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Chesapeake Utilities Corporation Reports Third Quarter 2020 Results
Earnings for the third quarter of 2020 reflect increased earnings from the approval of the Hurricane Michael regulatory settlement by the
Year-to-date earnings were impacted by the factors noted above as well as higher retail propane margins, and contributions from the acquisitions of
In
"Our Company delivered strong third quarter results and is well positioned to achieve solid performance for the year, despite the challenges created by the COVID-19 pandemic. We also remain on track to achieve results within our stated 2022 EPS guidance range. The Company's performance to date has been driven by a myriad of growth initiatives across the enterprise. Since our second quarter earnings release, we have announced several key accomplishments, most notably the settlement of the Hurricane Michael regulatory proceeding, which had a significant impact on our third quarter and year-to-date results. The purchase of
Capital Expenditures Forecast and Earnings Guidance Update
In
The Company has continued to review its projections and remains supportive of this guidance, after taking into consideration its strategic plan, the expected impact of COVID-19 and the anticipated regulatory relief and opportunities for continued collaboration across the enterprise. The Company has historically achieved an average earnings growth at or above this range, and continues to view its long-term growth prospects as comparable to its historical growth.
*Unless otherwise noted, EPS information is presented on a diluted basis.
**This press release includes references to non-Generally Accepted Accounting Principles ("GAAP") financial measures, including gross margin. A "non-GAAP financial measure" is generally defined as a numerical measure of a company's historical or future performance that includes or excludes amounts, or that is subject to adjustments, so as to be different from the most directly comparable measure calculated or presented in accordance with GAAP. Our management believes certain non-GAAP financial measures, when considered together with GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period.
The Company calculates "gross margin" by deducting the cost of sales from operating revenue. Cost of sales includes the purchased fuel cost for natural gas, electricity and propane, and the cost of labor spent on direct revenue-producing activities and excludes depreciation, amortization and accretion. Other companies may calculate gross margin in a different manner. Gross margin should not be considered an alternative to operating income or net income, both of which are determined in accordance with GAAP. The Company believes that gross margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the profitability achieved by the Company under its allowed rates for regulated operations and under its competitive pricing structures for unregulated businesses. The Company's management uses gross margin in measuring its business units' performance.
Operating Results for the Quarters Ended
Consolidated Results
Three Months Ended |
||||||||||||||
|
||||||||||||||
(in thousands) |
2020 |
2019 |
Change |
Percent |
||||||||||
Gross margin |
$ |
79,508 |
$ |
67,298 |
$ |
12,210 |
18.1 |
% |
||||||
Depreciation, amortization and property taxes |
22,976 |
16,010 |
6,966 |
43.5 |
% |
|||||||||
Other operating expenses |
39,126 |
36,931 |
2,195 |
5.9 |
% |
|||||||||
Operating income |
$ |
17,406 |
$ |
14,357 |
$ |
3,049 |
21.2 |
% |
Operating income for the three months ended
Further contributing to the improved performance for the quarter was margin growth from the Company's organic growth projects, increased margins from investments in Florida Gas Reliability Infrastructure Program ("GRIP") and increased demand for Marlin Gas Services' compressed natural gas ("CNG") transportation services. These increases were partially offset by higher operating expenses related to growth initiatives.
Regulated Energy Segment
Three Months Ended |
||||||||||||||
|
||||||||||||||
(in thousands) |
2020 |
2019 |
Change |
Percent |
||||||||||
Gross margin |
$ |
66,491 |
$ |
54,961 |
$ |
11,530 |
21.0 |
% |
||||||
Depreciation, amortization and property taxes |
19,617 |
13,076 |
6,541 |
50.0 |
% |
|||||||||
Other operating expenses |
26,392 |
24,345 |
2,047 |
8.4 |
% |
|||||||||
Operating income |
$ |
20,482 |
$ |
17,540 |
$ |
2,942 |
16.8 |
% |
Operating income for the Regulated Energy segment increased by
The key components of the increase in gross margin are shown below:
(in thousands) |
|||
Margin contribution from Hurricane Michael regulatory proceeding settlement (1) |
$ |
8,261 |
|
|
2,677 |
||
Natural gas growth (excluding service expansions) |
797 |
||
Florida GRIP |
685 |
||
Margin contribution from |
357 |
||
Decreased customer consumption - weather related |
(1,013) |
||
Other variances |
(234) |
||
Quarter-over-quarter increase in gross margin |
$ |
11,530 |
(1) This amount includes |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
|||
Unfavorable COVID-19 impacts (primarily bad debt expense) |
$ |
1,334 |
|
Payroll, Benefits and other employee-related expenses |
447 |
||
Operating expenses from |
276 |
||
Other variances |
(10) |
||
Quarter-over-quarter increase in other operating expenses |
$ |
2,047 |
Unregulated Energy Segment
Three Months Ended |
||||||||||||||
|
||||||||||||||
(in thousands) |
2020 |
2019 |
Change |
Percent |
||||||||||
Gross margin |
$ |
13,068 |
$ |
12,418 |
$ |
650 |
5.2 |
% |
||||||
Depreciation, amortization and property taxes |
3,326 |
2,901 |
425 |
14.7 |
% |
|||||||||
Other operating expenses |
12,834 |
12,686 |
148 |
1.2 |
% |
|||||||||
Operating loss |
$ |
(3,092) |
$ |
(3,169) |
$ |
77 |
2.4 |
% |
Operating results for the Unregulated Energy segment increased by
The major components of the increase in gross margin are shown below:
(in thousands) |
||||
Marlin Gas Services - increased gross margin from demand for CNG transportation services |
$ |
599 |
||
|
327 |
|||
Unfavorable COVID-19 impacts on gross margin |
(399) |
|||
Other variances |
123 |
|||
Quarter-over-quarter increase in gross margin |
$ |
650 |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
|||
Operating expenses from |
$ |
290 |
|
Payroll, Benefits and other employee-related expenses |
(202) |
||
Other variances |
60 |
||
Quarter-over-quarter increase in other operating expenses |
$ |
148 |
Operating Results for the Nine Months Ended
Consolidated Results
Nine Months Ended |
||||||||||||||
(in thousands) |
2020 |
2019 |
Change |
Percent |
||||||||||
Gross margin |
$ |
253,418 |
$ |
236,203 |
$ |
17,215 |
7.3 |
% |
||||||
Depreciation, amortization and property taxes |
57,103 |
47,337 |
9,766 |
20.6 |
% |
|||||||||
Other operating expenses |
118,797 |
112,221 |
6,576 |
5.9 |
% |
|||||||||
Operating income |
$ |
77,518 |
$ |
76,645 |
$ |
873 |
1.1 |
% |
Operating income for the nine months ended
Regulated Energy Segment
Nine Months Ended |
||||||||||||||
(in thousands) |
2020 |
2019 |
Change |
Percent |
||||||||||
Gross margin |
$ |
191,745 |
$ |
177,149 |
$ |
14,596 |
8.2 |
% |
||||||
Depreciation, amortization and property taxes |
47,144 |
38,694 |
8,450 |
21.8 |
% |
|||||||||
Other operating expenses |
78,225 |
73,145 |
5,080 |
6.9 |
% |
|||||||||
Operating income |
$ |
66,376 |
$ |
65,310 |
$ |
1,066 |
1.6 |
% |
Operating income for the Regulated Energy segment for the nine months ended
The key components of the increase in gross margin are shown below:
(in thousands) |
|||
Margin Contribution from Hurricane Michael regulatory proceeding settlement |
$ |
8,261 |
|
|
5,485 |
||
Natural gas distribution - customer growth (excluding service expansions) |
2,497 |
||
|
793 |
||
Florida GRIP |
678 |
||
Margin contribution from |
357 |
||
Unfavorable COVID-19 impacts on gross margin |
(2,634) |
||
Absence of |
(910) |
||
Decreased customer consumption - weather related |
(863) |
||
Other variances |
932 |
||
Period-over-period increase in gross margin |
$ |
14,596 |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
|||
Unfavorable COVID-19 impacts (largely higher bad debt expense) |
$ |
2,194 |
|
Insurance expense (non-health) - both insured and self-insured |
1,377 |
||
Payroll, benefits and other employee-related expenses |
1,029 |
||
Facilities maintenance and outside services costs |
777 |
||
Operating expenses from Elkton acquisition (completed |
276 |
||
Other variances |
(573) |
||
Period-over-period increase in other operating expenses |
$ |
5,080 |
Unregulated Energy Segment
Nine Months Ended |
||||||||||||||
(in thousands) |
2020 |
2019 |
Change |
Percent |
||||||||||
Gross margin |
$ |
61,883 |
$ |
59,340 |
$ |
2,543 |
4.3 |
% |
||||||
Depreciation, amortization and property taxes |
9,869 |
8,543 |
1,326 |
15.5 |
% |
|||||||||
Other operating expenses |
40,964 |
39,480 |
1,484 |
3.8 |
% |
|||||||||
Operating income |
$ |
11,050 |
$ |
11,317 |
$ |
(267) |
(2.4) |
% |
Operating income for the Unregulated Energy segment decreased by
The key components of the increase in gross margin are shown below:
(in thousands) |
||||
Propane Operations |
||||
|
$ |
2,763 |
||
Increased retail propane margins per gallon driven by favorable market conditions and supply management |
1,892 |
|||
Decreased customer consumption - primarily weather related |
(1,540) |
|||
Marlin Gas Services |
||||
Increased demand for CNG services |
694 |
|||
Aspire Energy |
||||
Decreased customer consumption - primarily weather related |
(687) |
|||
Higher margins from negotiated rate increases |
443 |
|||
Unfavorable COVID-19 impacts on gross margin |
(1,145) |
|||
Other variances |
123 |
|||
Period-over-period increase in gross margin |
$ |
2,543 |
The major components of the increase in other operating expenses are as follows:
(in thousands) |
|||
Operating expenses from |
$ |
939 |
|
Insurance expense (non-health) - both insured and self-insured |
523 |
||
Unfavorable COVID-19 impacts (higher operating and bad debt expenses) |
417 |
||
Other variances |
(395) |
||
Period-over-period increase in other operating expenses |
$ |
1,484 |
Forward-Looking Statements
Matters included in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company's 2019 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the third quarter of 2020 for further information on the risks and uncertainties related to the Company's forward-looking statements. In addition, to the risks and uncertainties identified in the Company's 2019 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q for the first, second and third quarters of 2020, risks and uncertainties related to the COVID-19 pandemic could cause actual future results to differ materially from those expressed in any forward-looking statements, including, but not limited to, the duration and scope of the COVID-19 pandemic and impact on the demand for our services; our ability to obtain needed materials and components from our suppliers; actions governments, business, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; our customers' ability to make payments for our services; and general economic uncertainty in
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) |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
|
|
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Gross Margin |
|||||||||||||||
Regulated Energy segment |
$ |
66,491 |
$ |
54,961 |
$ |
191,745 |
$ |
177,149 |
|||||||
Unregulated Energy segment |
13,068 |
12,418 |
61,883 |
59,340 |
|||||||||||
Other businesses and eliminations |
(51) |
(81) |
(210) |
(286) |
|||||||||||
Total Gross Margin |
$ |
79,508 |
$ |
67,298 |
$ |
253,418 |
$ |
236,203 |
|||||||
Operating Income |
|||||||||||||||
Regulated Energy segment |
$ |
20,482 |
$ |
17,540 |
$ |
66,376 |
$ |
65,310 |
|||||||
Unregulated Energy segment |
(3,092) |
(3,169) |
11,050 |
11,317 |
|||||||||||
Other businesses and eliminations |
16 |
(14) |
92 |
18 |
|||||||||||
Total Operating Income |
17,406 |
14,357 |
77,518 |
76,645 |
|||||||||||
Other income (expense), net |
(40) |
(351) |
2,997 |
(731) |
|||||||||||
Interest Charges |
4,584 |
5,403 |
15,452 |
16,583 |
|||||||||||
Income from Continuing Operations Before Income Taxes |
12,782 |
8,603 |
65,063 |
59,331 |
|||||||||||
Income Taxes on Continuing Operations |
3,502 |
2,352 |
16,082 |
15,354 |
|||||||||||
Income from Continuing Operations |
9,280 |
6,251 |
48,981 |
43,977 |
|||||||||||
Income (loss) from Discontinued Operations, Net of Tax |
(19) |
(630) |
165 |
(1,388) |
|||||||||||
Net Income |
$ |
9,261 |
$ |
5,621 |
$ |
49,146 |
$ |
42,589 |
|||||||
Basic Earnings Per Share of Common Stock |
|||||||||||||||
Earnings from Continuing Operations |
$ |
0.56 |
$ |
0.38 |
$ |
2.97 |
$ |
2.68 |
|||||||
Earnings (loss) from Discontinued Operations |
— |
(0.04) |
0.01 |
(0.08) |
|||||||||||
Basic Earnings Per Share of Common Stock |
$ |
0.56 |
$ |
0.34 |
$ |
2.98 |
$ |
2.60 |
|||||||
Diluted Earnings Per Share of Common Stock |
|||||||||||||||
Earnings from Continuing Operations |
$ |
0.56 |
$ |
0.38 |
$ |
2.96 |
$ |
2.67 |
|||||||
Earnings (loss) from Discontinued Operations |
— |
(0.04) |
0.01 |
(0.08) |
|||||||||||
Diluted Earnings Per Share of Common Stock |
$ |
0.56 |
$ |
0.34 |
$ |
2.97 |
$ |
2.59 |
Financial Summary Highlights
Key variances in continuing operations, between the third quarter of 2020 and the third quarter of 2019, included:
(in thousands, except per share data) |
Pre-tax |
Net |
Earnings |
|||||||||
Third Quarter of 2019 Reported Results from Continuing Operations |
$ |
8,603 |
$ |
6,251 |
$ |
0.38 |
||||||
Adjusting for Unusual Items: |
||||||||||||
Hurricane Michael (net impact of the first and second quarter of 2020)(1) |
2,705 |
1,964 |
0.12 |
|||||||||
Unfavorable COVID-19 impacts |
(1,023) |
(742) |
(0.04) |
|||||||||
Decreased customer consumption - primarily weather related |
(1,005) |
(729) |
(0.05) |
|||||||||
677 |
493 |
0.03 |
||||||||||
Increased (Decreased) Gross Margins: |
||||||||||||
Margin contribution from the Hurricane Michael regulatory proceeding settlement* |
2,754 |
1,999 |
0.12 |
|||||||||
|
2,677 |
1,943 |
0.12 |
|||||||||
Natural gas growth (excluding service expansions) |
797 |
578 |
0.03 |
|||||||||
Florida GRIP* |
685 |
498 |
0.03 |
|||||||||
Margin contributions from |
684 |
496 |
0.03 |
|||||||||
Increased demand for CNG services for Marlin Gas Services* |
599 |
435 |
0.03 |
|||||||||
8,196 |
5,949 |
0.36 |
||||||||||
(Increased) Decreased Operating Expenses (Excluding Cost of Sales): |
||||||||||||
Depreciation and amortization associated with Hurricane Michael regulatory proceeding settlement |
(1,781) |
(1,293) |
(0.08) |
|||||||||
Depreciation, amortization and property tax costs due to new capital investments |
(1,312) |
(952) |
(0.06) |
|||||||||
Operating expenses from |
(867) |
(630) |
(0.04) |
|||||||||
Facilities, maintenance and outside services costs |
(414) |
(301) |
(0.02) |
|||||||||
Insurance expense (non-health) - both insured and self-insured |
(323) |
(234) |
(0.01) |
|||||||||
(4,697) |
(3,410) |
(0.21) |
||||||||||
Interest charges |
(841) |
(611) |
(0.04) |
|||||||||
Lower pension expense |
388 |
282 |
0.02 |
|||||||||
Net other changes |
456 |
326 |
0.02 |
|||||||||
3 |
(3) |
— |
||||||||||
Third Quarter of 2020 Reported Results from Continuing Operations |
$ |
12,782 |
$ |
9,280 |
$ |
0.56 |
*See the Major Projects and Initiatives table. |
|
(1) |
Includes amortization of regulatory liability associated with interest expense of |
Key variances in continuing operations, between the nine months ended 2020 and the nine months ended 2019, included:
(in thousands, except per share data) |
Pre-tax |
Net |
Earnings |
|||||||||
Nine Months Ended |
$ |
59,331 |
$ |
43,977 |
$ |
2.67 |
||||||
Adjusting for Unusual Items: |
||||||||||||
Unfavorable COVID-19 impacts |
(4,933) |
(3,587) |
(0.22) |
|||||||||
Decreased customer consumption - primarily weather related |
(3,090) |
(2,247) |
(0.14) |
|||||||||
Absence of |
(910) |
(667) |
(0.04) |
|||||||||
Gains from sales of assets |
3,162 |
2,317 |
0.14 |
|||||||||
Favorable income tax impact associated with net operating loss carryback |
— |
1,669 |
0.10 |
|||||||||
(5,771) |
(2,515) |
(0.16) |
||||||||||
Increased (Decreased) Gross Margins: |
||||||||||||
Margin contribution from the Hurricane Michael regulatory proceeding settlement* |
8,261 |
6,007 |
0.36 |
|||||||||
|
5,485 |
3,988 |
0.24 |
|||||||||
Margin contribution from |
3,120 |
2,269 |
0.14 |
|||||||||
Natural gas growth (excluding service expansions) |
2,497 |
1,816 |
0.11 |
|||||||||
Increased retail propane margins per gallon |
1,892 |
1,375 |
0.08 |
|||||||||
|
793 |
576 |
0.04 |
|||||||||
Increased demand for CNG services for Marlin Gas Services* |
694 |
505 |
0.03 |
|||||||||
Florida GRIP* |
678 |
493 |
0.03 |
|||||||||
Aspire Energy rate increases |
443 |
322 |
0.02 |
|||||||||
23,863 |
17,351 |
1.05 |
||||||||||
(Increased) Decreased Other Operating Expenses (Excluding Cost of Sales): |
||||||||||||
Depreciation and amortization associated with Hurricane Michael regulatory proceeding settlement |
(5,355) |
(3,894) |
(0.24) |
|||||||||
Depreciation, amortization and property tax costs due to new capital investments |
(3,732) |
(2,714) |
(0.16) |
|||||||||
Insurance expense (non-health) - both insured and self-insured |
(1,900) |
(1,382) |
(0.08) |
|||||||||
Operating expenses from |
(1,900) |
(1,382) |
(0.08) |
|||||||||
Facilities maintenance and outside services costs |
(1,294) |
(941) |
(0.06) |
|||||||||
(14,181) |
(10,313) |
(0.62) |
||||||||||
Other income tax effects |
— |
(914) |
(0.06) |
|||||||||
Lower pension expense |
1,131 |
822 |
0.05 |
|||||||||
Interest charges (1) |
(852) |
(620) |
(0.04) |
|||||||||
Net other changes |
1,542 |
1,193 |
0.07 |
|||||||||
1,821 |
481 |
0.02 |
||||||||||
Nine Months Ended |
$ |
65,063 |
$ |
48,981 |
$ |
2.96 |
*See the Major Projects and Initiatives table later in this press release. |
|
(1) |
Interest charges includes amortization of a regulatory liability of |
Recently Completed and Ongoing Major Projects and Initiatives
The Company constantly pursues and develops additional projects and initiatives to serve existing and new customers, and to further grow its businesses and earnings, with the intention to increase shareholder value. The following represent the major projects/initiatives recently completed and currently underway. Major projects and initiatives that have generated consistent year-over-year margin contributions are removed from the table. In the future, the Company will add new projects and initiatives to this table once negotiations are substantially final and the associated earnings can be estimated.
Gross Margin for the Period |
||||||||||||||||||||||||||||
Three Months |
Nine Months Ended |
Year Ended |
Estimate for |
|||||||||||||||||||||||||
Project/Initiative |
|
|
|
Fiscal |
||||||||||||||||||||||||
in thousands |
2020 |
2019 |
2020 |
2019 |
2019 |
2020 |
2021 |
|||||||||||||||||||||
Pipeline Expansions |
||||||||||||||||||||||||||||
West |
$ |
1,020 |
$ |
745 |
$ |
2,988 |
$ |
1,068 |
$ |
2,139 |
$ |
4,076 |
$ |
4,984 |
||||||||||||||
Del-Mar Energy Pathway (1) |
925 |
189 |
1,565 |
542 |
731 |
2,398 |
4,100 |
|||||||||||||||||||||
|
170 |
113 |
509 |
113 |
283 |
679 |
679 |
|||||||||||||||||||||
Callahan Intrastate Pipeline (including related |
1,609 |
— |
2,146 |
— |
— |
4,039 |
6,437 |
|||||||||||||||||||||
Guernsey Power Station |
— |
— |
— |
— |
— |
— |
514 |
|||||||||||||||||||||
Total Pipeline Expansions |
3,724 |
1,047 |
7,208 |
1,723 |
3,153 |
11,192 |
16,714 |
|||||||||||||||||||||
Virtual Pipeline Growth |
||||||||||||||||||||||||||||
Compressed Natural Gas Transportation |
1,592 |
993 |
5,047 |
4,353 |
5,410 |
7,000 |
8,000 |
|||||||||||||||||||||
Renewable Natural Gas Transportation |
— |
— |
— |
— |
— |
— |
1,000 |
|||||||||||||||||||||
Total Virtual Pipeline Growth |
1,592 |
993 |
5,047 |
4,353 |
5,410 |
7,000 |
9,000 |
|||||||||||||||||||||
Acquisitions |
||||||||||||||||||||||||||||
|
327 |
— |
2,763 |
— |
329 |
4,000 |
4,200 |
|||||||||||||||||||||
|
357 |
— |
357 |
— |
— |
1,365 |
3,992 |
|||||||||||||||||||||
|
— |
— |
— |
— |
— |
250 |
1,800 |
|||||||||||||||||||||
Total Acquisitions |
684 |
— |
3,120 |
— |
329 |
5,615 |
9,992 |
|||||||||||||||||||||
Regulatory Initiatives |
||||||||||||||||||||||||||||
Florida GRIP |
3,831 |
3,146 |
11,135 |
10,457 |
13,939 |
14,976 |
16,739 |
|||||||||||||||||||||
Hurricane Michael regulatory proceeding (2) |
8,261 |
— |
8,261 |
— |
— |
11,014 |
11,014 |
|||||||||||||||||||||
Total Regulatory Initiatives |
12,092 |
3,146 |
19,396 |
10,457 |
13,939 |
25,990 |
27,753 |
|||||||||||||||||||||
Total |
$ |
18,092 |
$ |
5,186 |
$ |
34,771 |
$ |
16,533 |
$ |
22,831 |
$ |
49,797 |
$ |
63,459 |
(1) |
Includes margin generated from interim services. |
(2) |
This amount includes |
Detailed Discussion of Major Projects and Initiatives
Pipeline Expansions
West
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
Virtual Pipeline Growth
CNG Transportation
Marlin Gas Services provides CNG temporary hold services, contracted pipeline integrity services, emergency services for damaged pipelines and specialized gas services for customers who have unique requirements. For the three and nine months ended
Renewable Natural Gas Transportation
Bioenergy DevCo
In
The resources generated from organic material at BDC's anaerobic digestion facilities in Delaware, will be processed by the Company and
In
At the present time, the Company has disclosed that it expects to generate at least
Acquisitions
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
Hurricane Michael
In
In
In
In
Three Months Ended |
Nine Months Ended |
||||||
(in thousands) |
|
|
|||||
Gross Margin |
$ |
2,754 |
$ |
8,261 |
|||
Depreciation |
(298) |
(883) |
|||||
Amortization of regulatory assets |
2,079 |
6,238 |
|||||
Operating income |
973 |
2,906 |
|||||
Amortization of liability associated with interest expense |
(360) |
(1,132) |
|||||
Pre-tax income |
1,333 |
4,038 |
|||||
Income tax expense |
365 |
1,106 |
|||||
Net income |
$ |
968 |
$ |
2,932 |
|||
(1) The Hurricane Michael impact for the three months ended |
Other major factors influencing gross margin
Weather and Consumption
Weather conditions accounted for a
Three Months Ended |
Nine Months Ended |
||||||||||||||||
|
|
||||||||||||||||
2020 |
2019 |
Variance |
2020 |
2019 |
Variance |
||||||||||||
Delmarva |
|||||||||||||||||
Actual HDD |
43 |
7 |
36 |
2,416 |
2,576 |
(160) |
|||||||||||
10-Year Average HDD ("Normal") |
48 |
61 |
(13) |
2,797 |
2,846 |
(49) |
|||||||||||
Variance from Normal |
(5) |
(54) |
(381) |
(270) |
|||||||||||||
|
|||||||||||||||||
Actual HDD |
— |
— |
— |
343 |
379 |
(36) |
|||||||||||
10-Year Average HDD ("Normal") |
— |
— |
— |
508 |
532 |
(24) |
|||||||||||
Variance from Normal |
— |
— |
(165) |
(153) |
|||||||||||||
|
|||||||||||||||||
Actual HDD |
86 |
2 |
84 |
3,383 |
3,533 |
(150) |
|||||||||||
10-Year Average HDD ("Normal") |
79 |
90 |
(11) |
3,691 |
3,742 |
(51) |
|||||||||||
Variance from Normal |
7 |
(88) |
(308) |
(209) |
|||||||||||||
|
|||||||||||||||||
Actual CDD |
1,337 |
1,620 |
(283) |
2,412 |
2,840 |
(428) |
|||||||||||
10-Year Average CDD ("Normal") |
1,573 |
1,553 |
20 |
2,666 |
2,625 |
41 |
|||||||||||
Variance from Normal |
(236) |
67 |
(254) |
215 |
Natural Gas Distribution Margin Growth
Customer growth for the Company's natural gas distribution operations, as a result of the addition of new customers and the conversion of customers from alternative fuel sources to natural gas service, generated
Three Months Ended |
Nine Months Ended |
|||||||||||||
|
|
|||||||||||||
(in thousands) |
|
|
|
|
||||||||||
Customer Growth: |
||||||||||||||
Residential |
$ |
302 |
$ |
166 |
$ |
1,069 |
$ |
560 |
||||||
Commercial and industrial |
78 |
251 |
302 |
566 |
||||||||||
Total Customer Growth |
$ |
380 |
$ |
417 |
$ |
1,371 |
$ |
1,126 |
Capital Investment Growth and Associated Financing Plans
The Company's capital expenditures were
2020 |
|||||||
(dollars in thousands) |
Low |
High |
|||||
Regulated Energy: |
|||||||
Natural gas distribution |
$ |
77,000 |
$ |
85,000 |
|||
Natural gas transmission |
70,000 |
74,000 |
|||||
Electric distribution |
3,000 |
5,000 |
|||||
Total Regulated Energy |
150,000 |
164,000 |
|||||
Unregulated Energy: |
|||||||
Propane distribution |
14,000 |
16,000 |
|||||
Energy transmission |
17,000 |
18,000 |
|||||
Other unregulated energy |
12,000 |
14,000 |
|||||
Total Unregulated Energy |
43,000 |
48,000 |
|||||
Other: |
|||||||
Corporate and other businesses |
2,000 |
3,000 |
|||||
Total Other |
2,000 |
3,000 |
|||||
Total 2020 Expected Capital Expenditures |
$ |
195,000 |
$ |
215,000 |
The capital expenditure projection is subject to continuous review and modification. Actual capital requirements may vary from the above estimates due to a number of factors, including changing economic conditions, capital delays because of COVID-19 that are greater than currently anticipated, customer growth in existing areas, regulation, new growth or acquisition opportunities and availability of capital. Historically, actual capital expenditures have typically lagged behind the budgeted amounts.
Management reaffirms its capital expenditure guidance of between
The Company's target ratio of equity to total capitalization, including short-term borrowings, is between 50 and 60 percent. The Company's equity to total capitalization ratio, including short term borrowings, was 45 percent as of
Depending on the Company's capital needs and subject to market conditions, in addition to other debt and equity offerings, the Company may consider, as necessary in the future, issuing additional shares under the direct stock purchase component of the DRIP, the ATM program, or pursuant to its shelf registration statement.
In
|
|||||||||||||||
Condensed Consolidated Statements of Income (Unaudited) |
|||||||||||||||
(in thousands, except shares and per share data) |
|||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
|
|
||||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||||
Operating Revenues |
|||||||||||||||
Regulated Energy |
$ |
82,762 |
$ |
74,580 |
$ |
259,235 |
$ |
251,601 |
|||||||
Unregulated Energy and other |
18,657 |
18,046 |
91,925 |
96,029 |
|||||||||||
Total Operating Revenues |
101,419 |
92,626 |
351,160 |
347,630 |
|||||||||||
Operating Expenses |
|||||||||||||||
Regulated Energy cost of sales |
16,271 |
19,619 |
67,490 |
74,452 |
|||||||||||
Unregulated Energy and other cost of sales |
5,640 |
5,709 |
30,250 |
36,975 |
|||||||||||
Operations |
34,959 |
32,614 |
105,516 |
99,558 |
|||||||||||
Maintenance |
3,717 |
3,920 |
11,695 |
11,200 |
|||||||||||
Gain from a settlement |
— |
— |
(130) |
(130) |
|||||||||||
Depreciation and amortization |
18,293 |
11,220 |
42,793 |
33,612 |
|||||||||||
Other taxes |
5,133 |
5,187 |
16,028 |
15,318 |
|||||||||||
Total operating expenses |
84,013 |
78,269 |
273,642 |
270,985 |
|||||||||||
Operating Income |
17,406 |
14,357 |
77,518 |
76,645 |
|||||||||||
Other income (expense), net |
(40) |
(351) |
2,997 |
(731) |
|||||||||||
Interest charges |
4,584 |
5,403 |
15,452 |
16,583 |
|||||||||||
Income from Continuing Operations Before Income Taxes |
12,782 |
8,603 |
65,063 |
59,331 |
|||||||||||
Income Taxes on Continuing Operations |
3,502 |
2,352 |
16,082 |
15,354 |
|||||||||||
Income from Continuing Operations |
9,280 |
6,251 |
48,981 |
43,977 |
|||||||||||
Income (loss) from Discontinued Operations, Net of Tax |
(19) |
(630) |
165 |
(1,388) |
|||||||||||
Net Income |
$ |
9,261 |
$ |
5,621 |
$ |
49,146 |
$ |
42,589 |
|||||||
Weighted Average Common Shares Outstanding: |
|||||||||||||||
Basic |
16,533,748 |
16,403,776 |
16,466,106 |
16,396,646 |
|||||||||||
Diluted |
16,592,842 |
16,453,867 |
16,523,200 |
16,444,231 |
|||||||||||
Basic Earnings Per Share of Common Stock: |
|||||||||||||||
Earnings from Continuing Operations |
$ |
0.56 |
$ |
0.38 |
$ |
2.97 |
$ |
2.68 |
|||||||
Earnings (loss) from Discontinued Operations |
— |
(0.04) |
0.01 |
(0.08) |
|||||||||||
Basic Earnings Per Share of Common Stock |
$ |
0.56 |
$ |
0.34 |
$ |
2.98 |
$ |
2.60 |
|||||||
Diluted Earnings Per Share of Common Stock: |
|||||||||||||||
Earnings from Continuing Operations |
$ |
0.56 |
$ |
0.38 |
$ |
2.96 |
$ |
2.67 |
|||||||
Earnings (loss) from Discontinued Operations |
— |
(0.04) |
0.01 |
(0.08) |
|||||||||||
Diluted Earnings Per Share of Common Stock |
$ |
0.56 |
$ |
0.34 |
$ |
2.97 |
$ |
2.59 |
|
||||||||
Condensed Consolidated Balance Sheets (Unaudited) |
||||||||
Assets |
|
|
||||||
(in thousands, except shares and per share data) |
||||||||
Property, Plant and Equipment |
||||||||
Regulated Energy |
$ |
1,564,420 |
$ |
1,441,473 |
||||
Unregulated Energy |
278,897 |
265,209 |
||||||
Other businesses and eliminations |
30,365 |
39,850 |
||||||
Total property, plant and equipment |
1,873,682 |
1,746,532 |
||||||
Less: Accumulated depreciation and amortization |
(358,851) |
(336,876) |
||||||
Plus: Construction work in progress |
52,519 |
54,141 |
||||||
Net property, plant and equipment |
1,567,350 |
1,463,797 |
||||||
Current Assets |
||||||||
Cash and cash equivalents |
3,056 |
6,985 |
||||||
Trade and other receivables |
53,132 |
50,899 |
||||||
Less: Allowance for credit losses |
(4,130) |
(1,337) |
||||||
Trade receivables, net |
49,002 |
49,562 |
||||||
Accrued revenue |
11,545 |
20,846 |
||||||
Propane inventory, at average cost |
4,099 |
5,824 |
||||||
Other inventory, at average cost |
5,583 |
6,067 |
||||||
Regulatory assets |
10,372 |
5,144 |
||||||
Storage gas prepayments |
2,971 |
3,541 |
||||||
Income taxes receivable |
15,156 |
20,050 |
||||||
Prepaid expenses |
14,817 |
13,928 |
||||||
Derivative assets, at fair value |
1,967 |
— |
||||||
Other current assets |
753 |
2,879 |
||||||
Total current assets |
119,321 |
134,826 |
||||||
Deferred Charges and Other Assets |
||||||||
|
36,930 |
32,668 |
||||||
Other intangible assets, net |
7,215 |
8,129 |
||||||
Investments, at fair value |
9,680 |
9,229 |
||||||
Operating lease right-of-use assets |
11,077 |
11,563 |
||||||
Regulatory assets |
112,650 |
73,407 |
||||||
Receivables and other deferred charges |
23,865 |
49,579 |
||||||
Total deferred charges and other assets |
201,417 |
184,575 |
||||||
Total Assets |
$ |
1,888,088 |
$ |
1,783,198 |
|
||||||||
Condensed Consolidated Balance Sheets (Unaudited) |
||||||||
Capitalization and Liabilities |
|
|
||||||
(in thousands, except shares and per share data) |
||||||||
Capitalization |
||||||||
Stockholders' equity |
||||||||
Preferred stock, par value |
$ |
— |
$ |
— |
||||
Common stock, par value |
8,126 |
7,984 |
||||||
Additional paid-in capital |
283,836 |
259,253 |
||||||
Retained earnings |
328,357 |
300,607 |
||||||
Accumulated other comprehensive loss |
(3,629) |
(6,267) |
||||||
Deferred compensation obligation |
5,634 |
4,543 |
||||||
Treasury stock |
(5,634) |
(4,543) |
||||||
Total stockholders' equity |
616,690 |
561,577 |
||||||
Long-term debt, net of current maturities |
519,971 |
440,168 |
||||||
Total capitalization |
1,136,661 |
1,001,745 |
||||||
Current Liabilities |
||||||||
Current portion of long-term debt |
15,600 |
45,600 |
||||||
Short-term borrowing |
216,388 |
247,371 |
||||||
Accounts payable |
46,492 |
54,068 |
||||||
Customer deposits and refunds |
32,635 |
30,939 |
||||||
Accrued interest |
5,231 |
2,554 |
||||||
Dividends payable |
7,293 |
6,644 |
||||||
Accrued compensation |
10,903 |
16,236 |
||||||
Regulatory liabilities |
6,460 |
5,991 |
||||||
Derivative liabilities, at fair value |
439 |
1,844 |
||||||
Other accrued liabilities |
18,531 |
12,077 |
||||||
Total current liabilities |
359,972 |
423,324 |
||||||
Deferred Credits and Other Liabilities |
||||||||
Deferred income taxes |
202,649 |
180,656 |
||||||
Regulatory liabilities |
142,280 |
127,744 |
||||||
Environmental liabilities |
4,447 |
6,468 |
||||||
Other pension and benefit costs |
27,462 |
30,569 |
||||||
Operating lease - liabilities |
9,681 |
9,896 |
||||||
Deferred investment tax credits and other liabilities |
4,936 |
2,796 |
||||||
Total deferred credits and other liabilities |
391,455 |
358,129 |
||||||
Environmental and other commitments and contingencies (1) |
||||||||
Total Capitalization and Liabilities |
$ |
1,888,088 |
$ |
1,783,198 |
(1) Refer to Note 6 and 7 in the Company's Quarterly Report on Form 10-Q for further information. |
|
||||||||||||||||||||||||||||||||
Distribution Utility Statistical Data (Unaudited) |
||||||||||||||||||||||||||||||||
For the Three Months Ended |
For the Three Months Ended |
|||||||||||||||||||||||||||||||
Delmarva NG |
Chesapeake |
FPU NG |
|
Delmarva NG |
Chesapeake |
FPU NG |
|
|||||||||||||||||||||||||
Operating Revenues (in thousands) |
||||||||||||||||||||||||||||||||
Residential |
$ |
6,722 |
$ |
1,412 |
$ |
6,380 |
$ |
11,308 |
$ |
7,314 |
$ |
1,349 |
$ |
5,671 |
$ |
14,460 |
||||||||||||||||
Commercial |
5,321 |
1,517 |
4,985 |
9,077 |
3,812 |
1,471 |
5,588 |
11,216 |
||||||||||||||||||||||||
Industrial |
1,982 |
3,235 |
6,028 |
414 |
1,678 |
3,063 |
5,707 |
591 |
||||||||||||||||||||||||
Other (1) |
(45) |
1,146 |
3,174 |
3 |
456 |
827 |
942 |
(2,093) |
||||||||||||||||||||||||
Total Operating Revenues |
$ |
13,980 |
$ |
7,310 |
$ |
20,567 |
$ |
20,802 |
$ |
13,260 |
$ |
6,710 |
$ |
17,908 |
$ |
24,174 |
||||||||||||||||
Volume (in Dts for natural gas and KWHs for electric) |
||||||||||||||||||||||||||||||||
Residential |
210,787 |
56,754 |
243,255 |
101,555 |
183,998 |
52,805 |
214,521 |
97,537 |
||||||||||||||||||||||||
Commercial |
508,172 |
1,047,271 |
302,504 |
88,250 |
483,382 |
1,045,666 |
344,727 |
92,571 |
||||||||||||||||||||||||
Industrial |
1,144,210 |
5,999,386 |
1,080,078 |
1,596 |
1,233,019 |
7,019,573 |
1,114,359 |
7,460 |
||||||||||||||||||||||||
Other |
53,093 |
— |
738,191 |
— |
59,635 |
— |
583,267 |
— |
||||||||||||||||||||||||
Total |
1,916,262 |
7,103,411 |
2,364,028 |
191,401 |
1,960,034 |
8,118,044 |
2,256,874 |
197,568 |
||||||||||||||||||||||||
Average Customers |
||||||||||||||||||||||||||||||||
Residential |
84,343 |
17,930 |
60,353 |
25,104 |
73,454 |
17,342 |
57,999 |
24,624 |
||||||||||||||||||||||||
Commercial |
7,710 |
1,583 |
3,984 |
7,282 |
7,040 |
1,555 |
3,934 |
7,240 |
||||||||||||||||||||||||
Industrial |
181 |
16 |
2,518 |
2 |
168 |
17 |
2,440 |
2 |
||||||||||||||||||||||||
Other |
21 |
— |
14 |
— |
18 |
— |
12 |
— |
||||||||||||||||||||||||
Total |
92,255 |
19,529 |
66,869 |
32,388 |
80,680 |
18,914 |
64,385 |
31,866 |
||||||||||||||||||||||||
For the Nine Months Ended |
For the Nine Months Ended |
|||||||||||||||||||||||||||||||
Delmarva NG |
Chesapeake |
FPU NG |
|
Delmarva NG |
Chesapeake |
FPU NG |
|
|||||||||||||||||||||||||
Operating Revenues (in thousands) |
||||||||||||||||||||||||||||||||
Residential |
$ |
49,472 |
$ |
4,773 |
$ |
26,272 |
$ |
26,225 |
$ |
47,729 |
$ |
4,645 |
$ |
23,848 |
$ |
35,121 |
||||||||||||||||
Commercial |
23,190 |
4,791 |
17,817 |
23,151 |
23,307 |
4,796 |
19,924 |
28,838 |
||||||||||||||||||||||||
Industrial |
6,444 |
9,754 |
19,323 |
725 |
5,839 |
9,450 |
17,767 |
1,617 |
||||||||||||||||||||||||
Other (1) |
(4,535) |
3,700 |
3,886 |
631 |
(4,013) |
2,734 |
(1,182) |
(6,560) |
||||||||||||||||||||||||
Total Operating Revenues |
$ |
74,571 |
$ |
23,018 |
$ |
67,298 |
$ |
50,732 |
$ |
72,862 |
$ |
21,625 |
$ |
60,357 |
$ |
59,016 |
||||||||||||||||
Volume (in Dts for natural gas and KWHs for electric) |
||||||||||||||||||||||||||||||||
Residential |
2,867,349 |
269,273 |
1,136,539 |
235,283 |
2,962,532 |
268,993 |
1,036,872 |
235,406 |
||||||||||||||||||||||||
Commercial |
2,730,931 |
3,270,286 |
1,119,081 |
220,238 |
2,810,391 |
3,348,307 |
1,275,328 |
233,940 |
||||||||||||||||||||||||
Industrial |
3,667,782 |
21,015,935 |
3,466,115 |
13,978 |
3,960,447 |
21,419,122 |
3,688,370 |
18,383 |
||||||||||||||||||||||||
Other |
196,076 |
— |
2,000,351 |
— |
138,009 |
— |
1,771,243 |
— |
||||||||||||||||||||||||
Total |
9,462,138 |
24,555,494 |
7,722,086 |
469,499 |
9,871,379 |
25,036,422 |
7,771,813 |
487,729 |
||||||||||||||||||||||||
Average Customers |
||||||||||||||||||||||||||||||||
Residential |
83,752 |
17,784 |
59,638 |
24,983 |
73,698 |
17,178 |
57,444 |
24,511 |
||||||||||||||||||||||||
Commercial |
7,756 |
1,582 |
3,982 |
7,268 |
7,090 |
1,543 |
3,923 |
7,233 |
||||||||||||||||||||||||
Industrial |
195 |
16 |
2,511 |
2 |
168 |
17 |
2,430 |
2 |
||||||||||||||||||||||||
Other |
18 |
— |
14 |
— |
14 |
— |
12 |
— |
||||||||||||||||||||||||
Total |
91,721 |
19,382 |
66,145 |
32,253 |
80,970 |
18,738 |
63,809 |
31,746 |
||||||||||||||||||||||||
(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. |
(2) |
Delmarva NG distribution customers includes approximately 7,000 customers acquired in the |
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