
|
)
|
|
(793
|
)
|
||
Cash and cash equivalents—beginning of period
|
|
2,855
|
|
|
4,574
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
1,536
|
|
|
$
|
3,781
|
|
•
|
Net income, adjusted for reconciling activities, increased cash flows by
$15.4 million
, due primarily to an increase in deferred income taxes as a result of the availability and utilization of bonus depreciation in the first nine months of 2016, which resulted in a higher book-to-tax timing difference and higher non-cash adjustments for depreciation and amortization.
|
•
|
Changes in net regulatory assets and liabilities decreased cash flows by
$9.8 million
, due primarily to changes in fuel costs collected through the various fuel cost recovery mechanisms.
|
•
|
Changes in net accounts receivable and accrued revenue and accounts payable and accrued liabilities decreased cash flows by
$12.2 million
, due primarily to higher revenues and the timing of the receipt of customer payments as well as increased operating expenses and the timing of payments to vendors.
|
•
|
Changes in propane, natural gas and materials inventories decreased net cash flows by approximately
$5.3 million
.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
|
Total
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase obligations - Commodity
(1)
|
|
$
|
42,155
|
|
|
$
|
3,417
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,572
|
|
(1)
|
In addition to the obligations noted above, we have agreements with commodity suppliers that have provisions with no minimum purchase requirements. There are no monetary penalties for reducing the amounts purchased; however, the propane contracts allow the suppliers to reduce the amounts available in the winter season if we do not purchase specified amounts during the summer season. Under these contracts, the commodity prices will fluctuate as market prices fluctuate.
|
|
|
|
|
|
||||
(in thousands)
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Mark-to-market energy assets, including call options, swap agreements and futures
|
|
$
|
477
|
|
|
$
|
153
|
|
Mark-to-market energy liabilities, including swap agreements and futures
|
|
$
|
29
|
|
|
$
|
433
|
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
Total
Number of
Shares
|
|
Average
Price Paid
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
|
|
Maximum Number of
Shares That May Yet Be
Purchased Under the Plans
|
|||||
Period
|
|
Purchased
|
|
per Share
|
|
or Programs
(2)
|
|
or Programs
(2)
|
|||||
July 1, 2016
through July 30, 2016 (1) |
|
366
|
|
|
$
|
66.35
|
|
|
—
|
|
|
—
|
|
August 1, 2016
through August 31, 2016 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
September 1, 2016
through September 30, 2016 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
366
|
|
|
$
|
66.35
|
|
|
—
|
|
|
—
|
|
(1)
|
Chesapeake Utilities purchased shares of stock on the open market for the purpose of reinvesting the dividend on deferred stock units held in the Rabbi Trust accounts for certain Directors and Senior Executives under the Deferred Compensation Plan. The Deferred Compensation Plan is discussed in detail in Item 8 under the heading “Notes to the Consolidated Financial Statements—Note 16
, Employee Benefit Plans
” in our latest Annual Report on Form 10-K for the year ended
December 31, 2015
. During the quarter ended
September 30, 2016
,
366
shares were purchased through the reinvestment of dividends on deferred stock units.
|
(2)
|
Except for the purposes described in Footnote
(1)
, Chesapeake Utilities has no publicly announced plans or programs to repurchase its shares.
|
Item 3.
|
Defaults upon Senior Securities
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
|
|
|
1.1
|
|
Underwriting Agreement entered into by Chesapeake Utilities Corporation and Wells Fargo Securities, LLC, RBC Capital Markets, LLC, Janney Montgomery Scott LLC., Robert W. Baird & Co., Incorporated, J.J.B. Hilliard, W.L. Lyons, LLC, Ladenburg Thalmann & Co. Inc., U.S. Capital Advisors LLC and BB&T Securities, LLC on September 22, 2016, relating to the sale and issuance of 835,207 shares of the Company’s common stock, is incorporated herein by reference to Exhibit 1.1 of the Company’s current report on Form 8-K, filed on September 28, 2016, File No. 001-11590.
|
|
|
|
3.3
|
|
Second Amendment to the Amended and Restated Bylaws of Chesapeake Utilities Corporation, effective November 2, 2016, is filed herewith.
|
|
|
|
31.1
|
|
Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
|
|
|
|
31.2
|
|
Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
|
|
|
|
32.1
|
|
Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350.
|
|
|
|
32.2
|
|
Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350.
|
|
|
|
101.INS*
|
|
XBRL Instance Document.
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
C
HESAPEAKE
U
TILITIES
C
ORPORATION
|
|
/
S
/ B
ETH
W. C
OOPER
|
Beth W. Cooper
Senior Vice President and Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended
September 30, 2016
of Chesapeake Utilities Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/
S
/ M
ICHAEL
P. M
C
M
ASTERS
|
Michael P. McMasters
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended
September 30, 2016
of Chesapeake Utilities Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/
S
/ B
ETH
W. C
OOPER
|
Beth W. Cooper
Senior Vice President and Chief Financial Officer
|
/
S
/ M
ICHAEL
P. M
C
M
ASTERS
|
Michael P. McMasters
|
November 3, 2016
|
/
S
/ B
ETH
W. C
OOPER
|
Beth W. Cooper
|
November 3, 2016
|