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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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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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Six Months Ended
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||||||||||||
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June 30,
|
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June 30,
|
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||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
||||||||
(in thousands, except shares and per share data)
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenues
|
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
|
$
|
70,996
|
|
|
$
|
67,395
|
|
|
$
|
168,650
|
|
|
$
|
156,611
|
|
|
Unregulated Energy and other
|
|
54,088
|
|
|
34,947
|
|
|
141,594
|
|
|
92,027
|
|
|
||||
Total Operating Revenues
|
|
125,084
|
|
|
102,342
|
|
|
310,244
|
|
|
248,638
|
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|
||||
Operating Expenses
|
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy cost of sales
|
|
24,167
|
|
|
21,635
|
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|
64,411
|
|
|
56,540
|
|
|
||||
Unregulated Energy and other cost of sales
|
|
40,505
|
|
|
22,934
|
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|
101,260
|
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|
56,958
|
|
|
||||
Operations
|
|
30,408
|
|
|
28,087
|
|
|
63,321
|
|
|
55,246
|
|
|
||||
Maintenance
|
|
3,403
|
|
|
2,904
|
|
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6,634
|
|
|
5,383
|
|
|
||||
Gain from a settlement
|
|
(130
|
)
|
|
(130
|
)
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|
(130
|
)
|
|
(130
|
)
|
|
||||
Depreciation and amortization
|
|
9,094
|
|
|
7,780
|
|
|
17,906
|
|
|
15,283
|
|
|
||||
Other taxes
|
|
3,971
|
|
|
3,390
|
|
|
8,501
|
|
|
7,236
|
|
|
||||
Total Operating Expenses
|
|
111,418
|
|
|
86,600
|
|
|
261,903
|
|
|
196,516
|
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|
||||
Operating Income
|
|
13,666
|
|
|
15,742
|
|
|
48,341
|
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|
52,122
|
|
|
||||
Other expense, net
|
|
(607
|
)
|
|
(8
|
)
|
|
(884
|
)
|
|
(42
|
)
|
|
||||
Interest charges
|
|
3,073
|
|
|
2,624
|
|
|
5,811
|
|
|
5,274
|
|
|
||||
Income Before Income Taxes
|
|
9,986
|
|
|
13,110
|
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41,646
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46,806
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|
||||
Income taxes
|
|
3,940
|
|
|
5,081
|
|
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16,456
|
|
|
18,410
|
|
|
||||
Net Income
|
|
$
|
6,046
|
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|
$
|
8,029
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$
|
25,190
|
|
|
$
|
28,396
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
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||||||||
Basic
|
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16,340,665
|
|
|
15,315,020
|
|
|
16,329,009
|
|
|
15,300,931
|
|
|
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Diluted
|
|
16,382,207
|
|
|
15,352,702
|
|
|
16,373,038
|
|
|
15,342,287
|
|
|
||||
Earnings Per Share of Common Stock:
|
|
|
|
|
|
|
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||||||||
Basic
|
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$
|
0.37
|
|
|
$
|
0.52
|
|
|
$
|
1.54
|
|
|
$
|
1.86
|
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Diluted
|
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$
|
0.37
|
|
|
$
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0.52
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|
$
|
1.54
|
|
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$
|
1.85
|
|
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Cash Dividends Declared Per Share of Common Stock
|
|
$
|
0.3250
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|
$
|
0.3050
|
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$
|
0.6300
|
|
|
$
|
0.5925
|
|
|
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Three Months Ended
|
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Six Months Ended
|
||||||||||||
|
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June 30,
|
|
June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
6,046
|
|
|
$
|
8,029
|
|
|
$
|
25,190
|
|
|
$
|
28,396
|
|
Other Comprehensive (Loss) Income, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Employee Benefits, net of tax:
|
|
|
|
|
|
|
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|
||||||||
Amortization of prior service cost, net of tax of $(8), $(8), $(16) and $(16), respectively
|
|
(12
|
)
|
|
(12
|
)
|
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(23
|
)
|
|
(24
|
)
|
||||
Net gain, net of tax of $69, $67, $145 and $133, respectively
|
|
101
|
|
|
99
|
|
|
194
|
|
|
200
|
|
||||
Cash Flow Hedges, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized (loss)/gain on commodity contract cash flow hedges, net of tax of $(554), $313, $(362) and $322, respectively
|
|
(875
|
)
|
|
496
|
|
|
(537
|
)
|
|
496
|
|
||||
Total Other Comprehensive (Loss) Income
|
|
(786
|
)
|
|
583
|
|
|
(366
|
)
|
|
672
|
|
||||
Comprehensive Income
|
|
$
|
5,260
|
|
|
$
|
8,612
|
|
|
$
|
24,824
|
|
|
$
|
29,068
|
|
Assets
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Property, Plant and Equipment
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
1,038,929
|
|
|
$
|
957,681
|
|
Unregulated Energy
|
|
202,707
|
|
|
196,800
|
|
||
Other businesses and eliminations
|
|
25,623
|
|
|
21,114
|
|
||
Total property, plant and equipment
|
|
1,267,259
|
|
|
1,175,595
|
|
||
Less: Accumulated depreciation and amortization
|
|
(260,428
|
)
|
|
(245,207
|
)
|
||
Plus: Construction work in progress
|
|
44,556
|
|
|
56,276
|
|
||
Net property, plant and equipment
|
|
1,051,387
|
|
|
986,664
|
|
||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
2,419
|
|
|
4,178
|
|
||
Accounts receivable (less allowance for uncollectible accounts of $862 and $909, respectively)
|
|
41,113
|
|
|
62,803
|
|
||
Accrued revenue
|
|
11,812
|
|
|
16,986
|
|
||
Propane inventory, at average cost
|
|
4,649
|
|
|
6,457
|
|
||
Other inventory, at average cost
|
|
9,996
|
|
|
4,576
|
|
||
Regulatory assets
|
|
7,167
|
|
|
7,694
|
|
||
Storage gas prepayments
|
|
4,415
|
|
|
5,484
|
|
||
Income taxes receivable
|
|
14,409
|
|
|
22,888
|
|
||
Prepaid expenses
|
|
3,939
|
|
|
6,792
|
|
||
Mark-to-market energy assets
|
|
229
|
|
|
823
|
|
||
Other current assets
|
|
2,287
|
|
|
2,470
|
|
||
Total current assets
|
|
102,435
|
|
|
141,151
|
|
||
Deferred Charges and Other Assets
|
|
|
|
|
||||
Goodwill
|
|
15,070
|
|
|
15,070
|
|
||
Other intangible assets, net
|
|
1,664
|
|
|
1,843
|
|
||
Investments, at fair value
|
|
5,952
|
|
|
4,902
|
|
||
Regulatory assets
|
|
76,128
|
|
|
76,803
|
|
||
Receivables and other deferred charges
|
|
4,352
|
|
|
2,786
|
|
||
Total deferred charges and other assets
|
|
103,166
|
|
|
101,404
|
|
||
Total Assets
|
|
$
|
1,256,988
|
|
|
$
|
1,229,219
|
|
Capitalization and Liabilities
|
|
June 30,
2017 |
|
December 31,
2016 |
||||
(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)
|
|
7,955
|
|
|
7,935
|
|
||
Additional paid-in capital
|
|
252,071
|
|
|
250,967
|
|
||
Retained earnings
|
|
206,896
|
|
|
192,062
|
|
||
Accumulated other comprehensive loss
|
|
(5,244
|
)
|
|
(4,878
|
)
|
||
Deferred compensation obligation
|
|
3,336
|
|
|
2,416
|
|
||
Treasury stock
|
|
(3,336
|
)
|
|
(2,416
|
)
|
||
Total stockholders’ equity
|
|
461,678
|
|
|
446,086
|
|
||
Long-term debt, net of current maturities
|
|
201,590
|
|
|
136,954
|
|
||
Total capitalization
|
|
663,268
|
|
|
583,040
|
|
||
Current Liabilities
|
|
|
|
|
||||
Current portion of long-term debt
|
|
12,124
|
|
|
12,099
|
|
||
Short-term borrowing
|
|
145,591
|
|
|
209,871
|
|
||
Accounts payable
|
|
52,101
|
|
|
56,935
|
|
||
Customer deposits and refunds
|
|
30,725
|
|
|
29,238
|
|
||
Accrued interest
|
|
1,637
|
|
|
1,312
|
|
||
Dividends payable
|
|
5,312
|
|
|
4,973
|
|
||
Accrued compensation
|
|
6,683
|
|
|
10,496
|
|
||
Regulatory liabilities
|
|
5,609
|
|
|
1,291
|
|
||
Mark-to-market energy liabilities
|
|
188
|
|
|
773
|
|
||
Other accrued liabilities
|
|
12,084
|
|
|
7,063
|
|
||
Total current liabilities
|
|
272,054
|
|
|
334,051
|
|
||
Deferred Credits and Other Liabilities
|
|
|
|
|
||||
Deferred income taxes
|
|
234,716
|
|
|
222,894
|
|
||
Regulatory liabilities
|
|
42,427
|
|
|
43,064
|
|
||
Environmental liabilities
|
|
8,457
|
|
|
8,592
|
|
||
Other pension and benefit costs
|
|
31,920
|
|
|
32,828
|
|
||
Deferred investment tax credits and other liabilities
|
|
4,146
|
|
|
4,750
|
|
||
Total deferred credits and other liabilities
|
|
321,666
|
|
|
312,128
|
|
||
Environmental and other commitments and contingencies (Note 4 and 5)
|
|
|
|
|
||||
Total Capitalization and Liabilities
|
|
$
|
1,256,988
|
|
|
$
|
1,229,219
|
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
|
||||||
|
|
2017
|
|
2016
|
||||
(in thousands)
|
|
|
|
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
25,190
|
|
|
$
|
28,396
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
17,906
|
|
|
15,283
|
|
||
Depreciation and accretion included in other costs
|
|
3,939
|
|
|
3,436
|
|
||
Deferred income taxes
|
|
12,034
|
|
|
6,162
|
|
||
Realized loss on commodity contracts/sale of assets/investments
|
|
2,223
|
|
|
664
|
|
||
Unrealized loss/(gain) on investments/commodity contracts
|
|
184
|
|
|
(42
|
)
|
||
Employee benefits and compensation
|
|
819
|
|
|
760
|
|
||
Share-based compensation
|
|
812
|
|
|
1,264
|
|
||
Other, net
|
|
(17
|
)
|
|
24
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable and accrued revenue
|
|
26,862
|
|
|
2,264
|
|
||
Propane inventory, storage gas and other inventory
|
|
(2,543
|
)
|
|
663
|
|
||
Regulatory assets/liabilities, net
|
|
4,255
|
|
|
519
|
|
||
Prepaid expenses and other current assets
|
|
2,129
|
|
|
2,878
|
|
||
Accounts payable and other accrued liabilities
|
|
(280
|
)
|
|
(561
|
)
|
||
Income taxes receivable
|
|
8,500
|
|
|
20,680
|
|
||
Customer deposits and refunds
|
|
1,487
|
|
|
399
|
|
||
Accrued compensation
|
|
(3,876
|
)
|
|
(3,340
|
)
|
||
Other assets and liabilities, net
|
|
(3,254
|
)
|
|
(1,786
|
)
|
||
Net cash provided by operating activities
|
|
96,370
|
|
|
77,663
|
|
||
Investing Activities
|
|
|
|
|
||||
Property, plant and equipment expenditures
|
|
(88,627
|
)
|
|
(72,783
|
)
|
||
Proceeds from sales of assets
|
|
185
|
|
|
89
|
|
||
Environmental expenditures
|
|
(135
|
)
|
|
(177
|
)
|
||
Net cash used in investing activities
|
|
(88,577
|
)
|
|
(72,871
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Common stock dividends
|
|
(9,636
|
)
|
|
(8,453
|
)
|
||
Issuance of stock for Dividend Reinvestment Plan
|
|
421
|
|
|
429
|
|
||
Tax withholding payments related to net settled stock compensation
|
|
(692
|
)
|
|
(770
|
)
|
||
Change in cash overdrafts due to outstanding checks
|
|
(2,370
|
)
|
|
1,473
|
|
||
Net (repayment) borrowing under line of credit agreements
|
|
(61,910
|
)
|
|
5,166
|
|
||
Proceeds from issuance of long-term debt
|
|
69,800
|
|
|
—
|
|
||
Repayment of long-term debt and capital lease obligation
|
|
(5,165
|
)
|
|
(2,226
|
)
|
||
Net cash used by financing activities
|
|
(9,552
|
)
|
|
(4,381
|
)
|
||
Net (Decrease) Increase in Cash and Cash Equivalents
|
|
(1,759
|
)
|
|
411
|
|
||
Cash and Cash Equivalents—Beginning of Period
|
|
4,178
|
|
|
2,855
|
|
||
Cash and Cash Equivalents—End of Period
|
|
$
|
2,419
|
|
|
$
|
3,266
|
|
|
Common Stock
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(in thousands, except shares and per
share data)
|
Number of
Shares
(2)
|
|
Par
Value
|
|
Additional Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated Other Comprehensive
Loss
|
|
Deferred
Compensation
|
|
Treasury
Stock
|
|
Total
(2)
|
|||||||||||||||
Balance at December 31, 2015
|
15,270,659
|
|
|
$
|
7,432
|
|
|
$
|
190,311
|
|
|
$
|
166,235
|
|
|
$
|
(5,840
|
)
|
|
$
|
1,883
|
|
|
$
|
(1,883
|
)
|
|
$
|
358,138
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
44,675
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44,675
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
962
|
|
|
—
|
|
|
—
|
|
|
962
|
|
|||||||
Dividend declared ($1.2025 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,848
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,848
|
)
|
|||||||
Retirement savings plan and dividend reinvestment plan
|
36,253
|
|
|
17
|
|
|
2,225
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,242
|
|
|||||||
Stock issuance
(3)
|
960,488
|
|
|
467
|
|
|
56,893
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,360
|
|
|||||||
Share-based compensation and tax benefit
(4) (5)
|
36,099
|
|
|
19
|
|
|
1,538
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,557
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
533
|
|
|
(533
|
)
|
|
—
|
|
|||||||
Balance at December 31, 2016
|
16,303,499
|
|
|
7,935
|
|
|
250,967
|
|
|
192,062
|
|
|
(4,878
|
)
|
|
2,416
|
|
|
(2,416
|
)
|
|
446,086
|
|
|||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
25,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,190
|
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(366
|
)
|
|
—
|
|
|
—
|
|
|
(366
|
)
|
|||||||
Dividend declared ($0.6300 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,356
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,356
|
)
|
|||||||
Dividend reinvestment plan
|
10,771
|
|
|
5
|
|
|
731
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
736
|
|
|||||||
Share-based compensation and tax benefit
(4)
(5)
|
30,172
|
|
|
15
|
|
|
373
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
388
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
920
|
|
|
(920
|
)
|
|
—
|
|
|||||||
Balance at June 30, 2017
|
16,344,442
|
|
|
$
|
7,955
|
|
|
$
|
252,071
|
|
|
$
|
206,896
|
|
|
$
|
(5,244
|
)
|
|
$
|
3,336
|
|
|
$
|
(3,336
|
)
|
|
$
|
461,678
|
|
(1)
|
2,000,000
shares of preferred stock at
$0.01
par value has been authorized. None has been issued or is outstanding; accordingly, no information has been included in the statements of stockholders’ equity.
|
(2)
|
Includes
90,201
and
76,745
shares at
June 30, 2017
and
December 31, 2016
, respectively, held in a Rabbi Trust related to our Deferred Compensation Plan.
|
(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
$57.4 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 six months ended June 30, 2017
, and for the year ended
December 31, 2016
, we withheld
10,269
and
12,031
shares, respectively, for taxes.
|
2.
|
Calculation of Earnings Per Share
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands, except shares and per share data)
|
|
|
|
|
|
|
|
|
||||||||
Calculation of Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
6,046
|
|
|
$
|
8,029
|
|
|
$
|
25,190
|
|
|
$
|
28,396
|
|
Weighted average shares outstanding
|
|
16,340,665
|
|
|
15,315,020
|
|
|
16,329,009
|
|
|
15,300,931
|
|
||||
Basic Earnings Per Share
|
|
$
|
0.37
|
|
|
$
|
0.52
|
|
|
$
|
1.54
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
||||||||
Calculation of Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
6,046
|
|
|
$
|
8,029
|
|
|
25,190
|
|
|
28,396
|
|
||
Reconciliation of Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted shares outstanding—Basic
|
|
16,340,665
|
|
|
15,315,020
|
|
|
16,329,009
|
|
|
15,300,931
|
|
||||
Effect of dilutive securities—Share-based compensation
|
|
41,542
|
|
|
37,682
|
|
|
44,029
|
|
|
41,356
|
|
||||
Adjusted denominator—Diluted
|
|
16,382,207
|
|
|
15,352,702
|
|
|
16,373,038
|
|
|
15,342,287
|
|
||||
Diluted Earnings Per Share
|
|
$
|
0.37
|
|
|
$
|
0.52
|
|
|
$
|
1.54
|
|
|
$
|
1.85
|
|
3.
|
Rates and Other Regulatory Activities
|
5.
|
Other Commitments and Contingencies
|
6.
|
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 as well as natural gas marketing, gathering, processing, transportation and supply. These operations are unregulated as to their rates and services. Effective June 2016, this segment includes electricity and steam generation through Eight Flags' CHP plant. Through March 31, 2017, this segment also included the operations of Xeron, our propane and crude oil trading subsidiary that began winding down operations at the end of the first quarter of 2017. Lastly, this segment also includes other unregulated energy services, such as energy-related merchandise sales and heating, ventilation and air conditioning, plumbing and electrical services.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenues, Unaffiliated Customers
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy segment
|
|
$
|
68,815
|
|
|
$
|
66,590
|
|
|
$
|
165,261
|
|
|
$
|
155,483
|
|
Unregulated Energy segment and other businesses
|
|
56,269
|
|
|
35,752
|
|
|
144,983
|
|
|
93,154
|
|
||||
Total operating revenues, unaffiliated customers
|
|
$
|
125,084
|
|
|
$
|
102,342
|
|
|
$
|
310,244
|
|
|
$
|
248,637
|
|
Intersegment Revenues
(1)
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy segment
|
|
$
|
2,181
|
|
|
$
|
805
|
|
|
$
|
3,389
|
|
|
$
|
1,128
|
|
Unregulated Energy segment
|
|
6,780
|
|
|
1,052
|
|
|
10,791
|
|
|
1,165
|
|
||||
Other businesses
|
|
159
|
|
|
240
|
|
|
387
|
|
|
466
|
|
||||
Total intersegment revenues
|
|
$
|
9,120
|
|
|
$
|
2,097
|
|
|
$
|
14,567
|
|
|
$
|
2,759
|
|
Operating Income
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy segment
|
|
$
|
13,730
|
|
|
$
|
15,226
|
|
|
$
|
36,747
|
|
|
$
|
39,545
|
|
Unregulated Energy segment
|
|
(38
|
)
|
|
412
|
|
|
11,492
|
|
|
12,347
|
|
||||
Other businesses and eliminations
|
|
(26
|
)
|
|
104
|
|
|
102
|
|
|
230
|
|
||||
Total operating income
|
|
13,666
|
|
|
15,742
|
|
|
48,341
|
|
|
52,122
|
|
||||
Other expense, net
|
|
(607
|
)
|
|
(8
|
)
|
|
(884
|
)
|
|
(42
|
)
|
||||
Interest
|
|
3,073
|
|
|
2,624
|
|
|
5,811
|
|
|
5,274
|
|
||||
Income before Income Taxes
|
|
9,986
|
|
|
13,110
|
|
|
41,646
|
|
|
46,806
|
|
||||
Income taxes
|
|
3,940
|
|
|
5,081
|
|
|
16,456
|
|
|
18,410
|
|
||||
Net Income
|
|
$
|
6,046
|
|
|
$
|
8,029
|
|
|
$
|
25,190
|
|
|
$
|
28,396
|
|
(1)
|
All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.
|
(in thousands)
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Identifiable Assets
|
|
|
|
|
||||
Regulated Energy segment
|
|
$
|
1,025,745
|
|
|
$
|
986,752
|
|
Unregulated Energy segment
|
|
202,730
|
|
|
226,368
|
|
||
Other businesses and eliminations
|
|
28,513
|
|
|
16,099
|
|
||
Total identifiable assets
|
|
$
|
1,256,988
|
|
|
$
|
1,229,219
|
|
7.
|
Stockholder's Equity
|
|
|
Defined Benefit
|
|
Commodity
|
|
|
||||||
|
|
Pension and
|
|
Contracts
|
|
|
||||||
|
|
Postretirement
|
|
Cash Flow
|
|
|
||||||
|
|
Plan Items
|
|
Hedges
|
|
Total
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
As of December 31, 2016
|
|
$
|
(5,360
|
)
|
|
$
|
482
|
|
|
$
|
(4,878
|
)
|
Other comprehensive (loss)/income before reclassifications
|
|
(9
|
)
|
|
837
|
|
|
828
|
|
|||
Amounts reclassified from accumulated other comprehensive (loss)/income
|
|
180
|
|
|
(1,374
|
)
|
|
(1,194
|
)
|
|||
Net current-period other comprehensive (loss)/income
|
|
171
|
|
|
(537
|
)
|
|
(366
|
)
|
|||
As of June 30, 2017
|
|
$
|
(5,189
|
)
|
|
$
|
(55
|
)
|
|
$
|
(5,244
|
)
|
|
|
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 income before reclassifications
|
|
—
|
|
|
525
|
|
|
525
|
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
176
|
|
|
(29
|
)
|
|
147
|
|
|||
Net prior-period other comprehensive income
|
|
176
|
|
|
496
|
|
|
672
|
|
|||
As of June 30, 2016
|
|
$
|
(5,404
|
)
|
|
$
|
236
|
|
|
$
|
(5,168
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Amortization of defined benefit pension and postretirement plan items:
|
|
|
|
|
|
|
|
|
||||||||
Prior service credit
(1)
|
|
$
|
20
|
|
|
$
|
20
|
|
|
$
|
39
|
|
|
$
|
40
|
|
Net loss
(1)
|
|
(170
|
)
|
|
(166
|
)
|
|
(339
|
)
|
|
(333
|
)
|
||||
Total before income taxes
|
|
(150
|
)
|
|
(146
|
)
|
|
(300
|
)
|
|
(293
|
)
|
||||
Income tax benefit
|
|
61
|
|
|
58
|
|
|
120
|
|
|
117
|
|
||||
Net of tax
|
|
$
|
(89
|
)
|
|
$
|
(88
|
)
|
|
$
|
(180
|
)
|
|
$
|
(176
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Gains and losses on commodity contracts cash flow hedges
|
|
|
|
|
|
|
|
|
||||||||
Propane swap agreements
(2)
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
465
|
|
|
$
|
(322
|
)
|
Natural gas futures
(2)
|
|
631
|
|
|
211
|
|
|
1,781
|
|
|
359
|
|
||||
Total before income taxes
|
|
708
|
|
|
211
|
|
|
2,246
|
|
|
37
|
|
||||
Income tax (expense) benefit
|
|
(273
|
)
|
|
(81
|
)
|
|
(872
|
)
|
|
(8
|
)
|
||||
Net of tax
|
|
435
|
|
|
130
|
|
|
1,374
|
|
|
29
|
|
||||
Total reclassifications for the period
|
|
$
|
346
|
|
|
$
|
42
|
|
|
$
|
1,194
|
|
|
$
|
(147
|
)
|
8.
|
Employee Benefit Plans
|
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
||||||||||||||||||||||||||||||
For the Three Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Interest cost
|
|
$
|
103
|
|
|
$
|
105
|
|
|
$
|
624
|
|
|
$
|
630
|
|
|
$
|
22
|
|
|
$
|
23
|
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
14
|
|
Expected return on plan assets
|
|
(127
|
)
|
|
(131
|
)
|
|
(700
|
)
|
|
(701
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
106
|
|
|
103
|
|
|
131
|
|
|
128
|
|
|
22
|
|
|
22
|
|
|
17
|
|
|
17
|
|
|
—
|
|
|
—
|
|
||||||||||
Net periodic cost (benefit)
|
|
82
|
|
|
77
|
|
|
55
|
|
|
57
|
|
|
44
|
|
|
45
|
|
|
8
|
|
|
8
|
|
|
13
|
|
|
14
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
191
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||||||||
Total periodic cost
|
|
$
|
82
|
|
|
$
|
77
|
|
|
$
|
246
|
|
|
$
|
248
|
|
|
$
|
44
|
|
|
$
|
45
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
15
|
|
|
$
|
16
|
|
|
|
Chesapeake
Pension Plan
|
|
FPU
Pension Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
||||||||||||||||||||||||||||||
For the Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Interest cost
|
|
206
|
|
|
$
|
210
|
|
|
1,247
|
|
|
$
|
1,259
|
|
|
$
|
44
|
|
|
$
|
46
|
|
|
$
|
21
|
|
|
$
|
21
|
|
|
$
|
26
|
|
|
$
|
28
|
|
||
Expected return on plan assets
|
|
(254
|
)
|
|
(261
|
)
|
|
(1,399
|
)
|
|
(1,402
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
213
|
|
|
206
|
|
|
262
|
|
|
257
|
|
|
44
|
|
|
44
|
|
|
32
|
|
|
34
|
|
|
—
|
|
|
—
|
|
||||||||||
Net periodic cost (benefit)
|
|
165
|
|
|
155
|
|
|
110
|
|
|
114
|
|
|
88
|
|
|
90
|
|
|
14
|
|
|
15
|
|
|
26
|
|
|
28
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
381
|
|
|
381
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||||||
Total periodic cost
|
|
$
|
165
|
|
|
$
|
155
|
|
|
$
|
491
|
|
|
$
|
495
|
|
|
$
|
88
|
|
|
$
|
90
|
|
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
30
|
|
|
$
|
32
|
|
For the Three Months Ended June 30, 2017
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
$
|
(20
|
)
|
Net loss
|
|
106
|
|
|
131
|
|
|
22
|
|
|
17
|
|
|
—
|
|
|
276
|
|
||||||
Total recognized in net periodic benefit cost
|
|
106
|
|
|
131
|
|
|
22
|
|
|
(3
|
)
|
|
—
|
|
|
256
|
|
||||||
Recognized from accumulated other comprehensive loss
(1)
|
|
106
|
|
|
25
|
|
|
22
|
|
|
(3
|
)
|
|
—
|
|
|
150
|
|
||||||
Recognized from regulatory asset
|
|
—
|
|
|
106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
||||||
Total
|
|
$
|
106
|
|
|
$
|
131
|
|
|
$
|
22
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
256
|
|
For the Three Months Ended June 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
|
|
|
128
|
|
|
22
|
|
|
17
|
|
|
—
|
|
|
270
|
|
||||||
Total recognized in net periodic benefit cost
|
|
103
|
|
|
128
|
|
|
22
|
|
|
(3
|
)
|
|
—
|
|
|
250
|
|
||||||
Recognized from accumulated other comprehensive loss
(1)
|
|
103
|
|
|
24
|
|
|
22
|
|
|
(3
|
)
|
|
—
|
|
|
146
|
|
||||||
Recognized from regulatory asset
|
|
—
|
|
|
104
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
104
|
|
||||||
Total
|
|
$
|
103
|
|
|
$
|
128
|
|
|
$
|
22
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
250
|
|
For the Six Months Ended June 30, 2017
|
|
Chesapeake
Pension
Plan
|
|
FPU
Pension
Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
$
|
(39
|
)
|
Net loss
|
|
213
|
|
|
262
|
|
|
44
|
|
|
32
|
|
|
—
|
|
|
551
|
|
||||||
Total recognized in net periodic benefit cost
|
|
213
|
|
|
262
|
|
|
44
|
|
|
(7
|
)
|
|
—
|
|
|
512
|
|
||||||
Recognized from accumulated other comprehensive loss
(1)
|
|
213
|
|
|
50
|
|
|
44
|
|
|
(7
|
)
|
|
—
|
|
|
300
|
|
||||||
Recognized from regulatory asset
|
|
—
|
|
|
212
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
212
|
|
||||||
Total
|
|
$
|
213
|
|
|
$
|
262
|
|
|
$
|
44
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
512
|
|
For the Six Months Ended June 30, 2016
|
|
Chesapeake
Pension
Plan
|
|
FPU
Pension
Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(40
|
)
|
|
$
|
—
|
|
|
$
|
(40
|
)
|
Net loss
|
|
206
|
|
|
257
|
|
|
44
|
|
|
34
|
|
|
—
|
|
|
541
|
|
||||||
Total recognized in net periodic benefit cost
|
|
206
|
|
|
257
|
|
|
44
|
|
|
(6
|
)
|
|
—
|
|
|
501
|
|
||||||
Recognized from accumulated other comprehensive loss
(1)
|
|
206
|
|
|
49
|
|
|
44
|
|
|
(6
|
)
|
|
—
|
|
|
293
|
|
||||||
Recognized from regulatory asset
|
|
—
|
|
|
208
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
208
|
|
||||||
Total
|
|
$
|
206
|
|
|
$
|
257
|
|
|
$
|
44
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
501
|
|
9.
|
Investments
|
|
|
||||||
(in thousands)
|
June 30,
2017 |
|
December 31,
2016 |
||||
Rabbi trust (associated with the Deferred Compensation Plan)
|
$
|
5,930
|
|
|
$
|
4,881
|
|
Investments in equity securities
|
22
|
|
|
21
|
|
||
Total
|
$
|
5,952
|
|
|
4,902
|
|
10.
|
Share-Based Compensation
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Awards to non-employee directors
|
|
$
|
136
|
|
|
$
|
145
|
|
|
$
|
271
|
|
|
$
|
310
|
|
Awards to key employees
|
|
37
|
|
|
470
|
|
|
541
|
|
|
954
|
|
||||
Total compensation expense
|
|
173
|
|
|
615
|
|
|
812
|
|
|
1,264
|
|
||||
Less: tax benefit
|
|
(70
|
)
|
|
(248
|
)
|
|
(327
|
)
|
|
(509
|
)
|
||||
Share-based compensation amounts included in net income
|
|
$
|
103
|
|
|
$
|
367
|
|
|
$
|
485
|
|
|
$
|
755
|
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value
|
|||
Outstanding— December 31, 2016
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
7,515
|
|
|
$
|
71.80
|
|
Vested
|
|
(7,515
|
)
|
|
$
|
71.80
|
|
Outstanding— June 30, 2017
|
|
—
|
|
|
$
|
—
|
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value
|
|||
Outstanding— December 31, 2016
|
|
115,091
|
|
|
$
|
51.85
|
|
Granted
|
|
52,355
|
|
|
$
|
67.47
|
|
Vested
|
|
(32,926
|
)
|
|
$
|
38.88
|
|
Expired
|
|
(1,878
|
)
|
|
$
|
39.97
|
|
Outstanding— June 30, 2017
|
|
132,642
|
|
|
$
|
54.13
|
|
11.
|
Derivative Instruments
|
|
|
Asset Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Propane swap agreements
|
|
Mark-to-market energy assets
|
|
$
|
4
|
|
|
$
|
8
|
|
Put options
|
|
Mark-to-market energy assets
|
|
—
|
|
|
9
|
|
||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Mark-to-market energy assets
|
|
128
|
|
|
113
|
|
||
Propane swap agreements
|
|
Mark-to-market energy assets
|
|
97
|
|
|
693
|
|
||
Total asset derivatives
|
|
|
|
$
|
229
|
|
|
$
|
823
|
|
|
|
Liability Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
June 30, 2017
|
|
December 31, 2016
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Propane swap agreements
|
|
Mark-to-market energy liabilities
|
|
$
|
177
|
|
|
$
|
—
|
|
Natural gas futures contracts
|
|
Mark-to-market energy liabilities
|
|
11
|
|
|
773
|
|
||
Total liability derivatives
|
|
|
|
$
|
188
|
|
|
$
|
773
|
|
|
|
|
|
Amount of Gain (Loss) on Derivatives:
|
||||||||||||||
|
|
Location of Gain
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
|
(Loss) on Derivatives
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
||||||||
Realized gain on forward contracts and options
(1)
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
88
|
|
|
$
|
112
|
|
|
$
|
275
|
|
Unrealized gain on forward contracts
(1)
|
|
Revenue
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Natural gas futures contracts
|
|
Cost of sales
|
|
497
|
|
|
—
|
|
|
621
|
|
|
—
|
|
||||
Propane swap agreements
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Put /Call option
(2)
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
$
|
(9
|
)
|
|
73
|
|
|||
Natural gas futures contracts
|
|
Natural Gas Inventory
|
|
—
|
|
|
(233
|
)
|
|
—
|
|
|
(233
|
)
|
||||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Propane swap agreements
|
|
Cost of sales
|
|
77
|
|
|
—
|
|
|
465
|
|
|
(364
|
)
|
||||
Propane swap agreements
|
|
Other Comprehensive Income (Loss)
|
|
(218
|
)
|
|
23
|
|
|
(775
|
)
|
|
23
|
|
||||
Natural gas futures contracts
|
|
Cost of sales
|
|
631
|
|
|
211
|
|
|
1,781
|
|
|
359
|
|
||||
Natural gas futures contracts
|
|
Other Comprehensive Income (Loss)
|
|
(1,211
|
)
|
|
786
|
|
|
(124
|
)
|
|
472
|
|
||||
Total
|
|
|
|
$
|
(224
|
)
|
|
$
|
876
|
|
|
$
|
2,067
|
|
|
$
|
607
|
|
(1)
|
All of the realized and unrealized gain 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.
|
12.
|
Fair Value of Financial Instruments
|
|
Six Months Ended
June 30, |
||||||
|
2017
|
|
2016
|
||||
(in thousands)
|
|
|
|
||||
Beginning Balance
|
$
|
561
|
|
|
$
|
279
|
|
Purchases and adjustments
|
65
|
|
|
112
|
|
||
Transfers
|
—
|
|
|
88
|
|
||
Distribution
|
—
|
|
|
(8
|
)
|
||
Investment income
|
4
|
|
|
4
|
|
||
Ending Balance
|
$
|
630
|
|
|
$
|
475
|
|
13.
|
Long-Term Debt
|
|
|
June 30,
|
|
December 31,
|
||||
(in thousands)
|
|
2017
|
|
2016
|
||||
FPU secured first mortgage bonds
(1)
:
|
|
|
|
|
||||
9.08% bond, due June 1, 2022
|
|
$
|
7,980
|
|
|
$
|
7,978
|
|
Uncollateralized senior notes:
|
|
|
|
|
||||
6.64% note, due October 31, 2017
|
|
2,727
|
|
|
2,727
|
|
||
5.50% note, due October 12, 2020
|
|
8,000
|
|
|
8,000
|
|
||
5.93% note, due October 31, 2023
|
|
19,500
|
|
|
21,000
|
|
||
5.68% note, due June 30, 2026
|
|
26,100
|
|
|
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
|
|
||
3.25% note, due April 30, 2032
|
|
70,000
|
|
|
—
|
|
||
Promissory notes
|
|
97
|
|
|
168
|
|
||
Capital lease obligation
|
|
2,777
|
|
|
3,471
|
|
||
Less: debt issuance costs
|
|
(467
|
)
|
|
(291
|
)
|
||
Total long-term debt
|
|
213,714
|
|
|
149,053
|
|
||
Less: current maturities
|
|
(12,124
|
)
|
|
(12,099
|
)
|
||
Total long-term debt, net of current maturities
|
|
$
|
201,590
|
|
|
$
|
136,954
|
|
•
|
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 timing of certificate authorizations associated with new capital projects;
|
•
|
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;
|
•
|
possible increased federal, state and local regulation of the safety of our operations;
|
•
|
general economic conditions, including any potential effects arising from terrorist attacks and any hostilities or other external factors over which we have no control;
|
•
|
industrial, commercial and residential growth or contraction in our markets or service territories;
|
•
|
the weather and other natural phenomena, including the economic, operational and other effects of hurricanes, ice storms and other damaging weather events;
|
•
|
the timing and extent of changes in commodity prices and interest rates;
|
•
|
the ability to establish and maintain key supply sources;
|
•
|
the effect of spot, forward and future market prices on our various energy businesses;
|
•
|
the effect of competition on our businesses;
|
•
|
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 ability to construct facilities at or below estimated costs and within projected time frames;
|
•
|
the creditworthiness of counterparties with which we are engaged in transactions;
|
•
|
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 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 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 ability to continue to hire, train and retain appropriately qualified personnel;
|
•
|
the effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
|
•
|
the timing and success of technological improvements;
|
•
|
risks related to cyber-attacks that could disrupt our business operations or result in failure of information technology systems; and
|
•
|
the impact of significant changes to current tax regulations and rates.
|
•
|
executing a capital investment program in pursuit of growth opportunities that generate returns equal to or greater than our cost of capital;
|
•
|
expanding our energy distribution and transmission businesses organically as well as into new geographic areas;
|
•
|
providing new services in our current service territories;
|
•
|
expanding our footprint in potential growth markets through strategic acquisitions;
|
•
|
entering new unregulated energy markets and business lines that will complement our existing operating units and growth strategy while capitalizing on opportunities across the energy value chain; and
|
•
|
differentiating the Company as a full-service energy supplier/partner/provider through a customer-centric model.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2017
|
|
2016
|
|
(decrease)
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy segment
|
|
$
|
13,730
|
|
|
$
|
15,226
|
|
|
$
|
(1,496
|
)
|
Unregulated Energy segment
|
|
(38
|
)
|
|
412
|
|
|
(450
|
)
|
|||
Other businesses and eliminations
|
|
(26
|
)
|
|
104
|
|
|
(130
|
)
|
|||
Operating Income
|
|
$
|
13,666
|
|
|
$
|
15,742
|
|
|
$
|
(2,076
|
)
|
Other expense, net
|
|
(607
|
)
|
|
(8
|
)
|
|
(599
|
)
|
|||
Interest charges
|
|
3,073
|
|
|
2,624
|
|
|
449
|
|
|||
Pre-tax Income
|
|
9,986
|
|
|
13,110
|
|
|
(3,124
|
)
|
|||
Income taxes
|
|
3,940
|
|
|
5,081
|
|
|
(1,141
|
)
|
|||
Net Income
|
|
$
|
6,046
|
|
|
$
|
8,029
|
|
|
$
|
(1,983
|
)
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.37
|
|
|
$
|
0.52
|
|
|
$
|
(0.15
|
)
|
Diluted
|
|
$
|
0.37
|
|
|
$
|
0.52
|
|
|
$
|
(0.15
|
)
|
(in thousands, except per share data)
|
|
Pre-tax
Income |
|
Net
Income |
|
Earnings
Per Share |
||||||
Second Quarter of 2016 Reported Results
|
|
$
|
13,110
|
|
|
$
|
8,029
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
||||||
Adjusting for unusual items:
|
|
|
|
|
|
|
||||||
Weather impact
|
|
(675
|
)
|
|
(409
|
)
|
|
(0.03
|
)
|
|||
Wind-down of Xeron operations
|
|
(351
|
)
|
|
(213
|
)
|
|
(0.01
|
)
|
|||
|
|
(1,026
|
)
|
|
(622
|
)
|
|
(0.04
|
)
|
|||
Increased (Decreased) Gross Margins:
|
|
|
|
|
|
|
||||||
Eight Flags' CHP plant*
|
|
2,128
|
|
|
1,289
|
|
|
0.08
|
|
|||
GRIP*
|
|
532
|
|
|
322
|
|
|
0.02
|
|
|||
Service expansions*
|
|
478
|
|
|
289
|
|
|
0.02
|
|
|||
Natural gas marketing
|
|
(450
|
)
|
|
(272
|
)
|
|
(0.02
|
)
|
|||
Natural gas growth (excluding service expansions)
|
|
325
|
|
|
197
|
|
|
0.01
|
|
|||
Pricing amendments to Aspire Energy's long-term agreements
|
|
271
|
|
|
164
|
|
|
0.01
|
|
|||
|
|
3,284
|
|
|
1,989
|
|
|
0.12
|
|
|||
Increased Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Higher depreciation, asset removal and property tax costs due to new capital investments
|
|
(1,337
|
)
|
|
(810
|
)
|
|
(0.05
|
)
|
|||
Eight Flags' operating expenses
|
|
(1,260
|
)
|
|
(763
|
)
|
|
(0.05
|
)
|
|||
Higher staffing and associated costs
|
|
(976
|
)
|
|
(591
|
)
|
|
(0.04
|
)
|
|||
Higher outside services and facilities maintenance costs
|
|
(335
|
)
|
|
(203
|
)
|
|
(0.01
|
)
|
|||
Higher regulatory expenses
|
|
(295
|
)
|
|
(179
|
)
|
|
(0.01
|
)
|
|||
|
|
(4,203
|
)
|
|
(2,546
|
)
|
|
(0.16
|
)
|
|||
|
|
|
|
|
|
|
||||||
Interest charges
|
|
(449
|
)
|
|
(272
|
)
|
|
(0.02
|
)
|
|||
Change in other expense
|
|
(253
|
)
|
|
(153
|
)
|
|
(0.01
|
)
|
|||
Net other changes
|
|
(477
|
)
|
|
(379
|
)
|
|
(0.02
|
)
|
|||
|
|
(1,179
|
)
|
|
(804
|
)
|
|
(0.05
|
)
|
|||
|
|
|
|
|
|
|
||||||
EPS impact of increase in outstanding shares due to September 2016 offering
|
|
—
|
|
|
—
|
|
|
(0.02
|
)
|
|||
Second Quarter of 2017 Reported Results
|
|
$
|
9,986
|
|
|
$
|
6,046
|
|
|
$
|
0.37
|
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2017
|
|
2016
|
|
(decrease)
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy segment
|
|
$
|
36,747
|
|
|
$
|
39,545
|
|
|
$
|
(2,798
|
)
|
Unregulated Energy segment
|
|
11,492
|
|
|
12,347
|
|
|
(855
|
)
|
|||
Other businesses and eliminations
|
|
102
|
|
|
230
|
|
|
(128
|
)
|
|||
Operating Income
|
|
$
|
48,341
|
|
|
$
|
52,122
|
|
|
$
|
(3,781
|
)
|
Other expense, net
|
|
(884
|
)
|
|
(42
|
)
|
|
(842
|
)
|
|||
Interest charges
|
|
5,811
|
|
|
5,274
|
|
|
537
|
|
|||
Pre-tax Income
|
|
41,646
|
|
|
46,806
|
|
|
(5,160
|
)
|
|||
Income taxes
|
|
16,456
|
|
|
18,410
|
|
|
(1,954
|
)
|
|||
Net Income
|
|
$
|
25,190
|
|
|
$
|
28,396
|
|
|
$
|
(3,206
|
)
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.54
|
|
|
$
|
1.86
|
|
|
$
|
(0.32
|
)
|
Diluted
|
|
$
|
1.54
|
|
|
$
|
1.85
|
|
|
$
|
(0.31
|
)
|
(in thousands, except per share data)
|
|
Pre-tax
Income |
|
Net
Income |
|
Earnings
Per Share |
||||||
Six Months Ended June 30, 2016 Reported Results
|
|
$
|
46,806
|
|
|
$
|
28,396
|
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
||||||
Adjusting for unusual items:
|
|
|
|
|
|
|
||||||
Weather impact
|
|
(1,363
|
)
|
|
(825
|
)
|
|
(0.05
|
)
|
|||
Wind-down of Xeron operations
|
|
(886
|
)
|
|
(536
|
)
|
|
(0.03
|
)
|
|||
|
|
(2,249
|
)
|
|
(1,361
|
)
|
|
(0.08
|
)
|
|||
Increased (Decreased) Gross Margins:
|
|
|
|
|
|
|
||||||
Eight Flags' CHP plant*
|
|
4,424
|
|
|
2,676
|
|
|
0.17
|
|
|||
Natural gas marketing
|
|
1,704
|
|
|
1,031
|
|
|
0.07
|
|
|||
Service expansions*
|
|
1,237
|
|
|
748
|
|
|
0.05
|
|
|||
GRIP*
|
|
1,213
|
|
|
734
|
|
|
0.05
|
|
|||
Natural gas growth (excluding service expansions)
|
|
1,130
|
|
|
683
|
|
|
0.04
|
|
|||
Pricing amendments to Aspire Energy's long-term agreements
|
|
844
|
|
|
510
|
|
|
0.03
|
|
|||
Implementation of Delaware Division new rates*
|
|
417
|
|
|
252
|
|
|
0.02
|
|
|||
Lower retail propane margins
|
|
(305
|
)
|
|
(184
|
)
|
|
(0.01
|
)
|
|||
|
|
10,664
|
|
|
6,450
|
|
|
0.42
|
|
|||
Increased Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Higher depreciation, asset removal and property tax costs due to new capital investments
|
|
(2,696
|
)
|
|
(1,631
|
)
|
|
(0.11
|
)
|
|||
Eight Flags' operating expenses
|
|
(2,528
|
)
|
|
(1,529
|
)
|
|
(0.10
|
)
|
|||
Higher payroll expense
|
|
(2,219
|
)
|
|
(1,342
|
)
|
|
(0.09
|
)
|
|||
Higher outside services and facilities maintenance costs
|
|
(2,054
|
)
|
|
(1,243
|
)
|
|
(0.08
|
)
|
|||
Higher benefits and other employee-related expenses
|
|
(1,966
|
)
|
|
(1,189
|
)
|
|
(0.08
|
)
|
|||
Higher regulatory expenses
|
|
(664
|
)
|
|
(401
|
)
|
|
(0.03
|
)
|
|||
|
|
(12,127
|
)
|
|
(7,335
|
)
|
|
(0.49
|
)
|
|||
|
|
|
|
|
|
|
||||||
Interest charges
|
|
(537
|
)
|
|
(325
|
)
|
|
(0.02
|
)
|
|||
Change in other expense
|
|
(476
|
)
|
|
(288
|
)
|
|
(0.02
|
)
|
|||
Net other changes
|
|
(435
|
)
|
|
(347
|
)
|
|
(0.02
|
)
|
|||
|
|
(1,448
|
)
|
|
(960
|
)
|
|
(0.06
|
)
|
|||
|
|
|
|
|
|
|
||||||
EPS impact of increase in outstanding shares due to September 2016 offering
|
|
—
|
|
|
—
|
|
|
(0.10
|
)
|
|||
Six Months Ended June 30, 2017 Reported Results
|
|
$
|
41,646
|
|
|
$
|
25,190
|
|
|
$
|
1.54
|
|
|
Gross Margin for the Period
|
|||||||||||||||||||||||||||||||||||||
|
Three Months Ended
|
Six Months Ended
|
|
Year Ended
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
June 30,
|
June 30,
|
|
December 31,
|
|
Estimate for
|
||||||||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
Variance
|
2017
|
|
2016
|
|
Variance
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||||||||||||
Major Projects and Initiatives Recently Completed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Capital Investment Projects
|
$
|
9,601
|
|
|
$
|
6,463
|
|
|
$
|
3,138
|
|
$
|
18,922
|
|
|
$
|
12,049
|
|
|
$
|
6,873
|
|
|
$
|
29,819
|
|
|
$
|
35,393
|
|
|
$
|
32,125
|
|
|
$
|
33,035
|
|
Settled Delaware Division Rate Case
|
425
|
|
|
555
|
|
|
(130
|
)
|
1,295
|
|
|
878
|
|
|
417
|
|
|
1,487
|
|
|
2,250
|
|
|
2,250
|
|
|
2,250
|
|
||||||||||
Total Major Projects and Initiatives Recently Completed
|
10,026
|
|
|
7,018
|
|
|
3,008
|
|
20,217
|
|
|
12,927
|
|
|
7,290
|
|
|
31,306
|
|
|
37,643
|
|
|
34,375
|
|
|
35,285
|
|
||||||||||
Future Major Projects and Initiatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Capital Investment Projects
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
2017 Eastern Shore System Expansion
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
126
|
|
|
9,313
|
|
|
15,799
|
|
|||||||||||
Northwest Florida Expansion
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
3,970
|
|
|
5,100
|
|
|||||||||||
Eastern Shore System Reliability
(1)
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1,875
|
|
|
4,500
|
|
|
4,500
|
|
|||||||||||
Total Future Major Projects and Initiatives
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2,001
|
|
|
17,783
|
|
|
25,399
|
|
|||||||||||
Total
|
$
|
10,026
|
|
|
$
|
7,018
|
|
|
$
|
3,008
|
|
$
|
20,217
|
|
|
$
|
12,927
|
|
|
$
|
7,290
|
|
|
$
|
31,306
|
|
|
$
|
39,644
|
|
|
$
|
52,158
|
|
|
$
|
60,684
|
|
|
Gross Margin for the Period
(1)
|
||||||||||||||||||||||||||||||||||||
|
Three Months Ended
|
Six Months Ended
|
Year Ended
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
June 30,
|
June 30,
|
December 31,
|
|
Estimate for
|
||||||||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
Variance
|
2017
|
|
2016
|
|
Variance
|
2016
|
|
2017
|
|
2018
|
|
2019
|
||||||||||||||||||||
Capital Investment Projects:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Service Expansions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Short-term contracts (Delaware)
|
$
|
1,194
|
|
|
$
|
2,648
|
|
|
$
|
(1,454
|
)
|
$
|
3,857
|
|
|
$
|
5,191
|
|
|
$
|
(1,334
|
)
|
$
|
11,454
|
|
|
$
|
5,689
|
|
|
$
|
1,407
|
|
|
$
|
1,407
|
|
Long-term contracts (Delaware)
|
2,387
|
|
|
455
|
|
|
1,932
|
|
3,481
|
|
|
911
|
|
|
2,570
|
|
1,815
|
|
|
7,611
|
|
|
7,605
|
|
|
7,583
|
|
||||||||||
Total Service Expansions
|
3,581
|
|
|
3,103
|
|
|
478
|
|
7,338
|
|
|
6,102
|
|
|
1,236
|
|
13,269
|
|
|
13,300
|
|
|
9,012
|
|
|
8,990
|
|
||||||||||
Florida GRIP
|
3,341
|
|
|
2,809
|
|
|
532
|
|
6,609
|
|
|
5,396
|
|
|
1,213
|
|
11,552
|
|
|
13,727
|
|
|
14,407
|
|
|
15,085
|
|
||||||||||
Eight Flags' CHP Plant
|
2,679
|
|
|
551
|
|
|
2,128
|
|
4,975
|
|
|
551
|
|
|
4,424
|
|
4,998
|
|
|
8,366
|
|
|
8,706
|
|
|
8,960
|
|
||||||||||
Total Capital Investment Projects
|
9,601
|
|
|
6,463
|
|
|
3,138
|
|
18,922
|
|
|
12,049
|
|
|
6,873
|
|
29,819
|
|
|
35,393
|
|
|
32,125
|
|
|
33,035
|
|
||||||||||
Settled Delaware Division Rate Case
|
425
|
|
|
555
|
|
|
(130
|
)
|
1,295
|
|
|
878
|
|
|
417
|
|
1,487
|
|
|
2,250
|
|
|
2,250
|
|
|
2,250
|
|
||||||||||
Total Major Projects and Initiatives Recently Completed
|
$
|
10,026
|
|
|
$
|
7,018
|
|
|
$
|
3,008
|
|
$
|
20,217
|
|
|
$
|
12,927
|
|
|
$
|
7,290
|
|
$
|
31,306
|
|
|
$
|
37,643
|
|
|
$
|
34,375
|
|
|
$
|
35,285
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||
|
June 30,
|
|
|
|
June 30,
|
|
|
||||||||||
|
2017
|
|
2016
|
|
Variance
|
|
2017
|
|
2016
|
|
Variance
|
||||||
Delmarva
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
288
|
|
|
485
|
|
|
(197
|
)
|
|
2,246
|
|
|
2,579
|
|
|
(333
|
)
|
10-Year Average HDD ("Delmarva Normal")
|
429
|
|
|
452
|
|
|
(23
|
)
|
|
2,783
|
|
|
2,854
|
|
|
(71
|
)
|
Variance from Delmarva Normal
|
(141
|
)
|
|
33
|
|
|
|
|
(537
|
)
|
|
(275
|
)
|
|
|
||
Florida
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
13
|
|
|
9
|
|
|
4
|
|
|
298
|
|
|
514
|
|
|
(216
|
)
|
10-Year Average HDD ("Florida Normal")
|
19
|
|
|
19
|
|
|
—
|
|
|
602
|
|
|
553
|
|
|
49
|
|
Variance from Florida Normal
|
(6
|
)
|
|
(10
|
)
|
|
|
|
(304
|
)
|
|
(39
|
)
|
|
|
||
Ohio
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
508
|
|
|
766
|
|
|
(258
|
)
|
|
2,992
|
|
|
3,557
|
|
|
(565
|
)
|
10-Year Average HDD ("Ohio Normal")
|
637
|
|
|
630
|
|
|
7
|
|
|
3,774
|
|
|
3,762
|
|
|
12
|
|
Variance from Ohio Normal
|
(129
|
)
|
|
136
|
|
|
|
|
(782
|
)
|
|
(205
|
)
|
|
|
||
Florida
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual CDD
|
935
|
|
|
986
|
|
|
(51
|
)
|
|
1,080
|
|
|
1,113
|
|
|
(33
|
)
|
10-Year Average CDD ("Florida CDD Normal")
|
955
|
|
|
948
|
|
|
7
|
|
|
1,037
|
|
|
1,025
|
|
|
12
|
|
Variance from Florida CDD Normal
|
(20
|
)
|
|
38
|
|
|
|
|
43
|
|
|
88
|
|
|
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2017
|
|
2016
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
70,996
|
|
|
$
|
67,395
|
|
|
$
|
3,601
|
|
Cost of sales
|
|
24,167
|
|
|
21,635
|
|
|
2,532
|
|
|||
Gross margin
|
|
46,829
|
|
|
45,760
|
|
|
1,069
|
|
|||
Operations & maintenance
|
|
22,763
|
|
|
21,301
|
|
|
1,462
|
|
|||
Depreciation & amortization
|
|
7,142
|
|
|
6,267
|
|
|
875
|
|
|||
Other taxes
|
|
3,194
|
|
|
2,966
|
|
|
228
|
|
|||
Other operating expenses
|
|
33,099
|
|
|
30,534
|
|
|
2,565
|
|
|||
Operating income
|
|
$
|
13,730
|
|
|
$
|
15,226
|
|
|
$
|
(1,496
|
)
|
•
|
$328,000
from Florida natural gas customer growth, due primarily to new services to commercial and industrial customers, and
|
•
|
$128,000
from a
four
-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;
|
•
|
which were partially offset by
$131,000
in decreased margin from interruptible service for Eastern Shore.
|
•
|
$1.2 million
in higher depreciation, asset removal and property tax costs associated with recent capital investments;
|
•
|
$358,000
in higher costs related to outside services to support growth and higher facility maintenance costs to maintain system integrity;
|
•
|
$295,000
in increased regulatory expenses, due primarily to costs associated with Eastern Shore’s rate case filing in 2017; and
|
•
|
$255,000
in higher benefits and employee-related costs, while payroll costs remained flat in the second quarter of 2017. Since we are self-insured, benefits costs will fluctuate depending upon actual claims experience.
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2017
|
|
2016
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
168,650
|
|
|
$
|
156,611
|
|
|
$
|
12,039
|
|
Cost of sales
|
|
64,411
|
|
|
56,540
|
|
|
7,871
|
|
|||
Gross margin
|
|
104,239
|
|
|
100,071
|
|
|
4,168
|
|
|||
Operations & maintenance
|
|
46,721
|
|
|
41,761
|
|
|
4,960
|
|
|||
Depreciation & amortization
|
|
14,027
|
|
|
12,563
|
|
|
1,464
|
|
|||
Other taxes
|
|
6,744
|
|
|
6,202
|
|
|
542
|
|
|||
Other operating expenses
|
|
67,492
|
|
|
60,526
|
|
|
6,966
|
|
|||
Operating income
|
|
$
|
36,747
|
|
|
$
|
39,545
|
|
|
$
|
(2,798
|
)
|
(in thousands)
|
|
|
|
Gross margin for the six months ended June 30, 2016
|
$
|
100,071
|
|
Factors contributing to the gross margin increase for the six months ended June 30, 2017:
|
|
||
Service Expansions
|
1,237
|
|
|
Additional Revenue from GRIP in Florida
|
1,213
|
|
|
Natural Gas Growth (Excluding Service Expansions)
|
1,130
|
|
|
Customer Consumption - Weather and Other
|
(797
|
)
|
|
Service to Eight Flags
|
535
|
|
|
Delaware Division Base Rate Increase
|
417
|
|
|
Sandpiper System Improvement Rates
|
239
|
|
|
Other
|
194
|
|
|
Gross margin for the six months ended June 30, 2017
|
$
|
104,239
|
|
•
|
$804,000
from Florida natural gas customer growth due primarily to new services to commercial and industrial customers, and
|
•
|
$649,000
from a
four
-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.
|
•
|
$2.1 million
in higher depreciation, asset removal and property tax costs associated with recent capital investments;
|
•
|
$1.5 million
in higher costs related to outside services to support growth and facility maintenance to maintain system integrity;
|
•
|
$1.3 million
in higher payroll expenses for addition personnel to support growth;
|
•
|
$1.2 million
in higher benefits and employee-related costs in 2017 (since we are self-insured, benefits costs will fluctuate depending upon actual claims experience); and
|
•
|
$664,000
in increased regulatory expenses, due primarily to costs associated with Eastern Shore’s rate case filing in 2017.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2017
|
|
2016
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
63,049
|
|
|
$
|
36,803
|
|
|
$
|
26,246
|
|
Cost of sales
|
|
49,313
|
|
|
24,726
|
|
|
24,587
|
|
|||
Gross margin
|
|
13,736
|
|
|
12,077
|
|
|
1,659
|
|
|||
Operations & maintenance
|
|
11,087
|
|
|
9,771
|
|
|
1,316
|
|
|||
Depreciation & amortization
|
|
1,929
|
|
|
1,490
|
|
|
439
|
|
|||
Other taxes
|
|
758
|
|
|
404
|
|
|
354
|
|
|||
Total operating expenses
|
|
13,774
|
|
|
11,665
|
|
|
2,109
|
|
|||
Operating Income
|
|
$
|
(38
|
)
|
|
$
|
412
|
|
|
$
|
(450
|
)
|
•
|
$1.3 million
incurred by Eight Flags' CHP plant, which commenced operations in June 2016; and
|
•
|
$645,000
in higher staffing and associated costs for additional personnel to support growth. Since we are self-insured, benefits costs will fluctuate depending upon actual claims experience.
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2017
|
|
2016
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
155,774
|
|
|
$
|
94,319
|
|
|
$
|
61,455
|
|
Cost of sales
|
|
115,219
|
|
|
59,141
|
|
|
56,078
|
|
|||
Gross margin
|
|
40,555
|
|
|
35,178
|
|
|
5,377
|
|
|||
Operations & maintenance
|
|
23,511
|
|
|
19,162
|
|
|
4,349
|
|
|||
Depreciation & amortization
|
|
3,833
|
|
|
2,672
|
|
|
1,161
|
|
|||
Other taxes
|
|
1,719
|
|
|
997
|
|
|
722
|
|
|||
Total operating expenses
|
|
29,063
|
|
|
22,831
|
|
|
6,232
|
|
|||
Operating Income
|
|
$
|
11,492
|
|
|
$
|
12,347
|
|
|
$
|
(855
|
)
|
•
|
$2.5 million
incurred by Eight Flags' CHP plant, which commenced operations in June 2016;
|
•
|
$935,000
in higher payroll costs for additional personnel to support growth;
|
•
|
$809,000
in higher benefits and employee-related costs in 2017 (since we are self-insured, benefits costs will fluctuate depending upon actual claims experience);
|
•
|
$609,000
in higher depreciation expense, of which
$382,000
relates to a credit adjustment in 2016 recorded in conjunction with the final valuation for Aspire Energy;
|
•
|
$514,000
in higher outside services costs associated primarily with growth and ongoing compliance activities; and
|
•
|
$355,000
in higher operating expenses associated with the wind-down of Xeron’s operations.
|
|
2017
|
||
(dollars in thousands)
|
|
||
Regulated Energy:
|
|
||
Natural gas distribution
|
$
|
68,645
|
|
Natural gas transmission
|
105,147
|
|
|
Electric distribution
|
11,751
|
|
|
Total Regulated Energy
|
185,543
|
|
|
Unregulated Energy:
|
|
||
Propane distribution
|
10,451
|
|
|
Other unregulated energy
|
5,955
|
|
|
Total Unregulated Energy
|
16,406
|
|
|
Other:
|
|
||
Corporate and other businesses
|
6,002
|
|
|
Total Other
|
6,002
|
|
|
Total 2017 Capital Expenditures
|
$
|
207,951
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Long-term debt, net of current maturities
|
|
$
|
201,590
|
|
|
30
|
%
|
|
$
|
136,954
|
|
|
23
|
%
|
Stockholders’ equity
|
|
461,678
|
|
|
70
|
%
|
|
446,086
|
|
|
77
|
%
|
||
Total capitalization, excluding short-term debt
|
|
$
|
663,268
|
|
|
100
|
%
|
|
$
|
583,040
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
||||||
|
|
June 30, 2017
|
|
December 31, 2016
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Short-term debt
|
|
$
|
145,591
|
|
|
18
|
%
|
|
$
|
209,871
|
|
|
26
|
%
|
Long-term debt, including current maturities
|
|
213,714
|
|
|
26
|
%
|
|
149,053
|
|
|
19
|
%
|
||
Stockholders’ equity
|
|
461,678
|
|
|
56
|
%
|
|
446,086
|
|
|
55
|
%
|
||
Total capitalization, including short-term debt
|
|
$
|
820,983
|
|
|
100
|
%
|
|
$
|
805,010
|
|
|
100
|
%
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
|
||||||
|
|
2017
|
|
2016
|
||||
(in thousands)
|
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
96,370
|
|
|
$
|
77,663
|
|
Investing activities
|
|
(88,577
|
)
|
|
(72,871
|
)
|
||
Financing activities
|
|
(9,552
|
)
|
|
(4,381
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
|
(1,759
|
)
|
|
411
|
|
||
Cash and cash equivalents—beginning of period
|
|
4,178
|
|
|
2,855
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
2,419
|
|
|
$
|
3,266
|
|
•
|
Changes in net accounts receivable and accrued revenue and accounts payable and accrued liabilities increased cash flows by
$24.9 million
, due primarily to higher revenues and the timing of the receipt of customer payments as well as the timing of payments to vendors.
|
•
|
Changes in income taxes decreased cash flows by
$12.2 million
, due to lower pre-tax income and lower tax refund during the first six months of 2017 compared to the same period in 2016.
|
•
|
Net income, adjusted for reconciling activities, increased cash flows by
$7.1 million
, due primarily to an increase in deferred income taxes as a result of the availability and utilization of bonus depreciation in the first six months of 2017, which resulted in a higher book-to-tax timing difference and higher non-cash adjustments for depreciation and amortization related to increased investing activities.
|
•
|
Changes in net regulatory assets and liabilities increased cash flows by
$3.7 million
, due primarily to changes in fuel costs collected through the various fuel cost recovery mechanisms.
|
•
|
Net cash flows from changes in other inventories decreased by approximately
$3.2 million
, due primarily to additional pipes and other construction inventory purchases which increased the levels of our inventory.
|
•
|
Changes in net customer deposits and refunds, prepaid expenses and other current assets, accrued compensation and other assets and liabilities decreased cash flows by
$1.6 million
.
|
•
|
We received
$69.8 million
in net cash proceeds from the issuance of the Prudential Shelf Notes, and we paid
$2.9 million
in scheduled long-term debt principal payments and capital lease obligations payments.
|
•
|
Net repayments of
$67.1 million
under our line of credit arrangements. The proceeds from the long-term debt issuance of the Prudential Shelf Notes were used to repay borrowings under our lines of credit. Change in cash overdrafts decreased cash flows by
$3.8 million
.
|
•
|
We paid
$9.6 million
in cash dividends for the six months ended June 30, 2017, compared to
$8.5 million
for the
six
months ended June 30,
2016
.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
|
Total
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
$
|
10,698
|
|
|
$
|
24,226
|
|
|
$
|
37,200
|
|
|
$
|
139,300
|
|
|
$
|
211,424
|
|
Purchase obligations - Commodity
(1)
|
|
44,380
|
|
|
1,696
|
|
|
—
|
|
|
—
|
|
|
46,076
|
|
|||||
Total
|
|
$
|
55,078
|
|
|
$
|
25,922
|
|
|
$
|
37,200
|
|
|
$
|
139,300
|
|
|
$
|
257,500
|
|
(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.
|
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)
|
|||||
April 1, 2017
through April 30, 2017 (1) |
|
379
|
|
|
$
|
69.80
|
|
|
—
|
|
|
—
|
|
May 1, 2017
through May 31, 2017 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
June 1, 2017
through June 30, 2017 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
379
|
|
|
$
|
69.80
|
|
|
—
|
|
|
—
|
|
(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, 2016
. During the quarter ended
June 30, 2017
,
379
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
|
|
|
|
10.1
|
|
Form of Performance Share Agreement, effective February 23, 2017 for the period 2017 to 2019, pursuant to Chesapeake Utilities Corporation 2013 Stock and Incentive Compensation Plan by and between Chesapeake Utilities Corporation and each of Michael P. McMasters, Beth W. Cooper, Stephen C. Thompson, Elaine B. Bittner, Jeffry M. Householder and James F. Moriarty 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.
|
Atmos Energy Corporation
|
2.
|
Black Hills Corporation
|
3.
|
Delta Natural Gas Company, Inc.
|
4.
|
New Jersey Resources Corporation
|
5.
|
NiSource, Inc.
|
6.
|
Northwest Natural Gas Company
|
7.
|
Northwestern Corporation
|
8.
|
OneGas, Inc.
|
9.
|
RGC Resources, Inc.
|
10.
|
South Jersey Industries, Inc.
|
11.
|
Spire, Inc.
|
12.
|
WGL Holdings, Inc.
|
13.
|
Unitil Corporation
|
14.
|
Vectren, Corporation
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended
June 30, 2017
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
June 30, 2017
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
|
August 3, 2017
|
/
S
/ B
ETH
W. C
OOPER
|
Beth W. Cooper
|
August 3, 2017
|