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Chesapeake Utilities Corporation Reports Record Results For Fiscal Year 2019 And Updates Earnings Guidance
In the fourth quarter of 2019, the Company completed the previously announced sales of the assets and contracts of its natural gas marketing subsidiary,
The Company's net income from continuing operations for 2019 was
The Company's net income from continuing operations for the quarter ended
"2019 was a remarkable year, whether measured by our record earnings and superior growth, the initiatives we completed, those we set into motion or by how effectively our employee team worked together to drive efficiency, increase collaboration and achieve continuous improvement across the organization," stated
Increasing Earnings Guidance
The Company previously provided guidance that its EPS should grow at an average annual rate of 7.75 percent to 9.50 percent through 2022, from a base level of
*Unless otherwise noted, EPS information is presented on a diluted basis.
**This press release includes references to non-Generally Accepted Accounting Principles ("GAAP") financial measures, including gross margin. A "non-GAAP financial measure" is generally defined as a numerical measure of a company's historical or future performance that includes or excludes amounts, or that is subject to adjustments, so as to be different from the most directly comparable measure calculated or presented in accordance with GAAP. Our management believes certain non-GAAP financial measures, when considered together with GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period.
The Company calculates "gross margin" by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electricity and propane, and the cost of labor spent on direct revenue-producing activities and excludes depreciation, amortization and accretion. Other companies may calculate gross margin in a different manner. Gross margin should not be considered an alternative to operating income or net income, both of which are determined in accordance with GAAP. The Company believes that gross margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the profitability achieved by the Company under its allowed rates for regulated operations and under its competitive pricing structures for unregulated businesses. The Company's management uses gross margin in measuring its business units' performance.
Operating Results for the Years Ended
Consolidated Results
Year Ended |
||||||||||||||
(in thousands) |
2019 |
2018 |
Change |
Percent |
||||||||||
Gross margin |
$ |
325,104 |
$ |
300,146 |
$ |
24,958 |
8.3 |
% |
||||||
Depreciation, amortization and property taxes |
45,423 |
40,220 |
5,203 |
12.9 |
% |
|||||||||
Other operating expenses |
173,394 |
165,083 |
8,311 |
5.0 |
% |
|||||||||
Operating income |
$ |
106,287 |
$ |
94,843 |
$ |
11,444 |
12.1 |
% |
Operating income, for the year ended
Regulated Energy Segment
Year Ended |
||||||||||||||
(in thousands) |
2019 |
2018 |
Change |
Percent |
||||||||||
Gross margin |
$ |
240,203 |
$ |
223,453 |
$ |
16,750 |
7.5 |
% |
||||||
Depreciation, amortization and property taxes |
51,683 |
46,523 |
5,160 |
11.1 |
% |
|||||||||
Other operating expenses |
101,936 |
97,715 |
4,221 |
4.3 |
% |
|||||||||
Operating income |
$ |
86,584 |
$ |
79,215 |
$ |
7,369 |
9.3 |
% |
Operating income for the Regulated Energy segment increased by
The key components of the increase in gross margin are shown below:
(in thousands) |
||||
|
$ |
12,600 |
||
Natural gas distribution - customer growth (excluding service expansions) |
4,718 |
|||
2018 retained tax savings for certain |
1,321 |
|||
Retained tax savings for certain |
1,023 |
|||
|
983 |
|||
Florida Gas Reliability Infrastructure Program ("GRIP") (1) |
508 |
|||
Decreased customer consumption - primarily due to warmer weather |
(3,295) |
|||
Other variances |
(1,108) |
|||
Period-over-period increase in gross margin |
$ |
16,750 |
(1) |
In 2019, the Company recorded a reduction in depreciation expense totaling |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
|||
Payroll, benefits and other employee-related expenses |
$ |
3,705 |
|
Insurance (non-health) expense - both insured and self-insured components |
1,847 |
||
Stock compensation expense associated with leadership transitions during 2019 |
908 |
||
Vehicle expenses due to additional fleet to support growth |
268 |
||
Timing of excavation and inspection activities in 2018 to comply with the Company's integrity management program |
(1,733) |
||
Facilities and maintenance costs due to consolidation of facilities |
(542) |
||
Other variances |
(232) |
||
Period-over-period increase in other operating expenses |
$ |
4,221 |
Unregulated Energy Segment
Year Ended |
||||||||||||||
(in thousands) |
2019 |
2018 |
Change |
Percent |
||||||||||
Gross margin |
$ |
85,266 |
$ |
77,196 |
$ |
8,070 |
10.5 |
% |
||||||
Depreciation, amortization and property taxes |
10,129 |
8,263 |
1,866 |
22.6 |
% |
|||||||||
Other operating expenses |
55,198 |
51,809 |
3,389 |
6.5 |
% |
|||||||||
Operating income |
$ |
19,939 |
$ |
17,124 |
$ |
2,815 |
16.4 |
% |
Operating income for the Unregulated Energy segment increased by
The key components of the increase in gross margin are shown below:
(in thousands) |
Margin Impact |
|||
Marlin Gas Services (acquired assets of |
$ |
5,300 |
||
Propane Operations: |
||||
Increased retail propane margins per gallon driven by favorable market conditions and supply management |
3,229 |
|||
Ohl acquisition (assets acquired in |
1,200 |
|||
|
329 |
|||
Decrease in customer consumption due primarily to the absence of the 2018 Bomb Cyclone |
(1,800) |
|||
Lower wholesale propane margins due to non-recurring impact of the 2018 Bomb Cyclone |
(866) |
|||
Aspire Energy - higher margins from rate increases |
518 |
|||
Higher Eight Flags margin from increased production |
418 |
|||
Other variances |
(258) |
|||
Period-over-period increase in gross margin |
$ |
8,070 |
The key components of the increase in other operating expenses are as follows:
(in thousands) |
|||
Operating expenses for Unregulated Energy acquisitions |
$ |
3,314 |
|
Insurance expense (non-health) - both insured and self-insured components |
415 |
||
Other variances |
(340) |
||
Period-over-period increase in other operating expenses |
$ |
3,389 |
Operating Results for the Quarters Ended
Consolidated Results
Three Months Ended |
||||||||||||||
(in thousands) |
2019 |
2018 |
Change |
Percent |
||||||||||
Gross margin |
$ |
88,900 |
$ |
82,981 |
$ |
5,919 |
7.1 |
% |
||||||
Depreciation, amortization and property taxes |
11,812 |
10,481 |
1,331 |
12.7 |
% |
|||||||||
Other operating expenses |
47,446 |
43,627 |
3,819 |
8.8 |
% |
|||||||||
Operating income |
$ |
29,642 |
$ |
28,873 |
$ |
769 |
2.7 |
% |
Operating income during the fourth quarter of 2019 increased by
Regulated Energy Segment
Three Months Ended |
||||||||||||||
(in thousands) |
2019 |
2018 |
Change |
Percent |
||||||||||
Gross margin |
$ |
63,054 |
$ |
60,528 |
$ |
2,526 |
4.2 |
% |
||||||
Depreciation, amortization and property taxes |
12,989 |
12,121 |
868 |
7.2 |
% |
|||||||||
Other operating expenses |
28,791 |
26,122 |
2,669 |
10.2 |
% |
|||||||||
Operating income |
$ |
21,274 |
$ |
22,285 |
$ |
(1,011) |
(4.5) |
% |
Operating income for the Regulated Energy segment decreased by
The key components of the increase in gross margin are shown below:
(in thousands) |
Margin Impact |
||
|
$ |
2,128 |
|
Natural gas distribution - customer growth (excluding service expansions) |
875 |
||
Increased margin primarily from the storm recovery surcharge (associated with Hurricanes Irma and Matthew) for |
596 |
||
Florida GRIP (1) |
118 |
||
Other variances |
(1,191) |
||
Quarter-over-quarter increase in gross margin |
$ |
2,526 |
(1) |
In 2019, the Company recorded a reduction in depreciation expense totaling |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
Other Operating |
||
Payroll, benefits and other employee-related expenses |
$ |
1,406 |
|
Stock compensation expense associated with leadership transitions during 2019 |
908 |
||
Insurance expense (non-health) - both insured and self-insured components |
872 |
||
Timing of excavation and inspection activities in 2018 to comply with the Company's integrity management program |
(733) |
||
Other variances |
216 |
||
Quarter-over-quarter increase in other operating expenses |
$ |
2,669 |
Unregulated Energy Segment
Three Months Ended |
||||||||||||||
(in thousands) |
2019 |
2018 |
Change |
Percent |
||||||||||
Gross margin |
$ |
25,926 |
$ |
22,560 |
$ |
3,366 |
14.9 |
% |
||||||
Depreciation, amortization and property taxes |
3,056 |
2,496 |
560 |
22.4 |
% |
|||||||||
Other operating expenses |
14,249 |
13,459 |
790 |
5.9 |
% |
|||||||||
Operating income |
$ |
8,621 |
$ |
6,605 |
$ |
2,016 |
30.5 |
% |
Operating income for the Unregulated Energy segment increased by
The major components of the increase in gross margin are shown below:
(in thousands) |
Margin Impact |
|||
Marlin Gas Services (acquired assets of |
$ |
947 |
||
Propane Operations: |
||||
Increased retail margins per gallon for certain customer classes |
1,513 |
|||
Ohl acquisition (assets acquired in |
517 |
|||
|
329 |
|||
Other variances |
60 |
|||
Quarter-over-quarter increase in gross margin |
$ |
3,366 |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
Other Operating |
|||
Operating expenses for Unregulated Energy acquisitions |
$ |
859 |
||
Other variances |
(69) |
|||
Quarter-over-quarter increase in other operating expenses |
$ |
790 |
Divestiture of PESCO
During the fourth quarter of 2019, the Company sold PESCO's assets and contracts in four separate transactions and accordingly, has exited the natural gas marketing business. As a result of the sales agreements, the Company began to report PESCO as discontinued operations during the third quarter of 2019 and excluded PESCO's performance from continuing operations for all periods presented and classified its assets and liabilities as held for sale where applicable.
The Company received a total of
Conference Call
About
Please note that
For more information, contact:
Executive Vice President, Chief Financial Officer, and Assistant Corporate Secretary
302.734.6799
Financial Summary (in thousands, except per-share data) |
||||||||||||||||
Year Ended |
Quarter Ended |
|||||||||||||||
|
|
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
Gross Margin |
||||||||||||||||
Regulated Energy segment |
$ |
240,203 |
$ |
223,453 |
$ |
63,054 |
$ |
60,528 |
||||||||
Unregulated Energy segment |
85,266 |
77,196 |
25,926 |
22,560 |
||||||||||||
Other businesses and eliminations |
(365) |
(503) |
(80) |
(107) |
||||||||||||
Total Gross Margin |
$ |
325,104 |
$ |
300,146 |
$ |
88,900 |
$ |
82,981 |
||||||||
Operating Income |
||||||||||||||||
Regulated Energy segment |
$ |
86,584 |
$ |
79,215 |
$ |
21,274 |
$ |
22,285 |
||||||||
Unregulated Energy segment |
19,939 |
17,124 |
8,621 |
6,605 |
||||||||||||
Other businesses and eliminations |
(236) |
(1,496) |
(253) |
(17) |
||||||||||||
Total Operating Income |
$ |
106,287 |
$ |
94,843 |
$ |
29,642 |
$ |
28,873 |
||||||||
Other expense, net |
(1,830) |
(603) |
(1,108) |
(434) |
||||||||||||
Interest Charges |
22,224 |
16,146 |
5,642 |
4,383 |
||||||||||||
Income from Continuing Operations Before Income Taxes |
82,233 |
78,094 |
22,892 |
24,056 |
||||||||||||
Income Taxes on Continuing Operations |
21,091 |
21,232 |
5,723 |
6,260 |
||||||||||||
Income from Continuing Operations |
61,142 |
56,862 |
17,169 |
17,796 |
||||||||||||
Income/(Loss) from Discontinued Operations, Net of tax |
(1,391) |
(282) |
(9) |
5 |
||||||||||||
Gain on sale of Discontinued Operations, Net of tax |
5,402 |
— |
5,402 |
— |
||||||||||||
Net Income |
$ |
65,153 |
$ |
56,580 |
$ |
22,562 |
$ |
17,801 |
||||||||
Basic Earnings Per Share of Common Stock: |
||||||||||||||||
Earnings Per Share from Continuing Operations |
$ |
3.73 |
$ |
3.48 |
$ |
1.05 |
$ |
1.09 |
||||||||
Earnings/(Loss) Per Share from Discontinued Operations |
0.24 |
(0.02) |
0.33 |
— |
||||||||||||
Basic Earnings per Share of Common Stock |
$ |
3.97 |
$ |
3.46 |
$ |
1.38 |
$ |
1.09 |
||||||||
Diluted Earnings Per Share of Common Stock: |
||||||||||||||||
Earnings Per Share from Continuing Operations |
$ |
3.72 |
$ |
3.47 |
$ |
1.04 |
$ |
1.08 |
||||||||
Earnings/(Loss) Per Share from Discontinued Operations |
0.24 |
(0.02) |
0.33 |
— |
||||||||||||
Diluted Earnings Per Share of Common Stock |
$ |
3.96 |
$ |
3.45 |
$ |
1.37 |
$ |
1.08 |
Financial Summary Highlights |
|||||||||||
Key variances in continuing operations for the year ended |
|||||||||||
(in thousands, except per share data) |
Pre-tax |
Net |
Earnings |
||||||||
Year ended |
$ |
78,094 |
$ |
56,862 |
$ |
3.47 |
|||||
Adjusting for unusual items: |
|||||||||||
Decreased customer consumption - primarily due to warmer weather |
(4,852) |
(3,607) |
(0.22) |
||||||||
Nonrecurring separation expenses associated with a former executive |
1,548 |
1,421 |
0.09 |
||||||||
2018 retained tax savings for certain |
1,321 |
990 |
0.06 |
||||||||
Lower wholesale propane margins due to non-recurring impact of the 2018 |
(866) |
(644) |
(0.04) |
||||||||
Pension settlement expense associated with the de-risking of the Chesapeake |
(693) |
(515) |
(0.03) |
||||||||
(3,542) |
(2,355) |
(0.14) |
|||||||||
Increased (Decreased) Gross Margins: |
|||||||||||
|
12,600 |
9,369 |
0.57 |
||||||||
Margin contribution from Unregulated Energy acquisitions* |
6,830 |
5,078 |
0.31 |
||||||||
Natural gas distribution growth (excluding service expansions) |
4,718 |
3,508 |
0.21 |
||||||||
Increased retail propane margins |
3,229 |
2,401 |
0.15 |
||||||||
Retained tax savings for certain |
1,023 |
760 |
0.05 |
||||||||
Sandpiper's margin primarily from natural gas conversions |
983 |
731 |
0.04 |
||||||||
Higher Aspire Energy margins from rate increases |
518 |
385 |
0.02 |
||||||||
Florida GRIP* |
508 |
378 |
0.02 |
||||||||
Higher Eight Flags margin from increased production |
418 |
311 |
0.02 |
||||||||
30,827 |
22,921 |
1.39 |
|||||||||
(Increased) Decreased Other Operating Expenses (Excluding Cost of Sales): |
|||||||||||
Depreciation, amortization and property tax costs due to new capital investments |
(5,727) |
(4,258) |
(0.26) |
||||||||
Operating expenses for Unregulated Energy acquisitions |
(4,636) |
(3,447) |
(0.21) |
||||||||
Payroll, benefits and other employee-related expenses |
(4,204) |
(3,126) |
(0.19) |
||||||||
Insurance expense (non-health) - both insured and self-insured components |
(2,267) |
(1,685) |
(0.10) |
||||||||
Stock compensation expense associated with leadership transitions during 2019 |
(1,114) |
(828) |
(0.05) |
||||||||
Vehicle expenses due to additional fleet to support growth |
(309) |
(230) |
(0.01) |
||||||||
Timing of excavation and inspection activities in 2018 to comply with the |
1,733 |
1,289 |
0.08 |
||||||||
Facilities and maintenance costs due to consolidation of facilities |
581 |
432 |
0.03 |
||||||||
(15,943) |
(11,853) |
(0.71) |
|||||||||
Other income tax effects |
— |
816 |
0.05 |
||||||||
Interest Charges |
(6,078) |
(4,519) |
(0.27) |
||||||||
Net Other Changes |
(1,125) |
(730) |
(0.07) |
||||||||
Year ended |
$ |
82,233 |
$ |
61,142 |
$ |
3.72 |
(1) |
In the fourth quarter of 2019, the Company executed a de-risking strategy for its Pension Plan. This amount reflects a portion of the cost of the pension settlement that was charged to expense as it was deemed not recoverable through the regulatory process. |
* |
See the Major Projects and Initiatives table later in this press release. |
Key variances in continuing operations for the fourth quarter ended |
||||||||||||
(in thousands, except per share) |
Pre-tax |
Net |
Earnings |
|||||||||
Fourth Quarter 2018 Reported Results from Continuing Operations |
$ |
24,056 |
$ |
17,796 |
$ |
1.08 |
||||||
Adjusting for Unusual items: |
||||||||||||
Pension settlement expense associated with the de-risking of the Chesapeake |
(693) |
(520) |
(0.03) |
|||||||||
Increased (Decreased) Gross Margins: |
||||||||||||
|
2,128 |
1,596 |
0.10 |
|||||||||
Margin contributions from Unregulated Energy acquisitions* |
1,794 |
1,345 |
0.08 |
|||||||||
Increased retail propane margins |
1,513 |
1,135 |
0.07 |
|||||||||
Natural gas growth (excluding service expansions) |
875 |
656 |
0.04 |
|||||||||
Increased margin primarily from the storm recovery surcharge (associated with |
596 |
447 |
0.03 |
|||||||||
Florida GRIP* |
118 |
88 |
0.01 |
|||||||||
7,024 |
5,267 |
0.33 |
||||||||||
(Increased) Decreased Other Operating Expenses (Excluding Cost of Sales): |
||||||||||||
Payroll, benefits and other employee-related expenses |
(1,829) |
(1,371) |
(0.08) |
|||||||||
Operating expenses for Unregulated Energy acquisitions |
(1,269) |
(952) |
(0.06) |
|||||||||
Stock compensation expense associated with leadership transitions during 2019 |
(1,114) |
(836) |
(0.05) |
|||||||||
Insurance expense (non-health) - both insured and self-insured components |
(1,044) |
(783) |
(0.05) |
|||||||||
Depreciation, amortization and property tax costs due to new capital investments |
(1,016) |
(762) |
(0.05) |
|||||||||
Timing of excavation and inspection activities in 2018 to comply with the |
733 |
550 |
0.03 |
|||||||||
(5,539) |
(4,154) |
(0.26) |
||||||||||
Interest Charges |
(1,259) |
(944) |
(0.06) |
|||||||||
Other income tax effects |
— |
83 |
0.01 |
|||||||||
Net Other Changes |
(697) |
(359) |
(0.03) |
|||||||||
Fourth Quarter 2019 Reported Results from Continuing Operations |
$ |
22,892 |
$ |
17,169 |
$ |
1.04 |
(1) |
In the fourth quarter of 2019, the Company executed a de-risking strategy for its Pension Plan. This amount reflects a portion of the cost of the pension settlement that was charged to expense as it was deemed not recoverable through the regulatory process. |
* |
See the Major Projects and Initiatives table later in this press release. |
The following information highlights certain key factors contributing to the Company's results for the year and quarter ended
Recently Completed and Ongoing Major Projects and Initiatives
The Company constantly pursues and develops additional projects and initiatives to serve existing and new customers, and to further grow its businesses and earnings, with the intention of increasing shareholder value. The following represent the major projects/initiatives recently completed and currently underway. In the future, the Company will add new projects and initiatives to this table once substantially finalized and the associated earnings can be estimated.
Gross Margin for the Period |
||||||||||||||||
Year Ended |
Estimate for Fiscal |
|||||||||||||||
(in thousands) |
2018 |
2019 |
2020 |
2021 |
||||||||||||
Expansions: |
||||||||||||||||
2017 Eastern Shore System Expansion - |
$ |
9,103 |
$ |
16,434 |
$ |
15,799 |
$ |
15,799 |
||||||||
Northwest Florida Expansion (including related |
4,350 |
6,516 |
6,500 |
6,500 |
||||||||||||
|
54 |
2,139 |
5,047 |
5,227 |
||||||||||||
Del-Mar Energy Pathway - including interim services |
— |
731 |
2,512 |
4,100 |
||||||||||||
|
— |
283 |
679 |
679 |
||||||||||||
Callahan Intrastate Pipeline |
— |
— |
3,219 |
6,400 |
||||||||||||
|
— |
— |
— |
1,400 |
||||||||||||
Total Expansions |
13,507 |
26,103 |
33,756 |
40,105 |
||||||||||||
Acquisitions: |
||||||||||||||||
Marlin Gas Services |
110 |
5,410 |
6,400 |
7,000 |
||||||||||||
|
— |
1,200 |
1,236 |
1,250 |
||||||||||||
|
— |
329 |
4,000 |
4,200 |
||||||||||||
|
— |
— |
TBD (4) |
TBD |
||||||||||||
Total Acquisitions |
110 |
6,939 |
11,636 |
12,450 |
||||||||||||
Regulatory Initiatives: |
||||||||||||||||
Florida GRIP(1) (2) |
13,020 |
13,528 |
14,858 |
15,831 |
||||||||||||
Tax benefit retained by certain |
— |
2,740 |
1,400 |
1,500 |
||||||||||||
Hurricane Michael regulatory proceeding |
— |
— |
TBD |
TBD |
||||||||||||
Total Regulatory Initiatives |
13,020 |
16,268 |
16,258 |
17,331 |
||||||||||||
Total |
$ |
26,637 |
$ |
49,310 |
$ |
61,650 |
$ |
69,886 |
(1) |
All periods shown have been adjusted to reflect lower customer rates as a result of the TCJA. Lower customer rates are offset by the corresponding decrease in federal income tax expense and have no negative impact on net income. |
(2) |
For the year ended |
(3) |
The amount disclosed for the year ended |
(4) |
The amount of margin to be generated by |
Detailed Discussion of Major Projects and Initiatives
Expansions
2017 Eastern Shore System Expansion
Northwest Florida Expansion
In
Peninsula Pipeline is constructing four transmission lines to bring additional natural gas to the Company's distribution system in
Del-Mar Energy Pathway
In
In
Callahan Intrastate Pipeline
In
Acquisitions
Marlin Gas Services
In
In
In
In
Regulatory Initiatives
Florida GRIP
Florida GRIP is a natural gas pipe replacement program approved by the Florida PSC that allows automatic recovery, through rates, of costs associated with the replacement of mains and services. Since the program's inception in
For the year ended
Florida Tax Savings Related to the TCJA
In
Hurricane Michael
In
In
Weather and Consumption
Weather did not have a material impact on fourth quarter 2019 results, compared to the fourth quarter of 2018. For the full year, weather conditions accounted for decreased gross margin of
HDD and CDD Information
For the Years Ended |
For the Quarters Ended |
||||||||||||||||
2019 |
2018 |
Variance |
2019 |
2018 |
Variance |
||||||||||||
Delmarva |
|||||||||||||||||
Actual HDD |
4,089 |
4,251 |
(162) |
1,513 |
1,522 |
(9) |
|||||||||||
10-Year Average HDD ("Normal") |
4,323 |
4,379 |
(56) |
1,519 |
1,533 |
(14) |
|||||||||||
Variance from Normal |
(234) |
(128) |
(6) |
(11) |
|||||||||||||
|
|||||||||||||||||
Actual HDD |
619 |
780 |
(161) |
240 |
273 |
(33) |
|||||||||||
10-Year Average HDD ("Normal") |
792 |
800 |
(8) |
260 |
267 |
(7) |
|||||||||||
Variance from Normal |
(173) |
(20) |
(20) |
6 |
|||||||||||||
|
|||||||||||||||||
Actual HDD |
5,498 |
5,845 |
(347) |
1,967 |
2,138 |
(171) |
|||||||||||
10-Year Average HDD ("Normal") |
5,983 |
5,823 |
160 |
2,133 |
2,048 |
85 |
|||||||||||
Variance from Normal |
(485) |
22 |
(166) |
90 |
|||||||||||||
|
|||||||||||||||||
Actual CDD |
3,200 |
3,105 |
95 |
360 |
401 |
(41) |
|||||||||||
10-Year Average CDD ("Normal") |
2,939 |
2,889 |
50 |
314 |
296 |
18 |
|||||||||||
Variance from Normal |
261 |
216 |
46 |
105 |
Natural Gas Distribution Growth
New customer growth for the Company's natural gas distribution operations generated
Gross Margin Increase |
|||||||
(in thousands) |
For the Year Ended |
||||||
Delmarva |
|
||||||
Customer growth: |
|||||||
Residential |
$ |
1,179 |
$ |
769 |
|||
Commercial and industrial, excluding the impact of the |
664 |
2,106 |
|||||
Total customer growth |
$ |
1,843 |
$ |
2,875 |
Capital Investment Growth and Associated Financing Plans
The Company's capital expenditures were
For the Year Ended |
||||
(dollars in thousands) |
2019 |
|||
Regulated Energy: |
||||
Natural gas distribution |
$ |
62,744 |
||
Natural gas transmission |
62,000 |
|||
Electric distribution |
5,860 |
|||
Total Regulated Energy |
130,604 |
|||
Unregulated Energy: |
||||
Propane distribution (1) |
38,347 |
|||
Energy transmission |
11,206 |
|||
Other unregulated energy |
10,481 |
|||
Total Unregulated Energy |
60,034 |
|||
Other: |
||||
Corporate and other businesses |
8,348 |
|||
Total 2019 Capital Expenditures |
$ |
198,986 |
(1) |
This amount includes |
The following table shows a range of the expected 2020 capital expenditures by segment and by business line:
Estimate for Fiscal 2020 |
|||||||
(dollars in thousands) |
Low |
High |
|||||
Regulated Energy: |
|||||||
Natural gas distribution |
$ |
72,000 |
$ |
83,000 |
|||
Natural gas transmission |
83,000 |
96,000 |
|||||
Electric distribution |
5,000 |
7,000 |
|||||
Total Regulated Energy |
160,000 |
186,000 |
|||||
Unregulated Energy: |
|||||||
Propane distribution |
10,000 |
11,000 |
|||||
Energy transmission |
6,000 |
6,000 |
|||||
Other unregulated energy |
6,000 |
8,000 |
|||||
Total Unregulated Energy |
22,000 |
25,000 |
|||||
Other: |
|||||||
Corporate and other businesses |
3,000 |
4,000 |
|||||
Total 2020 Expected Capital Expenditures |
$ |
185,000 |
$ |
215,000 |
The capital expenditure projection is subject to continuous review and modification. Actual capital requirements may vary from the above estimates due to a number of factors, including changing economic conditions, customer growth in existing areas, regulation, new growth or acquisition opportunities and availability of capital. Historically, actual capital expenditures have typically lagged behind the budgeted amounts.
Management reaffirms its capital expenditure guidance of
The Company's target ratio of equity to total capitalization, including short-term borrowings, is between 50 and 60 percent. The Company's equity to total capitalization ratio, including short term borrowings, was 43 percent as of
Condensed Consolidated Statements of Income (Unaudited) For the Periods Ended (in thousands, except shares and per share data) |
||||||||||||||||
Year Ended |
Fourth Quarter |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
Operating Revenues |
||||||||||||||||
Regulated Energy |
$ |
343,006 |
$ |
345,281 |
$ |
91,405 |
$ |
92,614 |
||||||||
Unregulated Energy |
154,150 |
161,904 |
45,903 |
55,886 |
||||||||||||
Other businesses and eliminations |
(17,552) |
(16,869) |
(5,335) |
(14,286) |
||||||||||||
Total Operating Revenues |
479,604 |
490,316 |
131,973 |
134,214 |
||||||||||||
Operating Expenses |
||||||||||||||||
Regulated energy cost of sales |
102,803 |
121,828 |
28,351 |
32,086 |
||||||||||||
Unregulated energy and other cost of sales |
51,697 |
68,342 |
14,722 |
19,147 |
||||||||||||
Operations |
137,844 |
132,523 |
38,284 |
34,833 |
||||||||||||
Maintenance |
15,679 |
14,387 |
4,479 |
3,968 |
||||||||||||
Gain from a settlement |
(130) |
(130) |
— |
— |
||||||||||||
Depreciation and amortization |
45,423 |
40,220 |
11,812 |
10,481 |
||||||||||||
Other taxes |
20,001 |
18,303 |
4,683 |
4,826 |
||||||||||||
Total operating expenses |
373,317 |
395,473 |
102,331 |
105,341 |
||||||||||||
Operating Income |
106,287 |
94,843 |
29,642 |
28,873 |
||||||||||||
Other expense, net |
(1,830) |
(603) |
(1,108) |
(434) |
||||||||||||
Interest charges |
22,224 |
16,146 |
5,642 |
4,383 |
||||||||||||
Income from Continuing Operations Before Income Taxes |
82,233 |
78,094 |
22,892 |
24,056 |
||||||||||||
Income Taxes on Continuing Operations |
21,091 |
21,232 |
5,723 |
6,260 |
||||||||||||
Income from Continuing Operations |
61,142 |
56,862 |
17,169 |
17,796 |
||||||||||||
Income/(Loss) from Discontinued Operations, Net of tax |
(1,391) |
(282) |
(9) |
5 |
||||||||||||
Gain on sale of Discontinued Operations, Net of tax |
5,402 |
— |
5,402 |
— |
||||||||||||
Net Income |
$ |
65,153 |
$ |
56,580 |
$ |
22,562 |
$ |
17,801 |
||||||||
Weighted Average Common Shares Outstanding: |
||||||||||||||||
Basic |
16,398,443 |
16,369,616 |
16,403,776 |
16,378,545 |
||||||||||||
Diluted |
16,448,486 |
16,419,870 |
16,461,112 |
16,430,594 |
||||||||||||
Basic Earnings Per Share of Common Stock: |
||||||||||||||||
Earnings Per Share from Continuing Operations |
$ |
3.73 |
$ |
3.48 |
$ |
1.05 |
$ |
1.09 |
||||||||
Earnings/(Loss) from Discontinued Operations |
0.24 |
(0.02) |
0.33 |
— |
||||||||||||
Basic Earnings per Share of Common Stock |
$ |
3.97 |
$ |
3.46 |
$ |
1.38 |
$ |
1.09 |
||||||||
Diluted Earnings Per Share of Common Stock: |
||||||||||||||||
Earnings Per Share from Continuing Operations |
$ |
3.72 |
$ |
3.47 |
$ |
1.04 |
$ |
1.08 |
||||||||
Earnings/(Loss) Per Share from Discontinued Operations |
0.24 |
(0.02) |
0.33 |
— |
||||||||||||
Diluted Earnings Per Share of Common Stock |
$ |
3.96 |
$ |
3.45 |
$ |
1.37 |
$ |
1.08 |
Consolidated Balance Sheets (Unaudited) |
||||||||
As of |
||||||||
Assets |
2019 |
2018 |
||||||
(in thousands, except shares and per share data) |
||||||||
Property, Plant and Equipment |
||||||||
Regulated energy |
$ |
1,441,473 |
$ |
1,297,416 |
||||
Unregulated energy |
265,209 |
236,440 |
||||||
Other |
39,850 |
34,585 |
||||||
Total property, plant and equipment |
1,746,532 |
1,568,441 |
||||||
Less: Accumulated depreciation and amortization |
(336,876) |
(294,089) |
||||||
Plus: Construction work in progress |
54,141 |
79,168 |
||||||
Net property, plant and equipment |
1,463,797 |
1,353,520 |
||||||
Current Assets |
||||||||
Cash and cash equivalents |
6,985 |
6,089 |
||||||
Accounts receivable (less allowance for uncollectible |
49,562 |
53,837 |
||||||
Accrued revenue |
20,846 |
22,640 |
||||||
Propane inventory, at average cost |
5,824 |
9,791 |
||||||
Other inventory, at average cost |
6,067 |
7,127 |
||||||
Regulatory assets |
5,144 |
4,796 |
||||||
Storage gas prepayments |
3,541 |
3,433 |
||||||
Income taxes receivable |
20,050 |
15,300 |
||||||
Prepaid expenses |
13,928 |
10,079 |
||||||
Derivative assets, at fair value |
— |
82 |
||||||
Other current assets |
2,879 |
5,682 |
||||||
Current assets held for sale |
— |
52,681 |
||||||
Total current assets |
134,826 |
191,537 |
||||||
Deferred Charges and Other Assets |
||||||||
|
32,668 |
21,568 |
||||||
Other intangible assets, net |
8,129 |
3,850 |
||||||
Investments, at fair value |
9,229 |
6,711 |
||||||
Operating lease right-of-use assets |
11,563 |
— |
||||||
Regulatory assets |
73,407 |
72,422 |
||||||
Receivables and other deferred charges |
49,579 |
36,401 |
||||||
Noncurrent assets held for sale |
— |
7,662 |
||||||
Total deferred charges and other assets |
184,575 |
148,614 |
||||||
Total Assets |
$ |
1,783,198 |
$ |
1,693,671 |
Consolidated Balance Sheets (Unaudited) |
||||||||
As of |
||||||||
Capitalization and Liabilities |
2019 |
2018 |
||||||
(in thousands, except shares and per share data) |
||||||||
Capitalization |
||||||||
Stockholders' equity |
||||||||
Preferred stock, par value |
$ |
— |
$ |
— |
||||
Common stock, par value |
7,984 |
7,971 |
||||||
Additional paid-in capital |
259,253 |
255,651 |
||||||
Retained earnings |
300,607 |
261,530 |
||||||
Accumulated other comprehensive loss |
(6,267) |
(6,713) |
||||||
Deferred compensation obligation |
4,543 |
3,854 |
||||||
|
(4,543) |
(3,854) |
||||||
Total stockholders' equity |
561,577 |
518,439 |
||||||
Long-term debt, net of current maturities |
440,168 |
316,020 |
||||||
Total capitalization |
1,001,745 |
834,459 |
||||||
Current Liabilities |
||||||||
Current portion of long-term debt |
45,600 |
11,935 |
||||||
Short-term borrowing |
247,371 |
294,458 |
||||||
Accounts payable |
54,068 |
98,681 |
||||||
Customer deposits and refunds |
30,939 |
32,620 |
||||||
Accrued interest |
2,554 |
2,317 |
||||||
Dividends payable |
6,644 |
6,060 |
||||||
Accrued compensation |
16,236 |
13,923 |
||||||
Regulatory liabilities |
5,991 |
7,883 |
||||||
Derivative liabilities, at fair value |
1,844 |
1,604 |
||||||
Other accrued liabilities |
12,077 |
10,081 |
||||||
Current liabilities held for sale |
— |
48,672 |
||||||
Total current liabilities |
423,324 |
528,234 |
||||||
Deferred Credits and Other Liabilities |
||||||||
Deferred income taxes |
180,656 |
156,820 |
||||||
Regulatory liabilities |
127,744 |
135,039 |
||||||
Environmental liabilities |
6,468 |
7,638 |
||||||
Other pension and benefit costs |
30,569 |
28,513 |
||||||
Operating lease - liabilities |
9,896 |
— |
||||||
Deferred investment tax credits and other liabilities |
2,796 |
2,968 |
||||||
Total deferred credits and other liabilities |
358,129 |
330,978 |
||||||
Environmental and other commitments and contingencies (1) |
||||||||
Total Capitalization and Liabilities |
$ |
1,783,198 |
$ |
1,693,671 |
(1) |
Refer to Note 20 and 21 in the Company's Annual Report on Form 10-K for further information. |
Distribution Utility Statistical Data (Unaudited) |
||||||||||||||||||||||||||||||||
For the Three Months Ended |
For the Three Months Ended |
|||||||||||||||||||||||||||||||
Delmarva NG Distribution |
Chesapeake |
FPU NG |
|
Delmarva NG |
Chesapeake |
FPU NG |
|
|||||||||||||||||||||||||
Operating Revenues |
||||||||||||||||||||||||||||||||
Residential |
$ |
15,569 |
$ |
1,587 |
$ |
8,169 |
$ |
10,618 |
$ |
15,647 |
$ |
1,313 |
$ |
5,846 |
$ |
9,450 |
||||||||||||||||
Commercial |
8,087 |
1,622 |
6,784 |
9,416 |
8,260 |
1,566 |
6,491 |
8,711 |
||||||||||||||||||||||||
Industrial |
2,300 |
3,232 |
6,753 |
511 |
2,274 |
3,117 |
5,995 |
411 |
||||||||||||||||||||||||
Other (1) |
5,425 |
769 |
356 |
(2,145) |
5,426 |
883 |
3,901 |
298 |
||||||||||||||||||||||||
Total Operating Revenues |
$ |
31,381 |
$ |
7,210 |
$ |
22,062 |
$ |
18,400 |
$ |
31,607 |
$ |
6,879 |
$ |
22,233 |
$ |
18,870 |
||||||||||||||||
Volumes (in Dts for natural gas and KWHs for electric) |
||||||||||||||||||||||||||||||||
Residential |
918,892 |
92,584 |
355,510 |
71,039 |
962,407 |
90,091 |
327,226 |
65,844 |
||||||||||||||||||||||||
Commercial |
977,449 |
1,157,869 |
439,246 |
76,916 |
947,924 |
1,192,733 |
417,254 |
69,464 |
||||||||||||||||||||||||
Industrial |
1,410,990 |
7,095,966 |
1,280,375 |
9,546 |
1,518,671 |
6,577,922 |
1,220,219 |
3,350 |
||||||||||||||||||||||||
Other |
82,532 |
— |
802,196 |
23,313 |
— |
919,192 |
1,686 |
|||||||||||||||||||||||||
Total |
3,389,863 |
8,346,419 |
2,877,327 |
157,501 |
3,452,315 |
7,860,746 |
2,883,891 |
140,344 |
||||||||||||||||||||||||
Average Customers |
||||||||||||||||||||||||||||||||
Residential |
74,884 |
17,511 |
58,280 |
24,759 |
72,219 |
16,703 |
56,181 |
24,573 |
||||||||||||||||||||||||
Commercial |
7,112 |
1,556 |
3,959 |
7,271 |
6,992 |
1,550 |
3,893 |
7,508 |
||||||||||||||||||||||||
Industrial |
169 |
16 |
2,455 |
2 |
162 |
17 |
2,380 |
2 |
||||||||||||||||||||||||
Other |
19 |
— |
12 |
4 |
— |
12 |
||||||||||||||||||||||||||
Total |
82,184 |
19,083 |
64,706 |
32,032 |
79,377 |
18,270 |
62,466 |
32,083 |
||||||||||||||||||||||||
For the Year Ended |
For the Year Ended |
|||||||||||||||||||||||||||||||
Delmarva NG Distribution |
Chesapeake |
FPU NG |
|
Delmarva NG |
Chesapeake |
FPU NG |
|
|||||||||||||||||||||||||
Operating Revenues |
||||||||||||||||||||||||||||||||
Residential |
$ |
62,708 |
$ |
6,232 |
$ |
32,016 |
$ |
45,738 |
$ |
70,466 |
$ |
5,086 |
$ |
30,334 |
$ |
44,788 |
||||||||||||||||
Commercial |
33,070 |
6,418 |
26,708 |
38,254 |
36,916 |
6,236 |
26,993 |
39,442 |
||||||||||||||||||||||||
Industrial |
8,314 |
12,682 |
24,520 |
2,128 |
8,289 |
10,911 |
22,296 |
1,543 |
||||||||||||||||||||||||
Other (1) |
152 |
3,153 |
(826) |
(8,704) |
928 |
3,108 |
1,494 |
(5,970) |
||||||||||||||||||||||||
Total Operating Revenues |
$ |
104,244 |
$ |
28,485 |
$ |
82,418 |
$ |
77,416 |
$ |
116,599 |
$ |
25,341 |
$ |
81,117 |
$ |
79,803 |
||||||||||||||||
Volumes (in Dts for natural gas and KWHs for electric) |
||||||||||||||||||||||||||||||||
Residential |
3,871,032 |
352,104 |
1,392,382 |
306,445 |
4,142,567 |
369,067 |
1,393,785 |
307,269 |
||||||||||||||||||||||||
Commercial |
3,776,388 |
4,475,776 |
1,714,574 |
310,856 |
3,792,220 |
4,719,725 |
1,722,081 |
302,687 |
||||||||||||||||||||||||
Industrial |
5,358,474 |
27,768,125 |
4,968,745 |
27,929 |
5,549,387 |
19,858,336 |
4,900,998 |
15,160 |
||||||||||||||||||||||||
Other |
220,541 |
— |
2,574,925 |
— |
80,254 |
— |
2,338,815 |
7,402 |
||||||||||||||||||||||||
Total |
13,226,435 |
32,596,005 |
10,650,626 |
645,230 |
13,564,428 |
24,947,128 |
10,355,679 |
632,518 |
||||||||||||||||||||||||
Average Customers |
||||||||||||||||||||||||||||||||
Residential |
73,995 |
17,262 |
57,653 |
24,573 |
71,322 |
16,450 |
55,701 |
24,686 |
||||||||||||||||||||||||
Commercial |
7,097 |
1,546 |
3,932 |
7,243 |
6,979 |
1,519 |
3,915 |
7,497 |
||||||||||||||||||||||||
Industrial |
169 |
17 |
2,436 |
2 |
157 |
16 |
2,312 |
2 |
||||||||||||||||||||||||
Other |
15 |
— |
12 |
— |
5 |
— |
11 |
|||||||||||||||||||||||||
Total |
81,276 |
18,825 |
64,033 |
31,818 |
78,463 |
17,985 |
61,939 |
32,185 |
||||||||||||||||||||||||
(1) |
Operating Revenues from "Other" sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for billing services provided to third parties and adjustments for pass-through taxes. |
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