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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Chesapeake Utilities Corporation | NYSE:CPK | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
3.50 | 3.23% | 112.01 | 112.13 | 108.57 | 109.09 | 128,129 | 22:30:00 |
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FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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C
HESAPEAKE
U
TILITIES
C
ORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
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51-0064146
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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I
TEM
1.
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I
TEM
2.
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I
TEM
3.
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I
TEM
4.
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I
TEM
1.
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||
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I
TEM
1
A
.
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I
TEM
2.
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||
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I
TEM
3.
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I
TEM
5.
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||
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I
TEM
6.
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||
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Three Months Ended
|
|
Six Months Ended
|
||||||||||||
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June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
(in thousands, except shares and per share data)
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenues
|
|
|
|
|
|
|
|
|
||||||||
Regulated energy
|
|
$
|
61,646
|
|
|
$
|
55,216
|
|
|
$
|
163,812
|
|
|
$
|
136,783
|
|
Unregulated energy
|
|
34,321
|
|
|
36,025
|
|
|
114,294
|
|
|
91,016
|
|
||||
Other
|
|
4,530
|
|
|
2,905
|
|
|
8,728
|
|
|
7,075
|
|
||||
Total Operating Revenues
|
|
100,497
|
|
|
94,146
|
|
|
286,834
|
|
|
234,874
|
|
||||
Operating Expenses
|
|
|
|
|
|
|
|
|
||||||||
Regulated energy cost of sales
|
|
24,672
|
|
|
22,115
|
|
|
78,979
|
|
|
63,730
|
|
||||
Unregulated energy and other cost of sales
|
|
28,442
|
|
|
28,773
|
|
|
89,766
|
|
|
68,861
|
|
||||
Operations
|
|
24,615
|
|
|
22,822
|
|
|
51,242
|
|
|
44,577
|
|
||||
Maintenance
|
|
2,457
|
|
|
1,820
|
|
|
4,606
|
|
|
3,542
|
|
||||
Depreciation and amortization
|
|
6,736
|
|
|
5,977
|
|
|
13,371
|
|
|
11,797
|
|
||||
Other taxes
|
|
3,118
|
|
|
3,487
|
|
|
6,791
|
|
|
6,665
|
|
||||
Total Operating Expenses
|
|
90,040
|
|
|
84,994
|
|
|
244,755
|
|
|
199,172
|
|
||||
Operating Income
|
|
10,457
|
|
|
9,152
|
|
|
42,079
|
|
|
35,702
|
|
||||
Other income, net of other expenses
|
|
405
|
|
|
24
|
|
|
413
|
|
|
312
|
|
||||
Interest charges
|
|
2,303
|
|
|
2,016
|
|
|
4,459
|
|
|
4,088
|
|
||||
Income Before Income Taxes
|
|
8,559
|
|
|
7,160
|
|
|
38,033
|
|
|
31,926
|
|
||||
Income taxes
|
|
3,425
|
|
|
2,804
|
|
|
15,218
|
|
|
12,701
|
|
||||
Net Income
|
|
$
|
5,134
|
|
|
$
|
4,356
|
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
9,704,161
|
|
|
9,621,580
|
|
|
9,681,422
|
|
|
9,611,610
|
|
||||
Diluted
|
|
9,737,852
|
|
|
9,695,470
|
|
|
9,715,762
|
|
|
9,687,253
|
|
||||
Earnings Per Share of Common Stock:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
|
$
|
2.36
|
|
|
$
|
2.00
|
|
Diluted
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
|
$
|
2.35
|
|
|
$
|
1.99
|
|
Cash Dividends Declared Per Share of Common Stock
|
|
$
|
0.405
|
|
|
$
|
0.385
|
|
|
$
|
0.790
|
|
|
$
|
0.750
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
5,134
|
|
|
$
|
4,356
|
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
Other Comprehensive Income, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Employee Benefits, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Amortization of prior service cost, net of tax of ($6), ($6), ($12), and ($12) respectively
|
|
(9
|
)
|
|
(9
|
)
|
|
(18
|
)
|
|
(18
|
)
|
||||
Net gain, net of tax of $27, $43, $53 and $81, respectively
|
|
40
|
|
|
64
|
|
|
79
|
|
|
122
|
|
||||
Cash Flow Hedges, net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized loss on commodity contract cash flow hedges, net of tax of ($1), $0, ($1) and $0, respectively.
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Total other comprehensive income
|
|
30
|
|
|
55
|
|
|
60
|
|
|
104
|
|
||||
Comprehensive Income
|
|
$
|
5,164
|
|
|
$
|
4,411
|
|
|
$
|
22,875
|
|
|
$
|
19,329
|
|
Assets
|
|
June 30,
2014 |
|
December 31,
2013 |
||||
(in thousands, except shares)
|
|
|
|
|
||||
Property, Plant and Equipment
|
|
|
|
|
||||
Regulated energy
|
|
$
|
710,444
|
|
|
$
|
691,522
|
|
Unregulated energy
|
|
78,616
|
|
|
76,267
|
|
||
Other
|
|
21,677
|
|
|
21,002
|
|
||
Total property, plant and equipment
|
|
810,737
|
|
|
788,791
|
|
||
Less: Accumulated depreciation and amortization
|
|
(186,663
|
)
|
|
(174,148
|
)
|
||
Plus: Construction work in progress
|
|
36,615
|
|
|
16,603
|
|
||
Net property, plant and equipment
|
|
660,689
|
|
|
631,246
|
|
||
Current Assets
|
|
|
|
|
||||
Cash and cash equivalents
|
|
2,529
|
|
|
3,356
|
|
||
Accounts receivable (less allowance for uncollectible accounts of $1,819 and $1,635, respectively)
|
|
44,858
|
|
|
75,293
|
|
||
Accrued revenue
|
|
7,631
|
|
|
13,910
|
|
||
Propane inventory, at average cost
|
|
6,836
|
|
|
10,456
|
|
||
Other inventory, at average cost
|
|
3,382
|
|
|
4,880
|
|
||
Storage gas prepayments
|
|
3,131
|
|
|
4,318
|
|
||
Prepaid expenses
|
|
4,229
|
|
|
6,910
|
|
||
Income taxes receivable
|
|
—
|
|
|
2,609
|
|
||
Mark-to-market energy assets
|
|
136
|
|
|
385
|
|
||
Regulatory assets
|
|
5,822
|
|
|
2,436
|
|
||
Deferred income taxes
|
|
1,657
|
|
|
1,696
|
|
||
Other current assets
|
|
203
|
|
|
160
|
|
||
Total current assets
|
|
80,414
|
|
|
126,409
|
|
||
Deferred Charges and Other Assets
|
|
|
|
|
||||
Investments, at fair value
|
|
3,542
|
|
|
3,098
|
|
||
Regulatory assets
|
|
66,300
|
|
|
66,584
|
|
||
Goodwill
|
|
4,625
|
|
|
4,354
|
|
||
Other intangible assets, net
|
|
2,775
|
|
|
2,975
|
|
||
Receivables and other deferred charges
|
|
2,740
|
|
|
2,856
|
|
||
Total deferred charges and other assets
|
|
79,982
|
|
|
79,867
|
|
||
Total Assets
|
|
$
|
821,085
|
|
|
$
|
837,522
|
|
Capitalization and Liabilities
|
|
June 30,
2014 |
|
December 31,
2013 |
||||
(in thousands, except shares and per share data)
|
|
|
|
|
||||
Capitalization
|
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
|
||||
Common stock, par value $0.4867 per share (authorized 25,000,000 shares)
|
|
$
|
4,727
|
|
|
$
|
4,691
|
|
Additional paid-in capital
|
|
154,619
|
|
|
152,341
|
|
||
Retained earnings
|
|
139,350
|
|
|
124,274
|
|
||
Accumulated other comprehensive loss
|
|
(2,473
|
)
|
|
(2,533
|
)
|
||
Deferred compensation obligation
|
|
1,202
|
|
|
1,124
|
|
||
Treasury stock
|
|
(1,202
|
)
|
|
(1,124
|
)
|
||
Total stockholders’ equity
|
|
296,223
|
|
|
278,773
|
|
||
Long-term debt, net of current maturities
|
|
165,370
|
|
|
117,592
|
|
||
Total capitalization
|
|
461,593
|
|
|
396,365
|
|
||
Current Liabilities
|
|
|
|
|
||||
Current portion of long-term debt
|
|
11,117
|
|
|
11,353
|
|
||
Short-term borrowing
|
|
47,870
|
|
|
105,666
|
|
||
Accounts payable
|
|
30,184
|
|
|
53,482
|
|
||
Accrued compensation
|
|
5,495
|
|
|
8,394
|
|
||
Accrued interest
|
|
1,352
|
|
|
1,235
|
|
||
Dividends payable
|
|
3,933
|
|
|
3,710
|
|
||
Income taxes payable
|
|
695
|
|
|
—
|
|
||
Mark-to-market energy liabilities
|
|
32
|
|
|
127
|
|
||
Regulatory liabilities
|
|
5,875
|
|
|
4,157
|
|
||
Customer deposits and refunds
|
|
23,482
|
|
|
26,140
|
|
||
Other accrued liabilities
|
|
9,978
|
|
|
7,678
|
|
||
Total current liabilities
|
|
140,013
|
|
|
221,942
|
|
||
Deferred Credits and Other Liabilities
|
|
|
|
|
||||
Deferred income taxes
|
|
142,766
|
|
|
142,597
|
|
||
Deferred investment tax credits
|
|
57
|
|
|
74
|
|
||
Regulatory liabilities
|
|
3,975
|
|
|
4,402
|
|
||
Accrued asset removal cost—Regulatory liability
|
|
39,991
|
|
|
39,510
|
|
||
Environmental liabilities
|
|
9,076
|
|
|
9,155
|
|
||
Other pension and benefit costs
|
|
20,123
|
|
|
21,000
|
|
||
Other liabilities
|
|
3,491
|
|
|
2,477
|
|
||
Total deferred credits and other liabilities
|
|
219,479
|
|
|
219,215
|
|
||
Other commitments and contingencies (Note 6)
|
|
|
|
|
||||
Total Capitalization and Liabilities
|
|
$
|
821,085
|
|
|
$
|
837,522
|
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
|
||||||
|
|
2014
|
|
2013
|
||||
(in thousands)
|
|
|
|
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
13,371
|
|
|
11,797
|
|
||
Depreciation and accretion included in other costs
|
|
3,447
|
|
|
3,030
|
|
||
Deferred income taxes, net
|
|
166
|
|
|
5,796
|
|
||
Gain on sale of assets
|
|
(420
|
)
|
|
(39
|
)
|
||
Unrealized (gain) loss on commodity contracts
|
|
62
|
|
|
(153
|
)
|
||
Unrealized gain on investments
|
|
(152
|
)
|
|
(42
|
)
|
||
Realized gain on sales of investments, net
|
|
—
|
|
|
(310
|
)
|
||
Employee benefits
|
|
319
|
|
|
458
|
|
||
Share-based compensation
|
|
1,065
|
|
|
861
|
|
||
Other, net
|
|
(1
|
)
|
|
(22
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
|
||||
Purchase of investments
|
|
(293
|
)
|
|
(398
|
)
|
||
Accounts receivable and accrued revenue
|
|
36,713
|
|
|
(6,268
|
)
|
||
Propane inventory, storage gas and other inventory
|
|
6,074
|
|
|
2,180
|
|
||
Regulatory assets
|
|
(5,250
|
)
|
|
1,721
|
|
||
Prepaid expenses and other current assets
|
|
3,183
|
|
|
2,312
|
|
||
Accounts payable and other accrued liabilities
|
|
(22,491
|
)
|
|
8,074
|
|
||
Income taxes receivable and payable
|
|
3,305
|
|
|
6,599
|
|
||
Accrued interest
|
|
118
|
|
|
(316
|
)
|
||
Customer deposits and refunds
|
|
(2,658
|
)
|
|
(3,958
|
)
|
||
Accrued compensation
|
|
(2,975
|
)
|
|
(2,060
|
)
|
||
Regulatory liabilities
|
|
1,761
|
|
|
5,588
|
|
||
Other assets and liabilities, net
|
|
63
|
|
|
(12
|
)
|
||
Net cash provided by operating activities
|
|
58,222
|
|
|
54,063
|
|
||
Investing Activities
|
|
|
|
|
||||
Property, plant and equipment expenditures
|
|
(42,753
|
)
|
|
(41,220
|
)
|
||
Proceeds from sales of assets
|
|
459
|
|
|
45
|
|
||
Acquisitions
|
|
—
|
|
|
(19,541
|
)
|
||
Environmental expenditures
|
|
(79
|
)
|
|
(209
|
)
|
||
Net cash used in investing activities
|
|
(42,373
|
)
|
|
(60,925
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Common stock dividends
|
|
(6,754
|
)
|
|
(6,356
|
)
|
||
Purchase of stock for Dividend Reinvestment Plan
|
|
(392
|
)
|
|
(655
|
)
|
||
Change in cash overdrafts due to outstanding checks
|
|
(806
|
)
|
|
(1,240
|
)
|
||
Net borrowing (repayment) under line of credit agreements
|
|
(56,990
|
)
|
|
15,532
|
|
||
Proceeds from issuance of long-term debt
|
|
50,000
|
|
|
7,000
|
|
||
Repayment of long-term debt and capital lease obligation
|
|
(1,734
|
)
|
|
(8,570
|
)
|
||
Net cash provided by (used in) financing activities
|
|
(16,676
|
)
|
|
5,711
|
|
||
Net Decrease in Cash and Cash Equivalents
|
|
(827
|
)
|
|
(1,151
|
)
|
||
Cash and Cash Equivalents—Beginning of Period
|
|
3,356
|
|
|
3,361
|
|
||
Cash and Cash Equivalents—End of Period
|
|
$
|
2,529
|
|
|
$
|
2,210
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
(in thousands, except shares and per
share data)
|
Number of
Shares
(1)
|
|
Par
Value
|
|
Additional Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated Other Comprehensive
Loss
|
|
Deferred
Compensation
|
|
Treasury
Stock
|
|
Total
|
|||||||||||||||
Balance at December 31, 2012
|
9,597,499
|
|
|
$
|
4,671
|
|
|
$
|
150,750
|
|
|
$
|
106,239
|
|
|
$
|
(5,062
|
)
|
|
$
|
982
|
|
|
$
|
(982
|
)
|
|
$
|
256,598
|
|
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
32,787
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,787
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,529
|
|
|
—
|
|
|
—
|
|
|
2,529
|
|
|||||||
Dividend declared ($1.520 per share)
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
(14,752
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,758
|
)
|
|||||||
Conversion of debentures
|
17,383
|
|
|
8
|
|
|
287
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
295
|
|
|||||||
Share-based compensation and tax benefit
(2) (3)
|
23,348
|
|
|
12
|
|
|
1,310
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,322
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
(142
|
)
|
|
—
|
|
|||||||
Balance at December 31, 2013
|
9,638,230
|
|
|
4,691
|
|
|
152,341
|
|
|
124,274
|
|
|
(2,533
|
)
|
|
1,124
|
|
|
(1,124
|
)
|
|
278,773
|
|
|||||||
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
22,815
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,815
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|||||||
Dividend declared ($0.790 per share)
|
5,193
|
|
|
3
|
|
|
318
|
|
|
(7,739
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,418
|
)
|
|||||||
Retirement Savings Plan
|
9,834
|
|
|
5
|
|
|
597
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
602
|
|
|||||||
Conversion of debentures
|
31,542
|
|
|
15
|
|
|
520
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
535
|
|
|||||||
Share-based compensation and tax benefit
(2)
(3)
|
26,772
|
|
|
13
|
|
|
843
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
856
|
|
|||||||
Treasury stock activities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
(78
|
)
|
|
—
|
|
|||||||
Balance at June 30, 2014
|
9,711,571
|
|
|
$
|
4,727
|
|
|
$
|
154,619
|
|
|
$
|
139,350
|
|
|
$
|
(2,473
|
)
|
|
$
|
1,202
|
|
|
$
|
(1,202
|
)
|
|
$
|
296,223
|
|
(1)
|
Includes
34,960
and
34,495
shares at
June 30, 2014
and
December 31, 2013
, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.
|
(2)
|
Includes amounts for shares issued for Directors’ compensation.
|
(3)
|
The shares issued under the SICP are net of shares withheld for employee taxes. For the quarter ended
June 30, 2014
and for the year ended
December 31, 2013
, we withheld
8,458
and
10,411
shares, respectively, for taxes.
|
1.
|
Summary of Accounting Policies
|
2.
|
Calculation of Earnings Per Share
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
(in thousands, except shares and per share data)
|
|
|
|
|
|
|
|
|
||||||||
Calculation of Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
5,134
|
|
|
$
|
4,356
|
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
Weighted average shares outstanding
|
|
9,704,161
|
|
|
9,621,580
|
|
|
9,681,422
|
|
|
9,611,610
|
|
||||
Basic Earnings Per Share
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
|
$
|
2.36
|
|
|
$
|
2.00
|
|
Calculation of Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
5,134
|
|
|
$
|
4,356
|
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
Effect of 8.25% Convertible debentures
(1)
|
|
—
|
|
|
11
|
|
|
—
|
|
|
22
|
|
||||
Adjusted numerator—Diluted
|
|
$
|
5,134
|
|
|
$
|
4,367
|
|
|
$
|
22,815
|
|
|
$
|
19,247
|
|
Reconciliation of Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted shares outstanding—Basic
|
|
9,704,161
|
|
|
9,621,580
|
|
|
9,681,422
|
|
|
9,611,610
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
||||||||
Share-based Compensation
|
|
33,691
|
|
|
22,454
|
|
|
34,340
|
|
|
22,789
|
|
||||
8.25% Convertible debentures
(1)
|
|
—
|
|
|
51,436
|
|
|
—
|
|
|
52,854
|
|
||||
Adjusted denominator—Diluted
|
|
9,737,852
|
|
|
9,695,470
|
|
|
9,715,762
|
|
|
9,687,253
|
|
||||
Diluted Earnings Per Share
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
|
$
|
2.35
|
|
|
$
|
1.99
|
|
3.
|
Acquisitions
|
4.
|
Rates and Other Regulatory Activities
|
5.
|
Environmental Commitments and Contingencies
|
6.
|
Other Commitments and Contingencies
|
7.
|
Segment Information
|
•
|
Regulated Energy
. The Regulated Energy segment includes natural gas distribution, natural gas transmission operations and electric distribution operations. All operations in this segment are regulated, as to their rates and services, by the PSC having jurisdiction in each operating territory or by the FERC in the case of Eastern Shore.
|
•
|
Unregulated Energy.
The Unregulated Energy segment includes propane distribution and wholesale marketing operations, and natural gas marketing operations, which are unregulated as to their rates and services. Also included in this segment are other unregulated energy services, such as energy-related merchandise sales and heating, ventilation and air conditioning, plumbing and electrical services.
|
•
|
Other
. The “Other” segment consists primarily of our advanced information services subsidiary, as well as our unregulated subsidiaries that own real estate leased to Chesapeake and certain corporate costs not allocated to other operations.
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Operating Revenues, Unaffiliated Customers
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
|
$
|
61,348
|
|
|
$
|
54,975
|
|
|
$
|
163,222
|
|
|
$
|
136,279
|
|
Unregulated Energy
|
|
34,299
|
|
|
34,273
|
|
|
114,173
|
|
|
89,264
|
|
||||
Other
|
|
4,850
|
|
|
4,898
|
|
|
9,439
|
|
|
9,331
|
|
||||
Total operating revenues, unaffiliated customers
|
|
$
|
100,497
|
|
|
$
|
94,146
|
|
|
$
|
286,834
|
|
|
$
|
234,874
|
|
Intersegment Revenues
(1)
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
|
$
|
298
|
|
|
$
|
241
|
|
|
$
|
590
|
|
|
$
|
504
|
|
Unregulated Energy
|
|
22
|
|
|
1,752
|
|
|
121
|
|
|
1,752
|
|
||||
Other
|
|
248
|
|
|
227
|
|
|
502
|
|
|
470
|
|
||||
Total intersegment revenues
|
|
$
|
568
|
|
|
$
|
2,220
|
|
|
$
|
1,213
|
|
|
$
|
2,726
|
|
Operating Income
|
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
|
$
|
10,711
|
|
|
$
|
8,619
|
|
|
$
|
31,802
|
|
|
$
|
25,925
|
|
Unregulated Energy
|
|
(43
|
)
|
|
447
|
|
|
10,815
|
|
|
9,816
|
|
||||
Other and eliminations
|
|
(211
|
)
|
|
86
|
|
|
(538
|
)
|
|
(39
|
)
|
||||
Total operating income
|
|
10,457
|
|
|
9,152
|
|
|
42,079
|
|
|
35,702
|
|
||||
Other income, net of other expenses
|
|
405
|
|
|
24
|
|
|
413
|
|
|
312
|
|
||||
Interest
|
|
2,303
|
|
|
2,016
|
|
|
4,459
|
|
|
4,088
|
|
||||
Income before Income Taxes
|
|
8,559
|
|
|
7,160
|
|
|
38,033
|
|
|
31,926
|
|
||||
Income taxes
|
|
3,425
|
|
|
2,804
|
|
|
15,218
|
|
|
12,701
|
|
||||
Net Income
|
|
$
|
5,134
|
|
|
$
|
4,356
|
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
(1)
|
All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.
|
(in thousands)
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Identifiable Assets
|
|
|
|
|
||||
Regulated energy
|
|
$
|
716,126
|
|
|
$
|
708,950
|
|
Unregulated energy
|
|
77,800
|
|
|
100,585
|
|
||
Other
|
|
27,159
|
|
|
27,987
|
|
||
Total identifiable assets
|
|
$
|
821,085
|
|
|
$
|
837,522
|
|
8.
|
Accumulated Other Comprehensive Income (Loss
)
|
|
|
Defined Benefit
|
|
Commodity
|
|
|
||||||
|
|
Pension and
|
|
Contracts
|
|
|
||||||
|
|
Postretirement
|
|
Cash Flow
|
|
|
||||||
|
|
Plan Items
|
|
Hedges
|
|
Total
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
December 31, 2013
|
|
$
|
(2,533
|
)
|
|
$
|
—
|
|
|
$
|
(2,533
|
)
|
Other comprehensive loss before reclassifications
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
61
|
|
|
—
|
|
|
61
|
|
|||
Net current-period other comprehensive income (loss)
|
|
61
|
|
|
(1
|
)
|
|
60
|
|
|||
June 30, 2014
|
|
$
|
(2,472
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2,473
|
)
|
|
|
Defined Benefit
|
|
Commodity
|
|
|
||||||
|
|
Pension and
|
|
Contracts
|
|
|
||||||
|
|
Postretirement
|
|
Cash Flow
|
|
|
||||||
|
|
Plan Items
|
|
Hedges
|
|
Total
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
December 31, 2012
|
|
$
|
(5,062
|
)
|
|
$
|
—
|
|
|
$
|
(5,062
|
)
|
Other comprehensive loss before reclassifications
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
|||
Amounts reclassified from accumulated other comprehensive loss
|
|
110
|
|
|
—
|
|
|
110
|
|
|||
Net current-period other comprehensive income
|
|
104
|
|
|
—
|
|
|
104
|
|
|||
June 30, 2013
|
|
$
|
(4,958
|
)
|
|
$
|
—
|
|
|
$
|
(4,958
|
)
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Amortization of defined benefit pension and postretirement plan items:
|
|
|
|
|
|
|
|
|
||||||||
Prior service cost
(1)
|
|
$
|
15
|
|
|
$
|
15
|
|
|
$
|
30
|
|
|
$
|
30
|
|
Net loss
(1)
|
|
(67
|
)
|
|
(107
|
)
|
|
(132
|
)
|
|
(213
|
)
|
||||
Total before income taxes
|
|
(52
|
)
|
|
(92
|
)
|
|
(102
|
)
|
|
(183
|
)
|
||||
Income tax benefit
|
|
21
|
|
|
37
|
|
|
41
|
|
|
73
|
|
||||
Net of tax
|
|
$
|
(31
|
)
|
|
$
|
(55
|
)
|
|
$
|
(61
|
)
|
|
$
|
(110
|
)
|
9.
|
Employee Benefit Plans
|
|
|
Chesapeake
Pension Plan
|
|
FPU
Pension Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
||||||||||||||||||||||||||||||
For the Three Months Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Interest cost
|
|
$
|
106
|
|
|
$
|
103
|
|
|
$
|
647
|
|
|
$
|
594
|
|
|
$
|
23
|
|
|
$
|
20
|
|
|
$
|
13
|
|
|
$
|
12
|
|
|
$
|
16
|
|
|
$
|
16
|
|
Expected return on plan assets
|
|
(132
|
)
|
|
(126
|
)
|
|
(772
|
)
|
|
(718
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|
(20
|
)
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
38
|
|
|
57
|
|
|
—
|
|
|
81
|
|
|
12
|
|
|
16
|
|
|
17
|
|
|
19
|
|
|
—
|
|
|
—
|
|
||||||||||
Net periodic cost (benefit)
|
|
12
|
|
|
34
|
|
|
(125
|
)
|
|
(43
|
)
|
|
40
|
|
|
41
|
|
|
10
|
|
|
11
|
|
|
16
|
|
|
16
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
191
|
|
|
191
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||||||||
Total periodic cost
|
|
$
|
12
|
|
|
$
|
34
|
|
|
$
|
66
|
|
|
$
|
148
|
|
|
$
|
40
|
|
|
$
|
41
|
|
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
18
|
|
|
$
|
18
|
|
|
|
Chesapeake
Pension Plan
|
|
FPU
Pension Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
||||||||||||||||||||||||||||||
For the Six Months Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Interest cost
|
|
$
|
213
|
|
|
$
|
205
|
|
|
$
|
1,294
|
|
|
$
|
1,188
|
|
|
$
|
46
|
|
|
$
|
41
|
|
|
$
|
26
|
|
|
$
|
24
|
|
|
$
|
33
|
|
|
$
|
32
|
|
Expected return on plan assets
|
|
(265
|
)
|
|
(252
|
)
|
|
(1,545
|
)
|
|
(1,437
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of prior service cost
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
9
|
|
|
10
|
|
|
(39
|
)
|
|
(39
|
)
|
|
—
|
|
|
—
|
|
||||||||||
Amortization of net loss
|
|
75
|
|
|
114
|
|
|
—
|
|
|
162
|
|
|
24
|
|
|
32
|
|
|
33
|
|
|
36
|
|
|
—
|
|
|
—
|
|
||||||||||
Net periodic cost (benefit)
|
|
23
|
|
|
66
|
|
|
(251
|
)
|
|
(87
|
)
|
|
79
|
|
|
83
|
|
|
20
|
|
|
21
|
|
|
33
|
|
|
32
|
|
||||||||||
Amortization of pre-merger regulatory asset
|
|
—
|
|
|
—
|
|
|
381
|
|
|
381
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
||||||||||
Total periodic cost
|
|
$
|
23
|
|
|
$
|
66
|
|
|
$
|
130
|
|
|
$
|
294
|
|
|
$
|
79
|
|
|
$
|
83
|
|
|
$
|
20
|
|
|
$
|
21
|
|
|
$
|
37
|
|
|
$
|
36
|
|
For the Three Months Ended June 30, 2014
|
|
Chesapeake
Pension
Plan
|
|
FPU
Pension
Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
(15
|
)
|
|
Net loss
|
|
38
|
|
|
—
|
|
|
12
|
|
|
17
|
|
|
—
|
|
|
67
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
52
|
|
Recognized from accumulated other comprehensive loss
(1)
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
52
|
|
Recognized from regulatory asset
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
52
|
|
For the Six Months Ended June 30, 2014
|
|
Chesapeake
Pension
Plan
|
|
FPU
Pension
Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
(30
|
)
|
|
Net loss
|
|
75
|
|
|
—
|
|
|
24
|
|
|
33
|
|
|
—
|
|
|
132
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
102
|
|
Recognized from accumulated other comprehensive loss
(1)
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
102
|
|
Recognized from regulatory asset
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
(6
|
)
|
|
$
|
—
|
|
|
$
|
102
|
|
For the Three Months Ended June 30, 2013
|
|
Chesapeake
Pension
Plan
|
|
FPU
Pension
Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
(20
|
)
|
|
$
|
—
|
|
|
(15
|
)
|
|
Net loss
|
|
57
|
|
|
81
|
|
|
16
|
|
|
19
|
|
|
—
|
|
|
173
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
57
|
|
|
$
|
81
|
|
|
$
|
21
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
158
|
|
Recognized from accumulated other comprehensive loss
|
|
$
|
57
|
|
|
$
|
15
|
|
|
$
|
21
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
92
|
|
Recognized from regulatory asset
|
|
—
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
||||||
Total
|
|
$
|
57
|
|
|
$
|
81
|
|
|
$
|
21
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
158
|
|
For the Six Months Ended June 30, 2013
|
|
Chesapeake
Pension
Plan
|
|
FPU
Pension
Plan
|
|
Chesapeake SERP
|
|
Chesapeake
Postretirement
Plan
|
|
FPU
Medical
Plan
|
|
Total
|
||||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prior service cost (credit)
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
(39
|
)
|
|
$
|
—
|
|
|
(30
|
)
|
|
Net loss
|
|
114
|
|
|
162
|
|
|
32
|
|
|
36
|
|
|
—
|
|
|
344
|
|
||||||
Total recognized in net periodic benefit cost
|
|
$
|
113
|
|
|
$
|
162
|
|
|
$
|
42
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
314
|
|
Recognized from accumulated other comprehensive loss
|
|
$
|
113
|
|
|
$
|
31
|
|
|
$
|
42
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
183
|
|
Recognized from regulatory asset
|
|
—
|
|
|
131
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
131
|
|
||||||
Total
|
|
$
|
113
|
|
|
$
|
162
|
|
|
$
|
42
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
314
|
|
(1)
|
See
Note 8, Accumulated Other Comprehensive Income (Loss)
.
|
10.
|
Investments
|
11.
|
Share-Based Compensation
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Awards to non-employee directors
|
|
$
|
132
|
|
|
$
|
120
|
|
|
$
|
256
|
|
|
$
|
231
|
|
Awards to key employees
|
|
295
|
|
|
341
|
|
|
809
|
|
|
630
|
|
||||
Total compensation expense
|
|
427
|
|
|
461
|
|
|
1,065
|
|
|
861
|
|
||||
Less: tax benefit
|
|
172
|
|
|
186
|
|
|
429
|
|
|
347
|
|
||||
Share-Based Compensation amounts included in net income
|
|
$
|
255
|
|
|
$
|
275
|
|
|
$
|
636
|
|
|
$
|
514
|
|
|
|
Number of Shares
|
|
Weighted Average Grant date Fair Value
|
|||
Outstanding - December 31, 2013
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
8,866
|
|
|
$
|
62.00
|
|
Vested
|
|
8,866
|
|
|
$
|
62.00
|
|
Outstanding - June 30, 2014
|
|
—
|
|
|
$
|
—
|
|
|
|
Number of Shares
|
|
Weighted Average
Fair Value
|
|||
Outstanding—December 31, 2013
|
|
80,761
|
|
|
$
|
42.30
|
|
Granted
|
|
27,628
|
|
|
$
|
59.98
|
|
Vested
|
|
26,364
|
|
|
$
|
40.30
|
|
Outstanding—June 30, 2014
|
|
82,025
|
|
|
$
|
48.90
|
|
12.
|
Derivative Instruments
|
|
Quantity in
|
|
Estimated Market
|
|
Weighted Average
|
|||
At June 30, 2014
|
Gallons
|
|
Prices
|
|
Contract Prices
|
|||
Forward Contracts
|
|
|
|
|
|
|||
Sale
|
630,000
|
|
|
$1.1400
|
|
$
|
1.1400
|
|
Purchase
|
631,000
|
|
|
$1.1300 - $1.3176
|
|
$
|
1.1302
|
|
|
|
Asset Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Forward contracts
|
|
Mark-to-market energy assets
|
|
$
|
37
|
|
|
$
|
196
|
|
Call Option
(1)
|
|
Mark-to-market energy assets
|
|
—
|
|
|
169
|
|
||
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
||||
Put Options
|
|
Mark-to-market energy assets
|
|
99
|
|
|
20
|
|
||
Total asset derivatives
|
|
|
|
$
|
136
|
|
|
$
|
385
|
|
(1)
|
We purchased a call option for the propane price cap program in May 2013. The call option was fully exercised during 2014. There was no outstanding call option at June 30, 2014.
|
|
|
Liability Derivatives
|
||||||||
|
|
|
|
Fair Value As Of
|
||||||
(in thousands)
|
|
Balance Sheet Location
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
||||
Forward contracts
|
|
Mark-to-market energy liabilities
|
|
$
|
30
|
|
|
$
|
127
|
|
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
||||
Propane swap agreements
|
|
Mark-to-market energy liabilities
|
|
2
|
|
|
—
|
|
||
Total liability derivatives
|
|
|
|
$
|
32
|
|
|
$
|
127
|
|
|
|
|
|
Amount of Gain (Loss) on Derivatives:
|
||||||||||||||
|
|
Location of Gain
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
|
(Loss) on Derivatives
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on forward contracts
|
|
Revenue
|
|
$
|
6
|
|
|
$
|
(60
|
)
|
|
(62
|
)
|
|
$
|
153
|
|
|
Call Option
|
|
Cost of sales
|
|
—
|
|
|
(8
|
)
|
|
137
|
|
|
(8
|
)
|
||||
Derivatives designated as fair value hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Put/Call Options
|
|
Cost of sales
|
|
(29
|
)
|
|
—
|
|
|
(49
|
)
|
|
(28
|
)
|
||||
Put/Call Options
|
|
Inventory
|
|
|
|
(14
|
)
|
|
|
|
(14
|
)
|
||||||
Derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Propane swap agreements
|
|
Other Comprehensive loss
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
Total
|
|
|
|
$
|
(25
|
)
|
|
$
|
(82
|
)
|
|
$
|
24
|
|
|
$
|
103
|
|
|
|
Location in the
|
|
For the Three Months Ended June 30,
|
|
For the Six Months Ended June 30,
|
||||||||||||
(in thousands)
|
|
Statements of Income
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Realized gain on forward contracts
|
|
Revenue
|
|
$
|
84
|
|
|
$
|
110
|
|
|
$
|
1,330
|
|
|
$
|
185
|
|
Unrealized gain (loss) on forward contracts
|
|
Revenue
|
|
6
|
|
|
(60
|
)
|
|
(62
|
)
|
|
153
|
|
||||
Total
|
|
|
|
$
|
90
|
|
|
$
|
50
|
|
|
$
|
1,268
|
|
|
$
|
338
|
|
13.
|
Fair Value of Financial Instruments
|
|
|
|
|
Fair Value Measurements Using:
|
||||||||||||
June 30, 2014
|
|
Fair Value
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Investments—guaranteed income fund
|
|
$
|
410
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
410
|
|
Investments—other
|
|
$
|
3,132
|
|
|
$
|
3,132
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mark-to-market energy assets, incl. put/call options
|
|
$
|
136
|
|
|
$
|
—
|
|
|
$
|
136
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Mark-to-market energy liabilities incl. swap agreements
|
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
Six Months Ended
June 30, |
||||||
|
2014
|
|
2013
|
||||
(in thousands)
|
|
|
|
||||
Beginning Balance
|
$
|
458
|
|
|
$
|
—
|
|
Transfers in due to change in trustee
|
—
|
|
|
425
|
|
||
Purchases and adjustments
|
(26
|
)
|
|
96
|
|
||
Transfers
|
(25
|
)
|
|
(16
|
)
|
||
Investment income
|
3
|
|
|
4
|
|
||
Ending Balance
|
$
|
410
|
|
|
$
|
509
|
|
14.
|
Long-Term Debt
|
|
|
June 30,
|
|
December 31,
|
||||
(in thousands)
|
|
2014
|
|
2013
|
||||
FPU secured first mortgage bonds
(A)
:
|
|
|
|
|
||||
9.08% bond, due June 1, 2022
|
|
$
|
7,968
|
|
|
$
|
7,967
|
|
Uncollateralized senior notes:
|
|
|
|
|
||||
7.83% note, due January 1, 2015
|
|
2,000
|
|
|
2,000
|
|
||
6.64% note, due October 31, 2017
|
|
10,909
|
|
|
10,909
|
|
||
5.50% note, due October 12, 2020
|
|
14,000
|
|
|
14,000
|
|
||
5.93% note, due October 31, 2023
|
|
28,500
|
|
|
30,000
|
|
||
5.68% note, due June 30, 2026
|
|
29,000
|
|
|
29,000
|
|
||
6.43% note, due May 2, 2028
|
|
7,000
|
|
|
7,000
|
|
||
3.73% note, due December 16, 2028
|
|
20,000
|
|
|
20,000
|
|
||
3.88% note, due May 15, 2029
|
|
50,000
|
|
|
—
|
|
||
Convertible debentures:
|
|
|
|
|
||||
8.25% due March 1, 2014
|
|
—
|
|
|
646
|
|
||
Promissory notes
|
|
344
|
|
|
445
|
|
||
Capital lease obligation
|
|
6,766
|
|
|
6,978
|
|
||
Total long-term debt
|
|
176,487
|
|
|
128,945
|
|
||
Less: current maturities
|
|
(11,117
|
)
|
|
(11,353
|
)
|
||
Total long-term debt, net of current maturities
|
|
$
|
165,370
|
|
|
$
|
117,592
|
|
(A)
|
FPU secured first mortgage bonds are guaranteed by Chesapeake.
|
•
|
state and federal legislative and regulatory initiatives (including deregulation) that affect cost and investment recovery, have an impact on rate structures, and affect the speed at and degree to which competition enters the electric and natural gas industries;
|
•
|
the outcomes of regulatory, tax, environmental and legal matters, including whether pending matters are resolved within current estimates and whether the costs associated with such matters are adequately covered by insurance or recovered in rates;
|
•
|
the loss of customers due to a government-mandated sale of our utility distribution facilities;
|
•
|
industrial, commercial and residential growth or contraction in our markets or service territories;
|
•
|
the weather and other natural phenomena, including the economic, operational and other effects of hurricanes, ice storms and other damaging weather events;
|
•
|
the timing and extent of changes in commodity prices and interest rates;
|
•
|
general economic conditions, including any potential effects arising from terrorist attacks and any consequential hostilities or other hostilities or other external factors over which we have no control;
|
•
|
changes in environmental and other laws and regulations to which we are subject and changes in environmental conditions of property that we now or may in the future own or operate;
|
•
|
the results of financing efforts, including our ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings and general economic conditions;
|
•
|
the impact to the asset values and resulting higher costs and funding obligations of the Company's pension and other postretirement benefit plans as a result of potential downturns in the financial markets, lower discount rates or impacts associated with the Patient Protection and Affordable Care Act;
|
•
|
the creditworthiness of counterparties with which we are engaged in transactions;
|
•
|
the extent of success in connecting natural gas and electric supplies to transmission systems and in expanding natural gas and electric markets;
|
•
|
the effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
|
•
|
conditions of the capital markets and equity markets during the periods covered by the forward-looking statements;
|
•
|
the ability to successfully execute, manage and integrate merger, acquisition or divestiture plans, regulatory or other limitations imposed as a result of a merger, acquisition or divestiture, and the success of the business following a merger, acquisition or divestiture;
|
•
|
the ability to establish and maintain new key supply sources;
|
•
|
the effect of spot, forward and future market prices on our distribution, wholesale marketing and energy trading businesses;
|
•
|
the effect of competition on our businesses;
|
•
|
the ability to construct facilities at or below estimated costs;
|
•
|
risks related to cyber-attack or failure of information technology systems; and
|
•
|
changes in technology affecting our advanced information services business.
|
•
|
executing a capital investment program in pursuit of organic growth opportunities that generate returns equal to or greater than our cost of capital;
|
•
|
expanding the regulated energy distribution and transmission businesses into new geographic areas and providing new services in our current service territories;
|
•
|
expanding the propane distribution business in existing and new markets through leveraging our community gas system services and our bulk delivery capabilities;
|
•
|
expanding both our regulated energy and unregulated energy businesses through strategic acquisitions;
|
•
|
utilizing our expertise across our various businesses to improve overall performance;
|
•
|
pursuing and entering new unregulated energy markets and business lines that will complement our existing strategy and operating units;
|
•
|
enhancing marketing channels to attract new customers;
|
•
|
providing reliable and responsive customer service to existing customers so they become our best promoters;
|
•
|
engaging our customers through a distinctive service excellence initiative;
|
•
|
developing and retaining a high-performing team that advances our goals;
|
•
|
empowering and engaging our employees at all levels to live our brand and vision;
|
•
|
demonstrating community leadership and engaging our local communities and governments in a cooperative and mutually beneficial way;
|
•
|
maintaining a capital structure that enables us to access capital as needed;
|
•
|
maintaining a consistent and competitive dividend for shareholders; and
|
•
|
creating and maintaining a diversified customer base, energy portfolio and utility foundation.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy
|
|
$
|
10,711
|
|
|
$
|
8,619
|
|
|
$
|
2,092
|
|
Unregulated Energy
|
|
(43
|
)
|
|
447
|
|
|
(490
|
)
|
|||
Other
|
|
(211
|
)
|
|
86
|
|
|
(297
|
)
|
|||
Operating Income
|
|
10,457
|
|
|
9,152
|
|
|
1,305
|
|
|||
Other Income
|
|
405
|
|
|
24
|
|
|
381
|
|
|||
Interest Charges
|
|
2,303
|
|
|
2,016
|
|
|
287
|
|
|||
Income Taxes
|
|
3,425
|
|
|
2,804
|
|
|
621
|
|
|||
Net Income
|
|
$
|
5,134
|
|
|
$
|
4,356
|
|
|
$
|
778
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
|
$
|
0.08
|
|
Diluted
|
|
$
|
0.53
|
|
|
$
|
0.45
|
|
|
$
|
0.08
|
|
(in thousands, except per share)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
||||||
Second Quarter of 2013 Reported Results
|
|
$
|
7,160
|
|
|
$
|
4,356
|
|
|
$
|
0.45
|
|
Adjusting for unusual items:
|
|
|
|
|
|
|
||||||
One-time sales tax expensed by Sandpiper associated with the acquisition
|
|
759
|
|
|
462
|
|
|
0.05
|
|
|||
|
|
759
|
|
|
462
|
|
|
0.05
|
|
|||
Increased Gross Margins:
|
|
|
|
|
|
|
||||||
Major Projects (See Major Projects Highlights table)
|
|
|
|
|
|
|
||||||
Service expansions
|
|
1,545
|
|
|
939
|
|
|
0.10
|
|
|||
Contribution from Sandpiper
|
|
966
|
|
|
588
|
|
|
0.06
|
|
|||
GRIP
|
|
643
|
|
|
391
|
|
|
0.04
|
|
|||
Other natural gas growth
|
|
572
|
|
|
348
|
|
|
0.04
|
|
|||
Contribution from other acquisitions
|
|
53
|
|
|
32
|
|
|
—
|
|
|||
|
|
3,779
|
|
|
2,298
|
|
|
0.24
|
|
|||
(Increased) Decreased Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Higher payroll costs
|
|
(1,509
|
)
|
|
(918
|
)
|
|
(0.09
|
)
|
|||
Expenses from acquisitions
|
|
(1,098
|
)
|
|
(668
|
)
|
|
(0.07
|
)
|
|||
Higher depreciation, asset removal and property tax costs due to new capital investments
|
|
(852
|
)
|
|
(519
|
)
|
|
(0.05
|
)
|
|||
Higher benefits costs
|
|
(661
|
)
|
|
(402
|
)
|
|
(0.04
|
)
|
|||
Lower accrual for incentive bonuses
|
|
316
|
|
|
193
|
|
|
0.02
|
|
|||
|
|
(3,804
|
)
|
|
(2,314
|
)
|
|
(0.23
|
)
|
|||
Net Other Changes
|
|
665
|
|
|
332
|
|
|
0.02
|
|
|||
Second Quarter of 2014 Reported Results
|
|
$
|
8,559
|
|
|
$
|
5,134
|
|
|
$
|
0.53
|
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands except per share)
|
|
|
|
|
|
|
||||||
Business Segment:
|
|
|
|
|
|
|
||||||
Regulated Energy
|
|
$
|
31,802
|
|
|
$
|
25,925
|
|
|
$
|
5,877
|
|
Unregulated Energy
|
|
10,815
|
|
|
9,816
|
|
|
999
|
|
|||
Other
|
|
(538
|
)
|
|
(39
|
)
|
|
(499
|
)
|
|||
Operating Income
|
|
42,079
|
|
|
35,702
|
|
|
6,377
|
|
|||
Other Income
|
|
413
|
|
|
312
|
|
|
101
|
|
|||
Interest Charges
|
|
4,459
|
|
|
4,088
|
|
|
371
|
|
|||
Income Taxes
|
|
15,218
|
|
|
12,701
|
|
|
2,517
|
|
|||
Net Income
|
|
$
|
22,815
|
|
|
$
|
19,225
|
|
|
$
|
3,590
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
2.36
|
|
|
$
|
2.00
|
|
|
$
|
0.36
|
|
Diluted
|
|
$
|
2.35
|
|
|
$
|
1.99
|
|
|
$
|
0.36
|
|
(in thousands, except per share)
|
|
Pre-tax
Income
|
|
Net
Income
|
|
Earnings
Per Share
|
||||||
Six months ended June 30, 2013 Reported Results
|
|
$
|
31,926
|
|
|
$
|
19,225
|
|
|
$
|
1.99
|
|
Adjusting for unusual items:
|
|
|
|
|
|
|
||||||
Weather impact (due primarily to colder temperatures in 2014)
|
|
2,266
|
|
|
1,365
|
|
|
0.14
|
|
|||
One-time sales tax expensed by Sandpiper associated with the acquisition
|
|
759
|
|
|
457
|
|
|
0.05
|
|
|||
|
|
3,025
|
|
|
1,822
|
|
|
0.19
|
|
|||
Increased Gross Margins:
|
|
|
|
|
|
|
||||||
Major Projects (See Major Projects Highlights table)
|
|
|
|
|
|
|
||||||
Contribution from Sandpiper
|
|
5,255
|
|
|
3,165
|
|
|
0.33
|
|
|||
Service expansions
|
|
2,970
|
|
|
1,789
|
|
|
0.18
|
|
|||
GRIP
|
|
1,310
|
|
|
789
|
|
|
0.08
|
|
|||
Increased wholesale propane sales
|
|
1,286
|
|
|
774
|
|
|
0.08
|
|
|||
Other natural gas growth
|
|
1,159
|
|
|
698
|
|
|
0.07
|
|
|||
Propane wholesale marketing
|
|
930
|
|
|
560
|
|
|
0.06
|
|
|||
Contributions from other acquisitions
|
|
555
|
|
|
334
|
|
|
0.03
|
|
|||
|
|
13,465
|
|
|
8,109
|
|
|
0.83
|
|
|||
Increased Other Operating Expenses:
|
|
|
|
|
|
|
||||||
Expenses from acquisitions
|
|
(3,214
|
)
|
|
(1,935
|
)
|
|
(0.20
|
)
|
|||
Higher payroll costs
|
|
(2,664
|
)
|
|
(1,605
|
)
|
|
(0.17
|
)
|
|||
Higher benefits costs
|
|
(1,709
|
)
|
|
(1,030
|
)
|
|
(0.11
|
)
|
|||
Higher depreciation, asset removal costs and property tax costs due to new capital investments
|
|
(1,631
|
)
|
|
(982
|
)
|
|
(0.10
|
)
|
|||
Larger accrual for incentive bonuses
|
|
(742
|
)
|
|
(447
|
)
|
|
(0.05
|
)
|
|||
|
|
(9,960
|
)
|
|
(5,999
|
)
|
|
(0.63
|
)
|
|||
Net Other Changes
|
|
(423
|
)
|
|
(342
|
)
|
|
(0.03
|
)
|
|||
Six months ended June 30, 2014 Reported Results
|
|
$
|
38,033
|
|
|
$
|
22,815
|
|
|
$
|
2.35
|
|
|
|
||||||||||
|
Q2 2014
|
|
YTD 2014
|
|
2014
(1)
|
||||||
Acquisition:
|
|
|
|
|
|
||||||
ESG acquisition being served by Sandpiper in Worcester County, Maryland
(2)
|
$
|
1,504
|
|
|
$
|
5,794
|
|
|
$
|
9,817
|
|
Service Expansions
|
|
|
|
|
|
||||||
Natural Gas Distribution:
|
|
|
|
|
|
||||||
Long-term
|
|
|
|
|
|
||||||
Sussex County, Delaware
(3)
|
$
|
155
|
|
|
$
|
359
|
|
|
$
|
694
|
|
Natural Gas Transmission:
|
|
|
|
|
|
||||||
Short-term
|
|
|
|
|
|
||||||
New Castle County, Delaware
(4) (5)
|
$
|
599
|
|
|
$
|
599
|
|
|
$
|
1,862
|
|
Kent County, Delaware
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total Short-term
|
$
|
599
|
|
|
$
|
599
|
|
|
$
|
1,862
|
|
Long-term
|
|
|
|
|
|
||||||
Sussex County, Delaware
(6)
|
$
|
431
|
|
|
$
|
863
|
|
|
$
|
1,725
|
|
New Castle County, Delaware
(6) (7)
|
741
|
|
|
1,482
|
|
|
2,964
|
|
|||
Nassau County, Florida
(6)
|
328
|
|
|
655
|
|
|
1,300
|
|
|||
Worcester County, Maryland
(6)
|
137
|
|
|
274
|
|
|
547
|
|
|||
Cecil County, Maryland
(6)
|
287
|
|
|
574
|
|
|
1,147
|
|
|||
Indian River County, Florida
|
210
|
|
|
420
|
|
|
840
|
|
|||
Kent County, Delaware
|
665
|
|
|
1,330
|
|
|
3,123
|
|
|||
Total Long-term
|
$
|
2,799
|
|
|
$
|
5,598
|
|
|
$
|
11,646
|
|
|
|
|
|
|
|
||||||
Total Service Expansions
|
$
|
3,553
|
|
|
$
|
6,556
|
|
|
$
|
14,202
|
|
|
|
|
|
|
|
||||||
Total Major Projects
|
$
|
5,057
|
|
|
$
|
12,350
|
|
|
$
|
24,019
|
|
|
|
|
|
|
|
||||||
Less: 2013 Margin
|
$
|
2,545
|
|
|
$
|
4,124
|
|
|
$
|
13,176
|
|
Incremental Margin in 2014 over 2013
|
$
|
2,512
|
|
|
$
|
8,226
|
|
|
$
|
10,843
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
||||||||||
|
June 30,
|
|
|
|
June 30,
|
|
|
||||||||||
|
2014
|
|
2013
|
|
Variance
|
|
2014
|
|
2013
|
|
Variance
|
||||||
Delmarva
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
456
|
|
|
490
|
|
|
(34
|
)
|
|
3,173
|
|
|
2,897
|
|
|
276
|
|
10-Year Average HDD ("Normal")
|
459
|
|
|
473
|
|
|
(14
|
)
|
|
2,820
|
|
|
2,850
|
|
|
(30
|
)
|
Variance from Normal
|
(3
|
)
|
|
17
|
|
|
|
|
353
|
|
|
47
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Florida
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual HDD
|
17
|
|
|
19
|
|
|
(2
|
)
|
|
574
|
|
|
487
|
|
|
87
|
|
10-Year Average HDD ("Normal")
|
26
|
|
|
28
|
|
|
(2
|
)
|
|
555
|
|
|
569
|
|
|
(14
|
)
|
Variance from Normal
|
(9
|
)
|
|
(9
|
)
|
|
|
|
19
|
|
|
(82
|
)
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Florida
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Actual CDD
|
928
|
|
|
865
|
|
|
63
|
|
|
970
|
|
|
946
|
|
|
24
|
|
10-Year Average CDD ("Normal")
|
908
|
|
|
911
|
|
|
(3
|
)
|
|
982
|
|
|
986
|
|
|
(4
|
)
|
Variance from Normal
|
20
|
|
|
(46
|
)
|
|
|
|
(12
|
)
|
|
(40
|
)
|
|
|
(in thousands)
|
Q2 2014 vs. Q2 2013
|
|
Q2 2014 vs. Normal
|
|
YTD 2014 vs. YTD 2013
|
|
YTD 2014 vs. Normal
|
||||||||
Delmarva
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
$
|
(256
|
)
|
|
$
|
19
|
|
|
$
|
255
|
|
|
$
|
636
|
|
Unregulated Energy
|
(39
|
)
|
|
(46
|
)
|
|
1,694
|
|
|
1,096
|
|
||||
Florida
|
|
|
|
|
|
|
|
||||||||
Regulated Energy
|
(56
|
)
|
|
(116
|
)
|
|
269
|
|
|
(322
|
)
|
||||
Unregulated Energy
|
—
|
|
|
—
|
|
|
48
|
|
|
81
|
|
||||
Total
|
$
|
(351
|
)
|
|
$
|
(143
|
)
|
|
$
|
2,266
|
|
|
$
|
1,491
|
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
61,646
|
|
|
$
|
55,216
|
|
|
$
|
6,430
|
|
Cost of sales
|
|
24,672
|
|
|
22,115
|
|
|
2,557
|
|
|||
Gross margin
|
|
36,974
|
|
|
33,101
|
|
|
3,873
|
|
|||
Operations & maintenance
|
|
18,109
|
|
|
16,683
|
|
|
1,426
|
|
|||
Depreciation & amortization
|
|
5,623
|
|
|
4,897
|
|
|
726
|
|
|||
Other taxes
|
|
2,531
|
|
|
2,902
|
|
|
(371
|
)
|
|||
Other operating expenses
|
|
26,263
|
|
|
24,482
|
|
|
1,781
|
|
|||
Operating Income
|
|
$
|
10,711
|
|
|
$
|
8,619
|
|
|
$
|
2,092
|
|
(in thousands)
|
|
||
Gross margin for the three months ended June 30, 2013
|
$
|
33,101
|
|
Factors contributing to the gross margin increase for the three months ended June 30, 2014:
|
|
||
Service expansions
|
1,545
|
|
|
Contributions from acquisitions
|
1,007
|
|
|
Additional revenue from GRIP in Florida
|
643
|
|
|
Other natural gas growth
|
572
|
|
|
Other
|
106
|
|
|
Gross margin for the three months ended June 30, 2014
|
$
|
36,974
|
|
•
|
$599,000
from a short-term contract with an industrial customer to provide 50,000 Dts/d of additional natural gas transmission services from April 2014 to April 2015. This short-term contract is expected to generate
$1.9 million
and
$767,000
of gross margin in 2014 and 2015, respectively.
|
•
|
$549,000
from long-term natural gas transmission services that commenced in November 2013 to several industrial customers, located in New Castle and Kent Counties, Delaware. These long-term transmission services displaced short-term services that Eastern Shore provided to these customers from May through October 2013 and are expected to generate
$4.3 million
of annual gross margin. They also displace annualized gross margin of $1.1 million from an older contract, which expired in November 2012.
|
•
|
$398,000
from service expansions completed in 2013 that facilitated new natural gas transmission and distribution services in Sussex County, Delaware; Worcester and Cecil Counties, Maryland; and Nassau and Indian River Counties, Florida.
|
•
|
$473,000
from Florida natural gas customer growth due primarily to new services to commercial and industrial customers; and
|
•
|
$165,000
from
three percent
residential customer growth, as well as growth in commercial and industrial customers, in our Delmarva natural gas distribution operation.
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
163,812
|
|
|
$
|
136,783
|
|
|
$
|
27,029
|
|
Cost of sales
|
|
78,980
|
|
|
63,731
|
|
|
15,249
|
|
|||
Gross margin
|
|
84,832
|
|
|
73,052
|
|
|
11,780
|
|
|||
Operations & maintenance
|
|
36,510
|
|
|
32,150
|
|
|
4,360
|
|
|||
Depreciation & amortization
|
|
11,150
|
|
|
9,706
|
|
|
1,444
|
|
|||
Other taxes
|
|
5,370
|
|
|
5,271
|
|
|
99
|
|
|||
Other operating expenses
|
|
53,030
|
|
|
47,127
|
|
|
5,903
|
|
|||
Operating Income
|
|
$
|
31,802
|
|
|
$
|
25,925
|
|
|
$
|
5,877
|
|
(in thousands)
|
|
||
Gross margin for the six months ended June 30, 2013
|
$
|
73,052
|
|
Factors contributing to the gross margin increase for the six months ended June 30, 2014:
|
|
||
Contributions from acquisitions
|
5,358
|
|
|
Service expansions
|
2,970
|
|
|
Additional revenue from GRIP in Florida
|
1,310
|
|
|
Other natural gas growth
|
1,159
|
|
|
Increased customer consumption - weather and other
|
540
|
|
|
Other
|
443
|
|
|
Gross margin for the six months ended June 30, 2014
|
$
|
84,832
|
|
•
|
$1.6 million
from long-term natural gas transmission services, which commenced in November 2013, for services provided by Eastern Shore to industrial customers located in New Castle and Kent Counties, Delaware. These long-term transmission services, which displaced short-term services provided by Eastern Shore to these customers from May through October 2013, are expected to generate
$4.3 million
of annual gross margin. They also displace annualized gross margin of $1.1 million from an older contract, which expired in November 2012.
|
•
|
$799,000
from expansions completed in 2013 that facilitated new natural gas transmission and distribution services in Sussex County, Delaware; Worcester and Cecil Counties, Maryland; and Nassau and Indian River Counties, Florida.
|
•
|
$599,000
from a short-term contract with an existing industrial customer to provide an additional 50,000 Dts/d of natural gas transmission services from April 2014 to April 2015. This short-term contract is expected to generate
$1.9 million
and
$767,000
of gross margin in 2014 and 2015, respectively.
|
•
|
$997,000
from Florida natural gas customer growth due primarily to new services to commercial and industrial customers.
|
•
|
$445,000
from a
three-percent
residential customer growth rate, as well as growth in commercial and industrial customers, in our Delmarva natural gas distribution operation.
|
•
|
These increases were partially offset by a decrease in Eastern Shore's interruptible service to an existing industrial customer, which lowered lower gross margin by
$454,000
.
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
34,321
|
|
|
$
|
36,025
|
|
|
$
|
(1,704
|
)
|
Cost of sales
|
|
26,020
|
|
|
27,934
|
|
|
(1,914
|
)
|
|||
Gross margin
|
|
8,301
|
|
|
8,091
|
|
|
210
|
|
|||
Operations & maintenance
|
|
7,022
|
|
|
6,319
|
|
|
703
|
|
|||
Depreciation & amortization
|
|
986
|
|
|
967
|
|
|
19
|
|
|||
Other taxes
|
|
336
|
|
|
358
|
|
|
(22
|
)
|
|||
Other operating expenses
|
|
8,344
|
|
|
7,644
|
|
|
700
|
|
|||
Operating Income (Loss)
|
|
$
|
(43
|
)
|
|
$
|
447
|
|
|
$
|
(490
|
)
|
(in thousands)
|
|
||
Gross margin for the three months ended June 30, 2013
|
$
|
8,091
|
|
Factors contributing to the gross margin increase for the three months ended June 30, 2014:
|
|
||
Increased wholesale propane sales
|
254
|
|
|
Increase in retail propane margins
|
237
|
|
|
Decreased customer consumption—weather and other
|
(195
|
)
|
|
Contributions from acquisitions
|
12
|
|
|
Other
|
(98
|
)
|
|
Gross margin for the three months ended June 30, 2014
|
$
|
8,301
|
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
114,294
|
|
|
$
|
91,016
|
|
|
$
|
23,278
|
|
Cost of sales
|
|
85,179
|
|
|
65,741
|
|
|
19,438
|
|
|||
Gross margin
|
|
29,115
|
|
|
25,275
|
|
|
3,840
|
|
|||
Operations & maintenance
|
|
15,447
|
|
|
12,706
|
|
|
2,741
|
|
|||
Depreciation & amortization
|
|
1,966
|
|
|
1,867
|
|
|
99
|
|
|||
Other taxes
|
|
887
|
|
|
886
|
|
|
1
|
|
|||
Other operating expenses
|
|
18,300
|
|
|
15,459
|
|
|
2,841
|
|
|||
Operating Income
|
|
$
|
10,815
|
|
|
$
|
9,816
|
|
|
$
|
999
|
|
(in thousands)
|
|
||
Gross margin for the six months ended June 30, 2013
|
$
|
25,275
|
|
Factors contributing to the gross margin increase for the six months ended June 30, 2014:
|
|
||
Increased customer consumption—weather and other
|
1,640
|
|
|
Increased wholesale propane sales
|
1,286
|
|
|
Increased margins from propane wholesale marketing
|
930
|
|
|
Contributions from acquisitions
|
452
|
|
|
Decrease in retail propane margins
|
(254
|
)
|
|
Other
|
(214
|
)
|
|
Gross margin for the six months ended June 30, 2014
|
$
|
29,115
|
|
|
|
Three Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
4,530
|
|
|
$
|
2,905
|
|
|
$
|
1,625
|
|
Cost of sales
|
|
2,422
|
|
|
839
|
|
|
1,583
|
|
|||
Gross margin
|
|
2,108
|
|
|
2,066
|
|
|
42
|
|
|||
Operations & maintenance
|
|
1,941
|
|
|
1,640
|
|
|
301
|
|
|||
Depreciation & amortization
|
|
127
|
|
|
113
|
|
|
14
|
|
|||
Other taxes
|
|
251
|
|
|
227
|
|
|
24
|
|
|||
Other operating expenses
|
|
2,319
|
|
|
1,980
|
|
|
339
|
|
|||
Operating Income (Loss)
|
|
$
|
(211
|
)
|
|
$
|
86
|
|
|
$
|
(297
|
)
|
|
|
Six Months Ended
|
|
|
||||||||
|
|
June 30,
|
|
Increase
|
||||||||
|
|
2014
|
|
2013
|
|
(decrease)
|
||||||
(in thousands)
|
|
|
|
|
|
|
||||||
Revenue
|
|
$
|
8,728
|
|
|
$
|
7,075
|
|
|
$
|
1,653
|
|
Cost of sales
|
|
4,587
|
|
|
3,120
|
|
|
1,467
|
|
|||
Gross margin
|
|
4,141
|
|
|
3,955
|
|
|
186
|
|
|||
Operations & maintenance
|
|
3,890
|
|
|
3,263
|
|
|
627
|
|
|||
Depreciation & amortization
|
|
255
|
|
|
223
|
|
|
32
|
|
|||
Other taxes
|
|
534
|
|
|
508
|
|
|
26
|
|
|||
Other operating expenses
|
|
4,679
|
|
|
3,994
|
|
|
685
|
|
|||
Operating Loss
|
|
$
|
(538
|
)
|
|
$
|
(39
|
)
|
|
$
|
(499
|
)
|
(dollars in thousands)
|
|
||
Regulated Energy:
|
|
||
Natural gas distribution
|
$
|
63,985
|
|
Natural gas transmission
|
51,442
|
|
|
Electric distribution
|
7,867
|
|
|
Total Regulated Energy
|
123,294
|
|
|
Unregulated Energy:
|
|
||
Propane distribution
|
8,774
|
|
|
Other unregulated energy
|
3,946
|
|
|
Total Unregulated Energy
|
12,720
|
|
|
Other
|
|
||
Advanced information services
|
898
|
|
|
Other
|
9,034
|
|
|
Total Other
|
9,932
|
|
|
Total 2014 projected capital expenditures
|
$
|
145,946
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Long-term debt, net of current maturities
|
|
$
|
165,370
|
|
|
36
|
%
|
|
$
|
117,592
|
|
|
30
|
%
|
Stockholders’ equity
|
|
296,223
|
|
|
64
|
%
|
|
278,773
|
|
|
70
|
%
|
||
Total capitalization, excluding short-term debt
|
|
$
|
461,593
|
|
|
100
|
%
|
|
$
|
396,365
|
|
|
100
|
%
|
|
|
June 30, 2014
|
|
December 31, 2013
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
||||||
Short-term debt
|
|
$
|
47,870
|
|
|
9
|
%
|
|
$
|
105,666
|
|
|
21
|
%
|
Long-term debt, including current maturities
|
|
176,487
|
|
|
34
|
%
|
|
128,945
|
|
|
25
|
%
|
||
Stockholders’ equity
|
|
296,223
|
|
|
57
|
%
|
|
278,773
|
|
|
54
|
%
|
||
Total capitalization, including short - term debt
|
|
$
|
520,580
|
|
|
100
|
%
|
|
$
|
513,384
|
|
|
100
|
%
|
|
|
Six Months Ended
|
||||||
|
|
June 30,
|
||||||
|
|
2014
|
|
2013
|
||||
(in thousands)
|
|
|
|
|
||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
58,222
|
|
|
$
|
54,063
|
|
Investing activities
|
|
(42,373
|
)
|
|
(60,925
|
)
|
||
Financing activities
|
|
(16,676
|
)
|
|
5,711
|
|
||
Net decrease in cash and cash equivalents
|
|
(827
|
)
|
|
(1,151
|
)
|
||
Cash and cash equivalents—beginning of period
|
|
3,356
|
|
|
3,361
|
|
||
Cash and cash equivalents—end of period
|
|
$
|
2,529
|
|
|
$
|
2,210
|
|
•
|
The changes in net accounts receivable and payable increased cash flows by
$12.4 million
, due primarily to the timing of the collections and payments associated with trading contracts entered into by our propane wholesale marketing subsidiary;
|
•
|
The changes in net regulatory assets and liabilities decreased cash flows by
$10.8 million
, due primarily to a change in fuel costs collected through fuel cost recovery;
|
•
|
Net cash flows from changes in propane and natural gas inventories increased by approximately
$3.9 million
, compared to 2013, as a result of the higher levels of propane and natural gas usage, which decreases the levels of our inventory;
|
•
|
Higher net income taxes paid decreased the cash flows by
$3.3 million
, due primarily to the absence of a bonus depreciation deduction in 2014, versus 2013.
|
•
|
Lower refunds of customer deposits increased cash flows by
$1.3 million
.
|
•
|
Net cash of
$19.5 million
was used to acquire Glades, Sandpiper, and Austin Cox during the first six months of 2013; there were no corresponding transactions during the same period in 2014;
|
•
|
Cash paid for capital expenditures increased by
$1.6 million
to
$42.8 million
for the first
six
months of 2014, compared to
$41.2 million
for the same period in 2013.
|
•
|
During the
six
months ended June 30, 2014, we received
$50.0 million
in cash proceeds from a long-term issuance of Series B Notes and paid
$1.7 million
for scheduled principal payments. During the first six months ended June 30, 2013, we issued
$7.0 million
in long-term debt to refinance
$8.5 million
of existing secured long-term bonds. These long-term debt activities increased cash flows by
$49.8 million
.
|
•
|
Net repayments of
$57.0 million
under our lines of credit during the six months ended June 30, 2014, compared to net borrowings of
$15.5 million
in the same period in 2013, decreased cash flows by
$72.5 million
. The proceeds from the long-term debt issuance during the first six months of 2014 were used to repay borrowings under our lines of credit.
|
|
|
Payments Due by Period
|
||||||||||||||||||
Purchase Obligations
|
|
Less than 1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5 years
|
|
Total
|
||||||||||
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodities
(1)
|
|
$
|
10,917
|
|
|
$
|
621
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,538
|
|
Propane
|
|
27,958
|
|
|
18,639
|
|
|
3,610
|
|
|
—
|
|
|
50,207
|
|
|||||
Total Purchase Obligations
|
|
$
|
38,875
|
|
|
$
|
19,260
|
|
|
$
|
3,610
|
|
|
$
|
—
|
|
|
$
|
61,745
|
|
(1)
|
In addition to the obligations noted above, the natural gas, electric and propane distribution operations have agreements with commodity suppliers that have provisions with no minimum purchase requirements. There are no monetary penalties for reducing the amounts purchased; however, the propane contracts allow the suppliers to reduce the amounts available in the winter season if we do not purchase specified amounts during the summer season. Under these contracts, the commodity prices will fluctuate as market prices fluctuate.
|
|
Quantity in
|
|
Estimated Market
|
|
Weighted Average
|
|||
At June 30, 2014
|
Gallons
|
|
Prices
|
|
Contract Prices
|
|||
Forward Contracts
|
|
|
|
|
|
|||
Sale
|
630,000
|
|
|
$1.1400
|
|
$
|
1.1400
|
|
Purchase
|
631,000
|
|
|
$1.1300 - $1.3176
|
|
$
|
1.1302
|
|
|
|
|
|
|
||||
(in thousands)
|
|
June 30, 2014
|
|
December 31, 2013
|
||||
Mark-to-market energy assets, including call options
|
|
$
|
136
|
|
|
$
|
385
|
|
Mark-to-market energy liabilities, including swap agreements
|
|
$
|
32
|
|
|
$
|
127
|
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
|
Total
Number of
Shares
|
|
Average
Price Paid
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
|
|
Maximum Number of
Shares That May Yet Be
Purchased Under the Plans
|
|||||
Period
|
|
Purchased
|
|
per Share
|
|
or Programs
(2)
|
|
or Programs
(2)
|
|||||
April 1, 2014 through April 30, 2014(1)
|
|
229
|
|
|
$
|
61.23
|
|
|
—
|
|
|
—
|
|
May 1, 2014
through May 31, 2014 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
June 1, 2014
through June 30, 2014 |
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
229
|
|
|
$
|
61.23
|
|
|
—
|
|
|
—
|
|
(1)
|
Chesapeake purchased shares of stock on the open market for the purpose of reinvesting the dividend on deferred stock units held in the Rabbi Trust accounts for certain Directors and Senior Executives under the Deferred Compensation Plan. The Deferred Compensation Plan is discussed in detail in Item 8 under the heading “Notes to the Consolidated Financial Statements—
Note 16, Employee Benefit Plans
” in our latest Annual Report on Form 10-K for the year ended
December 31, 2013
. During the quarter ended
June 30, 2014
,
229
shares were purchased through the reinvestment of dividends on deferred stock units.
|
(2)
|
Except for the purposes described in Footnote
(1)
, Chesapeake has no publicly announced plans or programs to repurchase its shares.
|
Item 3.
|
Defaults upon Senior Securities
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
|
|
|
31.1
|
|
Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, dated August 7, 2014.
|
|
|
|
31.2
|
|
Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, dated August 7, 2014.
|
|
|
|
32.1
|
|
Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350, dated August 7, 2014.
|
|
|
|
32.2
|
|
Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350, dated August 7, 2014.
|
|
|
|
101.INS*
|
|
XBRL Instance Document.
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
C
HESAPEAKE
U
TILITIES
C
ORPORATION
|
|
/
S
/ B
ETH
W. C
OOPER
|
Beth W. Cooper
Senior Vice President and Chief Financial Officer
|
1 Year Chesapeake Utilities Chart |
1 Month Chesapeake Utilities Chart |
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