CHESAPEAKE UTILITIES CORP [CPK] Filings

10-Q 1 cpk-20220630.htm 10-Q cpk-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM			10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-11590



CHESAPEAKE UTILITIES CORPORATION (Exact name of registrant as specified in its charter)


Delaware						51-0064146
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

500 Energy Lane, Dover, Delaware 19901

(Address of principal executive offices, including Zip Code)

(302) 734-6799

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock - par value per share $0.4867	CPK	New York Stock Exchange, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Common Stock, par value $0.4867 — 17,737,871 shares outstanding as of July 29, 2022.

Table of Contents



PART I—FINANCIAL INFORMATION		1

ITEM 1.	FINANCIAL STATEMENTS	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	60

ITEM 4.	CONTROLS AND PROCEDURES	61

PART II—OTHER INFORMATION		62

ITEM 1.	LEGAL PROCEEDINGS	62

ITEM 1A.	RISK FACTORS	62

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	62

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	62

ITEM 5.	OTHER INFORMATION	62

ITEM 6.	EXHIBITS	63

SIGNATURES		64

Table of Contents

GLOSSARY OF DEFINITIONS

Adjusted Gross Margin: a non-GAAP measure calculated 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

Aspire Energy: Aspire Energy of Ohio, LLC, a wholly-owned subsidiary of Chesapeake Utilities

Aspire Energy Express: Aspire Energy Express, LLC, a wholly-owned subsidiary of Chesapeake Utilities

ASU: Accounting Standards Update issued by the FASB

ATM: At-the-market

CARES Act: Coronavirus Aid, Relief, and Economic Security Act

CDC: U.S. Centers for Disease Control and Prevention

CDD: Cooling Degree-Day

CFG: Central Florida Gas Company

Chesapeake or Chesapeake Utilities: Chesapeake Utilities Corporation, its divisions and subsidiaries, as appropriate in the context of the disclosure

CHP: Combined Heat and Power Plant

Company: Chesapeake Utilities Corporation, its divisions and subsidiaries, as appropriate in the context of the disclosure

COVID-19: An infectious disease caused by a coronavirus

CNG: Compressed natural gas

Davenport Energy: An entity from whom we acquired certain propane operating assets in North Carolina.

Degree-day: A degree-day is the measure of the variation in the weather based on the extent to which the average daily temperature (from 10:00 am to 10:00 am) falls above (CDD) or below (HDD) 65 degrees Fahrenheit

Delmarva Peninsula: A peninsula on the east coast of the U.S. occupied by Delaware and portions of Maryland and Virginia

Diversified Energy: Diversified Energy Company an entity from whom we acquired certain propane operating assets in North Carolina, South Carolina, Virginia, and Pennsylvania

DRIP: Dividend Reinvestment and Direct Stock Purchase Plan

Dt(s): Dekatherm(s), which is a natural gas unit of measurement that includes a standard measure for heating value

Dts/d: Dekatherms per day

Eastern Shore: Eastern Shore Natural Gas Company, a wholly-owned subsidiary of Chesapeake Utilities

Eight Flags: Eight Flags Energy, LLC, a wholly-owned subsidiary of Chesapeake Utilities

Elkton Gas: Elkton Gas Company, a wholly-owned subsidiary of Chesapeake Utilities

Escambia Meter Station: A natural gas metering station owned by Peninsula Pipeline Company located in Escambia County,

Florida

ESG: Environmental, Social and Governance

FASB: Financial Accounting Standards Board

FERC: Federal Energy Regulatory Commission

Table of Contents

FGT: Florida Gas Transmission Company

Florida OPC: The Office of Public Counsel, an agency established by the Florida legislature who advocates on behalf of Florida's utility consumers prior to actions or rule changes

FPU: Florida Public Utilities Company, a wholly-owned subsidiary of Chesapeake Utilities

GAAP: Generally Accepted Accounting Principles

Guernsey Power Station: Guernsey Power Station, LLC, a partner with Aspire Energy Express in the construction of a power generation facility in Ohio

GRIP: Gas Reliability Infrastructure Program

Gross Margin: a term under U.S. GAAP which is the excess of sales over costs of goods sold

Gulfstream: Gulfstream Natural Gas System, LLC, an unaffiliated pipeline network that supplies natural gas to FPU

HDD: Heating Degree-Day

LNG: Liquefied Natural Gas

Marlin Gas Services: Marlin Gas Services, LLC, a wholly-owned subsidiary of Chesapeake Utilities

MetLife: MetLife Investment Advisors, an institutional debt investment management firm, with which we have previously issued Senior Notes and which is a party to the current MetLife Shelf Agreement, as amended

MGP: Manufactured gas plant, which is a site where coal was previously used to manufacture gaseous fuel for industrial, commercial and residential use

Peninsula Pipeline: Peninsula Pipeline Company, Inc., a wholly-owned subsidiary of Chesapeake Utilities

Peoples Gas: Peoples Gas System, an Emera Incorporated subsidiary

Prudential: Prudential Investment Management Inc., an institutional investment management firm, with which Chesapeake Utilities entered into a previous Shelf Agreement and issued Shelf Notes

PSC: Public Service Commission, which is the state agency that regulates utility rates and/or services in certain of our jurisdictions

Revolver: Our $400.0 million unsecured revolving credit facility with certain lenders

RNG: Renewable natural gas

Sandpiper Energy: Sandpiper Energy, Inc., a wholly-owned subsidiary of Chesapeake Utilities

SEC: Securities and Exchange Commission

Senior Notes: Our unsecured long-term debt issued primarily to insurance companies on various dates

Sharp: Sharp Energy, Inc., a wholly-owned subsidiary of Chesapeake Utilities

Shelf Agreement: An agreement entered into by Chesapeake Utilities and a counterparty pursuant to which Chesapeake Utilities may request that the counterparty purchase our unsecured senior debt with a fixed interest rate and a maturity date not to exceed 20 years from the date of issuance

Shelf Notes: Unsecured senior promissory notes issuable under the Shelf Agreement executed with various counterparties

SICP: 2013 Stock and Incentive Compensation Plan

TCJA: Tax Cuts and Jobs Act enacted on December 22, 2017

TETLP: Texas Eastern Transmission, LP, an interstate pipeline interconnected with Eastern Shore's pipeline

Uncollateralized Senior Notes: Our unsecured long-term debt issued primarily to insurance companies on various dates

Table of Contents

U.S.: The United States of America

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
(in thousands, except shares and per share data)
Operating Revenues
Regulated Energy	$	92,193	$	80,910	$	220,084	$	202,107
Unregulated Energy and other	47,277		30,172		142,266		100,161
Total Operating Revenues	139,470		111,082		362,350		302,268
Operating Expenses
Regulated natural gas and electric costs	21,573		14,447		67,016		57,491
Unregulated propane and natural gas costs	25,543		12,254		77,279		43,506
Operations	38,002		36,371		80,796		75,810
Maintenance	4,507		4,259		8,772		8,300
Depreciation and amortization	17,216		15,298		34,193		30,662
Other taxes	6,160		5,875		12,960		12,324
Total Operating Expenses	113,001		88,504		281,016		228,093
Operating Income	26,469		22,578		81,334		74,175
Other income, net	2,584		1,453		3,498		1,828
Interest charges	5,825		5,054		11,164		10,159
Income Before Income Taxes	23,228		18,977		73,668		65,844
Income Taxes	6,177		5,164		19,683		17,565
Net Income	$	17,051	$	13,813	$	53,985	$	48,279

Weighted Average Common Shares Outstanding:
Basic	17,730,833		17,546,346		17,704,592		17,516,273
Diluted	17,809,871		17,616,496		17,785,629		17,585,006
Earnings Per Share of Common Stock:
Basic	$	0.96	$	0.79	$	3.05	$	2.76




Diluted	$	0.96	$	0.78	$	3.04	$	2.75

The accompanying notes are an integral part of these financial statements.

Table of Contents

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
(in thousands)
Net Income	$	17,051	$	13,813	$	53,985	$	48,279
Other Comprehensive Income (Loss), net of tax:
Employee Benefits, net of tax:
Amortization of prior service cost, net of tax of $(5), $(5), $(10) and $(10), respectively	(14)		(14)		(28)		(28)
Net gain, net of tax of $11, $28, $23 and $53, respectively	32		78		63		156
Cash Flow Hedges, net of tax:
Unrealized gain (loss) on commodity contract cash flow hedges, net of tax of $(188), $1,193, $(4) and $1,257, respectively	(498)		3,126		32		3,291
Unrealized gain on interest rate swap cash flow hedges, net of tax of $0, $2, $0 and $1, respectively	—		6		—		4
Total Other Comprehensive Income (Loss), net of tax	(480)		3,196		67		3,423
Comprehensive Income	$	16,571	$	17,009	$	54,052	$	51,702

The accompanying notes are an integral part of these financial statements.

Table of Contents

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


Assets	June 30, 2022		December 31, 2021
(in thousands, except shares and per share data)
Property, Plant and Equipment
Regulated Energy	$	1,765,915	$	1,720,287
Unregulated Energy	381,718		357,259
Other businesses and eliminations	30,713		35,418
Total property, plant and equipment	2,178,346		2,112,964
Less: Accumulated depreciation and amortization	(438,573)		(417,479)
Plus: Construction work in progress	34,027		49,393
Net property, plant and equipment	1,773,800		1,744,878
Current Assets
Cash and cash equivalents	4,186		4,976
Trade and other receivables	42,892		61,623
Less: Allowance for credit losses	(2,758)		(3,141)
Trade and other receivables, net	40,134		58,482
Accrued revenue	15,999		22,513
Propane inventory, at average cost	9,317		11,644
Other inventory, at average cost	11,449		9,345
Regulatory assets	28,729		19,794
Storage gas prepayments	3,695		3,691
Income taxes receivable	12,353		17,460
Prepaid expenses	11,398		17,121
Derivative assets, at fair value	6,772		7,076
Other current assets	1,014		1,033
Total current assets	145,046		173,135
Deferred Charges and Other Assets
Goodwill	45,158		44,708
Other intangible assets, net	14,088		13,192
Investments, at fair value	10,523		12,095
Operating lease right-of-use assets	15,767		10,139
Regulatory assets	99,497		104,173
Receivables and other deferred charges	13,463		12,549
Total deferred charges and other assets	198,496		196,856
Total Assets	$	2,117,342	$	2,114,869

The accompanying notes are an integral part of these financial statements.

Table of Contents

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


Capitalization and Liabilities	June 30, 2022		December 31, 2021
(in thousands, except shares and per share data)
Capitalization
Stockholders’ equity
Preferred stock, par value $0.01 per share (authorized 2,000,000 shares), no shares issued and outstanding	$	—	$	—
Common stock, par value $0.4867 per share (authorized 50,000,000 shares)	8,632		8,593
Additional paid-in capital	376,866		371,162
Retained earnings	428,833		393,072
Accumulated other comprehensive income	1,370		1,303
Deferred compensation obligation	7,018		7,240
Treasury stock	(7,018)		(7,240)
Total stockholders’ equity	815,701		774,130
Long-term debt, net of current maturities	585,805		549,903
Total capitalization	1,401,506		1,324,033
Current Liabilities
Current portion of long-term debt	21,472		17,962
Short-term borrowing	137,024		221,634
Accounts payable	38,110		52,628
Customer deposits and refunds	34,489		36,488
Accrued interest	3,320		2,775
Dividends payable	9,488		8,466
Accrued compensation	9,471		15,505
Regulatory liabilities	6,663		2,312
Derivative liabilities, at fair value	427		743
Other accrued liabilities	26,827		17,920
Total current liabilities	287,291		376,433
Deferred Credits and Other Liabilities
Deferred income taxes	244,978		233,550
Regulatory liabilities	143,188		142,488
Environmental liabilities	3,097		3,538
Other pension and benefit costs	21,458		24,120
Operating lease - liabilities	13,807		8,571
Deferred investment tax credits and other liabilities	2,017		2,136
Total deferred credits and other liabilities	428,545		414,403
Environmental and other commitments and contingencies (Notes 6 and 7)
Total Capitalization and Liabilities	$	2,117,342	$	2,114,869

The accompanying notes are an integral part of these financial statements.

Table of Contents

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended
	June 30,
	2022		2021
(in thousands)
Operating Activities
Net income	$	53,985	$	48,279
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	34,193		30,662
Depreciation and accretion included in other costs	5,781		5,061
Deferred income taxes	11,434		12,810

Realized gain on commodity contracts and sale of assets	(6,980)		(5,342)
Unrealized loss (gain) on investments/commodity contracts	1,956		(988)
Employee benefits and compensation	(520)		(346)
Share-based compensation	3,555		3,315

Changes in assets and liabilities:
Accounts receivable and accrued revenue	24,766		23,664
Propane inventory, storage gas and other inventory	270		(1,085)
Regulatory assets/liabilities, net	(6,405)		7,711
Prepaid expenses and other current assets	10,326		2,789
Accounts payable and other accrued liabilities	(2,274)		6,563
Income taxes receivable	5,107		4,514
Customer deposits and refunds	(1,999)		681
Accrued compensation	(6,266)		(3,397)
Other assets and liabilities, net	(3,134)		(675)
Net cash provided by operating activities	123,795		134,216
Investing Activities
Property, plant and equipment expenditures	(65,087)		(104,631)
Proceeds from sale of assets	3,367		497
Acquisitions, net of cash acquired	(2,006)		—

Environmental expenditures	(441)		(395)
Net cash used in investing activities	(64,167)		(104,529)
Financing Activities
Common stock dividends	(16,575)		(15,047)
Issuance of stock under the Dividend Reinvestment Plan, net of offering fees	4,259		4,799
Tax withholding payments related to net settled stock compensation	(2,838)		(1,478)
Change in cash overdrafts due to outstanding checks	(1,202)		(1,101)
Net advances (repayments) under line of credit agreements	(83,424)		(5,249)
Proceeds from long-term debt, net of offering fees	49,890		—
Repayment of long-term debt	(10,528)		(10,099)
Net cash used in financing activities	(60,418)		(28,175)
Net Increase (Decrease) in Cash and Cash Equivalents	(790)		1,512
Cash and Cash Equivalents—Beginning of Period	4,976		3,499
Cash and Cash Equivalents—End of Period	$	4,186	$	5,011

The accompanying notes are an integral part of these financial statements.

Table of Contents

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)


	Common Stock (1)
(in thousands, except shares and per share data)	Number of Shares(2)	Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Deferred Compensation		Treasury Stock		Total
Balance at March 31, 2021	17,521,493	$	8,528	$	350,875	$	369,623	$	(2,638)	$	6,992	$	(6,992)	$	726,388
Net income	—	—		—		13,813		—		—		—		13,813
Other comprehensive income	—	—		—		—		3,196		—		—		3,196
Dividend declared ($0.480 per share)	—	—		—		(8,500)		—		—		—		(8,500)
Dividend reinvestment plan	39,605	19		4,602		—		—		—		—		4,621
Share-based compensation and tax benefit (3)(4)	6,830	3		2,043		—		—		—		—		2,046
Treasury stock activities	—	—		—		—		—		211		(211)		—
Balance at June 30, 2021	17,567,928	$	8,550	$	357,520	$	374,936	$	558	$	7,203	$	(7,203)	$	741,564

Balance at December 31, 2020	17,461,841	$	8,499	$	348,482	$	342,969	$	(2,865)	$	5,679	$	(5,679)	$	697,085
Net income	—	—		—		48,279		—		—		—		48,279
Other comprehensive income	—	—		—		—		3,423		—		—		3,423
Dividends declared ($0.920 per share)	—	—		—		(16,312)		—		—		—		(16,312)
Dividend reinvestment plan	60,116	29		6,806		—		—		—		—		6,835
Share-based compensation and tax benefit (3) (4)	45,971	22		2,232		—		—		—		—		2,254
Treasury stock activities	—	—		—		—		—		1,524		(1,524)		—

Balance at June 30, 2021	17,567,928	$	8,550	$	357,520	$	374,936	$	558	$	7,203	$	(7,203)	$	741,564

Balance at March 31, 2022	17,719,388	$	8,624	$	373,694	$	421,344	$	1,850	$	6,477	$	(6,477)	$	805,512
Net income	—	—		—		17,051

CHESAPEAKE UTILITIES CORP [CPK] Filings
10-Q	[2022-08-03]
10-Q	[2022-05-03]
10-K	[2022-02-23]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-04]
10-K	[2021-02-24]
10-Q	[2020-11-05]
10-Q	[2020-08-05]
10-Q	[2020-05-06]
10-K	[2020-02-26]
10-Q	[2019-11-07]
10-Q	[2019-08-08]
10-Q	[2019-05-08]
10-K	[2019-02-27]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-08]
10-K	[2018-03-01]
10-Q	[2017-11-09]
10-Q	[2017-08-03]
10-Q	[2017-05-03]
10-K	[2017-02-28]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-02-29]
10-Q	[2015-11-05]
10-Q	[2015-08-06]
10-Q	[2015-05-06]
10-K	[2015-03-05]
10-Q	[2014-11-06]
10-Q	[2014-08-07]
10-Q	[2014-05-06]
10-K	[2014-03-06]
10-Q	[2013-11-07]
10-Q	[2013-08-09]
10-Q	[2013-05-03]
10-K	[2013-03-08]
10-Q	[2012-11-08]
10-Q	[2012-08-08]
10-Q	[2012-05-03]
10-K	[2012-03-07]