- Earnings per share ("EPS")* for the first quarter of 2024
was $2.07 compared to $2.04 per share for the first quarter of
2023
- Adjusted EPS** for the first quarter of 2024, which excludes
transaction and transition-related expenses attributable to the
acquisition and integration of Florida City Gas ("FCG"), increased
by three percent to $2.10 compared to
$2.04 per share for the first quarter
of 2023
- Adjusted gross margin** growth of $35.0 million during the first quarter driven by
contributions from FCG, natural gas organic growth and continued
pipeline expansion projects, additional customer consumption, and
regulatory initiatives
- Completed filings for seven projects representing more than
$85 million of capital investment to
support growth initiatives in Florida, including for FCG
- Warmer than normal temperatures in our Delmarva and
Ohio service territories reduced
operating income by approximately $1.5
million, or $0.05 per
share
DOVER,
Del., May 8, 2024 /PRNewswire/ -- Chesapeake
Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the
"Company") today announced financial results for the three months
ended March 31, 2024.
Net income for the first quarter of 2024 was $46.2 million compared to $36.3 million in the first quarter of 2023.
Excluding transaction and transition related expenses associated
with the fourth quarter 2023 acquisition of FCG, adjusted net
income was $46.8 million, or
$2.10 per share compared to
$2.04 per share reported in the
same prior year period.
Adjusted earnings for the first quarter of 2024 were driven by
incremental margin contributions from FCG; growth in the Company's
natural gas distribution businesses and continued pipeline
expansion projects to support distribution growth; higher customer
consumption; incremental contributions associated with regulated
infrastructure programs; and contributions from the Company's
Florida natural gas base rate
proceeding. These improvements were partially offset by higher
operating expenses primarily attributed to the addition of FCG and
increased interest expense related to debt issued in connection
with financing the acquisition.
"During the first quarter, we continued to build on the momentum
from our strong finish to 2023. While the weather in our service
areas was colder than it was last year, temperatures were warmer
than normal for our respective territories. Nonetheless, our
team once again executed on all fronts, and we remain on track to
achieve our 2024 earnings guidance of $5.33-$5.45 on an
adjusted EPS basis and our longer-term outlook," commented
Jeff Householder, chair, president
and CEO.
"Our success is driven by our progress integrating our FCG and
Chesapeake families, pursuing
growth investments across all of our businesses, advancing
regulatory initiatives and prudently managing expenses.
Specifically, the team advanced the FCG integration, delivering
efficiencies from consolidating the SAFE and GUARD programs, and
filed for three new pipeline projects with the Florida Public
Service Commission which will serve RNG projects developed by third
parties in proximity to our distribution system and serve to
improve resilience and increase capacity to serve our customers.
Our regulated natural gas distribution businesses continued to gain
customers at more than twice the national average, we executed on
numerous opportunities to expand our natural gas transmission
systems, and we realized meaningful contributions from our
non-regulated businesses.
"We are undertaking numerous initiatives in our march to our
2025 guidance of $6.15-$6.35 per share. We have immediately
recognized positive impacts from our FCG integration efforts,
continued our business transformation to support our larger
footprint and accelerated the capital investment opportunities we
identified to propel earnings growth. Filing for seven new capital
investment projects with the Florida Public Service Commission
during the quarter is a record for our Company. Across the
enterprise, our team remains committed to delivering on the
attractive opportunities across our businesses, positioning our
company for future growth and contributing to another record year
of performance that will drive increased shareholder value,"
concluded Householder.
Earnings and Capital Investment Guidance
The Company continues to support its 2024 EPS guidance of
$5.33 to $5.45 in adjusted earnings per share given the
incremental margin opportunities present across the Company's
businesses, investment opportunities within and surrounding FCG,
regulatory initiatives and operating synergies. The Company also
supports its previously announced 2024 capital expenditure guidance
of $300 million to $360 million.
From a longer-term perspective, the Company is also reaffirming
its previously announced capital expenditure guidance for the
five-year period ended 2028 that will range from $1.5 billion to $1.8
billion. This investment profile is projected to
result in a 2025 EPS guidance range of $6.15 to $6.35, as
well as a 2028 EPS guidance range of $7.75 to $8.00 per
share. This implies an EPS growth rate of approximately 8 percent
from the previous 2025 EPS guidance range, or since 2018, an 8.5
percent growth rate.
*Unless otherwise noted, EPS and Adjusted EPS information are
presented on a diluted basis.
Non-GAAP Financial Measures
**This press release including the tables herein, include
references to both Generally Accepted Accounting Principles
("GAAP") and non-GAAP financial measures, including Adjusted Gross
Margin, Adjusted Net Income and Adjusted EPS. 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 Adjusted Gross Margin by deducting the
purchased cost of natural gas, propane and electricity and the cost
of labor spent on direct revenue-producing activities from
operating revenues. The costs included in Adjusted Gross Margin
exclude depreciation and amortization and certain costs presented
in operations and maintenance expenses in accordance with
regulatory requirements. The Company calculates Adjusted Net Income
and Adjusted EPS by deducting costs and expenses associated with
significant acquisitions that may affect the comparison of
period-over-period results. These non-GAAP financial
measures are not in accordance with, or an alternative to, GAAP and
should be considered in addition to, and not as a substitute for,
the comparable GAAP measures. The Company believes that these
non-GAAP measures are useful and meaningful to investors as a basis
for making investment decisions, and provide investors with
information that demonstrates the profitability achieved by the
Company under allowed rates for regulated energy operations and
under the Company's competitive pricing structures for unregulated
energy operations. The Company's management uses these non-GAAP
financial measures in assessing a business unit and Company
performance. Other companies may calculate these non-GAAP financial
measures in a different manner.
The following tables reconcile Gross Margin, Net Income, and
EPS, all as defined under GAAP, to our non-GAAP measures of
Adjusted Gross Margin, Adjusted Net Income and Adjusted EPS for
each of the periods presented.
Adjusted Gross
Margin
|
|
|
|
|
For the Three Months
Ended March 31, 2024
|
(in
thousands)
|
|
Regulated
Energy
|
|
Unregulated
Energy
|
|
Other and
Eliminations
|
|
Total
|
Operating
Revenues
|
|
$
168,426
|
|
$
83,103
|
|
$
(5,785)
|
|
$
245,744
|
Cost of
Sales:
|
|
|
|
|
|
|
|
|
Natural gas, propane
and electric costs
|
|
(49,918)
|
|
(37,054)
|
|
5,755
|
|
(81,217)
|
Depreciation &
amortization
|
|
(12,537)
|
|
(4,481)
|
|
2
|
|
(17,016)
|
Operations &
maintenance expenses (1)
|
|
(12,736)
|
|
(8,422)
|
|
(2)
|
|
(21,160)
|
Gross Margin
(GAAP)
|
|
93,235
|
|
33,146
|
|
(30)
|
|
126,351
|
Operations &
maintenance expenses (1)
|
|
12,736
|
|
8,422
|
|
2
|
|
21,160
|
Depreciation &
amortization
|
|
12,537
|
|
4,481
|
|
(2)
|
|
17,016
|
Adjusted Gross
Margin (Non-GAAP)
|
|
$
118,508
|
|
$
46,049
|
|
$
(30)
|
|
$
164,527
|
|
|
|
|
For the Three Months
Ended March 31, 2023
|
(in
thousands)
|
|
Regulated
Energy
|
|
Unregulated
Energy
|
|
Other and
Eliminations
|
|
Total
|
Operating
Revenues
|
|
$
142,270
|
|
$
83,165
|
|
$
(7,306)
|
|
$
218,129
|
Cost of
Sales:
|
|
|
|
|
|
|
|
|
Natural gas, propane
and electric costs
|
|
(55,288)
|
|
(40,571)
|
|
7,270
|
|
(88,589)
|
Depreciation &
amortization
|
|
(12,952)
|
|
(4,234)
|
|
3
|
|
(17,183)
|
Operations &
maintenance expenses (1)
|
|
(9,287)
|
|
(8,476)
|
|
5
|
|
(17,758)
|
Gross Margin
(GAAP)
|
|
64,743
|
|
29,884
|
|
(28)
|
|
94,599
|
Operations &
maintenance expenses (1)
|
|
9,287
|
|
8,476
|
|
(5)
|
|
17,758
|
Depreciation &
amortization
|
|
12,952
|
|
4,234
|
|
(3)
|
|
17,183
|
Adjusted Gross
Margin (Non-GAAP)
|
|
$
86,982
|
|
$
42,594
|
|
$
(36)
|
|
$
129,540
|
|
(1) Operations &
maintenance expenses within the condensed consolidated statements
of income are presented in accordance with regulatory requirements
and to provide comparability within the industry. Operations &
maintenance expenses which are deemed to be directly attributable
to revenue producing activities have been separately presented
above in order to calculate Gross Margin as defined under US
GAAP.
|
Adjusted Net Income
and Adjusted EPS
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
(in thousands,
except per share data)
|
|
2024
|
|
2023
|
Net Income
(GAAP)
|
|
$
46,168
|
|
$
36,344
|
FCG transaction and
transition-related expenses, net (1)
|
|
677
|
|
—
|
Adjusted Net Income
(Non-GAAP)
|
|
$
46,845
|
|
$
36,344
|
|
|
|
|
|
Weighted average common
shares outstanding - diluted (2)
|
|
22,306
|
|
17,832
|
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
|
$
2.07
|
|
$
2.04
|
FCG transaction and
transition-related expenses, net (1)
|
|
0.03
|
|
—
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)
|
|
$
2.10
|
|
$
2.04
|
|
(1) Transaction and
transition-related expenses represent costs incurred attributable
to the acquisition and integration of FCG including, but not
limited to, transition services, consulting, system integration,
rebranding and legal fees.
|
(2) Weighted average
shares for the quarter ended March 31, 2024 reflect the impact
of 4.4 million common shares issued in November 2023 in
connection with the acquisition of FCG.
|
|
Operating Results for the Quarters Ended March 31, 2024 and 2023
Consolidated
Results
|
|
|
Three Months
Ended
|
|
|
|
|
|
March
31,
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
Adjusted gross
margin**
|
$
164,527
|
|
$
129,540
|
|
$
34,987
|
|
27.0 %
|
Depreciation,
amortization and property taxes
|
26,110
|
|
23,490
|
|
2,620
|
|
11.2 %
|
FCG transaction and
transition-related expenses
|
921
|
|
—
|
|
921
|
|
NMF
|
Other operating
expenses
|
57,911
|
|
51,135
|
|
6,776
|
|
13.3 %
|
Operating
income
|
$
79,585
|
|
$
54,915
|
|
$
24,670
|
|
44.9 %
|
|
Operating income for the first quarter of 2024 was $79.6 million, an increase of $24.7 million compared to the same period in
2023. Excluding transaction and transition-related expenses
associated with the acquisition and integration of FCG, operating
income increased $25.6 million or
46.6 percent compared to the prior-year period. Adjusted gross
margin in the first quarter of 2024 was positively impacted by FCG,
natural gas organic growth and continued pipeline expansion
projects, higher customer consumption, incremental contributions
associated with regulatory initiatives, and contributions from the
Company's unregulated businesses. Higher operating expenses largely
associated with FCG were partially offset by lower employee
benefits and incentive compensation costs compared to the
prior-year period. Increases in depreciation, amortization
and property taxes attributable to growth projects and FCG were
partially offset by lower depreciation in our electric operations
due to revised rates in the electric depreciation study filing
approved in December 2023 and a
$3.4 million reserve surplus
amortization mechanism ("RSAM") adjustment from FCG.
Regulated Energy
Segment
|
|
|
Three Months
Ended
|
|
|
|
|
|
March
31,
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
Adjusted gross
margin**
|
$
118,508
|
|
$
86,982
|
|
$
31,526
|
|
36.2 %
|
Depreciation,
amortization and property taxes
|
20,955
|
|
18,670
|
|
2,285
|
|
12.2 %
|
FCG transaction and
transition-related expenses
|
921
|
|
—
|
|
921
|
|
NMF
|
Other operating
expenses
|
38,523
|
|
30,687
|
|
7,836
|
|
25.5 %
|
Operating
income
|
$
58,109
|
|
$
37,625
|
|
$
20,484
|
|
54.4 %
|
|
The key components of the increase in adjusted gross margin**
are shown below:
(in
thousands)
|
|
Contribution from
FCG
|
$
24,959
|
Natural gas growth
including conversions (excluding service expansions)
|
1,916
|
Natural gas
transmission service expansions
|
1,622
|
Rate changes associated
with the Florida natural gas base rate proceeding
(1)
|
1,498
|
Contributions from
regulated infrastructure programs
|
1,278
|
Other
variances
|
253
|
Quarter-over-quarter
increase in adjusted gross margin**
|
$
31,526
|
|
(1) Includes adjusted gross
margin contributions from permanent base rates that became
effective in March 2023.
|
|
The major components of the increase in other operating expenses
are as follows:
(in
thousands)
|
|
FCG operating
expenses
|
$
10,413
|
Payroll, benefits and
other employee-related expenses
|
(1,787)
|
Other
variances
|
(790)
|
Quarter-over-quarter
increase in other operating expenses
|
$
7,836
|
Unregulated
Energy Segment
|
|
|
Three Months
Ended
March 31,
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
Adjusted gross
margin**
|
$
46,049
|
|
$
42,594
|
|
$
3,455
|
|
8.1 %
|
Depreciation,
amortization and property taxes
|
5,155
|
|
4,822
|
|
333
|
|
6.9 %
|
Other operating
expenses
|
19,465
|
|
20,527
|
|
(1,062)
|
|
(5.2) %
|
Operating
income
|
$
21,429
|
|
$
17,245
|
|
$
4,184
|
|
24.3 %
|
|
The major components of the change in adjusted gross margin**
are shown below:
(in
thousands)
|
|
|
Propane
Operations
|
|
|
Increased propane
customer consumption
|
|
$
1,388
|
Increased propane
margins and service fees
|
|
559
|
Contributions from
acquisition
|
|
438
|
Aspire
Energy
|
|
|
Increased margins -
rate changes and gathering fees
|
|
938
|
Increased customer
consumption
|
|
309
|
Other
variances
|
|
(177)
|
Quarter-over-quarter
increase in adjusted gross margin**
|
|
$
3,455
|
|
The major components of the decrease in other operating expenses
are as follows:
(in
thousands)
|
|
|
Decreased payroll,
benefits and other employee-related expenses
|
|
$
(1,177)
|
Other
variances
|
|
115
|
Quarter-over-quarter
decrease in other operating expenses
|
|
$
(1,062)
|
|
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 2023 Annual Report on Form 10-K and Quarterly Report
on Form 10-Q for the first quarter of 2024 for further information
on the risks and uncertainties related to the Company's
forward-looking statements.
Conference Call
Chesapeake Utilities (NYSE: CPK) will host a conference call on
Thursday, May 9, 2024 at 8:30 a.m.
Eastern Time to discuss the Company's financial results for
the three months ended March 31, 2024. To listen to the
Company's conference call via live webcast, please visit the Events
& Presentations section of the Investors page on www.chpk.com.
For investors and analysts that wish to participate by phone for
the question and answer portion of the call, please use the
following dial-in information:
Toll-free: 800.343.5419
International: 203.518.9731
Conference ID: CPKQ124
A replay of the presentation will be made available on the
previously noted website following the conclusion of the call.
About Chesapeake Utilities Corporation
Chesapeake Utilities Corporation is a diversified energy
delivery company, listed on the New York Stock Exchange. Chesapeake
Utilities Corporation offers sustainable energy solutions through
its natural gas transmission and distribution, electricity
generation and distribution, propane gas distribution, mobile
compressed natural gas utility services and solutions, and other
businesses.
Please note that Chesapeake Utilities Corporation is not
affiliated with Chesapeake Energy, an oil and natural gas
exploration company headquartered in Oklahoma City, Oklahoma.
For more information, contact:
Beth W. Cooper
Executive Vice President, Chief Financial Officer, Treasurer and
Assistant Corporate Secretary
302.734.6022
Michael D. Galtman
Senior Vice President and Chief Accounting Officer
302.217.7036
Lucia M. Dempsey
Head of Investor Relations
347.804.9067
Financial
Summary
|
(in thousands,
except per-share data)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2024
|
|
2023
|
Adjusted Gross
Margin
|
|
|
|
Regulated Energy
segment
|
$
118,508
|
|
$ 86,982
|
Unregulated
Energy segment
|
46,049
|
|
42,594
|
Other businesses
and eliminations
|
(30)
|
|
(36)
|
Total Adjusted Gross
Margin**
|
$
164,527
|
|
$
129,540
|
|
|
|
|
Operating
Income
|
|
|
|
Regulated
Energy segment
|
$
58,109
|
|
$ 37,625
|
Unregulated Energy segment
|
21,429
|
|
17,245
|
Other
businesses and eliminations
|
47
|
|
45
|
Total Operating
Income
|
79,585
|
|
54,915
|
Other income,
net
|
195
|
|
276
|
Interest
charges
|
17,026
|
|
7,232
|
Income Before Income
Taxes
|
62,754
|
|
47,959
|
Income taxes
|
16,586
|
|
11,615
|
Net
Income
|
$
46,168
|
|
$ 36,344
|
|
|
|
|
Weighted Average
Common Shares Outstanding: (1)
|
|
|
|
Basic
|
22,250
|
|
17,760
|
Diluted
|
22,306
|
|
17,832
|
Earnings Per Share
of Common Stock
|
|
|
|
Basic
|
$
2.07
|
|
$
2.05
|
Diluted
|
$
2.07
|
|
$
2.04
|
|
|
|
|
Adjusted Net Income
and Adjusted Earnings Per Share
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
$
46,168
|
|
$ 36,344
|
FCG transaction and
transition-related-expenses, net (2)
|
677
|
|
—
|
Adjusted Net Income
(Non-GAAP)**
|
$
46,845
|
|
$ 36,344
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
$
2.07
|
|
$
2.04
|
FCG transaction and
transition-related-expenses, net (2)
|
0.03
|
|
—
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)**
|
$
2.10
|
|
$
2.04
|
|
(1) Weighted average shares
for the quarter ended March 31, 2024 reflect the impact of
4.4 million common shares issued in November 2023 in
connection with the acquisition of FCG.
|
(2) Transaction and
transition-related expenses represent costs incurred attributable
to the acquisition and integration of FCG including, but not
limited to, transition services, consulting, system integration,
rebranding and legal fees.
|
|
Financial Summary Highlights
Key variances between the first quarter of 2023 and the first
quarter of 2024 included:
(in thousands,
except per share data)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
First Quarter of
2023 Adjusted Results
|
|
$
47,959
|
|
$
36,344
|
|
$
2.04
|
|
|
|
|
|
|
|
Non-recurring
Items:
|
|
|
|
|
|
|
Absence of the one-time
benefit associated with a reduction in the PA state tax
rate
|
|
—
|
|
(1,284)
|
|
(0.06)
|
|
|
—
|
|
(1,284)
|
|
(0.06)
|
|
|
|
|
|
|
|
Increased Adjusted
Gross Margins:
|
|
|
|
|
|
|
Contribution from
recent acquisitions
|
|
25,397
|
|
18,685
|
|
0.84
|
Natural gas growth
including conversions (excluding service expansions)
|
|
1,916
|
|
1,409
|
|
0.07
|
Changes in customer
consumption
|
|
1,906
|
|
1,402
|
|
0.06
|
Natural gas
transmission service expansions*
|
|
1,622
|
|
1,193
|
|
0.05
|
Contribution from rates
associated with the Florida natural gas base rate
proceeding*
|
|
1,498
|
|
1,102
|
|
0.05
|
Contributions from
regulated infrastructure programs*
|
|
1,278
|
|
941
|
|
0.04
|
Higher performance from
Aspire Energy
|
|
938
|
|
690
|
|
0.03
|
Increased propane
margins and service fees
|
|
559
|
|
411
|
|
0.02
|
|
|
35,114
|
|
25,833
|
|
1.16
|
|
|
|
|
|
|
|
(Increased)
Decreased Operating Expenses (Excluding Natural Gas, Propane, and
Electric Costs):
|
|
|
|
|
|
|
FCG operating
expenses
|
|
(10,413)
|
|
(7,661)
|
|
(0.34)
|
Depreciation,
amortization and property tax costs
|
|
(1,498)
|
|
(1,102)
|
|
(0.05)
|
Insurance related
costs
|
|
(525)
|
|
(386)
|
|
(0.02)
|
Payroll, benefits and
other employee-related expenses
|
|
2,964
|
|
2,181
|
|
0.10
|
|
|
(9,472)
|
|
(6,968)
|
|
(0.31)
|
|
|
|
|
|
|
|
Interest
charges
|
|
(9,794)
|
|
(7,206)
|
|
(0.32)
|
Increase in shares
outstanding due to 2023 and 2024 equity offerings
|
|
—
|
|
—
|
|
(0.41)
|
Net other
changes
|
|
(132)
|
|
126
|
|
—
|
|
|
(9,926)
|
|
(7,080)
|
|
(0.73)
|
First Quarter of
2024 Adjusted Results**
|
|
$
63,675
|
|
$
46,845
|
|
$
2.10
|
|
* Refer to Major Projects
and Initiatives Table for additional information.
|
** Transaction and
transition-related expenses attributable to the acquisition and
integration of FCG have been excluded from the Company's non-GAAP
measures of adjusted net income and adjusted EPS. See
reconciliations above for a detailed comparison to the related GAAP
measures.
|
|
Recently Completed and Ongoing Major Projects and
Initiatives
The Company continuously pursues and develops additional
projects and initiatives to serve existing and new customers,
further grow its businesses and earnings, and increase shareholder
value. The following table includes all major projects and
initiatives that are currently underway or recently completed. The
Company's practice is to add new projects and initiatives to this
table once negotiations or details are substantially final and/or
the associated earnings can be estimated. Major projects and
initiatives that have generated consistent year-over-year adjusted
gross margin contributions are removed from the table at the
beginning of the next calendar year.
The related descriptions of projects and initiatives that
accompany the table include only new items and/or items where there
have been significant developments, all compared to the Company's
prior quarter filings. A comprehensive discussion of all projects
and initiatives reflected in the table below can be found in the
Company's first quarter 2024 Quarterly Report on Form 10-Q.
|
Adjusted Gross
Margin
|
|
Three Months
Ended
|
|
Year
Ended
|
|
Estimate
for
|
|
March
31,
|
|
December
31,
|
|
Fiscal
|
(in
thousands)
|
2024
|
|
2023
|
|
2023
|
|
2024
|
|
2025
|
Pipeline
Expansions:
|
|
|
|
|
|
|
|
|
|
Southern
Expansion
|
$
586
|
|
$
—
|
|
$
586
|
|
$
2,344
|
|
$
2,344
|
Beachside Pipeline
Expansion
|
603
|
|
—
|
|
1,810
|
|
2,451
|
|
2,414
|
North Ocean City
Connector
|
—
|
|
—
|
|
—
|
|
—
|
|
494
|
St. Cloud / Twin Lakes
Expansion
|
146
|
|
—
|
|
264
|
|
584
|
|
584
|
Wildlight
|
199
|
|
26
|
|
471
|
|
2,000
|
|
2,038
|
Lake Wales
|
114
|
|
—
|
|
265
|
|
454
|
|
454
|
Newberry
|
—
|
|
—
|
|
—
|
|
862
|
|
2,585
|
Boynton
Beach
|
—
|
|
—
|
|
—
|
|
—
|
|
3,342
|
New Smyrna
Beach
|
—
|
|
—
|
|
—
|
|
—
|
|
1,710
|
Total Pipeline
Expansions
|
1,648
|
|
26
|
|
3,396
|
|
8,695
|
|
15,965
|
|
|
|
|
|
|
|
|
|
|
CNG/RNG/LNG
Transportation and Infrastructure
|
3,435
|
|
3,521
|
|
11,181
|
|
12,500
|
|
13,969
|
|
|
|
|
|
|
|
|
|
|
Regulatory
Initiatives:
|
|
|
|
|
|
|
|
|
|
Florida GUARD
program
|
589
|
|
—
|
|
353
|
|
3,231
|
|
5,602
|
FCG SAFE
Program
|
412
|
|
—
|
|
—
|
|
2,683
|
|
5,293
|
Capital Cost Surcharge
Programs
|
831
|
|
720
|
|
2,829
|
|
3,979
|
|
4,374
|
Florida Rate Case
Proceeding (1)
|
5,595
|
|
4,097
|
|
15,835
|
|
17,153
|
|
17,153
|
Maryland Rate Case
(2)
|
—
|
|
—
|
|
—
|
|
TBD
|
|
TBD
|
Electric Storm
Protection Plan
|
630
|
|
206
|
|
1,326
|
|
2,433
|
|
3,951
|
Total Regulatory
Initiatives
|
8,057
|
|
5,023
|
|
20,343
|
|
29,479
|
|
36,373
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
13,140
|
|
$
8,570
|
|
$
34,920
|
|
$
50,674
|
|
$
66,307
|
|
(1) Includes adjusted gross
margin during 2023 comprised of both interim rates and permanent
base rates which became effective in March 2023.
|
(2) Rate case application and
depreciation study filed with the Maryland PSC in January 2024. See
additional information provided below.
|
|
Detailed Discussion of Major Projects and
Initiatives
Pipeline Expansions
St. Cloud / Twin Lakes
Expansion
In July 2022,
Peninsula Pipeline filed a petition with the Public Service
Commission ("PSC") for the State of
Florida for approval of its Transportation Service Agreement
with the Company's Florida
subsidiary, Florida Public Utilities ("FPU"), for an additional
2,400 Dts/day of firm service in the St.
Cloud, Florida area. As part of this agreement, Peninsula
Pipeline constructed a pipeline extension and regulator station for
FPU. The extension supports new incremental load due to growth in
the area, including providing service, most immediately, to the
residential development Twin Lakes. The expansion also improves
reliability and provides operational benefits to FPU's existing
distribution system in the area, supporting future growth. The
project went into service in July
2023.
In February 2024, Peninsula
Pipeline filed a petition with the Florida PSC for approval of an
amendment to its Transportation Service Agreement with FPU for an
additional 10,000 Dts/day of firm service in the St. Cloud, Florida area. Peninsula
Pipeline will construct pipeline expansions that will allow FPU to
serve the future communities that are expected in that area. The
Florida PSC approved the projects in May
2024.
Newberry Expansion
In April 2023, Peninsula Pipeline filed a petition
with the Florida PSC for approval of its Transportation Service
Agreement with FPU for an additional 8,000 Dts/day of firm service
in the Newberry, Florida area. The
petition was approved by the Florida PSC in the third quarter of
2023. Peninsula Pipeline will construct a pipeline extension, which
will be used by FPU to support the development of a natural gas
distribution system to provide gas service to the City of
Newberry. A filing to address the acquisition and conversion
of existing Company owned propane community gas systems in
Newberry was made in November 2023. The Florida PSC approved it in
April 2024. Conversions are
anticipated to begin during the second quarter of 2024.
East Coast Reinforcement Projects
In
December 2023, Peninsula Pipeline
filed a petition with the Florida PSC for approval of its
Transportation Service Agreements with FPU for projects that will
support additional supply to communities on the East Coast of
Florida. The projects are driven
by the need for increased supply to coastal portions of the state
that are experiencing significant population growth. Peninsula
Pipeline will construct several pipeline extensions which will
support FPU's distribution system in the areas of Boynton Beach and New Smyrna Beach with an additional 15,000
Dts/day and 3,400 Dts/day, respectively. The Florida PSC approved
the projects in March 2024.
Central Florida Reinforcement Projects
In
February 2024, Peninsula Pipeline
filed a petition with the Florida PSC for approval of its
Transportation Service Agreements with FPU for projects that will
support additional supply to communities located in Central Florida. The projects are driven by
the need for increased supply to communities in central
Florida that are experiencing
significant population growth. Peninsula Pipeline will construct
several pipeline extensions which will support FPU's distribution
system in the areas of Plant City
and Lake Mattie with an additional 5,000 Dts/day and 8,700 Dts/day,
respectively. The Florida PSC approved the projects in May 2024.
Pioneer Supply Header Pipeline Project
In
March 2024, Peninsula Pipeline filed
a petition with the Florida PSC for its approval of Firm
Transportation Service Agreements with both FCG and FPU for a
project that will support greater supply growth of natural gas
service in southeast Florida. The
project consists of the transfer of a pipeline asset from FCG to
Peninsula Pipeline. Peninsula Pipeline will proceed to provide
transportation service to both FCG and FPU using the pipeline
asset, which provides opportunities for additional project
development.
Alternative Natural Gas Projects
In
February 2024, Peninsula Pipeline
filed a petition with the Florida PSC for its approval of its
Transportation Service Agreements with FCG for projects that will
support the transportation of additional supply into FCG's
distribution system. The projects are driven by continued
growth in the regions and will facilitate additional transportation
capacity, including the transportation of pipeline quality gas
produced from landfills through FCG's system. Peninsula Pipeline
will construct several pipeline extensions which will support FCG's
distribution system in Brevard
County, Indian-River
County, and Miami-Dade
County.
Regulatory Initiatives
Maryland Natural Gas Rate Case
In January 2024, the Company's natural gas
distribution businesses in Maryland, CUC-Maryland Division, Sandpiper
Energy, Inc., and Elkton Gas Company (collectively, "Maryland natural gas distribution businesses")
filed a joint application for a natural gas rate case with the
Maryland PSC. In connection with the application, we are seeking
approval of the following: (i) permanent rate relief of
approximately $6.9 million; (ii)
authorization to make certain changes to tariffs to include a
unified rate structure and to consolidate the Maryland natural gas distribution businesses
which we anticipate will be called Chesapeake Utilities of
Maryland, Inc.; and (iii)
authorization to establish a rider for recovery of the costs
associated with our new technology systems. The outcome of the
application is subject to review and approval by the Maryland PSC.
Rate changes are suspended until December
2024.
Maryland Natural Gas Depreciation Study
In
January 2024, our Maryland natural gas distribution businesses
filed a joint petition for approval of their proposed unified
depreciation rates with the Maryland PSC. The outcome of the filing
is subject to review by the Maryland PSC which is expected to be
completed in the third quarter of 2024.
FCG SAFE Program
In April 2024, FCG filed a petition with the Florida
PSC to more closely align the SAFE Program with FPU's GUARD
program. Specifically, the requested modifications will enable FCG
to accelerate remediation related to problematic pipe and
facilities consisting of obsolete and exposed pipe. If approved,
these efforts will serve to improve the safety and reliability of
service to FCG's customers. These modifications, if approved,
result in an estimated additional $50
million in capital expenditures associated with the SAFE
Program which would increase the total projected capital
expenditures to $255 million over a
10-year period.
Other Major Factors Influencing Adjusted Gross Margin
Weather and Consumption
For the first quarter
of 2024, higher consumption driven primarily by colder weather
compared to the first quarter of 2023 resulted in a $1.9 million increase in adjusted gross margin.
While temperatures were colder than the prior-year period, they
were approximately 11.7 percent and 10.3 percent warmer,
respectively, compared to normal temperatures in our Delmarva and
Ohio service territories. Assuming
normal temperatures, as detailed below, we estimate that operating
income would have been higher by approximately $1.5 million, or $0.05 per share. The following table summarizes
HDD and CDD variances from the 10-year average HDD/CDD ("Normal")
for the three months ended March 31,
2024 and 2023.
HDD and CDD Information
|
Three Months
Ended
|
|
|
|
March
31,
|
|
|
|
2024
|
|
2023
|
|
Variance
|
Delmarva
|
|
|
|
|
|
Actual HDD
|
1,962
|
|
1,774
|
|
188
|
10-Year Average HDD
("Normal")
|
2,221
|
|
2,285
|
|
(64)
|
Variance from
Normal
|
(259)
|
|
(511)
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
Actual HDD
|
470
|
|
344
|
|
126
|
10-Year Average HDD
("Normal")
|
470
|
|
505
|
|
(35)
|
Variance from
Normal
|
—
|
|
(161)
|
|
|
|
|
|
|
|
|
Ohio
|
|
|
|
|
|
Actual HDD
|
2,659
|
|
2,384
|
|
275
|
10-Year Average HDD
("Normal")
|
2,965
|
|
2,965
|
|
—
|
Variance from
Normal
|
(306)
|
|
(581)
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
Actual CDD
|
181
|
|
323
|
|
(142)
|
10-Year Average CDD
("Normal")
|
217
|
|
192
|
|
25
|
Variance from
Normal
|
(36)
|
|
131
|
|
|
|
Natural Gas Distribution Growth
The average
number of residential customers served on the Delmarva Peninsula
and in the legacy Florida Natural Gas distribution business
increased by approximately 4.2 percent and 3.6 percent,
respectively, for the three months ended March 31, 2024.
The details of the adjusted gross margin increase are provided
in the following table:
|
Adjusted Gross
Margin**
|
|
For the Three Months
Ended March 31, 2024
|
(in
thousands)
|
Delmarva
Peninsula
|
|
Florida
|
Customer
growth:
|
|
|
|
Residential
|
$
490
|
|
$
880
|
Commercial and
industrial
|
156
|
|
390
|
Total customer
growth (1)
|
$
646
|
|
$
1,270
|
|
(1) Customer growth amounts
for the legacy Florida operations include the effects of revised
rates associated with the Company's natural gas base rate
proceeding, but exclude the effects of FCG.
|
|
Capital Investment Growth and Capital Structure
Updates
The Company's capital expenditures were $70.6 million for the three months ended
March 31, 2024. The following table
shows a range of the forecasted 2024 capital expenditures by
segment and by business line:
|
2024
|
(in
thousands)
|
Low
|
|
High
|
Regulated
Energy:
|
|
|
|
Natural gas
distribution
|
$ 150,000
|
|
$
170,000
|
Natural gas
transmission
|
90,000
|
|
120,000
|
Electric
distribution
|
25,000
|
|
28,000
|
Total Regulated
Energy
|
265,000
|
|
318,000
|
Unregulated
Energy:
|
|
|
|
Propane
distribution
|
13,000
|
|
15,000
|
Energy
transmission
|
5,000
|
|
6,000
|
Other unregulated
energy
|
13,000
|
|
15,000
|
Total Unregulated
Energy
|
31,000
|
|
36,000
|
Other:
|
|
|
|
Corporate and other
businesses
|
4,000
|
|
6,000
|
Total 2024
Forecasted Capital Expenditures
|
$
300,000
|
|
$
360,000
|
|
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, supply chain disruptions, capital delays 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 forecasted amounts.
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 approximately 48 percent as of
March 31, 2024.
Chesapeake Utilities
Corporation and Subsidiaries
|
Condensed
Consolidated Statements of Income (Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2024
|
|
2023
|
(in thousands,
except per share data)
|
|
|
|
|
Operating
Revenues
|
|
|
|
|
Regulated
Energy
|
|
$
168,426
|
|
$ 142,270
|
Unregulated
Energy
|
|
83,103
|
|
83,166
|
Other businesses and
eliminations
|
|
(5,785)
|
|
(7,307)
|
Total Operating
Revenues
|
|
245,744
|
|
218,129
|
Operating
Expenses
|
|
|
|
|
Natural gas and
electricity costs
|
|
49,918
|
|
55,288
|
Propane and natural
gas costs
|
|
31,299
|
|
33,301
|
Operations
|
|
51,560
|
|
44,767
|
FCG transaction
and transition-related expenses
|
|
921
|
|
—
|
Maintenance
|
|
5,903
|
|
5,104
|
Depreciation and
amortization
|
|
17,016
|
|
17,183
|
Other
taxes
|
|
9,542
|
|
7,571
|
Total operating
expenses
|
|
166,159
|
|
163,214
|
Operating
Income
|
|
79,585
|
|
54,915
|
Other income,
net
|
|
195
|
|
276
|
Interest
charges
|
|
17,026
|
|
7,232
|
Income Before Income
Taxes
|
|
62,754
|
|
47,959
|
Income taxes
|
|
16,586
|
|
11,615
|
Net
Income
|
|
$
46,168
|
|
$
36,344
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
Basic
|
|
22,250
|
|
17,760
|
Diluted
|
|
22,306
|
|
17,832
|
|
|
|
|
|
Earnings Per Share
of Common Stock:
|
|
|
|
|
Basic
|
|
$
2.07
|
|
$
2.05
|
Diluted
|
|
$
2.07
|
|
$
2.04
|
|
|
|
|
|
Adjusted Net Income
and Adjusted Earnings Per Share
|
|
|
|
|
Net Income
(GAAP)
|
|
$
46,168
|
|
$
36,344
|
FCG transaction and
transition-related expenses, net (1)
|
|
677
|
|
—
|
Adjusted Net Income
(Non-GAAP)**
|
|
$
46,845
|
|
$
36,344
|
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
|
$
2.07
|
|
$
2.04
|
FCG transaction and
transition-related expenses, net (1)
|
|
0.03
|
|
—
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)**
|
|
$
2.10
|
|
$
2.04
|
|
(1) Transaction and
transition-related expenses represent costs incurred attributable
to the acquisition and integration of FCG including, but not
limited to, transition services, consulting, system integration,
rebranding and legal fees.
|
Chesapeake Utilities
Corporation and Subsidiaries
|
Consolidated Balance
Sheets (Unaudited)
|
|
Assets
|
|
March 31,
2024
|
|
December 31,
2023
|
(in thousands,
except per share data)
|
|
|
|
|
Property, Plant and
Equipment
|
|
|
|
|
Regulated
Energy
|
|
$
2,470,135
|
|
$
2,418,494
|
Unregulated
Energy
|
|
416,833
|
|
410,807
|
Other businesses and
eliminations
|
|
31,606
|
|
30,310
|
Total property, plant
and equipment
|
|
2,918,574
|
|
2,859,611
|
Less: Accumulated
depreciation and amortization
|
|
(530,832)
|
|
(516,429)
|
Plus: Construction work
in progress
|
|
123,338
|
|
113,192
|
Net property, plant and
equipment
|
|
2,511,080
|
|
2,456,374
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
1,695
|
|
4,904
|
Trade and other
receivables
|
|
70,750
|
|
74,485
|
Less: Allowance for
credit losses
|
|
(2,450)
|
|
(2,699)
|
Trade and other
receivables, net
|
|
68,300
|
|
71,786
|
Accrued
revenue
|
|
28,308
|
|
32,597
|
Propane inventory, at
average cost
|
|
8,367
|
|
9,313
|
Other inventory, at
average cost
|
|
19,638
|
|
19,912
|
Regulatory
assets
|
|
24,289
|
|
19,506
|
Storage gas
prepayments
|
|
1,147
|
|
4,695
|
Income taxes
receivable
|
|
—
|
|
3,829
|
Prepaid
expenses
|
|
13,681
|
|
15,407
|
Derivative assets, at
fair value
|
|
1,012
|
|
1,027
|
Other current
assets
|
|
3,228
|
|
2,723
|
Total current
assets
|
|
169,665
|
|
185,699
|
Deferred Charges and
Other Assets
|
|
|
|
|
Goodwill
|
|
507,573
|
|
508,174
|
Other intangible
assets, net
|
|
16,414
|
|
16,865
|
Investments, at fair
value
|
|
13,221
|
|
12,282
|
Derivative assets, at
fair value
|
|
126
|
|
40
|
Operating lease
right-of-use assets
|
|
11,719
|
|
12,426
|
Regulatory
assets
|
|
86,039
|
|
96,396
|
Receivables and other
deferred charges
|
|
16,047
|
|
16,448
|
Total deferred charges
and other assets
|
|
651,139
|
|
662,631
|
Total
Assets
|
|
$
3,331,884
|
|
$
3,304,704
|
Chesapeake Utilities
Corporation and Subsidiaries
|
Consolidated
Balance Sheets (Unaudited)
|
|
Capitalization and
Liabilities
|
|
March 31,
2024
|
|
December 31,
2023
|
(in thousands,
except per share data)
|
|
|
|
|
Capitalization
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Preferred stock, par
value $0.01 per share (authorized 2,000 shares), no shares issued
and outstanding
|
|
$
—
|
|
$
—
|
Common stock, par
value $0.4867 per share (authorized 50,000 shares)
|
|
10,838
|
|
10,823
|
Additional paid-in
capital
|
|
750,162
|
|
749,356
|
Retained
earnings
|
|
521,689
|
|
488,663
|
Accumulated other
comprehensive loss
|
|
(1,786)
|
|
(2,738)
|
Deferred compensation
obligation
|
|
9,562
|
|
9,050
|
Treasury
stock
|
|
(9,562)
|
|
(9,050)
|
Total stockholders'
equity
|
|
1,280,903
|
|
1,246,104
|
Long-term debt, net of
current maturities
|
|
1,185,166
|
|
1,187,075
|
Total
capitalization
|
|
2,466,069
|
|
2,433,179
|
Current
Liabilities
|
|
|
|
|
Current portion of
long-term debt
|
|
18,511
|
|
18,505
|
Short-term
borrowing
|
|
170,355
|
|
179,853
|
Accounts
payable
|
|
63,058
|
|
77,481
|
Customer deposits and
refunds
|
|
43,682
|
|
46,427
|
Accrued
interest
|
|
17,148
|
|
7,020
|
Dividends
payable
|
|
13,138
|
|
13,119
|
Accrued
compensation
|
|
7,066
|
|
16,544
|
Regulatory
liabilities
|
|
21,328
|
|
13,719
|
Income taxes
payable
|
|
818
|
|
—
|
Derivative
liabilities, at fair value
|
|
31
|
|
354
|
Other accrued
liabilities
|
|
16,520
|
|
13,362
|
Total current
liabilities
|
|
371,655
|
|
386,384
|
Deferred Credits and
Other Liabilities
|
|
|
|
|
Deferred income
taxes
|
|
271,335
|
|
259,082
|
Regulatory
liabilities
|
|
193,030
|
|
195,279
|
Environmental
liabilities
|
|
2,546
|
|
2,607
|
Other pension and
benefit costs
|
|
16,010
|
|
15,330
|
Derivative
liabilities, at fair value
|
|
43
|
|
927
|
Operating lease -
liabilities
|
|
9,832
|
|
10,550
|
Deferred investment
tax credits and other liabilities
|
|
1,364
|
|
1,366
|
Total deferred credits
and other liabilities
|
|
494,160
|
|
485,141
|
Environmental and other
commitments and contingencies (1)
|
|
|
|
|
Total Capitalization
and Liabilities
|
|
$
3,331,884
|
|
$
3,304,704
|
|
(1) Refer to Note 6 and 7 in
the Company's Quarterly Report on Form 10-Q for further
information.
|
Chesapeake Utilities
Corporation and Subsidiaries
|
Distribution Utility
Statistical Data (Unaudited)
|
|
|
For the Three Months
Ended March 31, 2024
|
|
For the Three Months
Ended March 31, 2023
|
|
Delmarva NG
Distribution
|
|
Florida
Natural Gas
Distribution
|
|
Florida City
Gas
Distribution
|
|
FPU Electric
Distribution
|
|
Delmarva NG
Distribution
|
|
Florida
Natural Gas
Distribution
|
|
FPU Electric
Distribution
|
Operating
Revenues (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
$
35,796
|
|
$
15,343
|
|
$
15,031
|
|
$
11,426
|
|
$
42,020
|
|
$
16,496
|
|
$
11,357
|
Commercial and
Industrial
|
17,567
|
|
31,053
|
|
19,434
|
|
10,783
|
|
21,425
|
|
25,739
|
|
11,740
|
Other
(1)
|
(1,675)
|
|
1,560
|
|
1,412
|
|
(2,245)
|
|
(3,052)
|
|
4,123
|
|
(360)
|
Total Operating
Revenues
|
$
51,688
|
|
$
47,956
|
|
$
35,877
|
|
$
19,964
|
|
$
60,393
|
|
$
46,358
|
|
$
22,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (in Dts for
natural gas and
MWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
2,438,154
|
|
841,041
|
|
599,337
|
|
72,021
|
|
2,291,320
|
|
753,756
|
|
68,517
|
Commercial and
Industrial
|
3,427,173
|
|
10,115,552
|
|
2,984,627
|
|
87,827
|
|
3,387,831
|
|
10,307,956
|
|
68,703
|
Other
|
89,098
|
|
731,006
|
|
1,598,743
|
|
—
|
|
87,536
|
|
627,934
|
|
—
|
Total
|
5,954,425
|
|
11,687,599
|
|
5,182,707
|
|
159,848
|
|
5,766,687
|
|
11,689,646
|
|
137,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
100,534
|
|
90,471
|
|
113,027
|
|
25,704
|
|
96,511
|
|
87,325
|
|
25,616
|
Commercial and
Industrial
|
8,397
|
|
8,474
|
|
8,519
|
|
7,371
|
|
8,270
|
|
8,409
|
|
7,359
|
Other
|
25
|
|
—
|
|
100
|
|
—
|
|
24
|
|
6
|
|
—
|
Total
|
108,956
|
|
98,945
|
|
121,646
|
|
33,075
|
|
104,805
|
|
95,740
|
|
32,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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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SOURCE Chesapeake Utilities Corporation