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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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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock - par value per share $0.4867
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CPK
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New York Stock Exchange, Inc.
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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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Emerging growth 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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||||||
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March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Operating Revenues
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
103,618
|
|
|
$
|
109,393
|
|
Unregulated Energy and other
|
|
123,998
|
|
|
129,963
|
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||
Total Operating Revenues
|
|
227,616
|
|
|
239,356
|
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||
Operating Expenses
|
|
|
|
|
||||
Regulated Energy cost of sales
|
|
36,516
|
|
|
48,231
|
|
||
Unregulated Energy and other cost of sales
|
|
89,703
|
|
|
99,826
|
|
||
Operations
|
|
37,144
|
|
|
32,702
|
|
||
Maintenance
|
|
3,681
|
|
|
3,593
|
|
||
Depreciation and amortization
|
|
11,074
|
|
|
9,704
|
|
||
Other taxes
|
|
5,505
|
|
|
4,894
|
|
||
Total Operating Expenses
|
|
183,623
|
|
|
198,950
|
|
||
Operating Income
|
|
43,993
|
|
|
40,406
|
|
||
Other income (expense), net
|
|
(45
|
)
|
|
68
|
|
||
Interest charges
|
|
5,710
|
|
|
3,664
|
|
||
Income Before Income Taxes
|
|
38,238
|
|
|
36,810
|
|
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Income taxes
|
|
9,574
|
|
|
9,955
|
|
||
Net Income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
||||
Basic
|
|
16,384,927
|
|
|
16,351,338
|
|
||
Diluted
|
|
16,432,852
|
|
|
16,402,985
|
|
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Earnings Per Share of Common Stock:
|
|
|
|
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||||
Basic
|
|
$
|
1.75
|
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|
$
|
1.64
|
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Diluted
|
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$
|
1.74
|
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$
|
1.64
|
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Three Months Ended
|
||||||
|
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March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
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|
||||
Net Income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
Other Comprehensive Income (Loss), net of tax:
|
|
|
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|
||||
Employee Benefits, net of tax:
|
|
|
|
|
||||
Amortization of prior service cost, ne
t of tax of $(5)
and $(5), respectively
|
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(14
|
)
|
|
(14
|
)
|
||
Net gain, net of tax of $42 and $41, respectively
|
|
121
|
|
|
108
|
|
||
Cash Flow Hedges, net of tax:
|
|
|
|
|
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Unrealized gain (loss) on commodity contract cash flow hedges, net of tax of $1,194 and $(756), respectively
|
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2,982
|
|
|
(1,788
|
)
|
||
Total Other Comprehensive Income (Loss), net of tax
|
|
3,089
|
|
|
(1,694
|
)
|
||
Comprehensive Income
|
|
$
|
31,753
|
|
|
$
|
25,161
|
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Assets
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Property, Plant and Equipment
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
1,346,221
|
|
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$
|
1,297,416
|
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Unregulated Energy
|
|
241,126
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|
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237,682
|
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Other businesses and eliminations
|
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30,282
|
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34,585
|
|
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Total property, plant and equipment
|
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1,617,629
|
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1,569,683
|
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Less: Accumulated depreciation and amortization
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(312,949
|
)
|
|
(294,295
|
)
|
||
Plus: Construction work in progress
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90,453
|
|
|
108,584
|
|
||
Net property, plant and equipment
|
|
1,395,133
|
|
|
1,383,972
|
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||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
7,975
|
|
|
6,089
|
|
||
Trade and other receivables (less allowance for uncollectible accounts of $1,054 and $1,108, respectively)
|
|
74,098
|
|
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85,404
|
|
||
Accrued revenue
|
|
20,747
|
|
|
27,499
|
|
||
Propane inventory, at average cost
|
|
6,865
|
|
|
9,791
|
|
||
Other inventory, at average cost
|
|
8,122
|
|
|
7,127
|
|
||
Regulatory assets
|
|
7,913
|
|
|
4,796
|
|
||
Storage gas prepayments
|
|
1,327
|
|
|
6,603
|
|
||
Income taxes receivable
|
|
9,059
|
|
|
15,300
|
|
||
Prepaid expenses
|
|
7,192
|
|
|
10,079
|
|
||
Derivative assets, at fair value
|
|
9,221
|
|
|
13,165
|
|
||
Other current assets
|
|
1,121
|
|
|
5,684
|
|
||
Total current assets
|
|
153,640
|
|
|
191,537
|
|
||
Deferred Charges and Other Assets
|
|
|
|
|
||||
Goodwill
|
|
25,785
|
|
|
25,837
|
|
||
Other intangible assets, net
|
|
5,909
|
|
|
6,207
|
|
||
Investments, at fair value
|
|
7,509
|
|
|
6,711
|
|
||
Operating lease right-of-use assets (refer to Note 15)
|
|
12,523
|
|
|
—
|
|
||
Regulatory assets
|
|
77,101
|
|
|
72,422
|
|
||
Other assets
|
|
5,197
|
|
|
6,985
|
|
||
Total deferred charges and other assets
|
|
134,024
|
|
|
118,162
|
|
||
Total Assets
|
|
$
|
1,682,797
|
|
|
$
|
1,693,671
|
|
Capitalization and Liabilities
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Capitalization
|
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
|
||||
Preferred stock, par value $0.01 per share (authorized 2,000,000 shares), no shares issued and outstanding
|
|
$
|
—
|
|
|
$
|
—
|
|
Common stock, par value $0.4867 per share (authorized 50,000,000 shares)
|
|
7,980
|
|
|
7,971
|
|
||
Additional paid-in capital
|
|
255,307
|
|
|
255,651
|
|
||
Retained earnings
|
|
284,111
|
|
|
261,530
|
|
||
Accumulated other comprehensive loss
|
|
(3,739
|
)
|
|
(6,713
|
)
|
||
Deferred compensation obligation
|
|
4,376
|
|
|
3,854
|
|
||
Treasury stock
|
|
(4,376
|
)
|
|
(3,854
|
)
|
||
Total stockholders’ equity
|
|
543,659
|
|
|
518,439
|
|
||
Long-term debt, net of current maturities
|
|
285,998
|
|
|
316,020
|
|
||
Total capitalization
|
|
829,657
|
|
|
834,459
|
|
||
Current Liabilities
|
|
|
|
|
||||
Current portion of long-term debt
|
|
71,509
|
|
|
11,935
|
|
||
Short-term borrowing
|
|
276,393
|
|
|
294,458
|
|
||
Accounts payable
|
|
75,277
|
|
|
129,804
|
|
||
Customer deposits and refunds
|
|
29,710
|
|
|
34,155
|
|
||
Accrued interest
|
|
4,505
|
|
|
2,317
|
|
||
Dividends payable
|
|
6,067
|
|
|
6,060
|
|
||
Accrued compensation
|
|
8,506
|
|
|
13,923
|
|
||
Regulatory liabilities
|
|
15,085
|
|
|
7,883
|
|
||
Derivative liabilities, at fair value
|
|
6,798
|
|
|
14,871
|
|
||
Other accrued liabilities
|
|
14,719
|
|
|
12,828
|
|
||
Total current liabilities
|
|
508,569
|
|
|
528,234
|
|
||
Deferred Credits and Other Liabilities
|
|
|
|
|
||||
Deferred income taxes
|
|
160,912
|
|
|
156,820
|
|
||
Regulatory liabilities
|
|
132,686
|
|
|
135,039
|
|
||
Environmental liabilities
|
|
7,370
|
|
|
7,638
|
|
||
Other pension and benefit costs
|
|
29,822
|
|
|
28,513
|
|
||
Operating lease - liabilities (refer to Note 15)
|
|
10,873
|
|
|
—
|
|
||
Deferred investment tax credits and other liabilities
|
|
2,908
|
|
|
2,968
|
|
||
Total deferred credits and other liabilities
|
|
344,571
|
|
|
330,978
|
|
||
Environmental and other commitments and contingencies (Notes 5 and 6)
|
|
|
|
|
||||
Total Capitalization and Liabilities
|
|
$
|
1,682,797
|
|
|
$
|
1,693,671
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
|
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
11,074
|
|
|
9,704
|
|
||
Depreciation and accretion included in other costs
|
|
2,135
|
|
|
2,276
|
|
||
Deferred income taxes
|
|
3,430
|
|
|
6,469
|
|
||
Realized (gain) loss on commodity contracts/sale of assets/investments
|
|
(363
|
)
|
|
3,416
|
|
||
Unrealized (gain) loss on investments/commodity contracts
|
|
(721
|
)
|
|
44
|
|
||
Employee benefits and compensation
|
|
382
|
|
|
228
|
|
||
Share-based compensation
|
|
487
|
|
|
1,520
|
|
||
Other, net
|
|
—
|
|
|
(12
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable and accrued revenue
|
|
18,147
|
|
|
9,649
|
|
||
Propane inventory, storage gas and other inventory
|
|
7,207
|
|
|
12,448
|
|
||
Regulatory assets/liabilities, net
|
|
3,121
|
|
|
11,511
|
|
||
Prepaid expenses and other current assets
|
|
11,873
|
|
|
8,095
|
|
||
Accounts payable and other accrued liabilities
|
|
(44,783
|
)
|
|
(26,932
|
)
|
||
Income taxes receivable
|
|
6,241
|
|
|
8,741
|
|
||
Customer deposits and refunds
|
|
(4,445
|
)
|
|
44
|
|
||
Accrued compensation
|
|
(5,548
|
)
|
|
(7,731
|
)
|
||
Other assets and liabilities, net
|
|
3,585
|
|
|
347
|
|
||
Net cash provided by operating activities
|
|
40,486
|
|
|
66,672
|
|
||
Investing Activities
|
|
|
|
|
||||
Property, plant and equipment expenditures
|
|
(43,216
|
)
|
|
(63,116
|
)
|
||
Proceeds from sales of assets
|
|
115
|
|
|
193
|
|
||
Environmental expenditures
|
|
(268
|
)
|
|
(48
|
)
|
||
Net cash used in investing activities
|
|
(43,369
|
)
|
|
(62,971
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Common stock dividends
|
|
(5,877
|
)
|
|
(5,147
|
)
|
||
Issuance of stock under the Dividend Reinvestment Plan
|
|
(183
|
)
|
|
(164
|
)
|
||
Tax withholding payments related to net settled stock compensation
|
|
(692
|
)
|
|
(719
|
)
|
||
Change in cash overdrafts due to outstanding checks
|
|
84
|
|
|
2,352
|
|
||
Net repayment under line of credit agreements
|
|
(18,149
|
)
|
|
(24,213
|
)
|
||
Proceeds from long-term debt
|
|
30,000
|
|
|
25,000
|
|
||
Repayment of long-term debt, long-term borrowing under the Revolver and capital lease obligation
|
|
(414
|
)
|
|
(428
|
)
|
||
Net cash provided (used) by financing activities
|
|
4,769
|
|
|
(3,319
|
)
|
||
Net Increase in Cash and Cash Equivalents
|
|
1,886
|
|
|
382
|
|
||
Cash and Cash Equivalents—Beginning of Period
|
|
6,089
|
|
|
5,614
|
|
||
Cash and Cash Equivalents—End of Period
|
|
$
|
7,975
|
|
|
$
|
5,996
|
|
|
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
|
|||||||||||||||
Balance at December 31, 2017
|
16,344,442
|
|
|
$
|
7,955
|
|
|
$
|
253,470
|
|
|
$
|
229,141
|
|
|
$
|
(4,272
|
)
|
|
$
|
3,395
|
|
|
$
|
(3,395
|
)
|
|
$
|
486,294
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
26,855
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,855
|
|
|||||||
Cumulative effect of the adoption of ASU 2014-09
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,498
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,498
|
)
|
|||||||
Reclassification upon the adoption of ASU 2018-02
|
—
|
|
|
—
|
|
|
—
|
|
|
907
|
|
|
(907
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,694
|
)
|
|
—
|
|
|
—
|
|
|
(1,694
|
)
|
|||||||
Dividend declared ($.3250 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,381
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,381
|
)
|
|||||||
Dividend reinvestment plan
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||||
Share-based compensation and tax benefit
(3)(4)
|
19,350
|
|
|
9
|
|
|
657
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
666
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
178
|
|
|
(178
|
)
|
|
—
|
|
|||||||
Balance at March 31, 2018
|
16,363,792
|
|
|
$
|
7,964
|
|
|
$
|
254,126
|
|
|
$
|
250,024
|
|
|
$
|
(6,873
|
)
|
|
$
|
3,573
|
|
|
$
|
(3,573
|
)
|
|
$
|
505,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2018
|
16,378,545
|
|
|
$
|
7,971
|
|
|
$
|
255,651
|
|
|
$
|
261,530
|
|
|
$
|
(6,713
|
)
|
|
$
|
3,854
|
|
|
$
|
(3,854
|
)
|
|
$
|
518,439
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
28,664
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,664
|
|
|||||||
Prior period reclassification
|
—
|
|
|
—
|
|
|
—
|
|
|
115
|
|
|
(115
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,089
|
|
|
—
|
|
|
—
|
|
|
3,089
|
|
|||||||
Dividend declared ($0.3700 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,198
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,198
|
)
|
|||||||
Dividend reinvestment plan
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||||
Share-based compensation and tax benefit
(3)
(4)
|
18,472
|
|
|
9
|
|
|
(343
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(334
|
)
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
522
|
|
|
(522
|
)
|
|
—
|
|
|||||||
Balance at March 31, 2019
|
16,397,017
|
|
|
$
|
7,980
|
|
|
$
|
255,307
|
|
|
$
|
284,111
|
|
|
$
|
(3,739
|
)
|
|
$
|
4,376
|
|
|
$
|
(4,376
|
)
|
|
$
|
543,659
|
|
(1)
|
2,000,000
shares of preferred stock at
$0.01
par value have been authorized. None has been issued or is outstanding; accordingly, no information has been included in the statements of stockholders’ equity.
|
(2)
|
Includes
101,997
shares at
March 31, 2019
,
97,053
shares at December 31, 2018
,
93,422
shares at March 31,
2018
and
90,961
shares at December 31, 2017, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.
|
(3)
|
Includes amounts for shares issued for directors’ compensation.
|
(4)
|
The shares issued under the SICP are net of shares withheld for employee taxes.
For the three months ended March 31, 2019
and
2018
, we withheld
7,635
and
10,436
shares, respectively, for taxes.
|
|
Three Months Ended March 31, 2019
|
||||||
|
Operating Revenue
|
|
Operating Income
|
||||
(in thousands)
|
|
|
|
||||
Marlin Gas Services
|
$
|
2,434
|
|
|
$
|
1,375
|
|
Ohl
|
$
|
822
|
|
|
$
|
273
|
|
2.
|
Calculation of Earnings Per Share
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Calculation of Basic Earnings Per Share:
|
|
|
|
|
||||
|
|
|
|
|
||||
Net Income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
Weighted average shares outstanding
|
|
16,384,927
|
|
|
16,351,338
|
|
||
Basic Earnings Per Share
|
|
$
|
1.75
|
|
|
$
|
1.64
|
|
|
|
|
|
|
||||
Calculation of Diluted Earnings Per Share:
|
|
|
|
|
||||
Reconciliation of Numerator:
|
|
|
|
|
||||
Net Income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
Reconciliation of Denominator:
|
|
|
|
|
||||
Weighted shares outstanding—Basic
|
|
16,384,927
|
|
|
16,351,338
|
|
||
Effect of dilutive securities—Share-based compensation
|
|
47,925
|
|
|
51,647
|
|
||
Adjusted denominator—Diluted
|
|
16,432,852
|
|
|
16,402,985
|
|
||
Diluted Earnings Per Share
|
|
$
|
1.74
|
|
|
$
|
1.64
|
|
|
|
Three months ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
||||||||||||||||||||||||||||
(in thousands)
|
|
Regulated Energy
|
|
Unregulated Energy
|
|
Other and Eliminations
|
|
Total
|
|
Regulated Energy
|
|
Unregulated Energy
|
|
Other and Eliminations
|
|
Total
|
||||||||||||||||
Energy distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Delaware natural gas division
|
|
$
|
27,549
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27,549
|
|
|
$
|
32,072
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,072
|
|
Florida natural gas division
|
|
7,900
|
|
|
—
|
|
|
—
|
|
|
7,900
|
|
|
5,864
|
|
|
—
|
|
|
—
|
|
|
5,864
|
|
||||||||
FPU electric distribution
|
|
14,378
|
|
|
—
|
|
|
—
|
|
|
14,378
|
|
|
18,741
|
|
|
—
|
|
|
—
|
|
|
18,741
|
|
||||||||
FPU natural gas distribution
|
|
23,786
|
|
|
—
|
|
|
—
|
|
|
23,786
|
|
|
23,213
|
|
|
—
|
|
|
—
|
|
|
23,213
|
|
||||||||
Maryland natural gas division
|
|
10,047
|
|
|
—
|
|
|
—
|
|
|
10,047
|
|
|
10,672
|
|
|
—
|
|
|
—
|
|
|
10,672
|
|
||||||||
Sandpiper natural gas/propane operations
|
|
7,082
|
|
|
—
|
|
|
—
|
|
|
7,082
|
|
|
8,964
|
|
|
—
|
|
|
—
|
|
|
8,964
|
|
||||||||
Total energy distribution
|
|
90,742
|
|
|
—
|
|
|
—
|
|
|
90,742
|
|
|
99,526
|
|
|
—
|
|
|
—
|
|
|
99,526
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Energy transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Aspire Energy
|
|
—
|
|
|
13,470
|
|
|
—
|
|
|
13,470
|
|
|
—
|
|
|
12,077
|
|
|
—
|
|
|
12,077
|
|
||||||||
Eastern Shore
|
|
19,056
|
|
|
—
|
|
|
—
|
|
|
19,056
|
|
|
15,597
|
|
|
—
|
|
|
—
|
|
|
15,597
|
|
||||||||
Peninsula Pipeline
|
|
3,565
|
|
|
—
|
|
|
—
|
|
|
3,565
|
|
|
2,098
|
|
|
—
|
|
|
—
|
|
|
2,098
|
|
||||||||
Total energy transmission
|
|
22,621
|
|
|
13,470
|
|
|
—
|
|
|
36,091
|
|
|
17,695
|
|
|
12,077
|
|
|
—
|
|
|
29,772
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Energy generation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Eight Flags
|
|
—
|
|
|
4,142
|
|
|
—
|
|
|
4,142
|
|
|
—
|
|
|
4,378
|
|
|
—
|
|
|
4,378
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Propane operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Propane delivery operations
|
|
—
|
|
|
46,125
|
|
|
—
|
|
|
46,125
|
|
|
—
|
|
|
52,104
|
|
|
—
|
|
|
52,104
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Energy services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Marlin Gas Services
|
|
—
|
|
|
2,434
|
|
|
—
|
|
|
2,434
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
PESCO - Natural Gas Marketing
|
|
—
|
|
|
77,022
|
|
|
—
|
|
|
77,022
|
|
|
|
|
81,559
|
|
|
—
|
|
|
81,559
|
|
|||||||||
Total energy services
|
|
—
|
|
|
79,456
|
|
|
—
|
|
|
79,456
|
|
|
—
|
|
|
81,559
|
|
|
—
|
|
|
81,559
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Other and eliminations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Eliminations
|
|
(9,745
|
)
|
|
(5,496
|
)
|
|
(14,236
|
)
|
|
(29,477
|
)
|
|
(7,828
|
)
|
|
(5,245
|
)
|
|
(15,598
|
)
|
|
(28,671
|
)
|
||||||||
Other
|
|
—
|
|
|
405
|
|
|
132
|
|
|
537
|
|
|
—
|
|
|
494
|
|
|
194
|
|
|
688
|
|
||||||||
Total other and eliminations
|
|
(9,745
|
)
|
|
(5,091
|
)
|
|
(14,104
|
)
|
|
(28,940
|
)
|
|
(7,828
|
)
|
|
(4,751
|
)
|
|
(15,404
|
)
|
|
(27,983
|
)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Total operating revenues
(1)
|
|
$
|
103,618
|
|
|
$
|
138,102
|
|
|
$
|
(14,104
|
)
|
|
$
|
227,616
|
|
|
$
|
109,393
|
|
|
$
|
145,367
|
|
|
$
|
(15,404
|
)
|
|
$
|
239,356
|
|
|
|
Trade Receivables
|
|
Contract Assets (Non-current)
|
|
Contract Liabilities (Current)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Balance at 12/31/2018
|
|
$
|
83,214
|
|
|
$
|
2,614
|
|
|
$
|
480
|
|
Balance at 3/31/2019
|
|
72,162
|
|
|
3,004
|
|
|
305
|
|
|||
Increase (decrease)
|
|
$
|
(11,052
|
)
|
|
$
|
390
|
|
|
$
|
(175
|
)
|
(in thousands)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025 and thereafter
|
||||||||||||||
Eastern Shore and Peninsula Pipeline
|
$
|
28,754
|
|
|
$
|
36,791
|
|
|
$
|
33,510
|
|
|
$
|
26,566
|
|
|
$
|
21,146
|
|
|
$
|
18,969
|
|
|
$
|
193,651
|
|
Natural gas distribution operations
|
2,999
|
|
|
3,587
|
|
|
3,358
|
|
|
3,320
|
|
|
2,924
|
|
|
2,910
|
|
|
27,916
|
|
|||||||
PESCO - Natural Gas Marketing
|
4,435
|
|
|
4,585
|
|
|
1,706
|
|
|
22
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
FPU electric distribution
|
223
|
|
|
297
|
|
|
297
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total revenue contracts with remaining performance obligations
|
$
|
36,411
|
|
|
$
|
45,260
|
|
|
$
|
38,871
|
|
|
$
|
30,017
|
|
|
$
|
24,070
|
|
|
$
|
21,879
|
|
|
$
|
221,567
|
|
4.
|
Rates and Other Regulatory Activities
|
|
|
Regulatory Liabilities related to ADIT
|
|
|
|
Operation and Regulatory Jurisdiction
|
|
Amount (in thousands)
|
Status
|
|
Status of Customer Rate impact related to lower federal corporate income tax rate
|
Eastern Shore (FERC)
|
|
$34,190
|
Will be addressed in Eastern Shore's next rate case filing
|
|
Implemented one-time bill credit (totaling $900,000) in April 2018 - Customer rates adjusted in April, 2018
|
Delaware Division (Delaware PSC)
|
|
$13,082
|
PSC approved amortization of ADIT in January 2019
|
|
Customer rates adjusted March 1, 2019. One-time bill credit to be implemented during the second quarter of 2019
|
Maryland Division (Maryland PSC)
|
|
$4,171
|
PSC approved amortization of ADIT in May 2018
|
|
Implemented one-time bill credit (totaling $365,000) in July 2018 - Customer rates adjusted effective May 1, 2018
|
Sandpiper Energy (Maryland PSC)
|
|
$3,803
|
PSC approved amortization of ADIT in May 2018
|
|
Implemented one-time bill credit (totaling $608,000) in July 2018 - Customer rates adjusted effective May 1, 2018
|
Chesapeake Florida Gas Division/Central Florida Gas (Florida PSC)
|
|
$8,346
|
PSC issued order authorizing amortization and retention of net ADIT liability by the Company on February 25, 2019
|
|
PSC Staff recommendation issued on January 24, 2019; final order was issued on February 25, 2019; No one-time bill credit or adjustment in rates will be applied; the tax savings arising from the TCJA rate reduction will be retained by the Company
|
FPU Natural Gas (includes FPU, Fort Meade, and Indiantown) (Florida PSC)
|
|
$19,478
|
Same treatment on a net basis as Chesapeake Florida Gas Division (above)
|
|
Same treatment on a net basis as Chesapeake Florida Gas Division (above)
|
FPU Electric (Florida PSC)
|
|
$5,950
|
In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates
|
|
TCJA benefit will flow back to its customers through a combination of reductions to the fuel cost recovery rate, base rates, as well as application to the storm reserve over the next several years
|
MGP Site (Jurisdiction)
|
Status
|
Estimated Cost to Clean up
(Expect to Recover through Rates with Customers)
|
West Palm Beach (Florida)
|
Remedial actions approved by the Florida Department of Environmental Protection have been implemented on the east parcel of the site. We expect to implement similar remedial actions on other remaining portions, including the anticipated demolition of buildings on the site's west parcel in 2019.
|
Between $4.5 million to $15.4 million, including costs associated with the relocation of FPU’s operations at this site, which is necessary to implement the remedial plan, and any potential costs associated with future redevelopment of the properties.
|
Sanford (Florida)
|
In March 2018, the United States Environmental Protection Agency ("EPA") approved a "site-wide ready for anticipated use" status, which is the final step before delisting a site. Construction has been completed and restrictive covenants are in place to ensure protection of human health. The only remaining activity is long-term groundwater monitoring.
|
FPU's remaining remediation expenses, including attorneys' fees and costs, are anticipated to be less than $10,000. It is unlikely that FPU will incur any significant future costs associated with the site.
|
Winter Haven (Florida)
|
Remediation is ongoing.
|
Not expected to exceed $425,000, which includes costs of implementing institutional controls at the site.
|
Seaford (Delaware)
|
Conducted investigations of on-site and off-site impacts in the vicinity of the site, from 2014 through 2018, and submitted the findings to Delaware Department of Natural Resources and Environmental Control ("DNREC") in a March 2019 report. An interim action involving air-sparging/vapor extraction to mitigate on-site impact will be implemented, after the Work Plan has been submitted and approved by DNREC.
|
Between $273,000 and $465,000.
|
Cambridge (Maryland)
|
Currently in discussions with the MDE.
|
Unable to estimate.
|
6.
|
Other Commitments and Contingencies
|
7.
|
Segment Information
|
•
|
Regulated Energy
. Includes energy distribution and transmission services (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.
Includes energy transmission, energy generation (the operations of our Eight Flags' CHP plant), propane operations, the new mobile compressed natural gas utility and pipeline solutions subsidiary, and other energy services (natural gas marketing and related services). These operations are unregulated as to their rates and services. 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
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
|
|
||||
Operating Revenues, Unaffiliated Customers
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
100,739
|
|
|
$
|
105,954
|
|
Unregulated Energy
|
|
126,877
|
|
|
133,402
|
|
||
Total operating revenues, unaffiliated customers
|
|
$
|
227,616
|
|
|
$
|
239,356
|
|
Intersegment Revenues
(1)
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
2,879
|
|
|
$
|
3,439
|
|
Unregulated Energy
|
|
11,225
|
|
|
11,965
|
|
||
Other businesses
|
|
132
|
|
|
194
|
|
||
Total intersegment revenues
|
|
$
|
14,236
|
|
|
$
|
15,598
|
|
Operating Income
|
|
|
|
|
||||
Regulated Energy
|
|
$
|
29,741
|
|
|
$
|
26,711
|
|
Unregulated Energy
|
|
15,127
|
|
|
13,684
|
|
||
Other businesses and eliminations
|
|
(875
|
)
|
|
11
|
|
||
Operating income
|
|
43,993
|
|
|
40,406
|
|
||
Other income (expense), net
|
|
(45
|
)
|
|
68
|
|
||
Interest charges
|
|
5,710
|
|
|
3,664
|
|
||
Income before Income Taxes
|
|
38,238
|
|
|
36,810
|
|
||
Income taxes
|
|
9,574
|
|
|
9,955
|
|
||
Net Income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
(in thousands)
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Identifiable Assets
|
|
|
|
|
||||
Regulated Energy segment
|
|
$
|
1,343,061
|
|
|
$
|
1,345,805
|
|
Unregulated Energy segment
|
|
296,836
|
|
|
306,045
|
|
||
Other businesses and eliminations
|
|
42,900
|
|
|
41,821
|
|
||
Total identifiable assets
|
|
$
|
1,682,797
|
|
|
$
|
1,693,671
|
|
8.
|
Stockholder's Equity
|
|
|
Defined Benefit
|
|
Commodity
|
|
|
||||||
|
|
Pension and
|
|
Contracts
|
|
|
||||||
|
|
Postretirement
|
|
Cash Flow
|
|
|
||||||
|
|
Plan Items
|
|
Hedges
|
|
Total
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
As of December 31, 2018
|
|
$
|
(5,928
|
)
|
|
$
|
(785
|
)
|
|
$
|
(6,713
|
)
|
Other comprehensive income before reclassifications
|
|
—
|
|
|
3,021
|
|
|
3,021
|
|
|||
Amounts reclassified from accumulated other comprehensive income/(loss)
|
|
107
|
|
|
(39
|
)
|
|
68
|
|
|||
Net current-period other comprehensive income
|
|
107
|
|
|
2,982
|
|
|
3,089
|
|
|||
Prior-year reclassification
|
|
—
|
|
|
(115
|
)
|
|
(115
|
)
|
|||
As of March 31, 2019
|
|
$
|
(5,821
|
)
|
|
$
|
2,082
|
|
|
$
|
(3,739
|
)
|
(in thousands)
|
|
|
|
|
|
|
||||||
As of December 31, 2017
|
|
$
|
(4,743
|
)
|
|
$
|
471
|
|
|
$
|
(4,272
|
)
|
Other comprehensive loss before reclassifications
|
|
—
|
|
|
(2,232
|
)
|
|
(2,232
|
)
|
|||
Amounts reclassified from accumulated other comprehensive income/(loss)
|
|
94
|
|
|
444
|
|
|
538
|
|
|||
Net prior-period other comprehensive income/(loss)
|
|
94
|
|
|
(1,788
|
)
|
|
(1,694
|
)
|
|||
Stranded tax reclassification to retained earnings
|
|
(1,022
|
)
|
|
115
|
|
|
(907
|
)
|
|||
As of March 31, 2018
|
|
$
|
(5,671
|
)
|
|
$
|
(1,202
|
)
|
|
$
|
(6,873
|
)
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
|
|
||||
Amortization of defined benefit pension and postretirement plan items:
|
|
|
|
|
||||
Prior service credit
(1)
|
|
$
|
19
|
|
|
$
|
19
|
|
Net loss
(1)
|
|
(163
|
)
|
|
(149
|
)
|
||
Total before income taxes
|
|
(144
|
)
|
|
(130
|
)
|
||
Income tax benefit
|
|
37
|
|
|
36
|
|
||
Net of tax
|
|
$
|
(107
|
)
|
|
$
|
(94
|
)
|
Gains and losses on commodity contracts cash flow hedges:
|
|
|
|
|
||||
Propane swap agreements
(2)
|
|
$
|
606
|
|
|
$
|
(464
|
)
|
Natural gas swaps
(2)
|
|
11
|
|
|
(450
|
)
|
||
Natural gas futures
(2)
|
|
(573
|
)
|
|
298
|
|
||
Total before income taxes
|
|
44
|
|
|
(616
|
)
|
||
Income tax benefit (expense)
|
|
(5
|
)
|
|
172
|
|
||
Net of tax
|
|
39
|
|
|
(444
|
)
|
||
Total reclassifications for the period
|
|
$
|
(68
|
)
|
|
$
|
(538
|
)
|
9.
|
Employee Benefit Plans
|
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
||||||||||||||||||||||||||||||
For the Three Months Ended March 31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Interest cost
|
|
$
|
105
|
|
|
$
|
97
|
|
|
$
|
615
|
|
|
$
|
592
|
|
|
$
|
21
|
|
|
$
|
21
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
12
|
|
|
$
|
12
|
|
Expected return on plan assets
|
|
(127
|
)
|
|
(138
|
)
|
|
(693
|
)
|
|
(774
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service credit
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
101
|
|
|
88
|
|
|
129
|
|
|
109
|
|
|
26
|
|
|
25
|
|
|
12
|
|
|
15
|
|
|
—
|
|
|
—
|
|
||||||||||
Net periodic cost (benefit)
|
|
79
|
|
|
47
|
|
|
51
|
|
|
(73
|
)
|
|
47
|
|
|
46
|
|
|
3
|
|
|
6
|
|
|
12
|
|
|
12
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
190
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||||||||
Total periodic cost
|
|
$
|
79
|
|
|
$
|
47
|
|
|
$
|
241
|
|
|
$
|
118
|
|
|
$
|
47
|
|
|
$
|
46
|
|
|
$
|
3
|
|
|
$
|
6
|
|
|
$
|
14
|
|
|
$
|
14
|
|
For the Three Months Ended March 31, 2019
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
Net loss
|
|
101
|
|
|
129
|
|
|
26
|
|
|
12
|
|
|
—
|
|
|
268
|
|
||||||
Total recognized in net periodic benefit cost
|
|
101
|
|
|
129
|
|
|
26
|
|
|
(7
|
)
|
|
—
|
|
|
249
|
|
||||||
Recognized from accumulated other comprehensive loss
(1)
|
|
101
|
|
|
24
|
|
|
26
|
|
|
(7
|
)
|
|
—
|
|
|
144
|
|
||||||
Recognized from regulatory asset
|
|
—
|
|
|
105
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
105
|
|
||||||
Total
|
|
$
|
101
|
|
|
$
|
129
|
|
|
$
|
26
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
249
|
|
For the Three Months Ended March 31, 2018
|
|
Chesapeake
Pension Plan |
|
FPU
Pension Plan |
|
Chesapeake SERP
|
|
Chesapeake
Postretirement Plan |
|
FPU
Medical Plan |
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service credit
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
Net loss
|
|
88
|
|
|
109
|
|
|
25
|
|
|
15
|
|
|
—
|
|
|
237
|
|
||||||
Total recognized in net periodic benefit cost
|
|
88
|
|
|
109
|
|
|
25
|
|
|
(4
|
)
|
|
—
|
|
|
218
|
|
||||||
Recognized from accumulated other comprehensive loss
(1)
|
|
88
|
|
|
21
|
|
|
25
|
|
|
(4
|
)
|
|
—
|
|
|
130
|
|
||||||
Recognized from regulatory asset
|
|
—
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88
|
|
||||||
Total
|
|
$
|
88
|
|
|
$
|
109
|
|
|
$
|
25
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
218
|
|
10.
|
Investments
|
(in thousands)
|
March 31,
2019 |
|
December 31,
2018 |
||||
Rabbi trust (associated with the Non-Qualified Deferred Compensation Plan)
|
$
|
7,484
|
|
|
$
|
6,689
|
|
Investments in equity securities
|
25
|
|
|
22
|
|
||
Total
|
$
|
7,509
|
|
|
$
|
6,711
|
|
11.
|
Share-Based Compensation
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
|
|
||||
Awards to non-employee directors
|
|
$
|
149
|
|
|
$
|
135
|
|
Awards to key employees
|
|
338
|
|
|
1,385
|
|
||
Total compensation expense
|
|
487
|
|
|
1,520
|
|
||
Less: tax benefit
|
|
(127
|
)
|
|
(416
|
)
|
||
Share-based compensation amounts included in net income
|
|
$
|
360
|
|
|
$
|
1,104
|
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value
|
|||
Outstanding—December 31, 2018
|
|
131,741
|
|
|
$
|
67.24
|
|
Granted
|
|
45,016
|
|
|
$
|
91.19
|
|
Vested
|
|
(25,831
|
)
|
|
$
|
67.08
|
|
Expired
|
|
(15,086
|
)
|
|
$
|
69.28
|
|
Outstanding—March 31, 2019
|
|
135,840
|
|
|
$
|
74.05
|
|
12.
|
Derivative Instruments
|
Business unit
|
|
Commodity
|
|
Quantity hedged (in millions)
|
|
Designation
|
|
Longest Expiration date of hedge
|
PESCO
|
|
Natural gas (Dts)
|
|
21.7
|
|
Cash flows hedges
|
|
December 2022
|
PESCO
|
|
Natural gas (Dts)
|
|
3.8
|
|
Not designated
|
|
March 2021
|
Sharp
|
|
Propane (gallons)
|
|
5.4
|
|
Cash flows hedges
|
|
June 2021
|
|
|
At March 31, 2019
|
||||||||||
(in thousands)
|
|
Gross amounts
|
|
Amounts offset
|
|
Net amounts
|
||||||
Accounts receivable
|
|
$
|
8,832
|
|
|
$
|
3,264
|
|
|
$
|
5,568
|
|
Accounts payable
|
|
$
|
15,906
|
|
|
$
|
3,264
|
|
|
$
|
12,642
|
|
|
|
At December 31, 2018
|
||||||||||
(in thousands)
|
|
Gross amounts
|
|
Amounts offset
|
|
Net amounts
|
||||||
Accounts receivable
|
|
$
|
12,368
|
|
|
$
|
3,834
|
|
|
$
|
8,534
|
|
Accounts payable
|
|
$
|
24,741
|
|
|
$
|
3,834
|
|
|
$
|
20,907
|
|
(in thousands)
|
Balance Sheet Location
|
|
At March 31, 2019
|
|
At December 31, 2018
|
||||
PESCO
|
Other Current Assets
|
|
$
|
(335
|
)
|
|
$
|
2,810
|
|
|
|
Asset Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Derivative assets, at fair value
|
|
$
|
2,122
|
|
|
$
|
4,024
|
|
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
||||
Propane put options
|
|
Derivative assets, at fair value
|
|
—
|
|
|
71
|
|
||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Derivative assets, at fair value
|
|
7,055
|
|
|
9,059
|
|
||
Propane swap agreements
|
|
Derivative assets, at fair value
|
|
44
|
|
|
11
|
|
||
Total asset derivatives
|
|
|
|
$
|
9,221
|
|
|
$
|
13,165
|
|
|
|
Liability Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Derivative liabilities, at fair value
|
|
$
|
2,638
|
|
|
$
|
4,562
|
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Derivative liabilities, at fair value
|
|
3,533
|
|
|
8,705
|
|
||
Propane swap agreements
|
|
Derivative liabilities, at fair value
|
|
627
|
|
|
1,604
|
|
||
Total liability derivatives
|
|
|
|
$
|
6,798
|
|
|
$
|
14,871
|
|
|
|
|
|
Amount of Gain (Loss) on Derivatives:
|
||||||
|
|
Location of Gain
|
|
For the Three Months Ended March 31,
|
||||||
(in thousands)
|
|
(Loss) on Derivatives
|
|
2019
|
|
2018
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Natural gas futures contracts
|
|
Cost of sales
|
|
$
|
(22
|
)
|
|
$
|
(2,835
|
)
|
Propane swap agreements
|
|
Cost of sales
|
|
—
|
|
|
(9
|
)
|
||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Propane swap agreements
|
|
Cost of sales
|
|
606
|
|
|
(464
|
)
|
||
Propane swap agreements
|
|
Other comprehensive income (loss)
|
|
1,009
|
|
|
(992
|
)
|
||
Natural gas futures contracts
|
|
Cost of sales
|
|
(573
|
)
|
|
298
|
|
||
Natural gas swap contracts
|
|
Cost of sales
|
|
11
|
|
|
(450
|
)
|
||
Natural gas swap contracts
|
|
Other comprehensive income (loss)
|
|
3,226
|
|
|
(1,617
|
)
|
||
Natural gas futures contracts
|
|
Other comprehensive income (loss)
|
|
(59
|
)
|
|
65
|
|
||
Total
|
|
|
|
$
|
4,198
|
|
|
$
|
(6,004
|
)
|
(in thousands)
|
|
Carrying Amount of Hedged Item
|
Cumulative Adjustment Included in Carrying Amount of Hedged Item
|
||||||||||
Balance Sheet Location of Hedged Items
|
|
At March 31, 2019
|
At December 31, 2018
|
At March 31, 2019
|
At December 31, 2018
|
||||||||
Inventory
|
|
$
|
6
|
|
$
|
212
|
|
$
|
—
|
|
$
|
—
|
|
13.
|
Fair Value of Financial Instruments
|
|
|
|
|
Fair Value Measurements Using:
|
||||||||||||
As of March 31, 2019
|
|
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
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investments—guaranteed income fund
|
|
695
|
|
|
—
|
|
|
—
|
|
|
695
|
|
||||
Investments—mutual funds and other
|
|
6,789
|
|
|
6,789
|
|
|
—
|
|
|
—
|
|
||||
Total investments
|
|
7,509
|
|
|
6,814
|
|
|
—
|
|
|
695
|
|
||||
Derivative assets
|
|
9,221
|
|
|
—
|
|
|
9,221
|
|
|
—
|
|
||||
Total assets
|
|
$
|
16,730
|
|
|
$
|
6,814
|
|
|
$
|
9,221
|
|
|
$
|
695
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities
|
|
$
|
6,798
|
|
|
$
|
—
|
|
|
$
|
6,798
|
|
|
$
|
—
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
|
||||
Beginning Balance
|
$
|
686
|
|
|
$
|
648
|
|
Purchases and adjustments
|
6
|
|
|
(48
|
)
|
||
Investment income
|
3
|
|
|
2
|
|
||
Ending Balance
|
$
|
695
|
|
|
$
|
602
|
|
14.
|
Long-Term Debt
|
|
|
March 31,
|
|
December 31,
|
||||
(in thousands)
|
|
2019
|
|
2018
|
||||
FPU secured first mortgage bonds
(1)
:
|
|
|
|
|
||||
9.08% bond, due June 1, 2022
|
|
$
|
7,987
|
|
|
$
|
7,986
|
|
Uncollateralized senior notes:
|
|
|
|
|
||||
5.50% note, due October 12, 2020
|
|
4,000
|
|
|
4,000
|
|
||
5.93% note, due October 31, 2023
|
|
15,000
|
|
|
15,000
|
|
||
5.68% note, due June 30, 2026
|
|
23,200
|
|
|
23,200
|
|
||
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
|
|
|
70,000
|
|
||
3.48% note, due May 31, 2038
|
|
50,000
|
|
|
50,000
|
|
||
3.58% note, due November 30, 2038
|
|
50,000
|
|
|
50,000
|
|
||
Term Note due January 21, 2020
|
|
30,000
|
|
|
30,000
|
|
||
Term Note due February 28, 2020
|
|
30,000
|
|
|
—
|
|
||
Promissory notes
|
|
—
|
|
|
26
|
|
||
Finance lease obligation
|
|
909
|
|
|
1,310
|
|
||
Less: debt issuance costs
|
|
(589
|
)
|
|
(567
|
)
|
||
Total long-term debt
|
|
357,507
|
|
|
327,955
|
|
||
Less: current maturities
|
|
(71,509
|
)
|
|
(11,935
|
)
|
||
Total long-term debt, net of current maturities
|
|
$
|
285,998
|
|
|
$
|
316,020
|
|
|
|
Total Borrowing Capacity
|
|
Less: Amount of Debt Issued
|
|
Less: Unfunded Commitments
|
|
Remaining Borrowing Capacity
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Shelf Agreement
|
|
|
|
|
|
|
|
|
||||||||
Prudential Shelf Agreement
|
|
$
|
220,000
|
|
|
$
|
(70,000
|
)
|
|
$
|
(100,000
|
)
|
|
$
|
50,000
|
|
MetLife Shelf Agreement
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
||||
NYL Shelf Agreement
|
|
150,000
|
|
|
(100,000
|
)
|
|
—
|
|
|
50,000
|
|
||||
Total
|
|
$
|
520,000
|
|
|
$
|
(170,000
|
)
|
|
$
|
(100,000
|
)
|
|
$
|
250,000
|
|
15.
|
Leases
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
|
March 31,
|
||||||
( in thousands)
|
|
Classification
|
|
2019
|
|
2018
|
||||
Operating lease cost
(1)
|
|
Operations expense
|
|
$
|
635
|
|
|
$
|
1,107
|
|
Finance lease cost
|
|
|
|
|
|
|
||||
Amortization of lease assets
|
|
Depreciation and amortization
|
|
401
|
|
|
358
|
|
||
Interest on lease liabilities
|
|
Interest expense
|
|
4
|
|
|
17
|
|
||
Net lease cost
|
|
|
|
$
|
1,040
|
|
|
$
|
1,482
|
|
(in thousands)
|
|
Balance sheet classification
|
|
Amount
|
||
Assets
|
|
|
|
|
||
Operating lease assets
|
|
Operating lease right-of-use assets
|
|
$
|
12,523
|
|
Finance lease assets
|
|
Property, plant and equipment
|
|
1,839
|
|
|
Total lease assets
|
|
|
|
$
|
14,362
|
|
Liabilities
|
|
|
|
|
||
Current
|
|
|
|
|
||
Operating lease liabilities
|
|
Other accrued liabilities
|
|
$
|
1,642
|
|
Finance lease liabilities
|
|
Current portion of long-term debt
|
|
909
|
|
|
Noncurrent
|
|
|
|
|
||
Operating lease liabilities
|
|
Other liabilities
|
|
10,873
|
|
|
Finance lease liabilities
|
|
Long-term debt
|
|
—
|
|
|
Total lease liabilities
|
|
|
|
$
|
13,424
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
Operating cash flows from operating leases
|
|
$
|
537
|
|
|
$
|
1,018
|
|
Operating cash flows from finance leases
|
|
4
|
|
|
17
|
|
||
Financing cash flows from finance leases
|
|
401
|
|
|
358
|
|
(in thousands)
|
|
Operating
Leases
(1)
|
|
Finance Leases
|
|
Total
|
||||||
Remainder of 2019
|
|
$
|
1,539
|
|
|
$
|
910
|
|
|
$
|
2,449
|
|
2020
|
|
2,045
|
|
|
—
|
|
|
2,045
|
|
|||
2021
|
|
1,765
|
|
|
—
|
|
|
1,765
|
|
|||
2022
|
|
1,659
|
|
|
—
|
|
|
1,659
|
|
|||
2023
|
|
1,669
|
|
|
—
|
|
|
1,669
|
|
|||
2024
|
|
1,431
|
|
|
—
|
|
|
1,431
|
|
|||
Thereafter
|
|
4,860
|
|
|
—
|
|
|
4,860
|
|
|||
Total lease payments
|
|
$
|
14,968
|
|
|
$
|
910
|
|
|
$
|
15,878
|
|
Less: Interest
|
|
2,453
|
|
|
1
|
|
|
2,454
|
|
|||
Present value of lease liabilities
|
|
$
|
12,515
|
|
|
$
|
909
|
|
|
13,424
|
|
Year(s)
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected payments
|
|
$2,349
|
|
$1,998
|
|
$1,761
|
|
$1,689
|
|
$1,642
|
|
$5,398
|
|
$14,837
|
Our strategy is to consistently produce industry-leading total shareholder returns by profitably investing capital into opportunities that leverage our skills and expertise in energy distribution and transmission to achieve high levels of service and growth. The key elements of our strategy include:
•
capital investment in growth opportunities that generate our target returns;
•
expanding our energy distribution and transmission operations within our existing service areas as well as into new geographic areas;
•
providing new services in our current service areas;
•
expanding our footprint in potential growth markets through strategic acquisitions;
•
entering new energy markets and businesses that complement our existing operations and growth strategy; and
•
operating as a customer-centric full-service energy supplier/partner/provider of safe and reliable service.
Our employees strive to build meaningful connections that generate opportunities to grow our businesses, develop new markets, and enrich the communities in which we live, work and serve.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
March 31,
|
|
Increase
|
||||||||
|
|
2019
|
|
2018
|
|
(decrease)
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy segment
|
|
$
|
29,741
|
|
|
$
|
26,711
|
|
|
$
|
3,030
|
|
Unregulated Energy segment
|
|
15,127
|
|
|
13,684
|
|
|
1,443
|
|
|||
Other businesses and eliminations
|
|
(875
|
)
|
|
11
|
|
|
(886
|
)
|
|||
Operating Income
|
|
$
|
43,993
|
|
|
$
|
40,406
|
|
|
$
|
3,587
|
|
Other expense income (expense), net
|
|
(45
|
)
|
|
68
|
|
|
(113
|
)
|
|||
Interest charges
|
|
5,710
|
|
|
3,664
|
|
|
2,046
|
|
|||
Pre-tax Income
|
|
38,238
|
|
|
36,810
|
|
|
1,428
|
|
|||
Income taxes
|
|
9,574
|
|
|
9,955
|
|
|
(381
|
)
|
|||
Net Income
|
|
$
|
28,664
|
|
|
$
|
26,855
|
|
|
$
|
1,809
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
1.75
|
|
|
$
|
1.64
|
|
|
$
|
0.11
|
|
Diluted
|
|
$
|
1.74
|
|
|
$
|
1.64
|
|
|
$
|
0.10
|
|
(in thousands, except per share data)
|
|
Pre-tax
Income |
|
Net
Income |
|
Earnings
Per Share |
||||||
First Quarter of 2018 Reported Results
|
|
$
|
36,810
|
|
|
$
|
26,855
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
|
||||||
Adjusting for Unusual Items:
|
|
|
|
|
|
|
||||||
Net impact of PESCO's MTM activity
|
|
(5,591
|
)
|
|
(4,088
|
)
|
|
(0.24
|
)
|
|||
Impact of weather on customer consumption
|
|
(2,523
|
)
|
|
(1,891
|
)
|
|
(0.12
|
)
|
|||
2018 retained tax savings for certain Florida natural gas operations
|
|
1,321
|
|
|
990
|
|
|
0.06
|
|
|||
|
|
(6,793
|
)
|
|
(4,989
|
)
|
|
(0.30
|
)
|
|||
|
|
|
|
|
|
|
||||||
Increased (Decreased) Gross Margins:
|
|
|
|
|
|
|
||||||
Absence of the 2018 Bomb Cyclone and capacity constraints cost for PESCO
|
|
5,545
|
|
|
4,157
|
|
|
0.25
|
|
|||
Eastern Shore and Peninsula Pipeline service expansions*
|
|
4,266
|
|
|
3,198
|
|
|
0.19
|
|
|||
Margin contribution from Marlin Gas Services and Ohl (assets acquired in December 2018)*
|
|
2,805
|
|
|
2,103
|
|
|
0.13
|
|
|||
Natural gas distribution - customer growth (excluding service expansions)
|
|
1,451
|
|
|
1,088
|
|
|
0.06
|
|
|||
Higher propane retail margins per gallon
|
|
1,259
|
|
|
944
|
|
|
0.06
|
|
|||
Unregulated Energy customers' consumption growth
|
|
879
|
|
|
659
|
|
|
0.04
|
|
|||
Aspire Energy rate increases
|
|
779
|
|
|
584
|
|
|
0.04
|
|
|||
Other margin for PESCO operations
|
|
731
|
|
|
548
|
|
|
0.03
|
|
|||
Natural gas distribution - change in customer consumption (non-weather)
|
|
(485
|
)
|
|
(364
|
)
|
|
(0.02
|
)
|
|||
Lower wholesale propane margins and sales
|
|
(453
|
)
|
|
(340
|
)
|
|
(0.02
|
)
|
|||
Conversion of Sandpiper customers to natural gas
|
|
382
|
|
|
287
|
|
|
0.02
|
|
|||
Florida GRIP*
|
|
223
|
|
|
167
|
|
|
0.01
|
|
|||
|
|
17,382
|
|
|
13,031
|
|
|
0.79
|
|
|||
|
|
|
|
|
|
|
||||||
Decreased (Increased) Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Depreciation, asset removal and property tax costs due to growth investments
|
|
(1,560
|
)
|
|
(1,169
|
)
|
|
(0.07
|
)
|
|||
Incentive compensation costs (based on timing and period-over-period results)
|
|
(1,931
|
)
|
|
(1,448
|
)
|
|
(0.09
|
)
|
|||
Operating expenses for Marlin Gas Services and Ohl (assets acquired in December 2018)
|
|
(1,157
|
)
|
|
(867
|
)
|
|
(0.05
|
)
|
|||
Benefits and other employee-related expenses
|
|
(732
|
)
|
|
(549
|
)
|
|
(0.03
|
)
|
|||
Payroll expense (increased staffing and annual salary increases)
|
|
(673
|
)
|
|
(504
|
)
|
|
(0.03
|
)
|
|||
Operating expenses to support growth for PESCO
|
|
(431
|
)
|
|
(323
|
)
|
|
(0.02
|
)
|
|||
|
|
(6,484
|
)
|
|
(4,860
|
)
|
|
(0.29
|
)
|
|||
|
|
|
|
|
|
|
||||||
Interest charges
|
|
(2,046
|
)
|
|
(1,534
|
)
|
|
(0.09
|
)
|
|||
Change in effective tax rate
|
|
—
|
|
|
768
|
|
|
0.05
|
|
|||
Net other changes
|
|
(631
|
)
|
|
(607
|
)
|
|
(0.06
|
)
|
|||
|
|
(2,677
|
)
|
|
(1,373
|
)
|
|
(0.10
|
)
|
|||
|
|
|
|
|
|
|
||||||
First Quarter of 2019 Reported Results
|
|
$
|
38,238
|
|
|
$
|
28,664
|
|
|
$
|
1.74
|
|
|
Gross Margin for the Period
|
||||||||||||||||||
|
Three Months Ended
|
|
Year Ended
|
|
Estimate for
|
||||||||||||||
|
March 31,
|
|
December 31,
|
|
Fiscal
|
||||||||||||||
in thousands
|
2019
|
|
2018
|
|
2018
|
|
2019
|
|
2020
|
||||||||||
Florida GRIP
(1)
|
$
|
3,565
|
|
|
$
|
3,342
|
|
|
$
|
13,323
|
|
|
$
|
14,204
|
|
|
$
|
15,565
|
|
2017 Eastern Shore System Expansion Project - including interim services
|
4,800
|
|
|
2,263
|
|
|
9,238
|
|
|
16,183
|
|
|
15,799
|
|
|||||
Tax benefit retained by certain Florida entities
(2)
|
2,115
|
|
|
—
|
|
|
—
|
|
|
3,199
|
|
|
1,879
|
|
|||||
Northwest Florida Expansion
|
1,307
|
|
|
—
|
|
|
3,485
|
|
|
6,500
|
|
|
6,500
|
|
|||||
Western Palm Beach County, Florida Expansion
|
161
|
|
|
—
|
|
|
54
|
|
|
605
|
|
|
4,711
|
|
|||||
Marlin Gas Services
|
2,329
|
|
|
—
|
|
|
110
|
|
|
5,100
|
|
|
6,000
|
|
|||||
Ohl propane acquisition (rolled into Sharp)
|
476
|
|
|
—
|
|
|
—
|
|
|
1,200
|
|
|
1,236
|
|
|||||
Del-Mar Energy Pathway Project - including interim services
|
165
|
|
|
—
|
|
|
—
|
|
|
725
|
|
|
3,039
|
|
|||||
Total
|
$
|
14,918
|
|
|
$
|
5,605
|
|
|
$
|
26,210
|
|
|
$
|
47,716
|
|
|
$
|
54,729
|
|
|
Three Months Ended
|
|
|
|||||
|
March 31,
|
|
|
|||||
|
2019
|
|
2018
|
|
Variance
|
|||
Delmarva
|
|
|
|
|
|
|||
Actual HDD
|
2,322
|
|
|
2,295
|
|
|
27
|
|
10-Year Average HDD ("Normal")
|
2,362
|
|
|
2,354
|
|
|
8
|
|
Variance from Normal
|
(40
|
)
|
|
(59
|
)
|
|
|
|
Florida
|
|
|
|
|
|
|||
Actual HDD
|
361
|
|
|
490
|
|
|
(129
|
)
|
10-Year Average HDD ("Normal")
|
518
|
|
|
517
|
|
|
1
|
|
Variance from Normal
|
(157
|
)
|
|
(27
|
)
|
|
|
|
Ohio
|
|
|
|
|
|
|||
Actual HDD
|
2,996
|
|
|
2,991
|
|
|
5
|
|
10-Year Average HDD ("Normal")
|
3,045
|
|
|
3,069
|
|
|
(24
|
)
|
Variance from Normal
|
(49
|
)
|
|
(78
|
)
|
|
|
|
Florida
|
|
|
|
|
|
|||
Actual CDD
|
134
|
|
|
139
|
|
|
(5
|
)
|
10-Year Average CDD ("Normal")
|
97
|
|
|
89
|
|
|
8
|
|
Variance from Normal
|
37
|
|
|
50
|
|
|
|
|
|
Three Months Ended
|
||
(in thousands)
|
|
March 31, 2019
|
||
Customer Growth:
|
|
|
||
Residential
|
|
$
|
637
|
|
Commercial and industrial, excluding new service in Northwest Florida
|
|
529
|
|
|
New service in Northwest Florida
|
|
285
|
|
|
Total Customer Growth
|
|
1,451
|
|
|
Non-Weather Change in Customer Consumption:
|
|
|
||
Residential
|
|
(89
|
)
|
|
Commercial and industrial
|
|
(396
|
)
|
|
Total Decline in Customer Consumption
|
|
(485
|
)
|
|
Total (or net) Increase in Natural Gas Distribution Margin
|
|
$
|
966
|
|
|
Three Months Ended
|
||
|
March 31, 2019
|
||
(in thousands)
|
|
||
Decrease in customer consumption due to warmer weather
|
$
|
(1,307
|
)
|
Increased retail margins per gallon
|
1,259
|
|
|
Customer growth, increased sales volumes (non-weather-related) and other factors
|
482
|
|
|
Ohl acquisition (assets acquired in December 2018)
|
476
|
|
|
Lower wholesale propane margins and sales
|
(453
|
)
|
|
Other
|
(152
|
)
|
|
2019 Change in gross margin by our propane operations
|
$
|
305
|
|
|
Three Months Ended
|
||
(in thousands)
|
March 31, 2019
|
||
Net impact of PESCO's MTM activity
|
$
|
(5,591
|
)
|
Net impact of extraordinary costs associated with the 2018 Bomb Cyclone for the Mid-Atlantic wholesale portfolio
(1)
|
3,284
|
|
|
Mid-Atlantic retail portfolio loss due to pipeline capacity constraints in the first quarter of 2018
(1)
|
2,261
|
|
|
Other margin for PESCO operations (net)
|
731
|
|
|
2019 Change in PESCO gross margin
|
$
|
685
|
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
March 31,
|
|
Increase
|
||||||||
|
|
2019
|
|
2018
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
103,618
|
|
|
$
|
109,393
|
|
|
$
|
(5,775
|
)
|
Cost of sales
|
|
36,516
|
|
|
48,231
|
|
|
(11,715
|
)
|
|||
Gross margin
|
|
67,102
|
|
|
61,162
|
|
|
5,940
|
|
|||
Operations & maintenance
|
|
24,548
|
|
|
23,147
|
|
|
1,401
|
|
|||
Depreciation & amortization
|
|
8,446
|
|
|
7,516
|
|
|
930
|
|
|||
Other taxes
|
|
4,367
|
|
|
3,788
|
|
|
579
|
|
|||
Other operating expenses
|
|
37,361
|
|
|
34,451
|
|
|
2,910
|
|
|||
Operating income
|
|
$
|
29,741
|
|
|
$
|
26,711
|
|
|
$
|
3,030
|
|
(in thousands)
|
Margin Impact
|
||
Eastern Shore and Peninsula Pipeline service expansions
|
$
|
4,266
|
|
Natural gas distribution - customer growth (excluding service expansions)
|
1,451
|
|
|
2018 retained tax savings for certain Florida natural gas distribution operations
|
1,321
|
|
|
Impact of weather on customer consumption (primarily in Florida)
|
(1,093
|
)
|
|
Natural gas distribution - change in customer consumption (non-weather)
|
(485
|
)
|
|
Conversion of Sandpiper customers to natural gas
|
382
|
|
|
Florida GRIP
|
223
|
|
|
Other immaterial variances
|
(125
|
)
|
|
Quarter-over-quarter increase in gross margin
|
$
|
5,940
|
|
•
|
$2.5 million
from Eastern Shore's services in conjunction with its 2017 Expansion Project.
|
•
|
$1.5 million
generated by Peninsula Pipeline from the Belvedere Pipeline and Northwest Pipeline Expansion Projects.
|
(in thousands)
|
Other Operating Expenses
|
||
Depreciation, amortization and property taxes primarily associated with recent growth projects
|
$
|
1,375
|
|
Incentive compensation costs (based on timing and period-over-period results)
|
653
|
|
|
Outside services, facilities and maintenance costs
|
(609
|
)
|
|
Payroll expense (increased staffing and annual salary increases)
|
608
|
|
|
Benefits and other employee-related expenses
(1)
|
551
|
|
|
Other immaterial variances
|
332
|
|
|
Quarter-over-quarter increase in other operating expenses
|
$
|
2,910
|
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
March 31,
|
|
Increase
|
||||||||
|
|
2019
|
|
2018
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
138,102
|
|
|
$
|
145,367
|
|
|
$
|
(7,265
|
)
|
Cost of sales
|
|
103,700
|
|
|
115,066
|
|
|
(11,366
|
)
|
|||
Gross margin
|
|
34,402
|
|
|
30,301
|
|
|
4,101
|
|
|||
Operations & maintenance
|
|
15,555
|
|
|
13,359
|
|
|
2,196
|
|
|||
Depreciation & amortization
|
|
2,611
|
|
|
2,167
|
|
|
444
|
|
|||
Other taxes
|
|
1,109
|
|
|
1,091
|
|
|
18
|
|
|||
Total operating expenses
|
|
19,275
|
|
|
16,617
|
|
|
2,658
|
|
|||
Operating income
|
|
$
|
15,127
|
|
|
$
|
13,684
|
|
|
$
|
1,443
|
|
|
|
|
|
|
Increase
|
||||||
For the Three Months Ended March 31,
|
2019
|
|
2018
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
||||||
Gross margin
|
$
|
32,542
|
|
|
$
|
29,126
|
|
|
$
|
3,416
|
|
Depreciation, amortization and property taxes
|
2,792
|
|
|
2,357
|
|
|
435
|
|
|||
Other operating expenses
|
14,113
|
|
|
12,321
|
|
|
1,792
|
|
|||
Operating Income
|
$
|
15,637
|
|
|
$
|
14,448
|
|
|
$
|
1,189
|
|
(in thousands)
|
|
Margin Impact
|
||
Marlin Gas Services (acquired assets of Marlin Gas Transport in December 2018)
|
|
$
|
2,329
|
|
Propane Operations
|
|
|
||
Decrease in weather-related customer consumption due to the absence of the 2018 Bomb Cyclone
|
|
(1,307
|
)
|
|
Increased retail margins per gallon
|
|
1,259
|
|
|
Customer growth, increased sales volumes (non-weather-related) and other factors
|
|
482
|
|
|
Ohl acquisition (assets acquired in December 2018)
|
|
476
|
|
|
Lower wholesale propane margins and sales
|
|
(453
|
)
|
|
Aspire Energy
|
|
|
||
Rate increases
|
|
779
|
|
|
Increased customer consumption
|
|
397
|
|
|
Other immaterial variances
|
|
(546
|
)
|
|
Quarter-over-quarter increase in gross margin
|
|
$
|
3,416
|
|
(in thousands)
|
Other Operating Expenses
|
||
Operating expenses associated with operating Marlin Gas Services and Ohl (Asset acquisitions in December 2018)
|
$
|
1,157
|
|
Incentive compensation costs (based on timing and period-over-period results)
|
466
|
|
|
Outside services and facilities maintenance costs
|
286
|
|
|
Depreciation, asset removal and property tax costs due to new capital investments
|
187
|
|
|
Benefits and other employee-related expenses
(1)
|
133
|
|
|
Other immaterial variances
|
(2
|
)
|
|
Quarter-over-quarter increase in other operating expenses
|
$
|
2,227
|
|
|
|
|
|
|
Increase
|
||||||
For the Three Months Ended March 31,
|
2019
|
|
2018
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
||||||
Gross margin
|
$
|
1,860
|
|
|
$
|
1,175
|
|
|
$
|
685
|
|
Depreciation, amortization and property taxes
|
147
|
|
|
148
|
|
|
(1
|
)
|
|||
Other operating expenses
|
2,223
|
|
|
1,791
|
|
|
432
|
|
|||
Operating Income
|
$
|
(510
|
)
|
|
$
|
(764
|
)
|
|
$
|
254
|
|
(in thousands)
|
Margin Impact
|
||
Net impact of PESCO's MTM activity
|
$
|
(5,591
|
)
|
Net impact of extraordinary costs associated with the 2018 Bomb Cyclone for the Mid-Atlantic wholesale portfolio
(1)
|
3,284
|
|
|
Mid-Atlantic retail portfolio loss due to pipeline capacity constraints in the first quarter of 2018
(1)
|
2,261
|
|
|
Other margin for PESCO operations (net)
|
731
|
|
|
Quarter-over-quarter increase in gross margin for PESCO
|
$
|
685
|
|
|
2019
|
||
(dollars in thousands)
|
|
||
Regulated Energy:
|
|
||
Natural gas distribution
|
$
|
64,143
|
|
Natural gas transmission
|
66,787
|
|
|
Electric distribution
|
5,949
|
|
|
Total Regulated Energy
|
136,879
|
|
|
Unregulated Energy:
|
|
||
Propane distribution
|
11,870
|
|
|
Energy transmission
|
8,345
|
|
|
Other unregulated energy
|
1,416
|
|
|
Total Unregulated Energy
|
21,631
|
|
|
Other:
|
|
||
Corporate and other businesses
|
9,705
|
|
|
Total Other
|
9,705
|
|
|
Total 2019 Budgeted Capital Expenditures
|
$
|
168,215
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Long-term debt, net of current maturities
|
|
$
|
285,998
|
|
|
34
|
%
|
|
$
|
316,020
|
|
|
38
|
%
|
Stockholders’ equity
|
|
543,659
|
|
|
66
|
%
|
|
518,439
|
|
|
62
|
%
|
||
Total capitalization, excluding short-term debt
|
|
$
|
829,657
|
|
|
100
|
%
|
|
$
|
834,459
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
||||||
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Short-term debt
|
|
$
|
276,393
|
|
|
24
|
%
|
|
$
|
294,458
|
|
|
26
|
%
|
Long-term debt, including current maturities
|
|
357,507
|
|
|
30
|
%
|
|
327,955
|
|
|
29
|
%
|
||
Stockholders’ equity
|
|
543,659
|
|
|
46
|
%
|
|
518,439
|
|
|
45
|
%
|
||
Total capitalization, including short-term debt
|
|
$
|
1,177,559
|
|
|
100
|
%
|
|
$
|
1,140,852
|
|
|
100
|
%
|
|
|
Total Borrowing Capacity
|
|
Less: Amount of Debt Issued
|
|
Less: Unfunded Commitments
|
|
Remaining Borrowing Capacity
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Shelf Agreement
|
|
|
|
|
|
|
|
|
||||||||
Prudential Shelf Agreement
|
|
$
|
220,000
|
|
|
$
|
(70,000
|
)
|
|
$
|
(100,000
|
)
|
|
$
|
50,000
|
|
MetLife Shelf Agreement
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
||||
NYL Shelf Agreement
|
|
150,000
|
|
|
(100,000
|
)
|
|
—
|
|
|
50,000
|
|
||||
Total
|
|
$
|
520,000
|
|
|
$
|
(170,000
|
)
|
|
$
|
(100,000
|
)
|
|
$
|
250,000
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
(in thousands)
|
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
40,486
|
|
|
$
|
66,672
|
|
Investing activities
|
|
(43,369
|
)
|
|
(62,971
|
)
|
||
Financing activities
|
|
4,769
|
|
|
(3,319
|
)
|
||
Net increase in cash and cash equivalents
|
|
1,886
|
|
|
382
|
|
||
Cash and cash equivalents—beginning of period
|
|
6,089
|
|
|
5,614
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
7,975
|
|
|
$
|
5,996
|
|
•
|
Changes in net accounts receivable and accrued revenue and accounts payable and accrued liabilities decreased cash flows by
$9.4 million
, due primarily to the timing and receipt of payments.
|
•
|
Changes in net regulatory assets and liabilities decreased cash flows by
$8.4 million
, due primarily to the change in fuel costs collected through the various cost recovery mechanisms.
|
•
|
Net cash flows from changes in propane inventory, storage gas and other inventories decreased by approximately
$5.2 million
due primarily to lower levels of our inventory during 2018.
|
•
|
Net income, adjusted for reconciling activities, decreased cash flows by
$5.4 million
, primarily due to the absence of deferred tax assets pertaining to the availability and utilization of bonus depreciation during 2018, offset by an increase in net income and higher non-cash adjustments for depreciation and amortization related to increased investing activities.
|
•
|
Increased cash flows of
$5.0 million
as a result of
$30.0 million
in proceeds from a term note issued in January 2019. During the
three
months ended
March 31, 2018
, we received
$25.0 million
in proceeds from the Revolver, which was advanced on a long-term basis.
|
•
|
Increased cash flows from lower repayments of short-term borrowing of
$6.1 million
under our line of credit arrangements.
|
•
|
Decreased cash flows of
$2.3 million
as a result of changes in cash overdrafts and;
|
•
|
Cash dividends of
$5.9 million
paid during the
three
months ended
March 31, 2019
, compared to
$5.1 million
for the
three
months ended
March 31, 2018
.
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
|
Total
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
(1)
|
|
$
|
70,600
|
|
|
$
|
29,200
|
|
|
$
|
45,700
|
|
|
$
|
211,700
|
|
|
$
|
357,200
|
|
Purchase obligations - Commodity
(2)
|
|
112,947
|
|
|
34,384
|
|
|
13,483
|
|
|
11,762
|
|
|
172,576
|
|
|||||
Total
|
|
$
|
183,547
|
|
|
$
|
63,584
|
|
|
$
|
59,183
|
|
|
$
|
223,462
|
|
|
$
|
529,776
|
|
(in thousands)
|
Balance at December 31, 2018
|
|
Increase (Decrease) in Fair Market Value
|
|
Less Amounts Settled
|
|
Balance at March 31, 2019
|
||||||||
PESCO
|
$
|
(184
|
)
|
|
$
|
3,807
|
|
|
$
|
(617
|
)
|
|
$
|
3,006
|
|
Sharp
|
(1,522
|
)
|
|
354
|
|
|
585
|
|
|
(583
|
)
|
||||
Total
|
$
|
(1,706
|
)
|
|
$
|
4,161
|
|
|
$
|
(32
|
)
|
|
$
|
2,423
|
|
(in thousands)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Total Fair Value
|
||||||||||
Price based on ICE - PESCO
|
$
|
18
|
|
|
$
|
2,091
|
|
|
$
|
848
|
|
|
$
|
49
|
|
|
$
|
3,006
|
|
Price based on Mont Belvieu - Sharp
|
(386
|
)
|
|
(161
|
)
|
|
(36
|
)
|
|
—
|
|
|
(583
|
)
|
|||||
Total
|
$
|
(368
|
)
|
|
$
|
1,930
|
|
|
$
|
812
|
|
|
$
|
49
|
|
|
$
|
2,423
|
|
|
|
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)
|
|||||
January 1, 2019
through January 31, 2019 (1) |
|
388
|
|
|
$
|
81.65
|
|
|
—
|
|
|
—
|
|
February 1, 2019
through February 28, 2019 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
March 1, 2019
through March 31, 2019 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
388
|
|
|
$
|
81.65
|
|
|
—
|
|
|
—
|
|
Item 6.
|
Exhibits
|
|
|
|
10.1*
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
31.1*
|
|
|
|
|
|
31.2*
|
|
|
|
|
|
32.1*
|
|
|
|
|
|
32.2*
|
|
|
|
|
|
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
Executive Vice President, Chief Financial Officer, and Assistant Corporate Secretary
|
Name: Thomas E. Mahn
|
Name: Beth W. Cooper
|
Title: Treasurer and Vice President
|
Title: Senior Vice President and Chief Financial
|
1.
|
Definitions.
|
a.
|
“Applicable Margin”
means seventy five (75) basis points (0.75%).
|
b.
|
“Business Day”
means:
|
2.
|
Reserved
.
|
3.
|
Repayment, Prepayments and Interest
.
|
4.
|
Miscellaneous LIBOR Rate Loan Terms
.
|
1.)
|
Funded Debt to Total Capitalization
. The Funded Debt to Total Capitalization (as defined in the Term Loan Credit Agreement) is ________________, which is in compliance with the required maximum Funded Debt to Total Capitalization of 65% for the test period end date of _____________________.
|
2.)
|
The representations and warranties of the Borrower contained in the Term Loan Credit Agreement and in the other Credit Documents (as defined in the Term Loan Credit Agreement) are true on and as of this date with the same effect as though such representations and warranties have been made on and as of the date hereof and the Borrower has performed and complied in all respects with all covenants and conditions thereof.
|
3.)
|
[No event has occurred and is continuing or exists as of the date hereof, which constitutes a Default or an Event of Default (as each term is defined in the Term Loan Credit Agreement)]
|
$30,000,000.00
|
January ___, 2019
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended
March 31, 2019
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/ J
EFFRY
M. H
OUSEHOLDER
|
Jeffry M. Householder
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended
March 31, 2019
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
Executive Vice President, Chief Financial Officer, and Assistant Corporate Secretary
|
/s/ J
EFFRY
M. H
OUSEHOLDER
|
Jeffry M. Householder
|
May 8, 2019
|
/
S
/ B
ETH
W. C
OOPER
|
Beth W. Cooper
|
May 8, 2019
|