- Net income and earnings per share ("EPS")* were $17.5 million and $0.78, respectively, for the third quarter of
2024, and $81.9 million and
$3.66, respectively, for the nine
months ended September 30,
2024
- Adjusted net income and Adjusted EPS**, which exclude
transaction and transition-related expenses attributable to the
acquisition and integration of Florida City Gas ("FCG"), were
$18.1 million and $0.80, respectively, for the third quarter of
2024 and $84.2 million and
$3.76, respectively, for the nine
months ended September 30,
2024
- Adjusted gross margin** growth of $89.3 million during the first nine months of
2024 driven by contributions from FCG, regulatory initiatives and
infrastructure programs, natural gas organic growth, continued
pipeline expansion projects, and additional customer
consumption
- Results continue to track in line with Management's
expectations, and the Company continues to affirm 2024 EPS and
capital guidance
DOVER,
Del., Nov. 7, 2024 /PRNewswire/ -- Chesapeake
Utilities Corporation (NYSE: CPK) ("Chesapeake Utilities" or the
"Company") today announced financial results for the three and nine
months ended September 30, 2024.
Net income for the third quarter of 2024 was $17.5 million ($0.78 per share) compared to $9.4 million ($0.53
per share) in the third quarter of 2023. Excluding transaction and
transition-related expenses associated with the fourth quarter 2023
acquisition of FCG, adjusted net income was $18.1 million ($0.80 per share) or approximately 16 percent
higher per share compared to the prior-year period.
The higher results for the third quarter of 2024 were largely
attributable to incremental contributions from FCG, additional
margin from regulated infrastructure programs, continued pipeline
expansion projects to support distribution growth, growth in the
Company's natural gas distribution businesses and increased levels
of virtual pipeline services. The financing impacts of the FCG
acquisition, including increased interest expense related to debt
issued and additional shares outstanding, partially offset the
increases.
During the first nine months of 2024, net income was
$81.9 million ($3.66 per share) compared to $61.9 million ($3.47 per share) in the prior-year period.
Excluding the transaction and transition-related expenses, adjusted
net income was $84.2 million
($3.76 per share) compared to
$64.8 million ($3.63 per share) for the same period in 2023.
Year-to-date earnings for 2024 were primarily impacted by the
factors discussed for the third quarter as well as additional
adjusted gross margin from increased customer consumption
experienced earlier in the year and contributions from the
Company's unregulated businesses.
"Chesapeake Utilities delivered strong financial performance and
sustained operational excellence in the third quarter as we
continued to execute on the three pillars that drive long-term
earnings growth and shareholder value: prudently deploying record
levels of capital, proactively advancing our regulatory agenda and
continually executing on business transformation," said
Jeff Householder, chair, president
and CEO. "In the third quarter alone, we invested nearly
$100 million in capital expenditures,
filed for rate increases in Delaware and in Florida for our electric operations and
successfully implemented our new enterprise-wide customer billing
system."
"In the third quarter of 2024, adjusted earnings per share was
up 16 percent relative to the same period in 2023, attributable to
adjusted gross margin growth of close to 30 percent and continued
cost management driven by our business transformation efforts and
focus on a "one company" approach. Some of the larger margin
drivers include the addition of FCG, which we continue to
effectively integrate, strong customer growth of approximately 4
percent in both Delmarva and Florida, incremental margin related to
transmission expansions and increased virtual pipeline services and
depreciation savings related to regulatory initiatives," continued
Householder. "I'm proud of our teammates' consistent dedication to
prioritizing service and safety to deliver performance in line with
our expectations. This commitment enables us to affirm our
full-year 2024 adjusted EPS and capital guidance."
Earnings and Capital Investment Guidance
The Company continues to affirm 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 affirms its previously-announced 2024 capital
expenditure guidance of $300 million
to $360 million, as well as the
capital expenditure guidance for the five-year period ended 2028
that will range from $1.5 billion to
$1.8 billion. This investment
forecast 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. This implies an EPS growth rate of
approximately 8 percent from the 2025 EPS guidance range.
*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 September 30, 2024
|
|
(in
thousands)
|
|
Regulated
Energy
|
|
Unregulated
Energy
|
|
Other and
Eliminations
|
|
Total
|
|
Operating
Revenues
|
|
$
130,633
|
|
$
35,567
|
|
$
(6,062)
|
|
$
160,138
|
|
Cost of
Sales:
|
|
|
|
|
|
|
|
|
|
Natural gas, propane
and electric costs
|
|
(28,366)
|
|
(15,868)
|
|
6,033
|
|
(38,201)
|
|
Depreciation &
amortization
|
|
(12,301)
|
|
(4,553)
|
|
3
|
|
(16,851)
|
|
Operations &
maintenance expenses (1)
|
|
(10,722)
|
|
(8,058)
|
|
—
|
|
(18,780)
|
|
Gross Margin
(GAAP)
|
|
79,244
|
|
7,088
|
|
(26)
|
|
86,306
|
|
Operations &
maintenance expenses (1)
|
|
10,722
|
|
8,058
|
|
—
|
|
18,780
|
|
Depreciation &
amortization
|
|
12,301
|
|
4,553
|
|
(3)
|
|
16,851
|
|
Adjusted Gross
Margin (Non-GAAP)
|
|
$
102,267
|
|
$
19,699
|
|
$
(29)
|
|
$
121,937
|
|
|
|
|
For the Three Months
Ended September 30, 2023
|
|
(in
thousands)
|
|
Regulated
Energy
|
|
Unregulated
Energy
|
|
Other and
Eliminations
|
|
Total
|
|
Operating
Revenues
|
|
$
102,411
|
|
$
34,970
|
|
$
(5,834)
|
|
$
131,547
|
|
Cost of
Sales:
|
|
|
|
|
|
|
|
|
|
Natural gas, propane
and electric costs
|
|
(26,518)
|
|
(16,381)
|
|
5,805
|
|
(37,094)
|
|
Depreciation &
amortization
|
|
(13,192)
|
|
(4,420)
|
|
2
|
|
(17,610)
|
|
Operations &
maintenance expenses (1)
|
|
(4,819)
|
|
(7,532)
|
|
(382)
|
|
(12,733)
|
|
Gross Margin
(GAAP)
|
|
57,882
|
|
6,637
|
|
(409)
|
|
64,110
|
|
Operations &
maintenance expenses (1)
|
|
4,819
|
|
7,532
|
|
382
|
|
12,733
|
|
Depreciation &
amortization
|
|
13,192
|
|
4,420
|
|
(2)
|
|
17,610
|
|
Adjusted Gross
Margin (Non-GAAP)
|
|
$
75,893
|
|
$
18,589
|
|
$
(29)
|
|
$
94,453
|
|
|
|
|
For the Nine Months
Ended September 30, 2024
|
|
(in
thousands)
|
|
Regulated
Energy
|
|
Unregulated
Energy
|
|
Other and
Eliminations
|
|
Total
|
|
Operating
Revenues
|
|
$
429,684
|
|
$
160,089
|
|
$
(17,619)
|
|
$
572,154
|
|
Cost of
Sales:
|
|
|
|
|
|
|
|
|
|
Natural gas, propane
and electric costs
|
|
(105,662)
|
|
(70,928)
|
|
17,532
|
|
(159,058)
|
|
Depreciation &
amortization
|
|
(39,495)
|
|
(12,257)
|
|
8
|
|
(51,744)
|
|
Operations &
maintenance expenses (1)
|
|
(35,713)
|
|
(24,373)
|
|
1
|
|
(60,085)
|
|
Gross Margin
(GAAP)
|
|
248,814
|
|
52,531
|
|
(78)
|
|
301,267
|
|
Operations &
maintenance expenses (1)
|
|
35,713
|
|
24,373
|
|
(1)
|
|
60,085
|
|
Depreciation &
amortization
|
|
39,495
|
|
12,257
|
|
(8)
|
|
51,744
|
|
Adjusted Gross
Margin (Non-GAAP)
|
|
$
324,022
|
|
$
89,161
|
|
$
(87)
|
|
$
413,096
|
|
|
|
|
For the Nine Months
Ended September 30, 2023
|
|
(in
thousands)
|
|
Regulated
Energy
|
|
Unregulated
Energy
|
|
Other and
Eliminations
|
|
Total
|
|
Operating
Revenues
|
|
$
345,822
|
|
$
158,886
|
|
$
(19,439)
|
|
$
485,269
|
|
Cost of
Sales:
|
|
|
|
|
|
|
|
|
|
Natural gas, propane
and electric costs
|
|
(105,692)
|
|
(75,068)
|
|
19,282
|
|
(161,478)
|
|
Depreciation &
amortization
|
|
(39,179)
|
|
(12,923)
|
|
6
|
|
(52,096)
|
|
Operations &
maintenance expenses (1)
|
|
(23,346)
|
|
(23,528)
|
|
(377)
|
|
(47,251)
|
|
Gross Margin
(GAAP)
|
|
177,605
|
|
47,367
|
|
(528)
|
|
224,444
|
|
Operations &
maintenance expenses (1)
|
|
23,346
|
|
23,528
|
|
377
|
|
47,251
|
|
Depreciation &
amortization
|
|
39,179
|
|
12,923
|
|
(6)
|
|
52,096
|
|
Adjusted Gross
Margin (Non-GAAP)
|
|
$
240,130
|
|
$
83,818
|
|
$
(157)
|
|
$
323,791
|
|
|
(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
|
|
|
September
30,
|
|
(in thousands,
except per share data)
|
|
2024
|
|
2023
|
|
Net Income
(GAAP)
|
|
$
17,507
|
|
$
9,407
|
|
FCG transaction and
transition-related expenses, net (1)
|
|
593
|
|
2,804
|
|
Adjusted Net Income
(Non-GAAP)
|
|
$
18,100
|
|
$
12,211
|
|
|
|
|
|
|
Weighted average common
shares outstanding - diluted (2)
|
|
22,564
|
|
17,858
|
|
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
|
$
0.78
|
|
$
0.53
|
|
FCG transaction and
transition-related expenses, net (1)
|
|
0.02
|
|
0.16
|
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)
|
|
$
0.80
|
|
$
0.69
|
|
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
(in thousands,
except per share data)
|
|
2024
|
|
2023
|
|
Net Income
(GAAP)
|
|
$
81,946
|
|
$
61,884
|
|
FCG transaction and
transition-related expenses, net (1)
|
|
2,276
|
|
2,898
|
|
Adjusted Net Income
(Non-GAAP)
|
|
$
84,222
|
|
$
64,782
|
|
|
|
|
|
|
Weighted average common
shares outstanding - diluted (2)
|
|
22,402
|
|
17,847
|
|
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
|
$
3.66
|
|
$
3.47
|
|
FCG transaction and
transition-related expenses, net (1)
|
|
0.10
|
|
0.16
|
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)
|
|
$
3.76
|
|
$
3.63
|
|
|
(1) Transaction and
transition-related expenses represent costs incurred attributable
to the acquisition and integration of FCG including, but not
limited to, transaction costs, transition services, consulting,
system integration, rebranding and legal fees.
|
|
(2) Weighted average
shares for the three and nine months ended September 30, 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 September 30, 2024 and 2023
Consolidated Results
|
Three Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
|
Adjusted gross
margin**
|
$
121,937
|
|
$
94,453
|
|
$
27,484
|
|
29.1 %
|
|
Depreciation,
amortization and property taxes
|
24,998
|
|
23,800
|
|
1,198
|
|
5.0 %
|
|
FCG transaction and
transition-related expenses
|
819
|
|
3,899
|
|
(3,080)
|
|
(79.0) %
|
|
Other operating
expenses
|
55,202
|
|
46,526
|
|
8,676
|
|
18.6 %
|
|
Operating
income
|
$
40,918
|
|
$
20,228
|
|
$
20,690
|
|
102.3 %
|
Operating income for the third quarter of 2024 was $40.9 million, an increase of $20.7 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 $17.6 million or
73.0 percent compared to the prior-year period. An increase in
adjusted gross margin in the third quarter of 2024 was driven by
contributions from the acquisition of FCG, incremental margin from
regulated infrastructure programs, continued pipeline expansion
projects, increased demand for virtual pipeline services and
natural gas organic growth. Higher operating expenses were driven
largely by the operating expenses of FCG and increased payroll,
benefits and other employee-related expenses compared to the
prior-year period. Increases in depreciation, amortization and
property taxes attributable to growth projects and FCG were
partially offset by a $3.2 million
reserve surplus amortization mechanism ("RSAM") adjustment from FCG
and lower depreciation from our electric operations and
Maryland natural gas division due
to revised rates from approved depreciation studies.
Regulated Energy Segment
|
Three Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
|
Adjusted gross
margin**
|
$
102,267
|
|
$
75,893
|
|
$
26,374
|
|
34.8 %
|
|
Depreciation,
amortization and property taxes
|
19,853
|
|
18,891
|
|
962
|
|
5.1 %
|
|
FCG transaction and
transition-related expenses
|
819
|
|
3,899
|
|
(3,080)
|
|
(79.0) %
|
|
Other operating
expenses
|
37,660
|
|
28,191
|
|
9,469
|
|
33.6 %
|
|
Operating
income
|
$
43,935
|
|
$
24,912
|
|
$
19,023
|
|
76.4 %
|
The key components of the increase in adjusted gross margin**
are shown below:
|
(in
thousands)
|
|
|
Contribution from
FCG
|
$
23,399
|
|
Margin from regulated
infrastructure programs
|
1,806
|
|
Natural gas
transmission service expansions, including interim
services
|
1,548
|
|
Natural gas growth
including conversions (excluding service expansions)
|
1,013
|
|
Changes in customer
consumption
|
(361)
|
|
Other
variances
|
(1,031)
|
|
Quarter-over-quarter
increase in adjusted gross margin**
|
$
26,374
|
The major components of the increase in other operating expenses
are as follows:
|
(in
thousands)
|
|
|
FCG operating
expenses
|
$
7,476
|
|
Payroll, benefits and
other employee-related expenses
|
1,223
|
|
Insurance related
costs
|
222
|
|
Other
variances
|
548
|
|
Quarter-over-quarter
increase in other operating expenses
|
$
9,469
|
Unregulated Energy Segment
|
Three Months
Ended
September 30,
|
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
|
Adjusted gross
margin**
|
$
19,699
|
|
$
18,589
|
|
$
1,110
|
|
6.0 %
|
|
Depreciation,
amortization and property taxes
|
5,144
|
|
4,902
|
|
242
|
|
4.9 %
|
|
Other operating
expenses
|
17,616
|
|
18,410
|
|
(794)
|
|
(4.3) %
|
|
Operating
loss
|
$
(3,061)
|
|
$
(4,723)
|
|
$
1,662
|
|
35.2 %
|
Operating results for the second and third quarters historically
have been lower due to reduced customer demand during warmer
periods of the year. The impact to operating income may not align
with the seasonal variations in adjusted gross margin as many of
the operating expenses are recognized ratably over the course of
the year.
The major components of the increase in adjusted gross margin**
are shown below:
|
(in
thousands)
|
|
|
|
Propane
Operations
|
|
|
|
Contributions from
acquisition
|
|
$
135
|
|
CNG/RNG/LNG
Transportation and Infrastructure
|
|
|
|
Increased level of
virtual pipeline services
|
|
1,098
|
|
Other
variances
|
|
(123)
|
|
Quarter-over-quarter
increase in adjusted gross margin**
|
|
$
1,110
|
The major components of the decrease in other operating expenses
are as follows:
|
(in
thousands)
|
|
|
|
Payroll, benefits and
other employee-related expenses
|
|
$
(515)
|
|
Other
variances
|
|
(279)
|
|
Quarter-over-quarter
decrease in other operating expenses
|
|
$
(794)
|
Operating Results for the Nine Months Ended
September 30, 2024 and 2023
Consolidated Results
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
|
Adjusted gross
margin**
|
$
413,096
|
|
$
323,791
|
|
$
89,305
|
|
27.6 %
|
|
Depreciation,
amortization and property taxes
|
77,811
|
|
70,918
|
|
6,893
|
|
9.7 %
|
|
FCG transaction and
transition-related expenses
|
3,114
|
|
3,899
|
|
(785)
|
|
(20.1) %
|
|
Other operating
expenses
|
170,878
|
|
145,486
|
|
25,392
|
|
17.5 %
|
|
Operating
income
|
$
161,293
|
|
$
103,488
|
|
$
57,805
|
|
55.9 %
|
Operating income for the first nine months of 2024 was
$161.3 million, an increase of
$57.8 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 $57.0
million or 53.1 percent compared to the prior-year period.
An increase in adjusted gross margin in the first nine months of
2024 was driven by contributions from the acquisition of FCG,
incremental margin from regulatory initiatives, natural gas organic
growth and continued pipeline expansion projects, higher customer
consumption and increased margins from the Company's unregulated
businesses. Higher operating expenses during the current period
were driven largely by the operating expenses of FCG and increased
insurance costs. These increases were partially offset by lower
payroll, benefits and other employee-related expenses compared to
the prior-year period. Increases in depreciation, amortization and
property taxes attributable to growth projects and FCG were
partially offset by an $8.9 million
RSAM adjustment from FCG and lower depreciation from our electric
operations and Maryland natural
gas division due to revised rates from approved depreciation
studies.
Regulated Energy Segment
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
|
Adjusted gross
margin**
|
$
324,022
|
|
$
240,130
|
|
$
83,892
|
|
34.9 %
|
|
Depreciation,
amortization and property taxes
|
63,671
|
|
56,415
|
|
7,256
|
|
12.9 %
|
|
FCG transaction and
transition-related expenses
|
3,114
|
|
3,899
|
|
(785)
|
|
(20.1) %
|
|
Other operating
expenses
|
114,688
|
|
87,988
|
|
26,700
|
|
30.3 %
|
|
Operating
income
|
$
142,549
|
|
$
91,828
|
|
$
50,721
|
|
55.2 %
|
The key components of the increase in adjusted gross margin**
are shown below:
|
(in
thousands)
|
|
|
Contribution from
FCG
|
$
71,725
|
|
Margin from regulated
infrastructure programs
|
4,424
|
|
Natural gas growth
including conversions (excluding service expansions)
|
4,182
|
|
Natural gas
transmission service expansions, including interim
services
|
3,702
|
|
Rate changes associated
with the Florida natural gas base rate proceeding
(1)
|
1,630
|
|
Eastern Shore
contracted rate adjustments
|
(238)
|
|
Other
variances
|
(1,533)
|
|
Period-over-period
increase in adjusted gross margin**
|
$
83,892
|
|
|
(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
|
$
25,363
|
|
Facilities, maintenance
costs and outside services
|
677
|
|
Insurance related
costs
|
651
|
|
Other
variances
|
9
|
|
Period-over-period
increase in other operating expenses
|
$
26,700
|
Unregulated Energy Segment
|
Nine Months
Ended
September
30,
|
|
|
|
|
|
(in
thousands)
|
2024
|
|
2023
|
|
Change
|
|
Percent
Change
|
|
Adjusted gross
margin**
|
$
89,161
|
|
$
83,818
|
|
$
5,343
|
|
6.4 %
|
|
Depreciation,
amortization and property taxes
|
14,142
|
|
14,500
|
|
(358)
|
|
(2.5) %
|
|
Other operating
expenses
|
56,413
|
|
57,789
|
|
(1,376)
|
|
(2.4) %
|
|
Operating
income
|
$
18,606
|
|
$
11,529
|
|
$
7,077
|
|
61.4 %
|
The major components of the change in adjusted gross margin**
are shown below:
|
(in
thousands)
|
|
|
|
Propane
Operations
|
|
|
|
Increased propane
customer consumption
|
|
$
1,261
|
|
Contributions from
acquisition
|
|
733
|
|
Increased propane
margins and service fees
|
|
521
|
|
CNG/RNG/LNG
Transportation and Infrastructure
|
|
|
|
Increased level of
virtual pipeline services
|
|
1,585
|
|
Aspire
Energy
|
|
|
|
Increased margins -
rate changes and gathering fees
|
|
1,267
|
|
Other
variances
|
|
(24)
|
|
Period-over-period
increase in adjusted gross margin**
|
|
$
5,343
|
The major components of the decrease in other operating expenses
are as follows:
|
(in
thousands)
|
|
|
|
Vehicle
expenses
|
|
$
575
|
|
Insurance related
costs
|
|
456
|
|
Payroll, benefits and
other employee-related expenses
|
|
(1,598)
|
|
Facilities, maintenance
costs, and outside services
|
|
(631)
|
|
Other
variances
|
|
(178)
|
|
Period-over-period
decrease in other operating expenses
|
|
$
(1,376)
|
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 third 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
Friday, November 8, 2024 at 8:30 a.m.
Eastern Time to discuss the Company's financial results for
the three and nine months ended September 30, 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: 800.245.3074
International: 203.518.9765
Conference ID: CPKQ324
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
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Adjusted Gross
Margin
|
|
|
|
|
|
|
|
|
Regulated Energy
segment
|
$
102,267
|
|
$
75,893
|
|
$
324,022
|
|
$ 240,130
|
|
Unregulated
Energy segment
|
19,699
|
|
18,589
|
|
89,161
|
|
83,818
|
|
Other businesses
and eliminations
|
(29)
|
|
(29)
|
|
(87)
|
|
(157)
|
|
Total Adjusted Gross
Margin**
|
$
121,937
|
|
$
94,453
|
|
$
413,096
|
|
$ 323,791
|
|
|
|
|
|
|
|
|
|
Operating Income
(Loss)
|
|
|
|
|
|
|
|
|
Regulated
Energy segment
|
$
43,935
|
|
$
24,912
|
|
$
142,549
|
|
$
91,828
|
|
Unregulated Energy segment
|
(3,061)
|
|
(4,723)
|
|
18,606
|
|
11,529
|
|
Other
businesses and eliminations
|
44
|
|
39
|
|
138
|
|
131
|
|
Total Operating
Income
|
40,918
|
|
20,228
|
|
161,293
|
|
103,488
|
|
Other income (expense),
net
|
400
|
|
(72)
|
|
1,705
|
|
1,036
|
|
Interest
charges
|
17,022
|
|
7,076
|
|
50,861
|
|
21,272
|
|
Income Before Income
Taxes
|
24,296
|
|
13,080
|
|
112,137
|
|
83,252
|
|
Income taxes
|
6,789
|
|
3,673
|
|
30,191
|
|
21,368
|
|
Net
Income
|
$
17,507
|
|
$ 9,407
|
|
$ 81,946
|
|
$
61,884
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding: (1)
|
|
|
|
|
|
|
|
|
Basic
|
22,501
|
|
17,797
|
|
22,346
|
|
17,784
|
|
Diluted
|
22,564
|
|
17,858
|
|
22,402
|
|
17,847
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
of Common Stock
|
|
|
|
|
|
|
|
|
Basic
|
$
0.78
|
|
$ 0.53
|
|
$
3.67
|
|
$ 3.48
|
|
Diluted
|
$
0.78
|
|
$ 0.53
|
|
$
3.66
|
|
$ 3.47
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
and Adjusted Earnings Per Share
|
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
$
17,507
|
|
$ 9,407
|
|
$ 81,946
|
|
$
61,884
|
|
FCG transaction and
transition-related-expenses, net (2)
|
593
|
|
2,804
|
|
2,276
|
|
2,898
|
|
Adjusted Net Income
(Non-GAAP)**
|
$
18,100
|
|
$
12,211
|
|
$ 84,222
|
|
$
64,782
|
|
|
|
|
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
$
0.78
|
|
$ 0.53
|
|
$
3.66
|
|
$ 3.47
|
|
FCG transaction and
transition-related-expenses, net (2)
|
0.02
|
|
0.16
|
|
0.10
|
|
0.16
|
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)**
|
$
0.80
|
|
$ 0.69
|
|
$
3.76
|
|
$ 3.63
|
|
|
(1) Weighted average shares for the
three and nine months ended September 30, 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, transaction costs, transition services, consulting,
system integration, rebranding and legal fees.
|
Financial Summary Highlights
Key variances between the third quarter of 2023 and 2024
included:
|
(in thousands,
except per share data)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
|
Third Quarter of
2023 Adjusted Results**
|
|
$
16,979
|
|
$
12,211
|
|
$
0.69
|
|
|
|
|
|
|
|
|
Increased Adjusted
Gross Margins:
|
|
|
|
|
|
|
|
Contributions from
acquisitions
|
|
23,534
|
|
16,958
|
|
0.75
|
|
Margin from regulated
infrastructure programs*
|
|
1,806
|
|
1,301
|
|
0.06
|
|
Natural gas
transmission service expansions, including interim
services*
|
|
1,548
|
|
1,115
|
|
0.05
|
|
Increased level of
virtual pipeline services
|
|
1,098
|
|
791
|
|
0.04
|
|
Natural gas growth
including conversions (excluding service expansions)
|
|
1,013
|
|
730
|
|
0.03
|
|
Changes in customer
consumption
|
|
(651)
|
|
(469)
|
|
(0.02)
|
|
|
28,348
|
|
20,426
|
|
0.91
|
|
|
|
|
|
|
|
|
Increased Operating
Expenses (Excluding Natural Gas, Propane, and Electric
Costs):
|
|
|
|
|
|
|
|
FCG operating
expenses
|
|
(8,680)
|
|
(6,255)
|
|
(0.28)
|
|
Payroll, benefits and
other employee-related expenses
|
|
(708)
|
|
(510)
|
|
(0.02)
|
|
|
(9,388)
|
|
(6,765)
|
|
(0.30)
|
|
|
|
|
|
|
|
|
Interest
charges
|
|
(9,946)
|
|
(7,167)
|
|
(0.32)
|
|
Increase in shares
outstanding due to 2023 and 2024 equity offerings***
|
|
—
|
|
—
|
|
(0.14)
|
|
Net other
changes
|
|
(878)
|
|
(605)
|
|
(0.04)
|
|
|
(10,824)
|
|
(7,772)
|
|
(0.50)
|
|
Third
Quarter of 2024 Adjusted Results**
|
|
$
25,115
|
|
$
18,100
|
|
$
0.80
|
|
|
|
*
|
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.
|
|
***
|
Reflects the impact of
4.4 million common shares issued in November 2023 in
connection with the acquisition of FCG and shares also issued in
2024.
|
Key variances between the nine months ended September 30, 2023 and September 30, 2024 included:
|
(in thousands,
except per share data)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
|
Nine months ended
September 30, 2023 Adjusted Results**
|
|
$
87,151
|
|
$
64,782
|
|
$
3.63
|
|
|
|
|
|
|
|
|
Non-recurring
Items:
|
|
|
|
|
|
|
|
Absence of benefit
associated with a reduction in the PA state tax rate
|
|
—
|
|
(1,284)
|
|
(0.06)
|
|
|
—
|
|
(1,284)
|
|
(0.06)
|
|
|
|
|
|
|
|
|
Increased Adjusted
Gross Margins:
|
|
|
|
|
|
|
|
Contributions from
acquisitions
|
|
72,458
|
|
52,952
|
|
2.36
|
|
Margin from regulated
infrastructure programs*
|
|
4,424
|
|
3,233
|
|
0.14
|
|
Natural gas growth
including conversions (excluding service expansions)
|
|
4,182
|
|
3,056
|
|
0.14
|
|
Natural gas
transmission service expansions, including interim
services*
|
|
3,702
|
|
2,706
|
|
0.12
|
|
Rate changes associated
with the Florida natural gas base rate proceeding*
|
|
1,630
|
|
1,191
|
|
0.05
|
|
Increased level of
virtual pipeline services
|
|
1,585
|
|
1,158
|
|
0.05
|
|
Improved Aspire Energy
performance - rate changes and gathering fees
|
|
1,267
|
|
926
|
|
0.04
|
|
Changes in customer
consumption
|
|
1,191
|
|
870
|
|
0.04
|
|
Increased propane
margins and fees
|
|
521
|
|
381
|
|
0.02
|
|
|
90,960
|
|
66,473
|
|
2.96
|
|
|
|
|
|
|
|
|
(Increased)
Decreased Operating Expenses (Excluding Natural Gas, Propane, and
Electric Costs):
|
|
|
|
|
|
|
|
FCG operating
expenses
|
|
(28,813)
|
|
(21,057)
|
|
(0.94)
|
|
Depreciation,
amortization and property tax costs (includes FCG)
|
|
(3,441)
|
|
(2,515)
|
|
(0.11)
|
|
Insurance related
costs
|
|
(1,107)
|
|
(809)
|
|
(0.04)
|
|
Payroll, benefits and
other employee-related expenses
|
|
1,484
|
|
1,084
|
|
0.05
|
|
|
(31,877)
|
|
(23,297)
|
|
(1.04)
|
|
|
|
|
|
|
|
|
Interest
charges
|
|
(29,589)
|
|
(21,623)
|
|
(0.97)
|
|
Increase in shares
outstanding due to 2023 and 2024 equity offerings***
|
|
—
|
|
—
|
|
(0.74)
|
|
Net other
changes
|
|
(1,394)
|
|
(829)
|
|
(0.02)
|
|
|
(30,983)
|
|
(22,452)
|
|
(1.73)
|
|
Nine months
ended September 30, 2024 Adjusted
Results**
|
|
$
115,251
|
|
$
84,222
|
|
$
3.76
|
|
*
|
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.
|
|
***
|
Reflects the impact of
4.4 million common shares issued in November 2023 in
connection with the acquisition of FCG and shares also issued in
2024.
|
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 incremental margin associated with 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, as compared to the Company's
prior quarterly filings. A comprehensive discussion of all projects
and initiatives reflected in the table below can be found in the
Company's third quarter 2024 Quarterly Report on Form 10-Q.
|
Adjusted Gross
Margin
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
Year
Ended
|
|
Estimate
for
|
|
September
30,
|
|
September
30,
|
|
December
31,
|
|
Fiscal
|
|
(in
thousands)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
2023
|
|
2024
|
|
2025
|
|
Pipeline
Expansions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern
Expansion
|
$
586
|
|
$
100
|
|
$ 1,758
|
|
$
586
|
|
$
586
|
|
$ 2,344
|
|
$ 2,344
|
|
Beachside Pipeline
Expansion
|
603
|
|
603
|
|
1,809
|
|
1,206
|
|
1,810
|
|
2,451
|
|
2,414
|
|
St. Cloud / Twin Lakes
Expansion
|
146
|
|
118
|
|
438
|
|
118
|
|
264
|
|
584
|
|
2,752
|
|
Wildlight
|
566
|
|
178
|
|
970
|
|
271
|
|
471
|
|
1,423
|
|
2,996
|
|
Lake Wales
|
114
|
|
114
|
|
342
|
|
152
|
|
265
|
|
454
|
|
454
|
|
Newberry
|
646
|
|
—
|
|
718
|
|
—
|
|
—
|
|
1,364
|
|
2,585
|
|
Boynton
Beach
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3,342
|
|
New Smyrna
Beach
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,710
|
|
Central Florida
Reinforcement
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
98
|
|
1,959
|
|
Warwick
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
258
|
|
1,858
|
|
Renewable Natural Gas
Supply Projects
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,460
|
|
Total Pipeline
Expansions
|
2,661
|
|
1,113
|
|
6,035
|
|
2,333
|
|
3,396
|
|
8,976
|
|
27,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CNG/RNG/LNG
Transportation and Infrastructure
|
3,498
|
|
2,385
|
|
10,438
|
|
8,811
|
|
11,181
|
|
14,000
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
Initiatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida GUARD
program
|
982
|
|
90
|
|
2,436
|
|
90
|
|
353
|
|
3,566
|
|
6,333
|
|
FCG SAFE
Program
|
1,051
|
|
—
|
|
2,152
|
|
—
|
|
—
|
|
3,337
|
|
6,534
|
|
Capital Cost Surcharge
Programs
|
765
|
|
687
|
|
2,373
|
|
2,110
|
|
2,829
|
|
3,167
|
|
4,374
|
|
Florida Rate Case
Proceeding (1)
|
3,991
|
|
3,991
|
|
13,591
|
|
11,961
|
|
15,835
|
|
17,153
|
|
17,153
|
|
Maryland Rate Case
(2)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
TBD
|
|
TBD
|
|
Delaware Rate Case
(3)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
TBD
|
|
TBD
|
|
Electric Rate Case
(4)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
TBD
|
|
TBD
|
|
Electric Storm
Protection Plan
|
717
|
|
298
|
|
2,024
|
|
940
|
|
1,326
|
|
3,133
|
|
5,581
|
|
Total Regulatory
Initiatives
|
7,506
|
|
5,066
|
|
22,576
|
|
15,101
|
|
20,343
|
|
30,356
|
|
39,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
13,665
|
|
$ 8,564
|
|
$
39,049
|
|
$
26,245
|
|
$
34,920
|
|
$
53,332
|
|
$
82,849
|
|
|
(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.
|
|
(3) Rate case application and
depreciation study filed with the Delaware PSC in August 2024. See
additional information provided below.
|
|
(4) Rate case application filed with
the Florida PSC in August 2024. See additional information provided
below.
|
Detailed Discussion of Major Projects and
Initiatives
Pipeline Expansions
St. Cloud / Twin Lakes
Expansion
In February
2024, Peninsula Pipeline filed a petition with the Florida
Public Service Commission ("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 project in May 2024, and
it is expected to be complete in the fourth quarter of 2025.
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, and conversions of the community gas systems began in
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.
Construction is projected to be complete in the first and second
quarters of 2025 for Boynton Beach
and New Smyrna Beach,
respectively.
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 around the Plant City and
Lake Mattie areas of Florida with
an additional 5,000 Dts/day and 8,700 Dts/day, respectively. The
Florida PSC approved the projects in May
2024. Completion of the projects is projected for the fourth
quarter of 2024 for Plant City and
the fourth quarter of 2025 for Lake Mattie.
Warwick
In
July 2024, the Company announced
plans to extend Eastern Shore's transmission deliverability by
constructing an additional 4.4 miles of six inch steel pipeline.
The project will reinforce the supply and growth for our
Delaware division distribution
system and expand natural gas service further into Maryland for anticipated future growth. The
project is estimated to be in service during the fourth quarter of
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 supports continued customer growth and system
reinforcement of these distribution systems. The Florida PSC
approved the petition in July
2024.
Renewable Natural Gas Supply Projects
In
February 2024, Peninsula Pipeline
filed a petition with the Florida PSC for approval of
Transportation Service Agreements with FCG for projects that will
support the transportation of additional renewable energy supply to
FCG. The projects, located in Florida's Brevard, Indian
River and Miami-Dade
counties, will bring renewable natural gas produced from local
landfills into FCG's natural gas distribution 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. Benefits of these projects
include increased gas supply to serve expected FCG growth,
strengthened system reliability and additional system flexibility.
The Florida PSC approved the petition at its July 2024 meeting with the projects estimated to
be completed in the first half of 2025.
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, the Company is
seeking approval of the following: (i) permanent rate relief of
approximately $6.9 million with a
return on equity ("ROE") of 11.5 percent; (ii) authorization to
make certain changes to tariffs to include a unified rate structure
and to consolidate the Maryland
natural gas distribution businesses which is anticipated to be
called Chesapeake Utilities of Maryland, Inc.; and (iii) authorization to
establish a rider for recovery of the costs associated with the
Company's new technology systems. In August
2024, the Maryland natural
gas distribution businesses, the Maryland Office of Peoples'
Counsel ("OPC") and PSC Staff reached a settlement agreement which
provided for, among other things, an increase in annual base rates
of $2.6 million. In September 2024, the Maryland Public Utility Judge
issued an order approving the settlement agreement in part. The
$2.6 million increase in annual base
rates was approved and the Company will file a Phase II filing to
determine rate design across the Maryland natural gas distribution businesses,
consolidation of the applicable tariffs and recovery of technology
costs. The outcome of the application is subject to review and
approval by the Maryland PSC.
Maryland Natural Gas Depreciation Study
In
January 2024, the Company's
Maryland natural gas distribution
businesses filed a joint petition for approval of its proposed
unified depreciation rates with the Maryland PSC. A settlement
agreement between the Company, PSC staff and the Maryland OPC
Counsel was reached and the final order approving the settlement
agreement went into effect in July
2024, with new depreciation rates effective as of
January 1, 2023. The approved
depreciation rates will result in an annual reduction in
depreciation expense of approximately $1.2
million.
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. These
modifications will require an estimated additional $50.0 million in capital expenditures associated
with the SAFE Program, which would increase the total projected
capital expenditures to approximately $255.0
million over a 10-year period. The Florida PSC approved the
modifications in September 2024.
Delaware Natural Gas Rate Case
In August 2024, the Company's Delaware natural gas division filed an
application for a natural gas rate case with the Delaware PSC. In
connection with the application, the Company is seeking approval of
the following: (i) permanent rate relief of approximately
$12.1 million with a ROE of 11.5
percent; (ii) proposed changes to depreciation rates which were
part of a depreciation study also submitted with the filing; and
(iii) authorization to make certain changes to the existing
tariffs. In September 2024, interim
rates were approved by the Delaware PSC in the amount of
$2.5 million on an annualized basis
effective in October 2024. The
discovery process has commenced and hearing for the proceeding has
been scheduled for May 2025. The
outcome of the application is subject to review and approval by the
Delaware PSC.
FPU Electric Rate Case
In August 2024, the Company's Florida Electric
division filed a petition with the Florida PSC seeking a general
base rate increase of $12.6 million
with a ROE of 11.3 percent based on a 2025 projected test year. The
outcome of the application will be subject to review and approval
by the Florida PSC. In October 2024,
annualized interim rates of approximately $1.8 million were approved with an effective date
of November 1, 2024.
Other Major Factors Influencing Adjusted Gross Margin
Weather and Consumption
Weather was not a
significant factor to adjusted gross margin in the third quarter of
2024 compared to the same period in 2023.
For the nine months ended September 30,
2024, higher consumption which includes the effects of
colder weather conditions compared to the prior-year period
resulted in a $1.2 million
increase in adjusted gross margin. While temperatures through
September 30, 2024 were colder than the prior-year
period, they were approximately 13.2 percent and 13.1
percent warmer, respectively, compared to normal temperatures
in our Delmarva and Ohio service
territories.
The following table summarizes HDD and CDD variances from the
10-year average HDD/CDD ("Normal") for the three and nine months
ended September 30, 2024 and
2023.
|
Three Months
Ended
|
|
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
|
|
September
30,
|
|
|
|
2024
|
|
2023
|
|
Variance
|
|
2024
|
|
2023
|
|
Variance
|
|
Delmarva
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
6
|
|
19
|
|
(13)
|
|
2,287
|
|
2,069
|
|
218
|
|
10-Year Average HDD
("Normal")
|
27
|
|
38
|
|
(11)
|
|
2,635
|
|
2,731
|
|
(96)
|
|
Variance from
Normal
|
(21)
|
|
(19)
|
|
|
|
(348)
|
|
(662)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
—
|
|
1
|
|
(1)
|
|
511
|
|
371
|
|
140
|
|
10-Year Average HDD
("Normal")
|
1
|
|
1
|
|
—
|
|
512
|
|
550
|
|
(38)
|
|
Variance from
Normal
|
(1)
|
|
—
|
|
|
|
(1)
|
|
(179)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ohio
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual HDD
|
43
|
|
86
|
|
(43)
|
|
3,180
|
|
3,148
|
|
32
|
|
10-Year Average HDD
("Normal")
|
65
|
|
65
|
|
—
|
|
3,661
|
|
3,661
|
|
—
|
|
Variance from
Normal
|
(22)
|
|
21
|
|
|
|
(481)
|
|
(513)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual CDD
|
1,528
|
|
1,533
|
|
(5)
|
|
2,824
|
|
2,793
|
|
31
|
|
10-Year Average CDD
("Normal")
|
1,420
|
|
1,391
|
|
29
|
|
2,615
|
|
2,535
|
|
80
|
|
Variance from
Normal
|
108
|
|
142
|
|
|
|
209
|
|
258
|
|
|
Natural Gas Distribution Growth
The average number of residential customers served on the
Delmarva Peninsula increased by approximately 3.9 percent for the
three and nine months ended September 30,
2024 while our legacy Florida Natural Gas distribution
business increased by approximately 3.9 percent and 3.7 percent,
respectively, during the same periods.
The details of the adjusted gross margin increase are provided
in the following table:
|
Adjusted Gross
Margin**
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September 30,
2024
|
|
September 30,
2024
|
|
(in
thousands)
|
Delmarva
Peninsula
|
|
Florida
|
|
Delmarva
Peninsula
|
|
Florida
|
|
Customer
growth:
|
|
|
|
|
|
|
|
|
Residential
|
$
276
|
|
$
470
|
|
$
1,118
|
|
$
1,997
|
|
Commercial and
industrial
|
172
|
|
95
|
|
452
|
|
615
|
|
Total customer
growth (1)
|
$
448
|
|
$
565
|
|
$
1,570
|
|
$
2,612
|
|
(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 $256.8 million for the nine months ended
September 30, 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
|
$ 160,000
|
|
$
190,000
|
|
Natural gas
transmission
|
75,000
|
|
90,000
|
|
Electric
distribution
|
30,000
|
|
38,000
|
|
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.
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 49 percent as of
September 30, 2024.
|
Chesapeake Utilities
Corporation and Subsidiaries
Condensed
Consolidated Statements of Income (Unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
September
30,
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
Operating
Revenues
|
|
|
|
|
|
|
|
|
|
Regulated
Energy
|
|
$
130,633
|
|
$ 102,411
|
|
$ 429,684
|
|
$ 345,822
|
|
Unregulated
Energy
|
|
35,567
|
|
34,970
|
|
160,089
|
|
158,886
|
|
Other businesses and
eliminations
|
|
(6,062)
|
|
(5,834)
|
|
(17,619)
|
|
(19,439)
|
|
Total Operating
Revenues
|
|
160,138
|
|
131,547
|
|
572,154
|
|
485,269
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
Natural gas and
electricity costs
|
|
28,366
|
|
26,518
|
|
105,662
|
|
105,692
|
|
Propane and
natural gas costs
|
|
9,835
|
|
10,576
|
|
53,396
|
|
55,786
|
|
Operations
|
|
49,519
|
|
41,217
|
|
153,418
|
|
128,147
|
|
FCG transaction
and transition-related expenses
|
|
819
|
|
3,899
|
|
3,114
|
|
3,899
|
|
Maintenance
|
|
5,062
|
|
5,125
|
|
16,526
|
|
15,487
|
|
Depreciation and
amortization
|
|
16,851
|
|
17,610
|
|
51,744
|
|
52,096
|
|
Other
taxes
|
|
8,768
|
|
6,374
|
|
27,001
|
|
20,674
|
|
Total operating
expenses
|
|
119,220
|
|
111,319
|
|
410,861
|
|
381,781
|
|
Operating
Income
|
|
40,918
|
|
20,228
|
|
161,293
|
|
103,488
|
|
Other income (expense),
net
|
|
400
|
|
(72)
|
|
1,705
|
|
1,036
|
|
Interest
charges
|
|
17,022
|
|
7,076
|
|
50,861
|
|
21,272
|
|
Income Before Income
Taxes
|
|
24,296
|
|
13,080
|
|
112,137
|
|
83,252
|
|
Income taxes
|
|
6,789
|
|
3,673
|
|
30,191
|
|
21,368
|
|
Net
Income
|
|
$
17,507
|
|
$
9,407
|
|
$
81,946
|
|
$
61,884
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
22,501
|
|
17,797
|
|
22,346
|
|
17,784
|
|
Diluted
|
|
22,564
|
|
17,858
|
|
22,402
|
|
17,847
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share
of Common Stock:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.78
|
|
$
0.53
|
|
$
3.67
|
|
$
3.48
|
|
Diluted
|
|
$
0.78
|
|
$
0.53
|
|
$
3.66
|
|
$
3.47
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
and Adjusted Earnings Per Share
|
|
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
|
$
17,507
|
|
$
9,407
|
|
$
81,946
|
|
$
61,884
|
|
FCG transaction and
transition-related expenses, net (1)
|
|
593
|
|
2,804
|
|
2,276
|
|
2,898
|
|
Adjusted Net Income
(Non-GAAP)**
|
|
$
18,100
|
|
$
12,211
|
|
$
84,222
|
|
$
64,782
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share -
Diluted (GAAP)
|
|
$
0.78
|
|
$
0.53
|
|
$
3.66
|
|
$
3.47
|
|
FCG transaction and
transition-related expenses, net (1)
|
|
0.02
|
|
0.16
|
|
0.10
|
|
0.16
|
|
Adjusted Earnings
Per Share - Diluted (Non-GAAP)**
|
|
$
0.80
|
|
$
0.69
|
|
$
3.76
|
|
$
3.63
|
|
|
(1) Transaction and
transition-related expenses represent costs incurred attributable
to the acquisition and integration of FCG including, but not
limited to, transaction costs, transition services, consulting,
system integration, rebranding and legal fees.
|
|
Chesapeake Utilities
Corporation and Subsidiaries
Consolidated Balance
Sheets (Unaudited)
|
|
Assets
|
|
September
30,
2024
|
|
December 31,
2023
|
|
(in thousands,
except per share data)
|
|
|
|
|
|
Property, Plant and
Equipment
|
|
|
|
|
|
Regulated
Energy
|
|
$
2,600,087
|
|
$
2,418,494
|
|
Unregulated
Energy
|
|
426,127
|
|
410,807
|
|
Other businesses and
eliminations
|
|
32,136
|
|
30,310
|
|
Total property, plant
and equipment
|
|
3,058,350
|
|
2,859,611
|
|
Less: Accumulated
depreciation and amortization
|
|
(556,421)
|
|
(516,429)
|
|
Plus: Construction work
in progress
|
|
156,180
|
|
113,192
|
|
Net property, plant and
equipment
|
|
2,658,109
|
|
2,456,374
|
|
Current
Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
1,609
|
|
4,904
|
|
Trade and other
receivables
|
|
57,113
|
|
74,485
|
|
Less: Allowance for
credit losses
|
|
(2,739)
|
|
(2,699)
|
|
Trade and other
receivables, net
|
|
54,374
|
|
71,786
|
|
Accrued
revenue
|
|
23,634
|
|
32,597
|
|
Propane inventory, at
average cost
|
|
6,781
|
|
9,313
|
|
Other inventory, at
average cost
|
|
21,139
|
|
19,912
|
|
Regulatory
assets
|
|
20,446
|
|
19,506
|
|
Storage gas
prepayments
|
|
4,339
|
|
4,695
|
|
Income taxes
receivable
|
|
12,563
|
|
3,829
|
|
Prepaid
expenses
|
|
18,965
|
|
15,407
|
|
Derivative assets, at
fair value
|
|
405
|
|
1,027
|
|
Other current
assets
|
|
2,232
|
|
2,723
|
|
Total current
assets
|
|
166,487
|
|
185,699
|
|
Deferred Charges and
Other Assets
|
|
|
|
|
|
Goodwill
|
|
507,852
|
|
508,174
|
|
Other intangible
assets, net
|
|
15,475
|
|
16,865
|
|
Investments, at fair
value
|
|
14,156
|
|
12,282
|
|
Derivative assets, at
fair value
|
|
122
|
|
40
|
|
Operating lease
right-of-use assets
|
|
10,945
|
|
12,426
|
|
Regulatory
assets
|
|
81,899
|
|
96,396
|
|
Receivables and other
deferred charges
|
|
12,147
|
|
16,448
|
|
Total deferred charges
and other assets
|
|
642,596
|
|
662,631
|
|
Total
Assets
|
|
$
3,467,192
|
|
$
3,304,704
|
|
Chesapeake Utilities
Corporation and Subsidiaries
Consolidated
Balance Sheets (Unaudited)
|
|
Capitalization and
Liabilities
|
|
September
30,
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)
|
|
11,085
|
|
10,823
|
|
Additional paid-in
capital
|
|
812,896
|
|
749,356
|
|
Retained
earnings
|
|
528,426
|
|
488,663
|
|
Accumulated other
comprehensive loss
|
|
(4,135)
|
|
(2,738)
|
|
Deferred compensation
obligation
|
|
9,775
|
|
9,050
|
|
Treasury
stock
|
|
(9,775)
|
|
(9,050)
|
|
Total stockholders'
equity
|
|
1,348,272
|
|
1,246,104
|
|
Long-term debt, net of
current maturities
|
|
1,172,956
|
|
1,187,075
|
|
Total
capitalization
|
|
2,521,228
|
|
2,433,179
|
|
Current
Liabilities
|
|
|
|
|
|
Current portion of
long-term debt
|
|
18,522
|
|
18,505
|
|
Short-term
borrowing
|
|
214,753
|
|
179,853
|
|
Accounts
payable
|
|
70,138
|
|
77,481
|
|
Customer deposits and
refunds
|
|
47,408
|
|
46,427
|
|
Accrued
interest
|
|
13,776
|
|
7,020
|
|
Dividends
payable
|
|
14,492
|
|
13,119
|
|
Accrued
compensation
|
|
14,495
|
|
16,544
|
|
Regulatory
liabilities
|
|
14,762
|
|
13,719
|
|
Derivative
liabilities, at fair value
|
|
633
|
|
354
|
|
Other accrued
liabilities
|
|
25,832
|
|
13,362
|
|
Total current
liabilities
|
|
434,811
|
|
386,384
|
|
Deferred Credits and
Other Liabilities
|
|
|
|
|
|
Deferred income
taxes
|
|
289,208
|
|
259,082
|
|
Regulatory
liabilities
|
|
190,512
|
|
195,279
|
|
Environmental
liabilities
|
|
2,441
|
|
2,607
|
|
Other pension and
benefit costs
|
|
16,327
|
|
15,330
|
|
Derivative
liabilities, at fair value
|
|
2,030
|
|
927
|
|
Operating lease -
liabilities
|
|
9,157
|
|
10,550
|
|
Deferred investment
tax credits and other liabilities
|
|
1,478
|
|
1,366
|
|
Total deferred credits
and other liabilities
|
|
511,153
|
|
485,141
|
|
Environmental and other
commitments and contingencies (1)
|
|
|
|
|
|
Total Capitalization
and Liabilities
|
|
$
3,467,192
|
|
$
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 September 30, 2024
|
|
For the Three Months
Ended September 30, 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
|
$
8,277
|
|
$
9,583
|
|
$
12,026
|
|
$
16,053
|
|
$
8,663
|
|
$
9,862
|
|
$
16,967
|
|
Commercial and
Industrial
|
7,119
|
|
22,873
|
|
15,713
|
|
14,368
|
|
9,119
|
|
26,020
|
|
15,920
|
|
Other
(1)
|
2,375
|
|
4,485
|
|
5,710
|
|
(565)
|
|
217
|
|
2,441
|
|
(204)
|
|
Total Operating
Revenues
|
$
17,771
|
|
$
36,941
|
|
$
33,449
|
|
$
29,856
|
|
$
17,999
|
|
$
38,323
|
|
$
32,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (in Dts for
natural gas and MWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
237,744
|
|
347,995
|
|
341,010
|
|
100,207
|
|
245,612
|
|
325,445
|
|
102,699
|
|
Commercial and
Industrial
|
1,913,091
|
|
9,070,258
|
|
2,686,804
|
|
118,214
|
|
1,915,125
|
|
10,684,539
|
|
96,716
|
|
Other
|
59,512
|
|
659,557
|
|
1,496,698
|
|
—
|
|
62,277
|
|
—
|
|
—
|
|
Total
|
2,210,347
|
|
10,077,810
|
|
4,524,512
|
|
218,421
|
|
2,223,014
|
|
11,009,984
|
|
199,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
101,635
|
|
92,125
|
|
114,200
|
|
25,776
|
|
97,847
|
|
88,640
|
|
25,782
|
|
Commercial and
Industrial
|
8,322
|
|
8,494
|
|
8,567
|
|
7,354
|
|
8,208
|
|
8,411
|
|
7,382
|
|
Other
|
27
|
|
—
|
|
118
|
|
—
|
|
24
|
|
6
|
|
—
|
|
Total
|
109,984
|
|
100,619
|
|
122,885
|
|
33,130
|
|
106,079
|
|
97,057
|
|
33,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
Ended September 30, 2024
|
|
For the Nine Months
Ended September 30, 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
|
$
60,003
|
|
$
36,201
|
|
$
39,975
|
|
$
38,704
|
|
$
67,562
|
|
$
38,546
|
|
$
39,347
|
|
Commercial and
Industrial
|
35,009
|
|
80,647
|
|
52,115
|
|
37,285
|
|
41,637
|
|
80,499
|
|
39,913
|
|
Other
(1)
|
(2,262)
|
|
7,966
|
|
9,730
|
|
(3,623)
|
|
(6,696)
|
|
6,401
|
|
(805)
|
|
Total Operating
Revenues
|
$
92,750
|
|
$
124,814
|
|
$
101,820
|
|
$
72,366
|
|
$
102,503
|
|
$
125,446
|
|
$
78,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volumes (in Dts for
natural gas and MWHs for electric)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
3,499,276
|
|
1,714,914
|
|
1,367,409
|
|
243,454
|
|
3,302,125
|
|
1,551,348
|
|
238,051
|
|
Commercial and
Industrial
|
7,588,547
|
|
29,318,803
|
|
8,455,727
|
|
301,687
|
|
7,523,061
|
|
31,047,013
|
|
239,505
|
|
Other
|
207,213
|
|
1,962,689
|
|
4,566,210
|
|
—
|
|
213,600
|
|
627,934
|
|
—
|
|
Total
|
11,295,036
|
|
32,996,406
|
|
14,389,346
|
|
545,141
|
|
11,038,786
|
|
33,226,295
|
|
477,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
101,045
|
|
91,345
|
|
113,633
|
|
25,747
|
|
97,230
|
|
88,051
|
|
25,718
|
|
Commercial and
Industrial
|
8,361
|
|
8,484
|
|
8,545
|
|
7,361
|
|
8,242
|
|
8,408
|
|
7,373
|
|
Other
|
26
|
|
—
|
|
109
|
|
—
|
|
23
|
|
6
|
|
—
|
|
Total
|
109,432
|
|
99,829
|
|
122,287
|
|
33,108
|
|
105,495
|
|
96,465
|
|
33,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
