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SECURITIES AND EXCHANGE COMMISSION
THE SECURITIES EXCHANGE ACT OF 1934
State of Delaware | 51-0064146 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Name of each exchange on which registered | |
Common Stock — par value per share $0.4867 | New York Stock Exchange, Inc. |
8.25% Convertible Debentures Due 2014
(Title of class)
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller Reporting Companyo |
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Exhibit 4.9 | ||||||||
Exhibit 10.6 | ||||||||
Exhibit 10.8 | ||||||||
Exhibit 10.13 | ||||||||
Exhibit 10.28 | ||||||||
Exhibit 10.30 | ||||||||
Exhibit 10.41 | ||||||||
Exhibit 10.43 | ||||||||
Exhibit 12 | ||||||||
Exhibit 14.1 | ||||||||
Exhibit 14.2 | ||||||||
Exhibit 21 | ||||||||
Exhibit 23.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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BravePoint | BravePoint®, Inc., a wholly-owned subsidiary of Chesapeake Services Company, which is a wholly-owned subsidiary of Chesapeake | |
Chesapeake | The Registrant, the Registrant and its subsidiaries, or the Registrant’s subsidiaries, as appropriate in the context of the disclosure | |
Company | The Registrant, the Registrant and its subsidiaries or the Registrant’s subsidiaries, as appropriate in the context of the disclosure | |
ESNG | Eastern Shore Natural Gas Company, a wholly-owned subsidiary of Chesapeake | |
FPU | Florida Public Utilities Company, a wholly-owned subsidiary of Chesapeake, effective October 28, 2009 | |
PESCO | Peninsula Energy Services Company, Inc., a wholly-owned subsidiary of Chesapeake | |
PIPECO | Peninsula Pipeline Company, Inc., a wholly-owned subsidiary of Chesapeake | |
Sharp | Sharp Energy, Inc., a wholly-owned subsidiary of Chesapeake’s and Sharp’s subsidiary, Sharpgas, Inc. | |
Xeron | Xeron, Inc., a wholly-owned subsidiary of Chesapeake |
Delaware PSC | Delaware Public Service Commission | |
DOT | United States Department of Transportation | |
EPA | United States Environmental Protection Agency | |
FASB | Financial Accounting Standards Board | |
FERC | Federal Energy Regulatory Commission | |
FDEP | Florida Department of Environmental Protection | |
Florida PSC | Florida Public Service Commission | |
IASB | International Accounting Standards Board | |
IRS | Internal Revenue Service | |
Maryland PSC | Maryland Public Service Commission | |
MDE | Maryland Department of the Environment | |
PSC | Public Service Commission | |
SEC | Securities and Exchange Commission |
ASC | FASB Accounting Standards CodificationTM | |
ASU | FASB Accounting Standards Update | |
GAAP | Generally Accepted Accounting Principles | |
IFRS | International Financial Reporting Standards | |
FASB | Financial Accounting Standards Board |
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AS/SVE | Air Sparging and Soil/Vapor Extraction | |
BS/SVE | Bio-Sparging and Soil/Vapor Extraction | |
CDD | Cooling Degree-Days | |
Columbia | Columbia Gas Transmission, LLC | |
DSCP | Directors Stock Compensation Plan | |
Dts | Dekatherms | |
Dts/d | Dekatherms per Day | |
FCG | Florida City Gas | |
FGT | Florida Gas Transmission Company | |
FRP | Fuel Retention Percentage | |
GSR | Gas Sales Service Rates | |
Gulf | Columbia Gulf Transmission Company | |
Gulf Power | Gulf Power Company | |
Gulfstream | Gulfstream Natural Gas System, LLC | |
HDD | Heating Degree-Days | |
IGC | Indiantown Gas Company | |
Mcf | Thousand Cubic Feet | |
MGP | Manufactured Gas Plant | |
MWH | Megawatt Hour | |
NYSE | New York Stock Exchange | |
PIP | Performance Incentive Plan | |
RAP | Remedial Action Plan | |
S&P 500 Index | Standard & Poor’s 500 Index | |
Sanford Group | FPU and Other Responsible Parties involved with the Sanford Environmental Site | |
TETLP | Texas Eastern Transmission, LP | |
Transco | Transcontinental Gas Pipe Line Company, LLC |
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• | state and federal legislative and regulatory initiatives 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 (including deregulation); |
• | the outcomes of regulatory, tax, environmental and legal matters, including whether pending matters are resolved within current estimates; |
• | industrial, commercial and residential growth or contraction in our service territories; |
• | the weather and other natural phenomena, including the economic, operational and other effects of hurricanes and ice storms; |
• | 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, 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; |
• | 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; |
• | declines in the market prices of equity securities and resultant cash funding requirements for our defined benefit pension plans; |
• | the creditworthiness of counterparties with which we are engaged in transactions; |
• | growth in opportunities for our business units; |
• | 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 manage and maintain key customer relationships; |
• | the ability to maintain key supply sources; |
Chesapeake Utilities Corporation 2010 Form 10-K Page 1
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• | 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; |
• | changes in technology affecting our advanced information services business; and |
• | operational and litigation risks that may not be covered by insurance. |
(a) | Overview | |
We are a diversified utility company engaged in various energy and other businesses. Chesapeake is a Delaware corporation that was formed in 1947. On October 28, 2009, we completed a merger with Florida Public Utilities Company (“FPU”), pursuant to which FPU became a wholly-owned subsidiary of Chesapeake. We operate regulated energy businesses through our natural gas distribution divisions in Delaware, Maryland and Florida, natural gas and electric distribution operations in Florida through FPU, and natural gas transmission operations on the Delmarva Peninsula and Florida through our subsidiaries, Eastern Shore Natural Gas Company (“ESNG”) and Peninsula Pipeline Company, Inc. (“PIPECO”), respectively. Our unregulated businesses include our natural gas marketing operation through Peninsula Energy Services Company, Inc. (“PESCO”); propane distribution operations through Sharp Energy, Inc. and its subsidiary Sharpgas, Inc. (collectively “Sharp”) and FPU’s propane distribution subsidiary, Flo-Gas Corporation; and our propane wholesale marketing operation through Xeron, Inc. (“Xeron”). We also have an advanced information services subsidiary, BravePoint®, Inc. (“BravePoint”). |
(b) | Operating Segments | |
We are composed of three operating segments: |
• | Regulated Energy. The regulated energy segment includes natural gas distribution, electric distribution and natural gas transmission operations. All operations in this segment are regulated, as to their rates and services, by the Public Service Commission (“PSC”) having jurisdiction in each operating territory or by the Federal Energy Regulatory Commission (“FERC”) in the case of ESNG. |
• | Unregulated Energy.The unregulated energy segment includes natural gas marketing, propane distribution and propane wholesale marketing operations, which are unregulated as to their rates and services. |
• | Other.The “other” segment consists primarily of the advanced information services operation, unregulated subsidiaries that own real estate leased to Chesapeake and certain corporate costs not allocated to other operations. |
Net Property, Plant | ||||||||||||||||
(in thousands) | Operating Income | & Equipment | ||||||||||||||
Regulated Energy | $ | 43,509 | 84 | % | $ | 414,622 | 90 | % | ||||||||
Unregulated Energy | 7,908 | 15 | % | 35,658 | 8 | % | ||||||||||
Other | 513 | 1 | % | 12,477 | 2 | % | ||||||||||
Total | $ | 51,930 | 100 | % | $ | 462,757 | 100 | % | ||||||||
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(i) | Regulated Energy | |
Our regulated energy segment provides natural gas distribution services in Delaware, Maryland and Florida, electric distribution services in Florida and natural gas transmission services in Delaware, Maryland, Pennsylvania and Florida. | ||
Natural Gas Distribution | ||
Natural gas supplies nearly one-fourth of the energy used in the United States. Due to its efficiency, cleanliness and reliability, natural gas is growing increasingly popular. With 99 percent of the natural gas consumed in the United States coming from North America, supplies of natural gas are abundant. Natural gas is delivered to customers through a safe and efficient underground pipeline system. As the cleanest-burning fossil fuel, increased use of natural gas can help address various environmental concerns today. | ||
Our Delaware and Maryland natural gas distribution divisions serve 52,686 residential and commercial customers and 177 industrial customers in central and southern Delaware and Maryland’s Eastern Shore. For the year ended December 31, 2010, operating revenues and deliveries by customer class for our Delaware and Maryland distribution divisions were as follows: |
Operating Revenues | Deliveries | |||||||||||||||
(in thousands) | (Mcfs) | |||||||||||||||
Residential | $ | 46,041 | 57 | % | 2,881,073 | 35 | % | |||||||||
Commercial | 27,896 | 34 | % | 2,145,143 | 26 | % | ||||||||||
Industrial | 3,766 | 5 | % | 3,020,907 | 36 | % | ||||||||||
Subtotal | 77,703 | 96 | % | 8,047,123 | 97 | % | ||||||||||
Interruptible | 655 | 1 | % | 232,653 | 3 | % | ||||||||||
Other (1) | 2,507 | 3 | % | — | — | |||||||||||
Total | $ | 80,865 | 100 | % | 8,279,776 | 100 | % | |||||||||
(1) | Operating revenues from “other” include unbilled revenue, rental of gas properties, and other miscellaneous charges. |
Operating Revenues | Deliveries | |||||||||||||||
(in thousands) | (Mcf’s) | |||||||||||||||
Residential | $ | 27,742 | 35 | % | 1,716,934 | 8 | % | |||||||||
Commercial | 39,006 | 48 | % | 4,451,414 | 20 | % | ||||||||||
Industrial | 13,043 | 16 | % | 15,582,234 | 72 | % | ||||||||||
Other (1) | 607 | 1 | % | 12,723 | — | |||||||||||
Total | $ | 80,398 | 100 | % | 21,763,305 | 100 | % | |||||||||
(1) | Operating revenues from “other” include unbilled revenue, conservation revenue, fees for billing services provided to third parties and other miscellaneous charges. |
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Operating Revenues | Deliveries | |||||||||||||||
(in thousands) | (MWHs) | |||||||||||||||
Residential | $ | 51,498 | 55 | % | 347,040 | 47 | % | |||||||||
Commercial | 45,332 | 48 | % | 332,322 | 45 | % | ||||||||||
Industrial | 7,705 | 8 | % | 66,580 | 9 | % | ||||||||||
Subtotal | 104,535 | 111 | % | 745,942 | 101 | % | ||||||||||
Other(1) | (10,452 | ) | (11 | %) | (6,286 | ) | (1 | %) | ||||||||
Total | $ | 94,083 | 100 | % | 739,656 | 100 | % | |||||||||
(1) | Operating revenues from “other” include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges and adjustments for pass-through taxes. |
Operating Revenues | Deliveries | |||||||||||||||
(in thousands) | (Mcfs) | |||||||||||||||
Local distribution companies | $ | 20,441 | 76 | % | 10,848,108 | 62 | % | |||||||||
Industrial | 4,864 | 18 | % | 4,794,442 | 27 | % | ||||||||||
Commercial | 1,571 | 6 | % | 1,962,890 | 11 | % | ||||||||||
Other(1) | 41 | 0 | % | — | — | |||||||||||
Subtotal | 26,917 | 100 | % | 17,605,440 | 100 | % | ||||||||||
Less: affiliated local distribution companies | (12,903 | ) | (48 | %) | (5,853,083 | ) | (33 | %) | ||||||||
Total non-affiliated | $ | 14,014 | 52 | % | 11,752,357 | 67 | % | |||||||||
(1) | Operating revenues from “other” sources are from rental of gas properties. |
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Firm transportation | Firm storage capacity | |||||||||
capacity maximum | maximum peak-day | |||||||||
peak-day daily | daily withdrawal | |||||||||
Pipeline | deliverability (Mcfs) | (Mcfs) | Expiration | |||||||
Transco | 20,699 | 6,190 | Various dates between 2012 and 2028 | |||||||
Columbia | 17,836 | 7,946 | Various dates between 2011 and 2020 | |||||||
Gulf | 850 | — | Expires in 2014 | |||||||
TETLP | 14,493 | — | Expires in 2012 | |||||||
ESNG | 64,602 | 4,006 | Various dates between 2011 and 2027 |
Firm transportation | Firm storage capacity | |||||||||
capacity maximum | maximum peak-day | |||||||||
peak-day daily | daily withdrawal | |||||||||
Pipeline | deliverability (Mcfs) | (Mcfs) | Expiration | |||||||
Transco | 5,921 | 2,909 | Various dates between 2012 and 2013 | |||||||
Columbia | 6,473 | 3,539 | Various dates between 2011 and 2018 | |||||||
Gulf | 570 | — | Expires in 2014 | |||||||
TETLP | 4,831 | — | Expires in 2012 | |||||||
ESNG | 21,380 | 2,228 | Various dates between 2011 and 2027 |
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Daily Firm | ||||
Transportation Capacity | ||||
(in Mcfs) | ||||
January — March | 28,647 | |||
April | 24,156 | |||
May — September | 9,681 | |||
October | 10,210 | |||
November — December | 28,647 |
Daily Firm | ||||
Transportation Capacity | ||||
(in Mcfs) | ||||
January — April | 10,286 | |||
May — October | 4,360 | |||
November — December | 10,286 |
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Regulatory | Effective Date of | Allowed | ||||||
Regulated Business | Jurisdiction | the Currrent Rates | Return | |||||
Chesapeake — Delaware Division | Delaware PSC | 9/3/2008 | 10.25%(1) | |||||
Chesapeake — Maryland Division | Maryland PSC | 12/1/2007 | 10.75%(1) | |||||
Chesapeake — Florida Division | Florida PSC | 1/14/2010 | 10.80%(1) | |||||
FPU — Natural Gas | Florida PSC | 1/14/2010(3) | 10.85%(1) | |||||
FPU — Electric | Florida PSC | 5/22/2008 | 11.00%(1) | |||||
ESNG | FERC | 9/1/2007 | 13.60%(2) |
(1) | Allowed return on equity | |
(2) | Allowed overall pre-tax, pre-interest rate of return | |
(3) | Effective date of the Order approving settlement agreement, which adjusted rates originally approved on June 4, 2009. |
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(ii) | Unregulated Energy |
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Operating Revenues | Deliveries | |||||||||||||||
State | (in thousands) | (Mcfs) | ||||||||||||||
Florida | $ | 47,441 | 86 | % | 8,236,014 | 84 | % | |||||||||
Delmarva | 8,006 | 14 | % | 1,538,895 | 16 | % | ||||||||||
Total | $ | 55,447 | 100 | % | 9,774,909 | 100 | % | |||||||||
Operating Revenues | Total Gallons Sold | |||||||||||||||
State | (in thousands) | (in thousands) | ||||||||||||||
Delmarva | $ | 68,558 | 79 | % | 32,617 | 82 | % | |||||||||
Florida | 18,725 | 21 | % | 6,995 | 18 | % | ||||||||||
Total | $ | 87,283 | 100 | % | 39,612 | 100 | % | |||||||||
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(iii) | Other |
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(c) | Additional information about the Business |
(i) | Capital Budget |
(ii) | Employees |
(iii) | Financial Information about Geographic Areas |
(d) | Available Information |
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• | increase our costs related to operations, energy efficiency activities and compliance; |
• | affect the demand for natural gas, electricity and propane; and |
• | increase the prices we charge our energy customers. |
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Name | Age | Position | ||||
Michael P. McMasters | 52 | President and Chief Executive Officer | ||||
Beth W. Cooper | 44 | Senior Vice President and Chief Financial Officer | ||||
Stephen C. Thompson | 50 | Senior Vice President and President, ESNG | ||||
Joseph Cummiskey | 39 | Vice President and President, PESCO | ||||
Elaine B. Bittner | 41 | Vice President of Strategic Development |
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Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Dividends | ||||||||||||||||||
Declared | ||||||||||||||||||
Quarter Ended | High | Low | Close | Per Share | ||||||||||||||
2010 | ||||||||||||||||||
March 31 | $ | 32.25 | $ | 28.22 | $ | 29.80 | $ | 0.315 | ||||||||||
June 30 | 32.20 | 28.01 | 31.40 | 0.330 | ||||||||||||||
September 30 | 36.93 | 30.24 | 36.22 | 0.330 | ||||||||||||||
December 31 | 42.20 | 35.00 | 41.52 | 0.330 | ||||||||||||||
2009 | ||||||||||||||||||
March 31 | $ | 32.36 | $ | 22.02 | $ | 30.48 | $ | 0.305 | ||||||||||
June 30 | 34.55 | 27.62 | 32.53 | 0.315 | ||||||||||||||
September 30 | 35.00 | 29.24 | 30.99 | 0.315 | ||||||||||||||
December 31 | 32.67 | 29.53 | 32.05 | 0.315 |
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Total | Total Number of Shares | Maximum Number of | ||||||||||||||
Number | Average | Purchased as Part of | Shares That May Yet Be | |||||||||||||
of Shares | Price Paid | Publicly Announced Plans | Purchased Under the Plans | |||||||||||||
Period | Purchased | per Share | or Programs(2) | or Programs(2) | ||||||||||||
October 1, 2010 through October 31, 2010(1) | 258 | $ | 37.58 | — | — | |||||||||||
November 1, 2010 through November 30, 2010 | — | — | — | — | ||||||||||||
December 1, 2010 through December 31, 2010 | — | — | — | — | ||||||||||||
Total | 258 | �� | $ | 37.58 | — | — | ||||||||||
(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 Note N to the Consolidated Financial Statements. During the quarter, 258 shares were purchased through the reinvestment of dividends on deferred stock units. | |
(2) | Except for the purpose described in Footnote (1), Chesapeake has no publicly announced plans or programs to repurchase its shares. |
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2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||||||
Chesapeake | $ | 100 | $ | 103 | $ | 111 | $ | 114 | $ | 121 | $ | 161 | ||||||||||||
Industry Index | $ | 100 | $ | 119 | $ | 123 | $ | 132 | $ | 136 | $ | 155 | ||||||||||||
S&P 500 Index | $ | 100 | $ | 116 | $ | 122 | $ | 77 | $ | 97 | $ | 112 |
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For the Years Ended December 31, | 2010 | 2009(2) | 2008 | |||||||||
Operating(1) | ||||||||||||
(in thousands) | ||||||||||||
Revenues | ||||||||||||
Regulated Energy | $ | 269,934 | $ | 139,099 | $ | 116,468 | ||||||
Unregulated Energy | 146,793 | 119,973 | 161,290 | |||||||||
Other | 10,819 | 9,713 | 13,685 | |||||||||
Total revenues | $ | 427,546 | $ | 268,785 | $ | 291,443 | ||||||
Operating income | ||||||||||||
Regulated Energy | $ | 43,509 | $ | 26,900 | $ | 24,733 | ||||||
Unregulated Energy | 7,908 | 8,158 | 3,781 | |||||||||
Other | 513 | (1,322 | ) | (35 | ) | |||||||
Total operating income | $ | 51,930 | $ | 33,736 | $ | 28,479 | ||||||
Net income from continuing operations | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Assets | ||||||||||||
(in thousands) | ||||||||||||
Gross property, plant and equipment | $ | 584,385 | $ | 543,905 | $ | 381,689 | ||||||
Net property, plant and equipment | $ | 462,757 | $ | 436,587 | $ | 280,671 | ||||||
Total assets | $ | 670,993 | $ | 615,811 | $ | 385,795 | ||||||
Capital expenditures(1) | $ | 46,955 | $ | 26,294 | $ | 30,844 | ||||||
Capitalization | ||||||||||||
(in thousands) | ||||||||||||
Stockholders’ equity | $ | 226,239 | $ | 209,781 | $ | 123,073 | ||||||
Long-term debt, net of current maturities | 89,642 | 98,814 | 86,422 | |||||||||
Total capitalization | $ | 315,881 | $ | 308,595 | $ | 209,495 | ||||||
Current portion of long-term debt | 9,216 | 35,299 | 6,656 | |||||||||
Short-term debt | 63,958 | 30,023 | 33,000 | |||||||||
Total capitalization and short-term financing | $ | 389,055 | $ | 373,917 | $ | 249,151 | ||||||
(1) | These amounts exclude the results of distributed energy and water services due to their reclassification to discontinued operations. The Company closed its distributed energy operation in 2007. All assets of all of the water businesses were sold in 2004 and 2003. | |
(2) | These amounts include the financial position and results of operation of FPU for the period from the merger (October 28, 2009) to December 31, 2009. These amounts also include the effects of acquisition accounting and issuance of Chesapeake common shares as a result of the merger. These amounts may not be indicative of future results due to the inclusion of merger effects. See Item 8 under the heading “Notes to the Consolidated Financial Statements - Note B, Acquisitions and Dispositions” for additional discussions and presentation of pro forma results. | |
(3) | SFAS No. 123R (now codified within FASB ASC 718, 505 and 260 ) and SFAS No. 158 (codified within FASB ASC 715) were adopted in the year 2006; therefore, they were not applicable for the years prior to 2006. |
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2007 | 2006(3) | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||
$ | 128,850 | $ | 124,631 | $ | 124,563 | $ | 98,139 | $ | 92,079 | $ | 82,098 | $ | 87,444 | |||||||||||||
115,190 | 94,320 | 90,995 | 67,607 | 59,197 | 40,728 | 56,970 | ||||||||||||||||||||
14,246 | 12,249 | 13,927 | 12,209 | 12,292 | 12,430 | 13,992 | ||||||||||||||||||||
$ | 258,286 | $ | 231,200 | $ | 229,485 | $ | 177,955 | $ | 163,568 | $ | 135,256 | $ | 158,406 | |||||||||||||
$ | 21,809 | $ | 18,593 | $ | 16,248 | $ | 16,258 | $ | 16,219 | $ | 14,867 | $ | 14,060 | |||||||||||||
5,174 | 3,675 | 4,197 | 3,197 | 4,310 | 1,158 | 1,259 | ||||||||||||||||||||
1,131 | 1,064 | 1,476 | 722 | 1,050 | 580 | 902 | ||||||||||||||||||||
$ | 28,114 | $ | 23,332 | $ | 21,921 | $ | 20,177 | $ | 21,579 | $ | 16,605 | $ | 16,221 | |||||||||||||
$ | 13,218 | $ | 10,748 | $ | 10,699 | $ | 9,686 | $ | 10,079 | $ | 7,535 | $ | 7,341 | |||||||||||||
$ | 352,838 | $ | 325,836 | $ | 280,345 | $ | 250,267 | $ | 234,919 | $ | 229,128 | $ | 216,903 | |||||||||||||
$ | 260,423 | $ | 240,825 | $ | 201,504 | $ | 177,053 | $ | 167,872 | $ | 166,846 | $ | 161,014 | |||||||||||||
$ | 381,557 | $ | 325,585 | $ | 295,980 | $ | 241,938 | $ | 222,058 | $ | 223,721 | $ | 222,229 | |||||||||||||
$ | 30,142 | $ | 49,154 | $ | 33,423 | $ | 17,830 | $ | 11,822 | $ | 13,836 | $ | 26,293 | |||||||||||||
$ | 119,576 | $ | 111,152 | $ | 84,757 | $ | 77,962 | $ | 72,939 | $ | 67,350 | $ | 67,517 | |||||||||||||
63,256 | 71,050 | 58,991 | 66,190 | 69,416 | 73,408 | 48,409 | ||||||||||||||||||||
$ | 182,832 | $ | 182,202 | $ | 143,748 | $ | 144,152 | $ | 142,355 | $ | 140,758 | $ | 115,926 | |||||||||||||
7,656 | 7,656 | 4,929 | 2,909 | 3,665 | 3,938 | 2,686 | ||||||||||||||||||||
45,664 | 27,554 | 35,482 | 5,002 | 3,515 | 10,900 | 42,100 | ||||||||||||||||||||
$ | 236,152 | $ | 217,412 | $ | 184,159 | $ | 152,063 | $ | 149,535 | $ | 155,596 | $ | 160,712 | |||||||||||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 28
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For the Years Ended December 31, | 2010 | 2009(3) | 2008 | |||||||||
Common Stock Data and Ratios | ||||||||||||
Basic earnings per share from continuing operations(1) | $ | 2.75 | $ | 2.17 | $ | 2.00 | ||||||
Diluted earnings per share from continuing operations(1) | $ | 2.73 | $ | 2.15 | $ | 1.98 | ||||||
Return on average equity from continuing operations(1) | 11.6 | % | 11.2 | % | 11.2 | % | ||||||
Common equity / total capitalization | 71.6 | % | 68.0 | % | 58.7 | % | ||||||
Common equity / total capitalization and short-term financing | 58.2 | % | 56.1 | % | 49.4 | % | ||||||
Book value per share | $ | 23.75 | $ | 22.33 | $ | 18.03 | ||||||
Market price: | ||||||||||||
High | $ | 42.200 | $ | 35.000 | $ | 34.840 | ||||||
Low | $ | 28.010 | $ | 22.020 | $ | 21.930 | ||||||
Close | $ | 41.520 | $ | 32.050 | $ | 31.480 | ||||||
Average number of shares outstanding | 9,474,554 | 7,313,320 | 6,811,848 | |||||||||
Shares outstanding at year-end | 9,524,195 | 9,394,314 | 6,827,121 | |||||||||
Registered common shareholders | 2,482 | 2,670 | 1,914 | |||||||||
Cash dividends declared per share | $ | 1.31 | $ | 1.25 | $ | 1.21 | ||||||
Dividend yield (annualized)(2) | 3.2 | % | 3.9 | % | 3.9 | % | ||||||
Payout ratio from continuing operations(1) (4) | 47.6 | % | 57.6 | % | 60.5 | % | ||||||
Additional Data | ||||||||||||
Customers (5) | ||||||||||||
Natural gas distribution | 120,230 | 117,887 | 65,201 | |||||||||
Electric distribution | 30,966 | 31,030 | — | |||||||||
Propane distribution | 48,100 | 48,680 | 34,981 | |||||||||
Volumes(6) | ||||||||||||
Natural gas deliveries (in Mcfs) | 41,795,438 | 44,586,158 | 39,778,067 | |||||||||
Electric Distribution (in MWHs) | 739,656 | 105,739 | — | |||||||||
Propane distribution (in thousands of gallons) | 39,612 | 32,546 | 27,956 | |||||||||
Heating degree-days (Delmarva Peninsula) | ||||||||||||
Actual HDD | 4,831 | 4,729 | 4,431 | |||||||||
10-year average HDD (normal) | 4,528 | 4,462 | 4,401 | |||||||||
Propane bulk storage capacity (in thousands of gallons) | 3,041 | 3,042 | 2,471 | |||||||||
Total employees(1) (7) | 734 | 757 | 448 |
(1) | These amounts exclude the results of distributed energy and water services due to their reclassification to discontinued operations. The Company closed its distributed energy operation in 2007. All assets of all of the water businesses were sold in 2004 and 2003. | |
(2) | Dividend yield (annualized) is calculated by multiplying the fourth quarter dividend by four (4), then dividing that amount by the closing common stock price at December 31. | |
(3) | These amounts include the financial position and results of operation of FPU for the period from the merger closing (October 28, 2009) to December 31, 2009. These amounts also include the effects of acquisition accounting and issuance of Chesapeake common shares as a result of the merger. These amounts may not be indicative of future results due to the inclusion of merger effects. See Item 8 under the heading “Notes to the Consolidated Financial Statements — Note B, Acquisitions and Dispositions” for additional discussions and presentation of pro forma results. | |
(4) | The payout ratio from continuing operations is calculated by dividing cash dividends declared per share (for the year) by basic earnings per share from continuing operations. | |
(5) | Customer data for 2009 includes 51,536, 31,030 and 13,651 of natural gas distribution, electric distribution and propane distribution customers, respectively, from FPU. | |
(6) | Volumes data for 2009 includes 1,109,177 Mcfs, 105,739 MWHs and 1.1 million gallons for natural gas distribution, electric distribution and propane distribution, respectively, delivered by FPU from October 28, 2009 through December 31, 2009 | |
(7) | Total employees for 2009 include 332 FPU employees added to the Company upon the merger, effective October 28, 2009. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 29
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2007 | 2006(8) | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||
$ | 1.96 | $ | 1.78 | $ | 1.83 | $ | 1.68 | $ | 1.80 | $ | 1.37 | $ | 1.37 | |||||||||||||
$ | 1.94 | $ | 1.76 | $ | 1.81 | $ | 1.64 | $ | 1.76 | $ | 1.37 | $ | 1.35 | |||||||||||||
11.5 | % | 11.0 | % | 13.2 | % | 12.8 | % | 14.4 | % | 11.2 | % | 11.1 | % | |||||||||||||
65.4 | % | 61.0 | % | 59.0 | % | 54.1 | % | 51.2 | % | 47.8 | % | 58.2 | % | |||||||||||||
50.6 | % | 51.1 | % | 46.0 | % | 51.3 | % | 48.8 | % | 43.3 | % | 42.0 | % | |||||||||||||
$ | 17.64 | $ | 16.62 | $ | 14.41 | $ | 13.49 | $ | 12.89 | $ | 12.16 | $ | 12.45 | |||||||||||||
$ | 37.250 | $ | 35.650 | $ | 35.780 | $ | 27.550 | $ | 26.700 | $ | 21.990 | $ | 19.900 | |||||||||||||
$ | 28.000 | $ | 27.900 | $ | 23.600 | $ | 20.420 | $ | 18.400 | $ | 16.500 | $ | 17.375 | |||||||||||||
$ | 31.850 | $ | 30.650 | $ | 30.800 | $ | 26.700 | $ | 26.050 | $ | 18.300 | $ | 19.800 | |||||||||||||
6,743,041 | 6,032,462 | 5,836,463 | 5,735,405 | 5,610,592 | 5,489,424 | 5,367,433 | ||||||||||||||||||||
6,777,410 | 6,688,084 | 5,883,099 | 5,778,976 | 5,660,594 | 5,537,710 | 5,424,962 | ||||||||||||||||||||
1,920 | 1,978 | 2,026 | 2,026 | 2,069 | 2,130 | 2,171 | ||||||||||||||||||||
$ | 1.18 | $ | 1.16 | $ | 1.14 | $ | 1.12 | $ | 1.10 | $ | 1.10 | $ | 1.10 | |||||||||||||
3.7 | % | 3.8 | % | 3.7 | % | 4.2 | % | 4.2 | % | 6.0 | % | 5.6 | % | |||||||||||||
60.2 | % | 65.2 | % | 62.3 | % | 66.7 | % | 61.1 | % | 80.3 | % | 80.3 | % | |||||||||||||
62,884 | 59,132 | 54,786 | 50,878 | 47,649 | 45,133 | 42,741 | ||||||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||||
34,143 | 33,282 | 32,117 | 34,888 | 34,894 | 34,566 | 35,530 | ||||||||||||||||||||
34,820,050 | 34,321,160 | 34,980,939 | 31,429,494 | 29,374,818 | 27,934,715 | 27,263,542 | ||||||||||||||||||||
— | — | — | — | — | — | — | ||||||||||||||||||||
29,785 | 24,243 | 26,178 | 24,979 | 25,147 | 21,185 | 23,080 | ||||||||||||||||||||
4,504 | 3,931 | 4,792 | 4,553 | 4,715 | 4,161 | 4,368 | ||||||||||||||||||||
4,376 | 4,372 | 4,436 | 4,389 | 4,409 | 4,393 | 4,446 | ||||||||||||||||||||
2,441 | 2,315 | 2,315 | 2,045 | 2,195 | 2,151 | 1,958 | ||||||||||||||||||||
445 | 437 | 423 | 426 | 439 | 455 | 458 |
(8) | SFAS No. 123R (now codified within FASB ASC 718, 505 and 260 ) and SFAS No. 158 (codified within FASB ASC 715) were adopted in the year 2006; therefore, they were not applicable for the years prior to 2006. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 30
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | 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; | ||
• | utilizing our expertise across our various businesses to improve overall performance; | ||
• | enhancing marketing channels to attract new customers; | ||
• | providing reliable and responsive customer service to retain existing customers; | ||
• | 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. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 31
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Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
Net income | $ | 26,056 | $ | 15,897 | $ | 10,159 | $ | 15,897 | $ | 13,607 | $ | 2,290 | ||||||||||||
Earnings per common stock — diluted | $ | 2.73 | $ | 2.15 | $ | 0.58 | $ | 2.15 | $ | 1.98 | $ | 0.17 | ||||||||||||
Components of net income: | ||||||||||||||||||||||||
Legacy Cheapeake | $ | 17,192 | $ | 15,303 | $ | 1,889 | $ | 15,303 | $ | 14,299 | $ | 1,004 | ||||||||||||
FPU | 9,339 | 1,829 | 7,510 | 1,829 | — | 1,829 | ||||||||||||||||||
Merger-related costs | (475 | ) | (1,235 | ) | 760 | (1,235 | ) | (692 | ) | (543 | ) | |||||||||||||
Total | $ | 26,056 | $ | 15,897 | $ | 10,159 | $ | 15,897 | $ | 13,607 | $ | 2,290 | ||||||||||||
Components of EPS — diluted | ||||||||||||||||||||||||
Legacy Chesapeake (1) | $ | 2.44 | $ | 2.20 | $ | 0.24 | $ | 2.20 | $ | 2.08 | $ | 0.12 | ||||||||||||
FPU(2) | $ | 0.34 | $ | 0.12 | $ | 0.22 | $ | 0.12 | $ | 0.00 | $ | 0.12 | ||||||||||||
Merger-related costs | $ | (0.05 | ) | $ | (0.17 | ) | $ | 0.12 | $ | (0.17 | ) | $ | (0.10 | ) | $ | (0.07 | ) | |||||||
Total | $ | 2.73 | $ | 2.15 | $ | 0.58 | $ | 2.15 | $ | 1.98 | $ | 0.17 | ||||||||||||
(1) | Calculated based on weighted average common shares outstanding for the period, which excludes the shares issued in the FPU merger. | |
(2) | Represents the additional EPS generated by FPU’s results since the merger. |
• | Weather. We measure weather based on the number of heating degree-days (“HDD”) for the natural gas and propane distribution operations and the number of HDD and the number of cooling degree-days (“CDD”) for the electric distribution operation. We use historical averages as the “normal” weather for this analysis. | ||
HDD on the Delmarva Peninsula in 2010 increased by 102, or two percent, compared to 2009, and by 303, or seven percent, compared to normal. HDD on the Delmarva Peninsula in 2009 increased by 298, or seven percent, compared to 2008, and by 267, or six percent, compared to normal. We estimate that colder weather contributed approximately $679,000 and $1.6 million in additional gross margin for our Delmarva natural gas and propane distribution operations in 2010 and 2009, respectively, compared to the respective prior year. We also estimate that the effect of the colder-than-normal temperatures on the Delmarva Peninsula in 2010 was increased gross margin of $1.6 million for our Delmarva natural gas and propane distribution operations. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 32
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The colder temperatures in 2010 in Florida produced average HDD that were 590, or 65 percent, higher than 2009 and 582, or 63 percent, higher than normal. The average HDD in 2009 and 2008 were fairly consistent and did not fluctuate significantly from the normal weather. The warmer temperatures in the summer of 2010 also produced average CDD for the year that were 89, or three percent, higher than the prior year and 141, or five percent, higher than normal. We estimate that colder weather in the winter months and warmer weather in the summer months contributed approximately $1.4 million in additional gross margin for our Florida natural gas and electric distribution operations in 2010, compared to 2009. | |||
• | Growth. Despite the continued slowdown in growth and overall economic conditions on the Delmarva Peninsula, our Delmarva natural gas distribution operations achieved two percent growth in average residential customers in both 2010 and 2009, compared to the respective prior year. These growth rates exceeded the industry’s growth rates. In addition to the residential growth, in 2010, our Delmarva natural gas distribution operations added 10 large commercial and industrial customers with total expected annual margin of $748,000, as they were able to convert these customers to natural gas from other energy sources due to the pricing advantage of natural gas and its environmentally-friendly features. In total, customer growth for the Delmarva natural gas distribution operations generated additional margin of $1.1 million and $1.2 million in 2010 and 2009, respectively, compared to the respective prior year. The addition of certain industrial customers in 2010 also positioned us to further extend our natural gas distribution and transmission infrastructure in southern Delaware to serve other potential customers in the same area. | ||
ESNG continued to expand its infrastructure and add new transportation services. The additional margin generated from the continued expansions and new services, net of the expired services, was $1.1 million and $1.8 million in 2010 and 2009, respectively, compared to the respective prior year. Although not affecting our results in 2010, ESNG completed the eight-mile mainline extension in December 2010 to interconnect with the TETLP pipeline. ESNG commenced its new transportation services to Chesapeake’s Delaware and Maryland divisions in January 2011. The new transportation services have a three-year phase-in from 19,324 Mcfs per day to 38,647 Mcfs per day, providing estimated annualized margin of $2.4 million in 2011, $3.9 million in 2012 and $4.3 million thereafter. | |||
FPU’s natural gas distribution operation experienced growth in commercial and industrial customers in 2010, which contributed $196,000 in additional margin in 2010. Chesapeake’s Florida natural gas distribution division experienced a slight growth in customers in 2010 after experiencing a net customer loss in 2009, including a loss of three large industrial customers, in Florida in late 2008 and 2009, which decreased its margin by $190,000 in 2009 compared to 2008. Customer growth in the Florida electric and propane distribution operations was flat. | |||
• | Rates and Regulatory Matters. On January 14, 2010, new rates for Chesapeake’s Florida natural gas distribution division became effective. The new rates for Chesapeake’s Florida natural gas distribution division represented an annual rate increase of approximately $2.5 million and generated $2.3 million in increased margin in 2010, net of the impact from the interim rates in 2009, compared to 2009. An annual rate increase of approximately $8.0 million for FPU’s natural gas distribution operation pursuant to the settlement agreement also became effective on January 14, 2010. The Florida PSC previously issued an Order in May 2009, approving a rate increase for FPU’s natural gas distribution operation. The subsequent protest by the Office of Public Counsel of Florida led to this settlement agreement between the Office of Public Counsel and FPU, which the Florida PSC approved in December 2009. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 33
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The merger with FPU and the purchase of the operating assets of IGC resulted in approximately $34.9 million in purchase premium, which we intend to seek the recovery through rates. We also intend to seek the recovery of approximately $2.2 million in merger-related costs attributed to the natural gas operations. Our Florida natural gas distribution operations are required to submit to the Florida PSC by April 29, 2011 data that details benefits, synergies, cost savings and cost increases resulting from the merger. We are currently in the process of discussing with the Office of Public Counsel and the Florida PSC staff the benefits and cost savings resulted from the merger, current and expected operating results of the regulated operations in Florida, and recovery of the purchase premium and merger-related costs. Our results in 2010 reflect an accrual of $750,000 by FPU’s natural gas distribution operation for the regulatory risk associated with its earnings, merger benefits and recovery of purchase premium and merger-related costs. Also reflected in our 2010 results were approximately $75,000 of the costs associated with these discussions, which were expensed in 2010. | |||
Although not affecting our results in 2010, ESNG filed a proposed rate increase with the FERC on December 30, 2010. ESNG expects this base rate proceeding to be completed in 2011. ESNG expensed approximately $147,000 in costs associated with this filing in 2010. | |||
• | Propane Prices. A sharp decline in propane prices in the winter months when our propane inventory is at its highest level exposes us to inventory valuation risk as GAAP requires us to re-value the propane inventory using the “lower-of-cost-or-market” approach. We have implemented various propane supply and inventory strategies to hedge such risk. In late 2008, a sharp decline in propane prices resulted in inventory and swap valuation adjustments of $1.8 million in 2008, which lowered the propane inventory cost of our Delmarva propane distribution operation during the first half of 2009. The absence of similar inventory valuation adjustments in 2009 and increased margin generated from the low propane cost during the first half of 2009, coupled with sustained retail prices, contributed to increased gross margin of $3.5 million in 2009 compared to 2008 for the Delmarva propane distribution operation. Retail margins returned to more normal levels in 2010. | ||
Continued lack of volatility in wholesale propane prices reduced the opportunities for our propane wholesale marketing subsidiary, Xeron, and decreased its trading volume by 13 percent and 57 percent in 2010 and 2009, respectively, compared to the respective prior year. The lower volumes reduced gross margin by approximately $441,000 and $1.0 million for 2010 and 2009, respectively, over the prior year. | |||
• | Natural Gas Spot Sale Opportunities. Our unregulated natural gas marketing subsidiary, PESCO, entered into spot sales in 2009 with a refinery on the Delmarva Peninsula, which contributed significantly to PESCO’s gross margin increase of $1.0 million in 2009. The absence of spot sales opportunities to the same customer in 2010 reduced PESCO’s margin in 2010, compared to 2010. Spot sales are not predictable, and, therefore, are not included in our long-term financial plans or forecasts. | ||
• | Interest Rates. We continued to experience low short-term interest rates throughout 2010 and 2009 as our short-term weighted average interest rate approximated 1.77 percent in 2010, 1.28 percent in 2009, and 2.79 percent in 2008. The level of our short-term borrowings in 2010 increased over 2009 as we used a new short-term term loan facility to finance the redemption of $29.1 million of FPU’s 6.85 percent and 4.90 percent secured first mortgage bonds prior to their respective maturities. The level of our short-term borrowings in 2009 was reduced by the placement of $30.0 million of 5.93 percent unsecured senior notes in October 2008 and a decline in working capital requirements due to lower commodity prices, lower trading volume by the propane wholesale marketing subsidiary, lower income tax payments from bonus depreciation and the timing of our capital expenditures. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 34
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• | Advanced Information Services. Our advanced information services subsidiary, BravePoint, generated $759,000 in operating income in 2010, compared to an operating loss of $229,000 in 2009. Increased billable consulting hours in 2010 and cost containment actions implemented throughout 2009 contributed to the increased operating results. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 35
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• | During 2010 and 2009, our natural gas distribution, electric distribution, propane distribution and natural gas marketing operations entered into physical contracts for the purchase or sale of natural gas, electricity and propane. These contracts either did not meet the definition of derivatives as they did not have a minimum requirement to purchase/sell or were considered “normal purchases and sales” as they provided for the purchase or sale of natural gas, electricity or propane to be delivered in quantities expected to be used and sold by our operations over a reasonable period of time in the normal course of business. Accordingly, these contracts were accounted for on an accrual basis of accounting. | ||
• | During 2010 and 2009, the propane distribution operation entered into a put option to protect it from the impact of price decreases on the Pro-Cap (propane price-cap) Plan that we offer to customers. We accounted for the put option on a mark-to-market basis and recorded a loss of $168,000 and $41,000, at December 31, 2010 and 2009, respectively. | ||
• | Xeron, our propane wholesale marketing subsidiary, enters into forward, futures and other contracts that are considered derivatives. These contracts are marked-to-market, using prices at the end of each reporting period, and unrealized gains or losses are recorded in the Consolidated Statement of Income as revenue or expense. These contracts generally mature within one year and are almost exclusively for propane commodities. For the years ended December 31, 2010 and 2009, these contracts had net unrealized gains of $284,000 and net unrealized losses of $1.6 million, respectively. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 36
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Chesapeake Utilities Corporation 2010 Form 10-K Page 37
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(d) | Results of Operations |
Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
Business Segment: | ||||||||||||||||||||||||
Regulated Energy | $ | 43,509 | $ | 26,900 | $ | 16,609 | $ | 26,900 | $ | 24,733 | $ | 2,167 | ||||||||||||
Unregulated Energy | 7,908 | 8,158 | (250 | ) | 8,158 | 3,781 | 4,377 | |||||||||||||||||
Other | 513 | (1,322 | ) | 1,835 | (1,322 | ) | (35 | ) | (1,287 | ) | ||||||||||||||
Operating Income | 51,930 | 33,736 | 18,194 | 33,736 | 28,479 | 5,257 | ||||||||||||||||||
Other Income | 195 | 165 | 30 | 165 | 103 | 62 | ||||||||||||||||||
Interest Charges | 9,146 | 7,086 | 2,060 | 7,086 | 6,158 | 928 | ||||||||||||||||||
Income Taxes | 16,923 | 10,918 | 6,005 | 10,918 | 8,817 | 2,101 | ||||||||||||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 10,159 | $ | 15,897 | $ | 13,607 | $ | 2,290 | ||||||||||||
Earnings Per Share of Common Stock | ||||||||||||||||||||||||
Basic | $ | 2.75 | $ | 2.17 | $ | 0.58 | $ | 2.17 | $ | 2.00 | $ | 0.17 | ||||||||||||
Diluted | $ | 2.73 | $ | 2.15 | $ | 0.58 | $ | 2.15 | $ | 1.98 | $ | 0.17 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 38
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2010 | 2009 | |||||||||||||||||||||||
Chesapeake, | Chesapeake | Chesapeake, | Chesapeake | |||||||||||||||||||||
For the Years Ended December 31, | excluding FPU | FPU | Total | excluding FPU | FPU(1) | Total | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Operating Income (Loss) | ||||||||||||||||||||||||
Regulated Energy | $ | 26,711 | $ | 16,798 | $ | 43,509 | $ | 23,908 | $ | 2,992 | $ | 26,900 | ||||||||||||
Unregulated Energy | 6,335 | 1,573 | 7,908 | 7,605 | 553 | 8,158 | ||||||||||||||||||
Other, including merger-related costs | 513 | — | 513 | (1,322 | ) | — | (1,322 | ) | ||||||||||||||||
Operating Income | 33,559 | 18,371 | 51,930 | 30,191 | 3,545 | 33,736 | ||||||||||||||||||
Other Income, net of expenses | 48 | 147 | 195 | 58 | 107 | 165 | ||||||||||||||||||
Interest Charges | 5,752 | 3,394 | 9,146 | 6,345 | 741 | 7,086 | ||||||||||||||||||
Income Taxes | 11,138 | 5,785 | 16,923 | 9,836 | 1,082 | 10,918 | ||||||||||||||||||
Net Income | $ | 16,717 | $ | 9,339 | $ | 26,056 | $ | 14,068 | $ | 1,829 | $ | 15,897 | ||||||||||||
(1) | FPU operating results are for the period from the merger closing (October 28, 2009) to December 31, 2009 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 39
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2009 | 2008 | |||||||||||||||||||||||
Chesapeake, | Chesapeake | Chesapeake, | Chesapeake | |||||||||||||||||||||
For the Years Ended December 31, | excluding FPU | FPU(1) | Total | excluding FPU | FPU | Total | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Operating Income (Loss) | ||||||||||||||||||||||||
Regulated Energy | $ | 23,908 | $ | 2,992 | $ | 26,900 | $ | 24,733 | $ | 0 | $ | 24,733 | ||||||||||||
Unregulated Energy | 7,605 | 553 | 8,158 | 3,781 | — | 3,781 | ||||||||||||||||||
Other | (1,322 | ) | — | (1,322 | ) | (35 | ) | — | (35 | ) | ||||||||||||||
Operating Income | 30,191 | 3,545 | 33,736 | 28,479 | 0 | 28,479 | ||||||||||||||||||
Other Income, net of expenses | 58 | 107 | 165 | 103 | — | 103 | ||||||||||||||||||
Interest Charges | 6,345 | 741 | 7,086 | 6,158 | — | 6,158 | ||||||||||||||||||
Income Taxes | 9,836 | 1,082 | 10,918 | 8,817 | — | 8,817 | ||||||||||||||||||
Net Income | $ | 14,068 | $ | 1,829 | $ | 15,897 | $ | 13,607 | $ | 0 | $ | 13,607 | ||||||||||||
(1) | FPU operating results are for the period from the merger closing (October 28, 2009) to December 31, 2009 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 40
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Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue | $ | 269,934 | $ | 139,099 | $ | 130,835 | $ | 139,099 | $ | 116,468 | $ | 22,631 | ||||||||||||
Cost of sales | 144,217 | 64,803 | 79,414 | 64,803 | 54,789 | 10,014 | ||||||||||||||||||
Gross margin | 125,717 | 74,296 | 51,421 | 74,296 | 61,679 | 12,617 | ||||||||||||||||||
Operations & maintenance | 56,338 | 32,569 | 23,769 | 32,569 | 25,369 | 7,200 | ||||||||||||||||||
Depreciation & amortization | 17,038 | 8,866 | 8,172 | 8,866 | 6,694 | 2,172 | ||||||||||||||||||
Other taxes | 8,832 | 5,961 | 2,871 | 5,961 | 4,883 | 1,078 | ||||||||||||||||||
Other operating expenses | 82,208 | 47,396 | 34,812 | 47,396 | 36,946 | 10,450 | ||||||||||||||||||
Operating Income | $ | 43,509 | $ | 26,900 | $ | 16,609 | $ | 26,900 | $ | 24,733 | $ | 2,167 | ||||||||||||
Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
Delmarva Peninsula | ||||||||||||||||||||||||
Actual HDD | 4,831 | 4,729 | 102 | 4,729 | 4,431 | 298 | ||||||||||||||||||
10-year average HDD | 4,528 | 4,462 | 66 | 4,462 | 4,401 | 61 | ||||||||||||||||||
Estimated gross margin per HDD | $ | 1,995 | $ | 2,429 | $ | (434 | ) | $ | 2,429 | $ | 1,937 | $ | 492 | |||||||||||
Florida | ||||||||||||||||||||||||
Actual HDD | 1,501 | 911 | 590 | 911 | 851 | 60 | ||||||||||||||||||
10-year average HDD | 919 | 863 | 56 | 863 | 848 | 15 | ||||||||||||||||||
Actual CDD | 2,859 | 2,770 | 89 | 2,770 | 2,553 | 217 | ||||||||||||||||||
10-year average CDD | 2,718 | 2,694 | 24 | 2,694 | 2,687 | 7 | ||||||||||||||||||
Average number of residential customers | ||||||||||||||||||||||||
Delmarva natural gas distribution | 47,638 | 46,717 | 921 | 46,717 | 45,570 | 1,147 | ||||||||||||||||||
Florida natural gas distribution(1) | 61,053 | 60,048 | 1,005 | 60,048 | 13,373 | 46,675 | ||||||||||||||||||
Florida electric distribution(1) | 23,589 | 23,679 | (90 | ) | 23,679 | — | 23,679 | |||||||||||||||||
Total | 132,280 | 130,444 | 1,836 | 130,444 | 58,943 | 71,501 | ||||||||||||||||||
(1) | Average number of residential customers for FPU are included in 2010 and 2009. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 41
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• | $1.1 million of the gross margin increase was a result of a two-percent increase in residential customers as well as additional growth in commercial and industrial customers on the Delmarva Peninsula. Residential, commercial and industrial growth by our Delaware division generated $525,000, $163,000 and $313,000, respectively, of the gross margin increase, and the customer growth by our Maryland division contributed $97,000 to the gross margin increase. In 2010, our Delmarva natural gas distribution operations also added 10 large commercial and industrial customers with total expected annualized margin of $748,000, of which $196,000 has been reflected in 2010’s results. The addition of certain industrial customers in 2010 also positioned us to further extend our natural gas distribution and transmission infrastructure in southern Delaware to serve other potential customers in the same area. | ||
• | Colder weather on the Delmarva Peninsula generated an additional $365,000 to gross margin as heating degree-days increased by 102, or two percent, in 2010, compared to 2009. This increased gross margin is primarily related to our Delaware division, as residential heating rates for our Maryland division are weather-normalized, and we typically do not experience an impact on gross margin from the weather for our residential customers in Maryland. | ||
• | A decline in non-weather-related customer consumption, primarily by residential customers of our Delaware division, decreased gross margin by $111,000. |
• | FPU’s natural gas distribution operation generated $37.1 million in gross margin for 2010, which includes $148,000 of gross margin generated by the purchase of operating assets from IGC whose operating assets were purchased by FPU on August 9, 2010. Included in gross margin from FPU’s natural gas distribution operation in 2009 was $6.4 million. Gross margin from FPU’s natural gas distribution operation in 2010 was positively affected by an annual rate increase of approximately $8.0 million, effective January 14, 2010, colder temperatures in Florida and growth in commercial and industrial customers. Included in gross margin from FPU’s natural gas distribution operation was the impact of a $750,000 accrual related to the regulatory risk associated with its earnings, merger benefits and recovery of purchase premium. FPU is required to detail known benefits, synergies, cost savings and cost increases resulting from the merger and present the information in the “come-back” filing to the Florida PSC by April 29, 2011 (within 18 months of the merger). We are currently in discussions with the Office of Public Counsel and the Florida PSC staff regarding the benefits and cost savings of the merger, current and expected earnings levels as well as the recovery of approximately $34.9 million in purchase premium and $2.2 million in merger-related costs. We recorded this accrual based on our assessment of FPU’s current earnings, the regulatory environment in Florida and progress of the current discussions. | ||
• | Gross margin from Chesapeake’s Florida division increased by $2.9 million, primarily as a result of an annual rate increase of approximately $2.5 million, which became effective on January 14, 2010. The colder temperatures in 2010 also generated an additional $247,000 in gross margin in 2010, compared to 2009. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 42
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• | New transportation services implemented by ESNG in November 2009, May 2010 and November 2010 as a result of its system expansion projects generated an additional $1.1 million to gross margin in 2010, compared to 2009. These expansion projects added 9,623 Mcfs of service per day with estimated annual gross margin of $1.6 million, of which $1.2 million has been reflected in 2010’s results. | ||
• | New firm transportation service for an industrial customer for the period from November 2009 to October 2012 provided an additional 9,662 Mcfs per day for the period January 1, 2010 through February 5, 2010, and an additional 2,705 Mcfs per day for the period February 6, 2010 through October 31, 2010. These new services added $329,000 to gross margin for 2010. Partially offsetting the additional gross margin generated by this new firm transportation service was the margin of $232,000 in 2009 from the temporary interruptible service provided to the same customer. This temporary increase in service did not occur in 2010. | ||
• | ESNG changed its rates effective April 2009 to recover specific project costs in accordance with the terms of precedent agreements with certain customers. These rates generated $508,000 and $381,000 in gross margin in 2010 and 2009, respectively. ESNG and the customers agreed to shorten the recovery period, starting in March 2011. | ||
• | Offsetting the foregoing increases to gross margin, ESNG received notices from two customers of their intentions not to renew their firm transportation service contracts, which expired in November 2009 and April 2010, decreasing gross margin by $341,000 for 2010. | ||
• | Although not affecting our results in 2010, ESNG completed the eight-mile mainline extension in December 2010 to interconnect with the TETLP pipeline. ESNG commenced its new transportation services to Chesapeake’s Delaware and Maryland divisions in January 2011. These new services have a three-year phase-in from 19,324 Mcfs per day to 38,647 Mcfs per day, providing estimated gross margin of $2.4 million in 2011, $3.9 million in 2012 and $4.3 million thereafter. |
• | Payroll and benefits increased by $705,000 due primarily to annual salary increases and incentive pay as a result of improved performance. | ||
• | Depreciation and asset removal costs increased by $518,000 as a result of our increased capital investments made in 2010 and 2009 to support growth. | ||
• | Regulatory expenses increased by $349,000 due primarily to costs associated with ESNG’s recent rate case filing and ongoing regulatory discussions involving the merger impact and recovery of the purchase premium in Florida. | ||
• | Non-income-taxes increased by $63,000 due primarily to increased gross receipt tax. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 43
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• | The Delmarva natural gas distribution operations experienced growth in residential, commercial, and industrial customers, which contributed $471,000, $149,000 and $589,000, respectively, to the gross margin increase, in spite of the continued slowdown in the new housing construction and industrial growth in the region. A two-percent residential customer growth experienced by the Delmarva natural gas distribution operation in 2009 was lower than the growth experienced in recent years. | ||
• | Colder weather on the Delmarva Peninsula contributed $449,000 to the increased gross margin, as HDD increased by 298, or seven percent, compared to 2008. | ||
• | The Delaware division’s new rate structure allows collection of miscellaneous service fees of $256,000, which, although not representing additional revenue, were previously offset against other operating expenses. | ||
• | Interruptible sales to industrial customers decreased in 2009 due to a reduction in the price of alternative fuels, which reduced gross margin by $355,000. | ||
• | Non-weather related customer consumption decreased in 2009, which reduced gross margin by $187,000. |
• | New long-term transmission services implemented by ESNG in November of 2008 and 2009, which provided for an additional 5,459 Mcfs per day and 3,976 Mcfs per day, respectively, added $939,000 to gross margin in 2009. | ||
• | New firm transmission services provided to an industrial customer for the period of February 6, 2009 through October 31, 2009, provided for an additional 6,957 Mcfs per day and added $574,000 to gross margin. In addition, ESNG entered into two additional firm transmission service agreements with this customer for: (1) 6,006 Mcfs per day from November 1, 2009 through November 30, 2009, which added $56,000 to gross margin for 2009; and (2) 9,662 Mcfs per day from November 1, 2009 through October 31, 2012, which added $181,000 to gross margin in 2009. These services generate annual gross margin of $1.1 million. | ||
• | In April 2009, ESNG changed its rates to recover specific project costs in accordance with the terms of precedent agreements with certain customers. These new rates generated $381,000 in gross margin for 2009 and will contribute $516,000 annually thereafter for a period of 20 years. | ||
• | During January 2009, PIPECO, our intrastate pipeline subsidiary in Florida, began to provide natural gas transmission service to a customer under a 20-year contract. This agreement contributed $264,000 to gross margin in 2009. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 44
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• | Depreciation expense, asset removal costs and property taxes, collectively, increased by approximately $1.4 million as a result of our continued capital investments to support customer growth. Depreciation expense for 2008 also includes a $305,000 depreciation credit as a result of the Delaware negotiated rate settlement agreement in the third quarter of 2008, of which $295,000 was related to depreciation for the months of October through December 2007. | ||
• | Salaries and incentive compensation increased by $803,000, due primarily to compensation adjustments implemented on January 1, 2009 for non-executive employees, based on a compensation survey completed in the fourth quarter of 2008, and annual salary increases, coupled with a slight increase in the accrual for incentive compensation. | ||
• | The allowance for uncollectible accounts in the natural gas operation increased by $176,000 due to growth in customers and the general economic climate. | ||
• | Benefit costs increased by $373,000, due primarily to higher pension costs as a result of the decline in the value of pension assets in 2008 and other benefit costs relating to increased payroll costs. | ||
• | Increased information technology spending to continuously enhance our information technology infrastructure and level of support generated increased costs of $285,000. | ||
• | Corporate overhead allocated to the regulated energy segment increased by approximately $722,000 due to the overall increase in corporate overhead costs. This increase was related primarily to increased payroll and benefits and increased costs associated with investor relations and financial reporting activities. |
Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue | $ | 146,793 | $ | 119,973 | $ | 26,820 | $ | 119,973 | $ | 161,290 | $ | (41,317 | ) | |||||||||||
Cost of sales | 110,680 | 90,408 | 20,272 | 90,408 | 138,302 | (47,894 | ) | |||||||||||||||||
Gross margin | 36,113 | 29,565 | 6,548 | 29,565 | 22,988 | 6,577 | ||||||||||||||||||
Operations & maintenance | 23,140 | 18,016 | 5,124 | 18,016 | 16,322 | 1,694 | ||||||||||||||||||
Depreciation & amortization | 3,433 | 2,415 | 1,018 | 2,415 | 2,024 | 391 | ||||||||||||||||||
Other taxes | 1,632 | 976 | 656 | 976 | 861 | 115 | ||||||||||||||||||
Other operating expenses | 28,205 | 21,407 | 6,798 | 21,407 | 19,207 | 2,200 | ||||||||||||||||||
Operating Income | $ | 7,908 | $ | 8,158 | $ | (250 | ) | $ | 8,158 | $ | 3,781 | $ | 4,377 | |||||||||||
Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
Actual HDD | 4,831 | 4,729 | 102 | 4,729 | 4,431 | 298 | ||||||||||||||||||
10-year average HDD | 4,528 | 4,462 | 66 | 4,462 | 4,401 | 61 | ||||||||||||||||||
Estimated gross margin per HDD | $ | 2,415 | $ | 3,083 | $ | (668 | ) | $ | 3,083 | $ | 2,465 | $ | 618 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 45
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• | Retail volumes sold increased by 1.6 million gallons, or seven percent, in 2010, which generated additional gross margin of $1.1 million. The addition of 436 community gas system customers and 1,000 other customers acquired in February 2010 as part of the purchase of the operating assets of a propane distributor serving Northampton and Accomack Counties in Virginia contributed approximately 38% of this increase. The two-percent colder weather in 2010, compared to 2009, generated additional margin of $314,000. Timing of propane deliveries to our bulk customers contributed to the remaining increase in gross margin due to an increase in retail volumes. | ||
• | Other fees increased by $340,000 in 2010 driven by increased customer participation in various customer pricing programs. | ||
• | Retail margin per gallon decreased in 2010, compared to 2009, and decreased gross margin by $399,000. Retail margin during the first half of 2009 benefited from the inventory valuation adjustment recorded in late 2008 which lowered the propane inventory costs and, therefore, increased retail margins during the first half of 2009. Retail margins for the second half of 2010 returned to more normal levels. Retail margins in the second half of 2010 increased from the same period in 2009, partially offsetting the impact of the decrease in the first half of the year. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 46
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• | Payroll costs increased by $301,000 in 2009 compared to 2008 due to annual salary increases. | ||
• | Benefit costs increased by $167,000, due primarily to increased pension costs in 2009 as a result of the decline in the value of pension plan assets. | ||
• | Depreciation expense increased by $249,000 as we continued to make capital investments in the propane distribution operations. | ||
• | Additional costs of approximately $115,000 were incurred in 2009 to maintain propane tanks. | ||
• | Corporate overhead costs allocated to the unregulated energy segment increased by approximately $568,000 due to the overall increase in administrative payroll and benefits and increased costs associated with investor relations and financial reporting activities. | ||
• | These increases were partially offset by lower vehicle-related costs of $176,000, due primarily to a decrease in the cost of fuel. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 47
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Increase | Increase | |||||||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | (decrease) | 2009 | 2008 | (decrease) | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue | $ | 13,142 | $ | 11,998 | $ | 1,144 | $ | 11,998 | $ | 15,373 | $ | (3,375 | ) | |||||||||||
Cost of sales | 6,316 | 6,036 | 280 | 6,036 | 8,034 | (1,998 | ) | |||||||||||||||||
Gross margin | 6,826 | 5,962 | 864 | 5,962 | 7,339 | (1,377 | ) | |||||||||||||||||
Operations & maintenance | 4,766 | 4,859 | (93 | ) | 4,859 | 5,206 | (347 | ) | ||||||||||||||||
Transaction-related costs | 660 | 1,478 | (818 | ) | 1,478 | 1,153 | 325 | |||||||||||||||||
Depreciation & amortization | 289 | 310 | (21 | ) | 310 | 290 | 20 | |||||||||||||||||
Other taxes | 600 | 640 | (40 | ) | 640 | 728 | (88 | ) | ||||||||||||||||
Other operating expenses | 6,315 | 7,287 | (972 | ) | 7,287 | 7,377 | (90 | ) | ||||||||||||||||
Operating Income — Other | 511 | (1,325 | ) | 1,836 | (1,325 | ) | (38 | ) | (1,287 | ) | ||||||||||||||
Operating Income — Eliminations | 2 | 3 | (1 | ) | 3 | 3 | — | |||||||||||||||||
Operating Income | $ | 513 | $ | (1,322 | ) | 1,835 | $ | (1,322 | ) | $ | (35 | ) | $ | (1,287 | ) | |||||||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 48
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• | An increase in long-term interest expense of $1.3 million was related to interest on FPU’s first mortgage bonds. | ||
• | Interest expense from a new term loan credit facility during 2010 was $491,000. In January 2010, we redeemed two series of FPU bonds, the 4.9 percent and 6.85 percent series, to achieve interest savings and to maintain compliance with the covenants in our unsecured senior notes. We used $29.1 million of the new term loan facility for the redemptions. | ||
• | Additional interest expense of $730,000 is related to interest on deposits from FPU’s customers. |
• | Excluding FPU’s long-term debt, interest expense on long-term debt increased by $990,000 as our average long-term debt balance increased to $92.1 million in 2009 from $76.2 million in 2008. This increase was primarily related to the placement of $30.0 million of 5.93 percent Unsecured Senior Notes in October 2008. The weighted average interest rate on our long-term debt remained fairly constant at 6.37 percent in 2009, compared to 6.40 percent in 2008. | ||
• | Interest expense on short-term borrowings decreased by $852,000 in 2009, compared to 2008, as our average short-term borrowing balance decreased to $13.0 million in 2009 from $38.3 million in 2008. The $30.0 million long-term placement in October 2008 contributed to this decrease in addition to a decline in working capital requirements in 2009, due to lower capital expenditures, lower income tax payments from bonus depreciation, net tax operating losses carried forward from 2008 and lower commodity costs. The impact from these factors was offset slightly by increased working capital needs as a result of the FPU merger. Also contributing to the decrease in interest expense in short-term borrowings was a decrease in the weighted average short-term interest rate to 1.28 percent in 2009 from 2.79 percent in 2008 as we continued to experience low interest rates throughout 2009. | ||
• | Other interest charges increased by $49,000. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 49
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Chesapeake Utilities Corporation 2010 Form 10-K Page 50
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December 31, | December 31, | |||||||||||||||
(in thousands) | 2010 | 2009 | ||||||||||||||
Long-term debt, net of current maturities | $ | 89,642 | 28 | % | $ | 98,814 | 32 | % | ||||||||
Stockholders’ equity | 226,239 | 72 | % | 209,781 | 68 | % | ||||||||||
Total capitalization, excluding short-term debt | $ | 315,881 | 100 | % | $ | 308,595 | 100 | % | ||||||||
December 31, | December 31, | |||||||||||||||
(in thousands) | 2010 | 2009 | ||||||||||||||
Short-term debt | $ | 63,958 | 17 | % | $ | 30,023 | 8 | % | ||||||||
Long-term debt, including current maturities | 98,858 | 25 | % | 134,113 | 36 | % | ||||||||||
Stockholders’ equity | 226,239 | 58 | % | 209,781 | 56 | % | ||||||||||
Total capitalization, including short-term debt | $ | 389,055 | 100 | % | $ | 373,917 | 100 | % | ||||||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 51
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
Net income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Non-cash adjustments to net income | 37,364 | 28,319 | 22,919 | |||||||||
Changes in assets and liabilities | (2,415 | ) | 1,583 | (7,982 | ) | |||||||
Net cash from operating activities | $ | 61,005 | $ | 45,799 | $ | 28,544 | ||||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 52
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• | Net cash flows from changes in accounts receivable and accounts payable were due primarily to the inclusion of FPU and timing of collections and payments of trading contracts entered into by our propane wholesale and marketing operation; | ||
• | Net income increased by $10.2 million. A full year’s results for FPU and organic growth within Chesapeake’s legacy businesses contributed to this increase; | ||
• | Non-cash adjustments to net income increased by $12.4 million due primarily to higher depreciation and amortization, changes in deferred income taxes, higher employee benefits and compensation and an increase in share based compensation. Higher depreciation and amortization was due to the inclusion of FPU and an increase in capital investments. The increase in deferred income taxes was a result of bonus depreciation in 2010, which significantly reduced our income tax payment obligations in 2010; and | ||
• | The decrease in income tax receivables was due primarily to the receipt of large refunds in 2009 due to higher tax deductions in 2009 and 2008 and a decrease in taxes payable due to bonus depreciation in 2010. |
• | Net cash flows from changes in accounts receivable and accounts payable, due primarily to the timing of collections and payments of trading contracts entered into by our propane wholesale and marketing operation; | ||
• | Timing of payments for the purchase of propane inventory, natural gas purchases injected into storage, and the relative decline in the unit price of these commodities; | ||
• | Reduction in regulatory liabilities, which resulted primarily from lower deferred gas cost recoveries in our natural gas distribution operations as the price of natural gas declined in the second half of 2008; | ||
• | Reduced payments for income taxes payable as a result of higher tax deductions provided by the 2008 Economic Stimulus Act; and | ||
• | Cash flows provided by non-cash adjustments for deferred income taxes. The increase in deferred income taxes was the result of higher book-to-tax timing differences during the period that were generated by the Economic Stimulus Act, which authorized bonus depreciation for certain assets. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 53
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• | Cash utilized for capital expenditures was $45.4 million, $26.6 million and $30.8 million for 2010, 2009, and 2008, respectively. | ||
• | We invested $1.6 million in equity securities and paid $1.2 million and $310,000 for the acquisition of Indiantown Gas Company and Virginia LP, respectively, in 2010. | ||
• | In 2009, we received $3.5 million in proceeds from an investment account related to future environmental costs, as we transferred the amount to our general account that invests in overnight income-producing securities. We also acquired $359,000 in cash, net of cash paid, in the FPU merger in 2009. | ||
• | Environmental expenditures exceeded amounts recovered through rates charged to customers in 2010, 2009 and 2008 by $290,000, $418,000 and $480,000, respectively. |
• | During 2010 we entered into a new term loan with an existing lender and we borrowed $29.1 million under this facility in order to temporarily finance the early redemption of the 6.85 percent and 4.90 percent series of FPU’s secured first mortgage bonds prior to their respective maturity. | ||
• | During 2010 we increased our short-term borrowing by $1.6 million primarily to support our capital expenditures. During 2009 and 2008, we reduced our short-term debt by $3.8 million and $12.0 million, respectively. | ||
• | We repaid $36.9 million, $10.9 million and $7.7 million of long-term debt during 2010, 2009 and 2008 respectively. | ||
• | We paid $11.0 million, $8.0 million and $7.8 million in cash dividends in 2010, 2009 and 2008, respectively. An increase in cash dividends paid in each year reflects the growth in the annualized dividend rate. 2010 also reflects dividends on a larger number of shares outstanding, from the FPU shares that were exchanged for Chesapeake shares in the merger. | ||
• | In October 2008, we completed the placement of $30.0 million of 5.93 percent Unsecured Senior Notes. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 54
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Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Less than 1 | More than 5 | ||||||||||||||||||
(in thousands) | year | 1 - 3 years | 3 - 5 years | years | Total | |||||||||||||||
Long-term debt(1) | $ | 9,216 | $ | 16,393 | $ | 21,656 | $ | 51,682 | $ | 98,947 | ||||||||||
Operating leases(2) | 803 | 1,234 | 470 | 2,017 | 4,524 | |||||||||||||||
Purchase obligations(3) | ||||||||||||||||||||
Transmission capacity | 35,051 | 59,761 | 37,949 | 70,293 | 203,054 | |||||||||||||||
Storage — Natural Gas | 2,615 | 4,687 | 1,525 | 2,063 | 10,890 | |||||||||||||||
Commodities | 37,179 | 100 | — | — | 37,279 | |||||||||||||||
Electric supply | 1,626 | 26,498 | 26,498 | 39,173 | 93,795 | |||||||||||||||
Forward purchase contracts — Propane(4) | 15,618 | — | — | — | 15,618 | |||||||||||||||
Other | 144 | 109 | 253 | |||||||||||||||||
Unfunded benefits(5) | 1,132 | 731 | 870 | 5,706 | 8,439 | |||||||||||||||
Funded benefits(6) | 2,400 | 150 | 108 | 1,228 | 3,886 | |||||||||||||||
Total Contractual Obligations | $ | 105,784 | $ | 109,663 | $ | 89,076 | $ | 172,162 | $ | 476,685 | ||||||||||
(1) | Principal payments on long-term debt, see Item 8 under the heading “Notes to the Consolidated Financial Statements — Note J, Long-Term Debt”, for additional discussion of this item. The expected interest payments on long-term debt are $6.6 million, $11.4 million, $8.6 million and $13.3 million, respectively, for the periods indicated above. Expected interest payments for all periods total $40.0 million. | |
(2) | See Item 8 under the heading “Notes to the Consolidated Financial Statements — Note L, Lease Obligations,” for additional discussion of this item. | |
(3) | See Item 8 under the heading “Notes to the Consolidated Financial statement — Note Q, Other Commitments and Contingencies,” in the Notes to the Consolidated Financial Statements for further information. | |
(4) | We have also entered into forward sale contracts. See “Market Risk” of Management’s Discussion and Analysis for further information. | |
(5) | We have recorded long-term liabilities of $8.4 million at December 31, 2010 for unfunded post-employment and post-retirement benefit plans. The amounts specified in the table are based on expected payments to current retirees and assume a retirement age of 62 for currently active employees. There are many factors that would cause actual payments to differ from these amounts, including early retirement, future health care costs that differ from past experience and discount rates implicit in calculations. | |
(6) | We have recorded long-term liabilities of $16.3 million at December 31, 2010 for two qualified, defined benefit pension plans. The assets funding these plans are in a separate trust and are not considered assets of the Company or included in the Company’s balance sheets. The Contractual Obligations table above includes $1.5 million, reflecting the expected payments the Company will make to the trust funds in 2011. Additional contributions may be required in future years based on the actual return earned by the plan assets and other actuarial assumptions, such as the discount rate and long-term expected rate of return on plan assets. See Item 8 under the heading “Notes to the Consolidated Financial Statements — Note M, Employee Benefit Plans,” for further information on the plans. Additionally, the Contractual Obligations table includes deferred compensation obligations totaling $2.4 million, funded with Rabbi Trust assets in the same amount. The Rabbi Trust assets are recorded under Investments on the Balance Sheet. We assume a retirement age of 65 for purposes of distribution from this account. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 55
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Chesapeake Utilities Corporation 2010 Form 10-K Page 56
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Quantity in | Estimated Market | Weighted Average | ||||||||||
At December 31, 2010 | Gallons | Prices | Contract Prices | |||||||||
Forward Contracts | ||||||||||||
Sale | 13,523,496 | $1.0350 — $1.4100 | $ | 1.2192 | ||||||||
Purchase | 12,914,496 | $1.0150 — $1.3779 | $ | 1.2093 | ||||||||
Other Contract | ||||||||||||
Put option | 1,470,000 | $— | $ | 0.1150 |
Quantity in | Estimated Market | Weighted Average | ||||||||||
At December 31, 2009 | gallons | Prices | Contract Prices | |||||||||
Forward Contracts | ||||||||||||
Sale | 11,944,800 | $0.6900 — $1.3350 | $ | 1.1264 | ||||||||
Purchase | 11,256,000 | $0.7275 — $1.3350 | $ | 1.1367 | ||||||||
Other Contract | ||||||||||||
Put option | 1,260,000 | $— | $ | 0.1500 |
December 31, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Mark-to-market energy assets | $ | 1,642 | $ | 2,379 | ||||
Mark-to-market energy liabilities | $ | 1,492 | $ | 2,514 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 57
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Chesapeake Utilities Corporation 2010 Form 10-K Page 58
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Chesapeake Utilities Corporation 2010 Form 10-K Page 59
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 8. | Financial Statements and Supplementary Data. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 60
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Stockholders of Chesapeake Utilities Corporation
/s/ ParenteBeard LLC | ||
Malvern, Pennsylvania | ||
March 8, 2011 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 61
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands, except shares and per share data) | ||||||||||||
Operating Revenues | ||||||||||||
Regulated Energy | $ | 269,934 | $ | 139,099 | $ | 116,468 | ||||||
Unregulated Energy | 146,793 | 119,973 | 161,290 | |||||||||
Other | 10,819 | 9,713 | 13,685 | |||||||||
Total operating revenues | 427,546 | 268,785 | 291,443 | |||||||||
Operating Expenses | ||||||||||||
Regulated energy cost of sales | 144,217 | 64,803 | 54,789 | |||||||||
Unregulated energy and other cost of sales | 116,098 | 95,467 | 145,854 | |||||||||
Operations | 75,335 | 50,706 | 43,476 | |||||||||
Transaction-related costs | 660 | 1,478 | 1,153 | |||||||||
Maintenance | 7,484 | 3,430 | 2,215 | |||||||||
Depreciation and amortization | 20,758 | 11,588 | 9,005 | |||||||||
Other taxes | 11,064 | 7,577 | 6,472 | |||||||||
Total operating expenses | 375,616 | 235,049 | 262,964 | |||||||||
Operating Income | 51,930 | 33,736 | 28,479 | |||||||||
Other income, net of other expenses | 195 | 165 | 103 | |||||||||
Interest charges | 9,146 | 7,086 | 6,158 | |||||||||
Income Before Income Taxes | 42,979 | 26,815 | 22,424 | |||||||||
Income taxes | 16,923 | 10,918 | 8,817 | |||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Weighted Average Common Shares Outstanding: | ||||||||||||
Basic | 9,474,554 | 7,313,320 | 6,811,848 | |||||||||
Diluted | 9,582,374 | 7,440,201 | 6,927,483 | |||||||||
Earnings Per Share of Common Stock: | ||||||||||||
Basic | $ | 2.75 | $ | 2.17 | $ | 2.00 | ||||||
Diluted | $ | 2.73 | $ | 2.15 | $ | 1.98 | ||||||
Cash Dividends Declared Per Share of Common Stock | $ | 1.305 | $ | 1.250 | $ | 1.210 |
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Operating Activities | ||||||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Adjustments to reconcile net income to net operating cash: | ||||||||||||
Depreciation and amortization | 20,758 | 11,588 | 9,005 | |||||||||
Depreciation and accretion included in other costs | 3,133 | 2,789 | 2,239 | |||||||||
Deferred income taxes, net | 13,389 | 10,065 | 11,442 | |||||||||
Unrealized (gain) loss on commodity contracts | (116 | ) | 1,606 | (1,252 | ) | |||||||
Unrealized (gain) loss on investments | (181 | ) | (212 | ) | 509 | |||||||
Employee benefits and compensation | (757 | ) | 1,217 | 152 | ||||||||
Share based compensation | 1,155 | 1,306 | 820 | |||||||||
Other, net | (17 | ) | (40 | ) | 4 | |||||||
Changes in assets and liabilities: | ||||||||||||
Purchase of investments | (297 | ) | (146 | ) | (201 | ) | ||||||
Accounts receivable and accrued revenue | (20,467 | ) | (13,652 | ) | 19,411 | |||||||
Propane inventory, storage gas and other inventory | 151 | 2,597 | (1,730 | ) | ||||||||
Regulatory assets | 687 | (1,842 | ) | 411 | ||||||||
Prepaid expenses and other current assets | 1,157 | (757 | ) | (1,182 | ) | |||||||
Other deferred charges | (156 | ) | (83 | ) | (153 | ) | ||||||
Long-term receivables | 286 | 191 | 207 | |||||||||
Accounts payable and other accrued liabilities | 15,853 | 10,185 | (15,033 | ) | ||||||||
Income taxes receivable | (3,761 | ) | 5,020 | (6,155 | ) | |||||||
Accrued interest | (97 | ) | 66 | 158 | ||||||||
Customer deposits and refunds | 2,038 | (75 | ) | (502 | ) | |||||||
Accrued compensation | 1,339 | (2,066 | ) | (175 | ) | |||||||
Regulatory liabilities | 665 | 1,071 | (3,107 | ) | ||||||||
Other liabilities | 187 | 1,074 | 69 | |||||||||
Net cash provided by operating activities | 61,005 | 45,799 | 28,544 | |||||||||
Investing Activities | ||||||||||||
Property, plant and equipment expenditures | (45,411 | ) | (26,603 | ) | (30,756 | ) | ||||||
Cash acquired in the merger, net of cash paid | — | 359 | — | |||||||||
(Purchases of) proceeds from investments | (3,108 | ) | 3,519 | — | ||||||||
Environmental expenditures | (290 | ) | (418 | ) | (480 | ) | ||||||
Net cash used by investing activities | (48,809 | ) | (23,143 | ) | (31,236 | ) | ||||||
Financing Activities | ||||||||||||
Common stock dividends | (11,013 | ) | (7,957 | ) | (7,810 | ) | ||||||
Issuance of stock for Dividend Reinvestment Plan | 568 | 392 | (118 | ) | ||||||||
Change in cash overdrafts due to outstanding checks | 3,255 | 835 | (684 | ) | ||||||||
Net borrowing (repayment) under line of credit agreements | 1,579 | (3,812 | ) | (11,980 | ) | |||||||
Other short-term borrowing | 29,100 | — | 29,961 | |||||||||
Repayment of long-term debt | (36,860 | ) | (10,907 | ) | (7,658 | ) | ||||||
Net cash provided by (used in) financing activities | (13,371 | ) | (21,449 | ) | 1,711 | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (1,175 | ) | 1,207 | (981 | ) | |||||||
Cash and Cash Equivalents — Beginning of Period | 2,818 | 1,611 | 2,592 | |||||||||
Cash and Cash Equivalents — End of Period | $ | 1,643 | $ | 2,818 | $ | 1,611 | ||||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 63
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December 31, | December 31, | |||||||
Assets | 2010 | 2009 | ||||||
(in thousands, except shares and per share data) | ||||||||
Property, Plant and Equipment | ||||||||
Regulated energy | $ | 500,689 | $ | 462,061 | ||||
Unregulated energy | 61,313 | 61,334 | ||||||
Other | 16,989 | 16,049 | ||||||
Total property, plant and equipment | 578,991 | 539,444 | ||||||
Less: Accumulated depreciation and amortization | (121,628 | ) | (107,318 | ) | ||||
Plus: Construction work in progress | 5,394 | 4,461 | ||||||
Net property, plant and equipment | 462,757 | 436,587 | ||||||
Investments, at fair value | 4,036 | 1,959 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | 1,643 | 2,818 | ||||||
Accounts receivable (less allowance for uncollectible accounts of $1,194 and $1,609, respectively) | 88,074 | 69,773 | ||||||
Accrued revenue | 14,978 | 12,838 | ||||||
Propane inventory, at average cost | 8,876 | 7,901 | ||||||
Other inventory, at average cost | 3,084 | 3,149 | ||||||
Regulatory assets | 51 | 448 | ||||||
Storage gas prepayments | 5,084 | 6,144 | ||||||
Income taxes receivable | 6,748 | 2,614 | ||||||
Deferred income taxes | 2,191 | 724 | ||||||
Prepaid expenses | 4,613 | 5,853 | ||||||
Mark-to-market energy assets | 1,642 | 2,379 | ||||||
Other current assets | 245 | 147 | ||||||
Total current assets | 137,229 | 114,788 | ||||||
Deferred Charges and Other Assets | ||||||||
Goodwill | 35,613 | 34,095 | ||||||
Other intangible assets, net | 3,459 | 3,951 | ||||||
Long-term receivables | 155 | 440 | ||||||
Regulatory assets | 23,884 | 20,100 | ||||||
Other deferred charges | 3,860 | 3,891 | ||||||
Total deferred charges and other assets | 66,971 | 62,477 | ||||||
Total Assets | $ | 670,993 | $ | 615,811 | ||||
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December 31, | December 31, | |||||||
Capitalization and Liabilities | 2010 | 2009 | ||||||
(in thousands, except shares and per share data) | ||||||||
Capitalization | ||||||||
Stockholders’ equity | ||||||||
Common stock, par value $0.4867 per share (authorized 25,000,000 and 12,000,000 shares, respectively) | $ | 4,635 | $ | 4,572 | ||||
Additional paid-in capital | 148,159 | 144,502 | ||||||
Retained earnings | 76,805 | 63,231 | ||||||
Accumulated other comprehensive loss | (3,360 | ) | (2,524 | ) | ||||
Deferred compensation obligation | 777 | 739 | ||||||
Treasury stock | (777 | ) | (739 | ) | ||||
Total stockholders’ equity | 226,239 | 209,781 | ||||||
Long-term debt, net of current maturities | 89,642 | 98,814 | ||||||
Total capitalization | 315,881 | 308,595 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt | 9,216 | 35,299 | ||||||
Short-term borrowing | 63,958 | 30,023 | ||||||
Accounts payable | 65,541 | 51,462 | ||||||
Customer deposits and refunds | 26,317 | 25,046 | ||||||
Accrued interest | 1,789 | 1,887 | ||||||
Dividends payable | 3,143 | 2,959 | ||||||
Accrued compensation | 6,784 | 5,341 | ||||||
Regulatory liabilities | 9,009 | 8,295 | ||||||
Mark-to-market energy liabilities | 1,492 | 2,514 | ||||||
Other accrued liabilities | 10,393 | 7,017 | ||||||
Total current liabilities | 197,642 | 169,843 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred income taxes | 80,031 | 66,008 | ||||||
Deferred investment tax credits | 243 | 335 | ||||||
Regulatory liabilities | 3,734 | 4,393 | ||||||
Environmental liabilities | 10,587 | 11,104 | ||||||
Other pension and benefit costs | 18,199 | 15,088 | ||||||
Accrued asset removal cost — Regulatory liability | 35,092 | 33,214 | ||||||
Other liabilities | 9,584 | 7,231 | ||||||
Total deferred credits and other liabilities | 157,470 | 137,373 | ||||||
Other commitments and contingencies (Note P and Q) | ||||||||
Total Capitalization and Liabilities | $ | 670,993 | $ | 615,811 | ||||
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Common Stock | Accumulated Other | |||||||||||||||||||||||||||||||
Number of | Additional Paid-In | Comprehensive | Deferred | |||||||||||||||||||||||||||||
(in thousands, except shares and per share data) | Shares(7) | Par Value | Capital | Retained Earnings | Loss | Compensation | Treasury Stock | Total | ||||||||||||||||||||||||
Balances at December 31, 2007 | 6,777,410 | $ | 3,298 | $ | 65,593 | $ | 51,538 | $ | (852 | ) | $ | 1,404 | $ | (1,404 | ) | $ | 119,577 | |||||||||||||||
Net Income | 13,607 | 13,607 | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Employee Benefit Plans, net of tax: | ||||||||||||||||||||||||||||||||
Amortization of prior service costs(4) | (71 | ) | (71 | ) | ||||||||||||||||||||||||||||
Net loss(5) | (2,825 | ) | (2,825 | ) | ||||||||||||||||||||||||||||
Total comprehensive income | 10,711 | |||||||||||||||||||||||||||||||
Dividend Reinvestment Plan | 9,060 | 5 | 269 | 274 | ||||||||||||||||||||||||||||
Retirement Savings Plan | 5,260 | 3 | 156 | 159 | ||||||||||||||||||||||||||||
Conversion of debentures | 10,397 | 5 | 171 | 176 | ||||||||||||||||||||||||||||
Share based compensation(1) (3) | 24,994 | 12 | 442 | 454 | ||||||||||||||||||||||||||||
Tax benefit on stock warrants | 50 | 50 | ||||||||||||||||||||||||||||||
Deferred Compensation Plan | 145 | (145 | ) | — | ||||||||||||||||||||||||||||
Purchase of treasury stock | (2,425 | ) | (72 | ) | (72 | ) | ||||||||||||||||||||||||||
Sale and distribution of treasury stock | 2,425 | 72 | 72 | |||||||||||||||||||||||||||||
Dividends on stock-based compensation | (81 | ) | (81 | ) | ||||||||||||||||||||||||||||
Cash dividends(2) | (8,247 | ) | (8,247 | ) | ||||||||||||||||||||||||||||
Balances at December 31, 2008 | 6,827,121 | 3,323 | 66,681 | 56,817 | (3,748 | ) | 1,549 | (1,549 | ) | 123,073 | ||||||||||||||||||||||
Net Income | 15,897 | 15,897 | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Employee Benefit Plans, net of tax: | ||||||||||||||||||||||||||||||||
Amortization of prior service costs(4) | 7 | 7 | ||||||||||||||||||||||||||||||
Net Gain(5) | 1,217 | 1,217 | ||||||||||||||||||||||||||||||
Total comprehensive income | 17,121 | |||||||||||||||||||||||||||||||
Dividend Reinvestment Plan | 31,607 | 15 | 921 | 936 | ||||||||||||||||||||||||||||
Retirement Savings Plan | 32,375 | 16 | 966 | 982 | ||||||||||||||||||||||||||||
Conversion of debentures | 7,927 | 4 | 131 | 135 | ||||||||||||||||||||||||||||
Share based compensation(1) (3) | 7,374 | 3 | 1,332 | 1,335 | ||||||||||||||||||||||||||||
Deferred Compensation Plan(6) | (810 | ) | 810 | — | ||||||||||||||||||||||||||||
Purchase of treasury stock | (2,411 | ) | (73 | ) | (73 | ) | ||||||||||||||||||||||||||
Sale and distribution of treasury stock | 2,411 | 73 | 73 | |||||||||||||||||||||||||||||
Common stock issued in the merger | 2,487,910 | 1,211 | 74,471 | 75,682 | ||||||||||||||||||||||||||||
Dividends on stock-based compensation | (104 | ) | (104 | ) | ||||||||||||||||||||||||||||
Cash dividends(2) | (9,379 | ) | (9,379 | ) | ||||||||||||||||||||||||||||
Balances at December 31, 2009 | 9,394,314 | 4,572 | 144,502 | 63,231 | (2,524 | ) | 739 | (739 | ) | 209,781 | ||||||||||||||||||||||
Net Income | 26,056 | 26,056 | ||||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Employee Benefit Plans, net of tax: | ||||||||||||||||||||||||||||||||
Amortization of prior service costs(4) | 8 | 8 | ||||||||||||||||||||||||||||||
Net loss(5) | (844 | ) | (844 | ) | ||||||||||||||||||||||||||||
Total comprehensive income | 25,220 | |||||||||||||||||||||||||||||||
Dividend Reinvestment Plan | 53,806 | 26 | 1,699 | 1,725 | ||||||||||||||||||||||||||||
Retirement Savings Plan | 27,795 | 14 | 889 | 903 | ||||||||||||||||||||||||||||
Conversion of debentures | 11,865 | 6 | 196 | 202 | ||||||||||||||||||||||||||||
Tax benefit on share based compensation | 253 | 253 | ||||||||||||||||||||||||||||||
Share based compensation(1) (3) | 36,415 | 17 | 620 | 637 | ||||||||||||||||||||||||||||
Deferred Compensation Plan(6) | 38 | (38 | ) | — | ||||||||||||||||||||||||||||
Purchase of treasury stock | 1,144 | (38 | ) | (38 | ) | |||||||||||||||||||||||||||
Sale and distribution of treasury stock | (1,144 | ) | 38 | 38 | ||||||||||||||||||||||||||||
Dividends on stock-based compensation | (103 | ) | (103 | ) | ||||||||||||||||||||||||||||
Cash dividends(2) | (12,379 | ) | (12,379 | ) | ||||||||||||||||||||||||||||
Balances at December 31, 2010 | 9,524,195 | $ | 4,635 | $ | 148,159 | $ | 76,805 | $ | (3,360 | ) | $ | 777 | $ | (777 | ) | $ | 226,239 | |||||||||||||||
(1) | Includes amounts for shares issued for Directors’ compensation. | |
(2) | Cash dividends declared per share for the periods ended December 31, 2010, 2009 and 2008 were $1.305, $1.250 and $1.210 respectively. | |
(3) | The shares issued under the Performance Incentive Plan (“PIP”) are net of shares withheld for employee taxes. For 2010 and 2008, the Company withheld 17,695 and 12,511 respectively shares for taxes. The Company did not issue any shares for the PIP in 2009. | |
(4) | Tax expense (benefit) recognized on the prior service cost component of employees benefit plans for the periods ended December 31, 2010, 2009 and 2008 were approximately $5, $5 and ($52) respectively. | |
(5) | Tax expense (benefit) recognized on the net gain (loss) component of employees benefit plans for the periods ended December 31, 2010, 2009 and 2008 were ($541), $794 and ($1,900) respectively. | |
(6) | In May and November 2009, certain participants of the Deferred Compensation Plan received distributions totaling $883. There were no distributions in 2010 and 2008. | |
(7) | Includes 29,600, 28,452, and 62,221 shares at December 31, 2010, 2009 and 2008, respectively, held in a Rabbi Trust established by the Company relating to the Deferred Compensation Plan. |
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December 31, | December 31, | |||||||||
2010 | 2009 | Useful Life(1) | ||||||||
(in thousands) | ||||||||||
Plant in service | ||||||||||
Mains | $ | 259,672 | $ | 236,352 | 27-62 years | |||||
Services — utility | 68,349 | 65,070 | 12-48 years | |||||||
Compressor station equipment | 24,952 | 24,981 | 42 years | |||||||
Liquified petroleum gas equipment | 27,623 | 28,240 | 5-31 years | |||||||
Meters and meter installations | 32,850 | 28,419 | Unregulated energy 3-33 years, regulated energy 14-49 years | |||||||
Measuring and regulating station equipment | 22,332 | 17,708 | 14-54 years | |||||||
Office furniture and equipment | 15,796 | 15,532 | Unregulated energy 4-7 years, regulated energy 14-25 years | |||||||
Transportation equipment | 17,046 | 16,613 | 1-20 years | |||||||
Structures and improvements | 16,290 | 15,184 | 3-44 years(2) | |||||||
Land and land rights | 15,052 | 12,789 | Not depreciable, except certain regulated assets | |||||||
Propane bulk plants and tanks | 7,967 | 7,275 | 12-40 years | |||||||
Electric transmission lines and transformers | 30,669 | 29,024 | 10-41 years | |||||||
Poles and towers | 9,259 | 8,434 | 21-40 years | |||||||
Other equipment | 9,189 | 11,147 | 10-61 years | |||||||
Various | 21,945 | 22,676 | Various | |||||||
Total plant in service | 578,991 | 539,444 | ||||||||
Plus construction work in progress | 5,394 | 4,461 | ||||||||
Less accumulated depreciation | (121,628 | ) | (107,318 | ) | ||||||
Net property, plant and equipment | $ | 462,757 | $ | 436,587 | ||||||
(1) | Certain immaterial account balances may fall outside this range. | |
The regulated operations compute depreciation in accordance with rates approved by either the state PSC or the FERC. These rates are based on depreciation studies and may change periodically upon receiving approval from the appropriate regulatory body. The depreciation rates shown above are based on the remaining useful lives of the assets at the time of the depreciation study, rather than their original lives. The depreciation rates are composite, straight-line rates applied to the average investment for each class of depreciable property and are adjusted for anticipated cost of removal less salvage value. | ||
The non-regulated operations compute depreciation using the straight-line method over the estimated useful life of the asset. | ||
(2) | Includes buildings, structures used in connection with natural gas, electric and propane operations, improvements to those facilities and leasehold improvements. |
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December 31, | December 31, | |||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Regulatory Assets | ||||||||
Underrecovered purchased fuel costs | $ | — | $ | 368 | ||||
Income tax related amounts due from customers | 1,897 | 2,022 | ||||||
Deferred post retirement benefits | 8,304 | 3,636 | ||||||
Deferred transaction and transition costs | 1,264 | 1,486 | ||||||
Deferred conversion and development costs | 2,069 | 2,720 | ||||||
Environmental regulatory assets and expenditures | 6,826 | 7,510 | ||||||
Acquisition adjustment(1) | 764 | 795 | ||||||
Loss on reacquired debt(3) | 1,668 | 154 | ||||||
Other | 1,143 | 1,857 | ||||||
Total Regulatory Assets | $ | 23,935 | $ | 20,548 | ||||
Regulatory Liabilities | ||||||||
Self insurance | $ | 1,265 | $ | 1,152 | ||||
Overrecovered purchased fuel costs | 8,159 | 6,523 | ||||||
Shared interruptible margins | — | 84 | ||||||
Conservation cost recovery | 320 | 1,060 | ||||||
Rate refund(2) | — | 258 | ||||||
Income tax related amounts due to customers | 48 | 74 | ||||||
Storm reserve | 2,682 | 2,554 | ||||||
Accrued asset removal cost | 35,092 | 33,214 | ||||||
Other | 269 | 983 | ||||||
Total Regulatory Liabilities | $ | 47,835 | $ | 45,902 | ||||
(1) | Net carrying value of goodwill from FPU’s previous acquisition that is allowed to be amortized pursuant to a rate order. | |
(2) | Refunded to FPU natural gas customers in February 2010. | |
(3) | Gains and losses resulting from the reacquisition of long-term debt, which are amortized over future periods as adjustments to interest expense in accordance with established regulatory practice. |
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands, except shares and per share data) | ||||||||||||
Calculation of Basic Earnings Per Share: | ||||||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Weighted average shares outstanding | 9,474,554 | 7,313,320 | 6,811,848 | |||||||||
Basic Earnings Per Share | $ | 2.75 | $ | 2.17 | $ | 2.00 | ||||||
Calculation of Diluted Earnings Per Share: | ||||||||||||
Reconciliation of Numerator: | ||||||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Effect of 8.25% Convertible debentures | 73 | 79 | 89 | |||||||||
Adjusted numerator — Diluted | $ | 26,129 | $ | 15,976 | $ | 13,696 | ||||||
Reconciliation of Denominator: | ||||||||||||
Weighted shares outstanding — Basic | 9,474,554 | 7,313,320 | 6,811,848 | |||||||||
Effect of dilutive securities: | ||||||||||||
Share-based Compensation | 22,550 | 34,229 | 12,083 | |||||||||
8.25% Convertible debentures | 85,270 | 92,652 | 103,552 | |||||||||
Adjusted denominator — Diluted | 9,582,374 | 7,440,201 | 6,927,483 | |||||||||
Diluted Earnings Per Share | $ | 2.73 | $ | 2.15 | $ | 1.98 | ||||||
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October 28, 2009 | ||||
(in thousands) | ||||
Purchase price | $ | 75,699 | ||
Current assets | 26,761 | |||
Property, plant and equipment | 139,709 | |||
Regulatory assets | 19,899 | |||
Investments and other deferred charges | 3,659 | |||
Intangible assets | 4,019 | |||
Total assets acquired | 194,047 | |||
Long term debt | 47,812 | |||
Borrowings from line of credit | 4,249 | |||
Other current liabilities | 17,427 | |||
Pre-merger contingencies | 923 | |||
Other regulatory liabilities | 19,414 | |||
Pension and post retirement obligations | 14,276 | |||
Environmental liabilities | 12,414 | |||
Deferred income taxes | 20,559 | |||
Customer deposits and other liabilities | 15,467 | |||
Total liabilities assumed | 152,541 | |||
Net identifiable assets acquired | 41,506 | |||
Goodwill | $ | 34,193 | ||
During 2010, we adjusted the allocation of the purchase price based on additional information available. The adjustments are related to certain accruals, regulatory assets, deferred and current income tax assets and liabilities, and pre-merger contingencies (see discussion below). These adjustments also resulted in a change in fair value of the propane property, plant and equipment. Goodwill from the merger increased to $34.2 million after incorporating these adjustments, compared to $33.4 million as previously disclosed at December 31, 2009. |
None of the $34.2 million in goodwill recorded in connection with the merger is deductible for tax purposes. All of the goodwill recorded in connection with the merger is related to the regulated energy segment. We believe the goodwill recognized is attributable to the synergies and opportunities primarily related to FPU’s regulated energy businesses. The intangible assets acquired in connection with the merger are related to propane customer list ($3.5 million) and favorable propane supply contracts ($519,000). The intangible value assigned to FPU’s existing propane customer list is being amortized over a 12-year period based on the expected duration of the benefit arising from the list. The intangible value assigned to FPU’s favorable propane contracts is being amortized over a period ranging from one to 14 months based on contractual terms. |
Current assets of $26.8 million acquired during the merger included notes receivable of approximately $5.8 million, for which we received full payment in March 2010, and accounts receivable of approximately $3.1 million, $6.0 million and $891,000 for FPU’s natural gas, electric and propane distribution businesses, respectively. |
The pre-merger contingencies of $923,000 included in the final allocation of the purchase price are primarily related to a pending settlement agreement for a class action complaint against FPU from a propane customer, which is further discussed in Note Q, “Other Commitments and Contingencies” to the Consolidated Financial Statements. The proposed settlement addresses a particular charge by FPU to its propane customers during the period from May 27, 2006 to September 24, 2010, which encompasses both pre-merger and post-merger periods. We used the ratio of the charges assessed to customers during the pre-merger period to the charges assessed to customers during the total settlement period to estimate that $835,000 of the total contingency was related to FPU’s operations prior to the merger with Chesapeake. The portion of the liability related to FPU’s operations after the merger with Chesapeake and any increases to the liability after the measurement date, which totaled to $370,000, was expensed in 2010. Also included in the pre-merger contingencies are liabilities related to FPU’s income taxes for periods prior to the merger. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 77
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The financial position and results of operations and cash flows of FPU from the effective date of the merger are included in our consolidated financial statements. The revenue from FPU for the years December 31, 2010 and 2009, included in our consolidated statements of income, were $180.2 million and $26.4 million, respectively, and the net income from FPU for the years ended December 31, 2010 and 2009, included in our consolidated statements of income, were $9.3 million and $1.8 million, respectively. |
The following table shows the actual results of combined operations for the year ended December 31, 2010 and pro forma results of combined operations for the year ended December 31, 2009, as if the merger had been completed at January 1, 2009. Since the effects of the merger for the year ended December 31, 2010 were already included in the actual results of our consolidated operations, there is no pro forma adjustment for the year ended December 31, 2010. |
For the Years Ended December 31, | 2010 | 2009 | ||||||
(in thousands, except per share data) | ||||||||
Operating revenues | $ | 427,546 | $ | 394,772 | ||||
Operating Income | $ | 51,930 | $ | 44,382 | ||||
Net Income | $ | 26,056 | $ | 20,872 | ||||
Earnings per share — basic | $ | 2.75 | $ | 2.23 | ||||
Earnings per share — diluted | $ | 2.73 | $ | 2.20 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 78
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• | Regulated Energy. The regulated energy segment includes natural gas distribution, electric distribution and natural gas transmission 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 ESNG. |
• | Unregulated Energy.The unregulated energy segment includes natural gas marketing, propane distribution and propane wholesale marketing operations, which are unregulated as to their rates and services. |
• | Other. The “Other” segment consists primarily of the advanced information services subsidiary, unregulated subsidiaries that own real estate leased to Chesapeake and certain corporate costs not allocated to other operations. |
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Operating Revenues, Unaffiliated Customers | ||||||||||||
Regulated Energy | $ | 268,830 | $ | 137,847 | $ | 115,544 | ||||||
Unregulated Energy | 146,430 | 119,719 | 161,287 | |||||||||
Other | 12,286 | 11,219 | 14,612 | |||||||||
Total operating revenues, unaffiliated customers | $ | 427,546 | $ | 268,785 | $ | 291,443 | ||||||
Intersegment Revenues(1) | ||||||||||||
Regulated Energy | $ | 1,104 | $ | 1,252 | $ | 924 | ||||||
Unregulated Energy | 363 | 254 | 3 | |||||||||
Other | 856 | 779 | 761 | |||||||||
Total intersegment revenues | $ | 2,323 | $ | 2,285 | $ | 1,688 | ||||||
Operating Income | ||||||||||||
Regulated Energy | $ | 43,509 | $ | 26,900 | $ | 24,733 | ||||||
Unregulated Energy | 7,908 | 8,158 | 3,781 | |||||||||
Other | 513 | (1,322 | ) | (35 | ) | |||||||
Operating Income | 51,930 | 33,736 | 28,479 | |||||||||
Other income | 195 | 165 | 103 | |||||||||
Interest charges | 9,146 | 7,086 | 6,158 | |||||||||
Income taxes | 16,923 | 10,918 | 8,817 | |||||||||
Net income from continuing operations | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Depreciation and Amortization | ||||||||||||
Regulated Energy | $ | 17,038 | $ | 8,866 | $ | 6,694 | ||||||
Unregulated Energy | 3,433 | 2,415 | 2,024 | |||||||||
Other and eliminations | 287 | 307 | 287 | |||||||||
Total depreciation and amortization | $ | 20,758 | $ | 11,588 | $ | 9,005 | ||||||
Capital Expenditures | ||||||||||||
Regulated Energy | $ | 41,898 | $ | 22,917 | $ | 25,386 | ||||||
Unregulated Energy | 2,764 | 1,873 | 3,417 | |||||||||
Other | 2,293 | 1,504 | 2,041 | |||||||||
Total capital expenditures | $ | 46,955 | $ | 26,294 | $ | 30,844 | ||||||
(1) | All significant intersegment revenues are billed at market rates and have been eliminated from consolidated revenues. |
At December 31, | 2010 | 2009 | ||||||
(in thousands) | ||||||||
Identifiable Assets | ||||||||
Regulated Energy | $ | 520,192 | $ | 481,606 | ||||
Unregulated Energy | 113,039 | 99,642 | ||||||
Other | 37,762 | 34,286 | ||||||
Total identifiable assets | $ | 670,993 | $ | 615,534 | ||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 80
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Cash paid for interest | $ | 8,751 | $ | 6,703 | $ | 5,835 | ||||||
Cash paid for income taxes | $ | 10,168 | $ | 1,111 | $ | 3,885 |
For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Capital property and equipment acquired on account, but not paid as of December 31 | $ | 1,064 | $ | 1,151 | $ | 696 | ||||||
Merger/acquisitions | $ | 300 | $ | 75,682 | $ | — | ||||||
Retirement Savings Plan | $ | 902 | $ | 982 | $ | 159 | ||||||
Dividend Reinvestment Plan | $ | 1,182 | $ | 692 | $ | 208 | ||||||
Conversion of Debentures | $ | 202 | $ | 135 | $ | 177 | ||||||
Performance Incentive Plan | $ | 719 | $ | — | $ | 568 | ||||||
Director Stock Compensation Plan | $ | 297 | $ | 214 | $ | 181 | ||||||
Tax benefit on stock warrants and share-based compensation | $ | 253 | $ | — | $ | 50 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 81
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Quantity in | Estimated Market | Weighted Average | ||||||||||
At December 31, 2010 | Gallons | Prices | Contract Prices | |||||||||
Forward Contracts | ||||||||||||
Sale | 13,523,496 | $1.0350 — $1.4100 | $ | 1.2192 | ||||||||
Purchase | 12,914,496 | $1.0150 — $1.3779 | $ | 1.2093 | ||||||||
Other Contract | ||||||||||||
Put option | 1,470,000 | $— | $ | 0.1150 |
Asset Derivatives | ||||||||||||
Fair Value | ||||||||||||
December 31, | December 31, | |||||||||||
(in thousands) | Balance Sheet Location | 2010 | 2009 | |||||||||
Derivatives not designated as hedging instruments: | ||||||||||||
Forward contracts | Mark-to-market energy assets | $ | 1,642 | $ | 2,379 | |||||||
Put Option(1) (2) | Mark-to-market energy assets | — | — | |||||||||
Total asset derivatives | $ | 1,642 | $ | 2,379 | ||||||||
Liability Derivatives | ||||||||||||
Fair Value | ||||||||||||
December 31, | December 31, | |||||||||||
(in thousands) | Balance Sheet Location | 2010 | 2009 | |||||||||
Derivatives not designated as hedging instruments: | ||||||||||||
Forward contracts | Mark-to-market energy liabilities | $ | 1,492 | $ | 2,514 | |||||||
Total liability derivatives | $ | 1,492 | $ | 2,514 | ||||||||
(1) | We purchased a put option for the Pro-Cap (propane price cap) Plan in October 2010. The put option which expires in January and February 2011 had a fair value of $0 at December 31, 2010. | |
(2) | We purchased a put option for the Pro-Cap Plan in September 2009. The put option, which expired on March 31, 2010, had a fair value of $0 at December 31, 2009. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 82
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Amount of Gain (Loss) on Derivatives: | ||||||||||||||
Location of Gain | For the Years Ended December 31, | |||||||||||||
(in thousands) | (Loss) on Derivatives | 2010 | 2009 | 2008 | ||||||||||
Derivatives designated a fair value hedges: | ||||||||||||||
Propane swap agreement(1) | Cost of Sales | $ | — | $ | (42 | ) | $ | 1,476 | ||||||
Derivatives not designated as hedging instruments: | ||||||||||||||
Put Option(2) | Cost of Sales | (168 | ) | — | — | |||||||||
Put Option(3) | Revenue | — | (41 | ) | — | |||||||||
Unrealized gain (loss) on forward contracts | Revenue | 284 | (1,565 | ) | 1,357 | |||||||||
Total | $ | 116 | $ | (1,648 | ) | $ | 2,833 | |||||||
(1) | Our propane distribution operation entered into a propane swap agreement to protect it from the impact that wholesale propane price increases would have on the Pro-Cap (propane price cap) Plan that was offered to customers. We terminated this swap agreement in January 2009. | |
(2) | We purchased a put option for the Pro-Cap Plan in October 2010. The put option, which expires in January and February 2011, had a fair value of $0 at December 31, 2010. | |
(3) | We purchased a put option for the Pro-Cap Plan in September 2009. The put option, which expired on March 31, 2010, had a fair value of $0 at December 31, 2009. |
Amount of Trading Revenue | ||||||||||||||||
Location of Gain | For the Years Ended December 31, | |||||||||||||||
(in thousands) | (Loss) on Derivatives | 2010 | 2009 | 2008 | ||||||||||||
Realized gain on forward contracts/put option | Revenue | $ | 1,540 | $ | 3,830 | $ | 1,935 | |||||||||
Unrealized gain (loss) on forward contracts | Revenue | 284 | (1,565 | ) | 1,357 | |||||||||||
Total | $ | 1,824 | $ | 2,265 | $ | 3,292 | ||||||||||
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and |
Level 3: Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). |
Chesapeake Utilities Corporation 2010 Form 10-K Page 83
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Fair Value Measurements Using: | ||||||||||||||||
Significant | ||||||||||||||||
Other | Significant | |||||||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||||||
Active Markets | Inputs | Inputs | ||||||||||||||
(in thousands) | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Investments | $ | 4,036 | $ | 4,036 | $ | — | $ | — | ||||||||
Mark-to-market energy assets | $ | 1,642 | $ | — | $ | 1,642 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Mark-to-market energy liabilities | $ | 1,492 | $ | — | $ | 1,492 | $ | — |
Fair Value Measurements Using: | ||||||||||||||||
Significant | ||||||||||||||||
Other | Significant | |||||||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||||||
Active Markets | Inputs | Inputs | ||||||||||||||
(in thousands) | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets: | ||||||||||||||||
Investments | $ | 1,959 | $ | 1,959 | — | $ | — | |||||||||
Mark-to-market energy assets | $ | 2,379 | $ | — | $ | 2,379 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Mark-to-market energy liabilities | $ | 2,514 | $ | — | $ | 2,514 | $ | — |
Level 1 Fair Value Measurements: |
Investments— The fair values of these trading securities are recorded at fair value based on unadjusted quoted prices in active markets for identical securities. |
Level 2 Fair Value Measurements: |
Mark-to-market energy assets and liabilities —These forward contracts are valued using market transactions in either the listed or OTC markets. |
Propane price swap agreement and put option —The fair value of the propane price swap agreement and put option is valued using market transactions for similar assets and liabilities in either the listed or OTC markets. |
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December 31, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Regulated Energy | $ | 34,939 | $ | 33,421 | ||||
Unregulated Energy | 674 | 674 | ||||||
Total | $ | 35,613 | $ | 34,095 | ||||
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December 31, 2010 | December 31, 2009 | |||||||||||||||
Gross | Gross | |||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
(in thousands) | ||||||||||||||||
Favorable propane contracts | $ | 0 | $ | 0 | $ | 519 | $ | 169 | ||||||||
Customer list | 3,500 | 340 | 3,500 | 49 | ||||||||||||
Other | 566 | 267 | 379 | 229 | ||||||||||||
$ | 4,066 | $ | 607 | $ | 4,398 | $ | 447 | |||||||||
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Current Income Tax Expense | ||||||||||||
Federal | $ | 1,566 | $ | — | $ | (2,551 | ) | |||||
State | 2,116 | 878 | — | |||||||||
Investment tax credit adjustments, net | (91 | ) | (69 | ) | (42 | ) | ||||||
Total current income tax expense (benefit) | 3,591 | 809 | (2,593 | ) | ||||||||
Deferred Income Tax Expense (1) | ||||||||||||
Property, plant and equipment | 16,964 | 7,098 | 10,272 | |||||||||
Deferred gas costs | (2,505 | ) | (786 | ) | 781 | |||||||
Pensions and other employee benefits | (402 | ) | (612 | ) | (174 | ) | ||||||
Amortization of intangibles | (211 | ) | 5 | 75 | ||||||||
Environmental expenditures | 32 | 7 | 145 | |||||||||
Net operating loss carryforwards | 99 | 4,106 | — | |||||||||
Merger related costs | (13 | ) | 967 | — | ||||||||
Reserve for insurance deductibles | (419 | ) | 518 | 462 | ||||||||
Other | (213 | ) | (1,194 | ) | (151 | ) | ||||||
Total deferred income tax expense (benefit) | 13,332 | 10,109 | 11,410 | |||||||||
Total Income Tax Expense | $ | 16,923 | $ | 10,918 | $ | 8,817 | ||||||
Reconciliation of Effective Income Tax Rates | ||||||||||||
Continuing Operations | ||||||||||||
Federal income tax expense (2) | $ | 15,053 | $ | 9,171 | $ | 7,863 | ||||||
State income taxes, net of federal benefit | 2,083 | 1,490 | 1,162 | |||||||||
Merger related costs | 70 | 299 | — | |||||||||
ESOP dividend deduction | (266 | ) | (213 | ) | (205 | ) | ||||||
Other | (17 | ) | 171 | (3 | ) | |||||||
Total income tax expense | $ | 16,923 | $ | 10,918 | $ | 8,817 | ||||||
Effective income tax rate | 39.38 | % | 40.72 | % | 39.32 | % |
At December 31, | 2010 | 2009 | ||||||
(in thousands) | ||||||||
Deferred Income Taxes | ||||||||
Deferred income tax liabilities: | ||||||||
Property, plant and equipment | $ | 89,544 | $ | 75,863 | ||||
Deferred gas costs | — | 848 | ||||||
Loss on reacquired debt | 643 | 59 | ||||||
Other | 2,891 | 2,884 | ||||||
Total deferred income tax liabilities | 93,078 | 79,654 | ||||||
Deferred income tax assets: | ||||||||
Pension and other employee benefits | 7,849 | 7,972 | ||||||
Environmental costs | 1,770 | 1,803 | ||||||
Net operating loss carryforwards | 1,300 | 305 | ||||||
Self insurance | 419 | 464 | ||||||
Storm reserve liability | 1,034 | 985 | ||||||
Other | 2,866 | 2,841 | ||||||
Total deferred income tax assets | 15,238 | 14,370 | ||||||
Deferred Income Taxes Per Consolidated Balance Sheet | $ | 77,840 | $ | 65,284 | ||||
(1) | Includes $1,963,000, $1,588,000 and $260,000 of deferred state income taxes for the years 2010, 2009 and 2008, respectively. | |
(2) | Federal income taxes were recorded at 35% for each year represented. |
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December 31, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
FPU secured first mortgage bonds: | ||||||||
9.57% bond, due May 1, 2018 | $ | 7,248 | $ | 8,156 | ||||
10.03% bond, due May 1, 2018 | 3,986 | 4,486 | ||||||
9.08% bond, due June 1, 2022 | 7,950 | 7,950 | ||||||
6.85% bond, due October 1, 2031 | — | 14,012 | ||||||
4.90% bond, due November 1, 2031 | — | 13,222 | ||||||
Uncollateralized senior notes: | ||||||||
6.91% note, due October 1, 2010 | — | 909 | ||||||
6.85% note, due January 1, 2012 | 1,000 | 2,000 | ||||||
7.83% note, due January 1, 2015 | 8,000 | 10,000 | ||||||
6.64% note, due October 31, 2017 | 19,091 | 21,818 | ||||||
5.50% note, due October 12, 2020 | 20,000 | 20,000 | ||||||
5.93% note, due October 31, 2023 | 30,000 | 30,000 | ||||||
Convertible debentures: | ||||||||
8.25% due March 1, 2014 | 1,318 | 1,520 | ||||||
Promissory note | 265 | 40 | ||||||
Total long-term debt | 98,858 | 134,113 | ||||||
Less: current maturities | (9,216 | ) | (35,299 | ) | ||||
Total long-term debt, net of current maturities | $ | 89,642 | $ | 98,814 | ||||
Chesapeake Utilities Corporation 2010 Form 10-K Page 88
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Chesapeake Utilities Corporation 2010 Form 10-K Page 89
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• | a funded indebtedness ratio of no greater than 65 percent; and |
• | a fixed charge coverage ratio of at least 1.20 to 1.0. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 90
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Chesapeake | FPU | Chesapeake | FPU | |||||||||||||||||||||
Pension | Pension | Chesapeake | Postretirement | Medical | ||||||||||||||||||||
(in thousands) | Plan | Plan | SERP | Plan | Plan | Total | ||||||||||||||||||
Prior service cost (credit) | $ | (11 | ) | $ | — | $ | 83 | $ | — | $ | — | $ | 72 | |||||||||||
Net loss | 3,221 | 1,409 | 793 | 1,145 | 531 | 7,099 | ||||||||||||||||||
Total unrecognized cost | $ | 3,210 | $ | 1,409 | $ | 876 | $ | 1,145 | $ | 531 | $ | 7,171 | ||||||||||||
Accumulated other comprehesive loss pre-tax(1) | $ | 3,210 | $ | 268 | $ | 876 | $ | 1,145 | $ | 101 | $ | 5,600 | ||||||||||||
Regulatory asset post merger | — | 1,141 | — | — | 430 | 1,571 | ||||||||||||||||||
Subtotal | 3,210 | 1,409 | 876 | 1,145 | 531 | 7,171 | ||||||||||||||||||
Regulatory asset pre-merger | — | 6,631 | — | — | 78 | 6,709 | ||||||||||||||||||
Total | $ | 3,210 | $ | 8,040 | $ | 876 | $ | 1,145 | $ | 609 | $ | 13,880 | ||||||||||||
(1) | The total amount of accumulated other comprehensive loss recorded on our consolidated balance sheets as of December 31, 2010 is net of income tax benefits of $2.2 million. |
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Chesapeake | FPU | Chesapeake | FPU | |||||||||||||||||||||
Pension | Pension | Chesapeake | Postretirement | Medical | ||||||||||||||||||||
(in thousands) | Plan | Plan | SERP | Plan | Plan | Total | ||||||||||||||||||
Prior service cost (credit) | $ | (5 | ) | $ | — | $ | 19 | $ | — | $ | — | $ | 14 | |||||||||||
Net (gain) loss | $ | 173 | $ | — | $ | 43 | $ | 58 | $ | 22 | $ | 296 | ||||||||||||
Amortization of pre-merger regulatory asset | $ | — | $ | 761 | $ | — | $ | — | $ | 8 | $ | 769 |
Chesapeake | FPU | |||||||||||||||||||
Pension Plan | Pension Plan | |||||||||||||||||||
At December 31, | 2010 | 2009 | 2008 | 2010 | 2009 | |||||||||||||||
Asset Category | ||||||||||||||||||||
Equity securities | 64.33 | % | 66.22 | % | 48.70 | % | 60.00 | % | 63.00 | % | ||||||||||
Debt securities | 30.60 | % | 33.76 | % | 51.24 | % | 35.00 | % | 29.00 | % | ||||||||||
Other | 5.07 | % | 0.02 | % | 0.06 | % | 5.00 | % | 8.00 | % | ||||||||||
Total | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||
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• | United States government obligations; and |
• | Repurchase agreements that are fully collateralized by such obligations. |
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Chesapeake | FPU | |||||||||||||||
Pension Plan | Pension Plan | |||||||||||||||
At December 31, | 2010 | 2009 | 2010 | 2009 | ||||||||||||
(in thousands) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation — beginning of year(1) | $ | 11,127 | $ | 11,593 | $ | 45,420 | $ | 46,851 | ||||||||
Interest cost | 570 | 547 | 2,729 | 418 | ||||||||||||
Change in assumptions | (5 | ) | (188 | ) | — | — | ||||||||||
Actuarial loss | 776 | (307 | ) | 6,326 | (1,544 | ) | ||||||||||
Benefits paid | (708 | ) | (518 | ) | (1,997 | ) | (305 | ) | ||||||||
Benefit obligation — end of year | 11,760 | 11,127 | 52,478 | 45,420 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets — beginning of year(1) | 7,449 | 6,689 | 36,427 | 35,037 | ||||||||||||
Actual return on plan assets | 490 | 1,278 | 4,605 | 1,695 | ||||||||||||
Employer contributions | 556 | — | 1,166 | |||||||||||||
Benefits paid | (708 | ) | (518 | ) | (1,997 | ) | (305 | ) | ||||||||
Fair value of plan assets — end of year | 7,787 | 7,449 | 40,201 | 36,427 | ||||||||||||
Reconciliation: | ||||||||||||||||
Funded status | (3,973 | ) | (3,678 | ) | (12,277 | ) | (8,993 | ) | ||||||||
Accrued pension cost | $ | (3,973 | ) | $ | (3,678 | ) | $ | (12,277 | ) | $ | (8,993 | ) | ||||
Assumptions: | ||||||||||||||||
Discount rate | 5.00 | % | 5.25 | % | 5.25 | % | 5.75 | % | ||||||||
Expected return on plan assets | 6.00 | % | 6.00 | % | 7.00 | % | 7.00 | % |
(1) | FPU Pension Plan’s beginning balance for 2009 reflects the benefit obligations as of the merger date of October 28, 2009. |
Chesapeake | FPU | |||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | 2008 | 2010 | 2009(1) | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Components of net periodic pension cost: | ||||||||||||||||||||
Interest cost | $ | 570 | $ | 547 | $ | 594 | $ | 2,729 | $ | 418 | ||||||||||
Expected return on assets | (423 | ) | (362 | ) | (629 | ) | (2,532 | ) | (396 | ) | ||||||||||
Amortization of prior service cost | (5 | ) | (5 | ) | (5 | ) | — | — | ||||||||||||
Amortization of actuarial loss | 155 | 237 | — | — | — | |||||||||||||||
Net periodic pension benefit | $ | 297 | $ | 417 | $ | (40 | ) | $ | 197 | $ | 22 | |||||||||
Assumptions: | ||||||||||||||||||||
Discount rate | 5.25 | % | 5.25 | % | 5.50 | % | 5.75 | % | 5.50 | % | ||||||||||
Expected return on plan assets | 6.00 | % | 6.00 | % | 6.00 | % | 7.00 | % | 7.00 | % |
(1) | FPU’s net periodic pension cost is from the merger date (October 28, 2009) through December 31, 2009. |
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At December 31, | 2010 | 2009 | ||||||
(in thousands) | ||||||||
Change in benefit obligation: | ||||||||
Benefit obligation — beginning of year | $ | 2,505 | $ | 2,520 | ||||
Interest cost | 136 | 129 | ||||||
Actuarial (gain) loss | 179 | (55 | ) | |||||
Amendments | — | — | ||||||
Benefits paid | (89 | ) | (89 | ) | ||||
Benefit obligation — end of year | 2,731 | 2,505 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets — beginning of year | — | — | ||||||
Employer contributions | 89 | 89 | ||||||
Benefits paid | (89 | ) | (89 | ) | ||||
Fair value of plan assets — end of year | — | — | ||||||
Reconciliation: | ||||||||
Funded status | (2,731 | ) | (2,505 | ) | ||||
Accrued pension cost | $ | (2,731 | ) | $ | (2,505 | ) | ||
Assumptions: | ||||||||
Discount rate | 5.00 | % | 5.25 | % |
For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Components of net periodic pension cost: | ||||||||||||
Interest cost | $ | 136 | $ | 130 | $ | 125 | ||||||
Amortization of prior service cost | 18 | 18 | — | |||||||||
Amortization of actuarial loss | 59 | 54 | 45 | |||||||||
Net periodic pension cost | $ | 213 | $ | 202 | $ | 170 | ||||||
Assumptions: | ||||||||||||
Discount rate | 5.25 | % | 5.25 | % | 5.50 | % |
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Chesapeake | FPU | |||||||||||||||
Postretirement Plan | Medical Plan | |||||||||||||||
At December 31, | 2010 | 2009 | 2010 | 2009 | ||||||||||||
(in thousands) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation — beginning of year(1) | $ | 2,585 | $ | 2,179 | $ | 2,417 | $ | 2,457 | ||||||||
Service cost | — | 3 | 76 | 18 | ||||||||||||
Interest cost | 121 | 131 | 122 | 23 | ||||||||||||
Plan participants contributions | 100 | 90 | — | 6 | ||||||||||||
Actuarial (gain) loss | (149 | ) | 378 | 595 | (71 | ) | ||||||||||
Benefits paid | (183 | ) | (196 | ) | (112 | ) | (16 | ) | ||||||||
Benefit obligation — end of year | 2,474 | 2,585 | 3,098 | 2,417 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets — beginning of year(1) | — | — | — | — | ||||||||||||
Employer contributions(2) | 83 | 106 | 112 | 10 | ||||||||||||
Plan participants contributions | 100 | 90 | — | 6 | ||||||||||||
Benefits paid | (183 | ) | (196 | ) | (112 | ) | (16 | ) | ||||||||
Fair value of plan assets — end of year | — | — | — | — | ||||||||||||
Reconciliation: | ||||||||||||||||
Funded status | (2,474 | ) | (2,585 | ) | (3,098 | ) | (2,417 | ) | ||||||||
Accrued postretirement cost | $ | (2,474 | ) | $ | (2,585 | ) | $ | (3,098 | ) | $ | (2,417 | ) | ||||
Assumptions: | ||||||||||||||||
Discount rate | 5.00 | % | 5.25 | % | 5.25 | % | 5.75 | % |
(1) | FPU Medical Plan’s beginning balance for 2009 reflects the benefit obligation as of the merger date of October 28, 2009. | |
(2) | Chesapeake’s Postretirement Plan does not receive a Medicare Part-D subsidy. The FPU Medical Plan did not receive a significant subsidy for the post-merger period. |
Chesapeake | FPU | |||||||||||||||||||
Postretirement Plan | Medical Plan | |||||||||||||||||||
For the Years Ended December 31, | 2010 | 2009 | 2008 | 2010 | 2009(1) | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Components of net periodic postretirement cost: | ||||||||||||||||||||
Service cost | $ | — | $ | 3 | $ | 3 | $ | 76 | $ | 18 | ||||||||||
Interest cost | 122 | 131 | 114 | 123 | 23 | |||||||||||||||
Amortization of: | ||||||||||||||||||||
Actuarial (gain) loss | 57 | 76 | 290 | (6 | ) | — | ||||||||||||||
Net periodic postretirement cost | $ | 179 | $ | 210 | $ | 407 | $ | 193 | $ | 41 | ||||||||||
Assumptions | ||||||||||||||||||||
Discount rate | 5.25 | % | 5.25 | % | 5.50 | % | 5.75 | % | 5.50 | % |
(1) | FPU Medical Plan’s net periodic cost includes only the cost from the merger date (October 28, 2009) through December 31, 2009. |
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Chesapeake | FPU | Chesapeake | FPU | |||||||||||||||||
Pension | Pension | Chesapeake | Postretirement | Medical | ||||||||||||||||
(in thousands) | Plan(1) | Plan(1) | SERP(2) | Plan(2) | Plan(2)(3) | |||||||||||||||
2011 | $ | 1,315 | $ | 2,324 | $ | 853 | $ | 96 | $ | 158 | ||||||||||
2012 | $ | 465 | $ | 2,484 | $ | 87 | $ | 104 | $ | 151 | ||||||||||
2013 | $ | 533 | $ | 2,662 | $ | 86 | $ | 111 | $ | 144 | ||||||||||
2014 | $ | 556 | $ | 2,815 | $ | 84 | $ | 119 | $ | 169 | ||||||||||
2015 | $ | 686 | $ | 2,939 | $ | 133 | $ | 128 | $ | 189 | ||||||||||
Years 2016 through 2020 | $ | 3,932 | $ | 15,974 | $ | 672 | $ | 703 | $ | 1,040 |
(1) | The pension plan is funded; therefore, benefit payments are expected to be paid out of the plan assets. | |
(2) | Benefit payments are expected to be paid out of our general funds. | |
(3) | These amounts are shown net of estimated Medicare Part-D reimbursements of $9,000, $10,000, $11,000, $12,000 and $13,000 for the years 2011 to 2015, respectively, and $78,000 for the years 2015 through 2019. |
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For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Directors Stock Compensation Plan | $ | 283 | $ | 191 | $ | 180 | ||||||
Performance Incentive Plan | 872 | 1,115 | 640 | |||||||||
Total compensation expense | 1,155 | 1,306 | 820 | |||||||||
Less: tax benefit | 463 | 523 | 327 | |||||||||
Share-Based Compensation amounts included in net income | $ | 692 | $ | 783 | $ | 493 | ||||||
Number of | Weighted Average | |||||||
Shares | Grant Date Fair Value | |||||||
Outstanding — December 31, 2008 | — | — | ||||||
Granted (1) | 7,174 | $ | 29.83 | |||||
Vested | 7,174 | $ | 29.83 | |||||
Forfeited | — | — | ||||||
Outstanding — December 31, 2009 | — | — | ||||||
Granted | 9,900 | $ | 29.99 | |||||
Vested | 9,900 | $ | 29.99 | |||||
Forfeited | — | — | ||||||
Outstanding — December 31, 2010 | — | — | ||||||
(1) | On October 28, 2009, we added two new members to our Board of Directors; each new member was awarded 337 shares of common stock for the prorated portion of their service period. |
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Number of | Weighted Average | |||||||
Shares | Fair Value | |||||||
Outstanding — December 31, 2008 | 94,200 | $ | 27.84 | |||||
Granted | 28,875 | $ | 29.19 | |||||
Vested | — | — | ||||||
Fortfeited | — | — | ||||||
Expired | — | — | ||||||
Outstanding — December 31, 2009 | 123,075 | $ | 28.15 | |||||
Granted | 40,875 | 29.38 | ||||||
Vested | 43,960 | 27.94 | ||||||
Fortfeited | — | — | ||||||
Expired | 18,840 | 27.94 | ||||||
Outstanding — December 31, 2010 | 101,150 | $ | 28.78 | |||||
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For the Quarters Ended | March 31 | June 30 | September 30 | December 31 | ||||||||||||
(in thousands except per share amounts) | ||||||||||||||||
2010 | ||||||||||||||||
Operating Revenue | $ | 153,260 | $ | 80,061 | $ | 76,466 | $ | 117,759 | ||||||||
Operating Income | $ | 25,398 | $ | 7,761 | $ | 4,583 | $ | 14,188 | ||||||||
Net Income | $ | 13,974 | $ | 3,340 | $ | 1,628 | $ | 7,113 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.48 | $ | 0.35 | $ | 0.17 | $ | 0.75 | ||||||||
Diluted | $ | 1.47 | $ | 0.35 | $ | 0.17 | $ | 0.74 | ||||||||
2009(1) | ||||||||||||||||
Operating Revenue | $ | 104,479 | $ | 40,834 | $ | 31,758 | $ | 91,715 | ||||||||
Operating Income | $ | 15,966 | $ | 2,856 | $ | 2,257 | $ | 12,658 | ||||||||
Net Income | $ | 8,593 | $ | 806 | $ | 308 | $ | 6,191 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 1.26 | $ | 0.12 | $ | 0.04 | $ | 0.71 | ||||||||
Diluted | $ | 1.24 | $ | 0.12 | $ | 0.04 | $ | 0.71 |
(1) | The quarterly results prior to the completion of the merger with FPU exclude the result from FPU. The merger became effective on October 28, 2009. | |
(2) | The sum of the four quarters does not equal the total year due to rounding. |
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Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
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Stockholders of Chesapeake Utilities Corporation
/s/ ParenteBeard LLC | ||
Malvern, Pennsylvania | ||
March 8, 2011 |
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Item 9B. | Other Information. |
Item 10. | Directors, Executive Officers of the Registrant and Corporate Governanace. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
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(a) | (b) | (c) | ||||||||||
Number of securities | ||||||||||||
remaining available for future | ||||||||||||
Number of securities to | Weighted-average | issuance under equity | ||||||||||
be issued upon exercise | exercise price | compensation plans | ||||||||||
of outstanding options, | of outstanding options, | (excluding securities | ||||||||||
warrants, and rights | warrants, and rights | reflected in column (a)) | ||||||||||
Equity compensation plans approved by security holders | — | — | 402,843 | (1) | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | — | — | 402,843 | |||||||||
(1) | Includes 345,028 shares under the 2005 Performance Incentive Plan, 34,215 shares available under the 2005 Directors Stock Compensation Plan, and 23,600 shares available under the 2005 Employee Stock Awards Plan. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accounting Fees and Services. |
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Item 15. | Exhibits, Financial Statement Schedules. |
(a) | The following documents are filed as part of this report: |
1. | Financial Statements: | ||
• | Report of Independent Registered Public Accounting Firm; | ||
• | Consolidated Statements of Income for each of the three years ended December 31, 2010, 2009, and 2008; | ||
• | Consolidated Balance Sheets at December 31, 2010 and December 31, 2009; | ||
• | Consolidated Statements of Cash Flows for each of the three years ended December 31, 2010, 2009, and 2008; | ||
• | Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, 2010, 2009, and 2008; and | ||
• | Notes to the Consolidated Financial Statements. | ||
2. | Financial Statement Schedules: | ||
• | Report of Independent Registered Public Accounting Firm; | ||
• | Schedule I — Parent Company Condensed Financial Statements; and | ||
• | Schedule II — Valuation and Qualifying Accounts. | ||
All other schedules are omitted, because they are not required, are inapplicable, or the information is otherwise shown in the financial statements or notes thereto. |
3. | Exhibits |
• Exhibit 1.1 | Underwriting Agreement entered into by Chesapeake Utilities Corporation and Robert W. Baird & Co. Incorporated and A.G. Edwards & Sons, Inc., on November 15, 2006 relating to the sale and issuance of 600,300 shares of Chesapeake’s common stock, is incorporated herein by reference to Exhibit 1.1 of our Current Report on Form 8-K, filed November 16, 2006, File No. 001-11590. | |
• Exhibit 2.1 | Agreement and Plan of Merger between Chesapeake Utilities Corporation and Florida Public Utilities Company dated April 17, 2009, is incorporated herein by reference to Exhibit 2.1 of our Current Report on Form 8-K, filed April 20, 2009, File No. 001-11590. | |
• Exhibit 3.1 | Amended and Restated Certificate of Incorporation of Chesapeake Utilities Corporation is incorporated herein by reference to Exhibit 3.1 of our Quarterly Report on Form 10-Q for the period ended June 30, 2010, File No. 001-11590. | |
• Exhibit 3.2 | Amended and Restated Bylaws of Chesapeake Utilities Corporation, effective April 7, 2010, are incorporated herein by reference to Exhibit 3 of the Company’s Current Report on Form 8-K, filed April 13, 2010, File No. 001-11590. | |
• Exhibit 4.1 | Form of Indenture between Chesapeake and Boatmen’s Trust Company, Trustee, with respect to the 8 1/4% Convertible Debentures is incorporated herein by reference to Exhibit 4.2 of our Registration Statement on Form S-2, Reg. No. 33-26582, filed on January 13, 1989. | |
• Exhibit 4.2 | Note Purchase Agreement, entered into by the Company on October 2, 1995, pursuant to which Chesapeake privately placed $10 million of its 6.91% Senior Notes, paid off in 2010, is not being filed herewith, in accordance with Item 601(b)(4)(iii) of Regulation S-K. We hereby agree to furnish a copy of that agreement to the SEC upon request. | |
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• Exhibit 4.3 | Note Purchase Agreement, entered into by Chesapeake on December 15, 1997, pursuant to which Chesapeake privately placed $10 million of its 6.85% Senior Notes due in 2012, is incorporated by reference to Exhibit 4.3 of our Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-11590. | |
• Exhibit 4.4 | Note Purchase Agreement entered into by Chesapeake on December 27, 2000, pursuant to which Chesapeake privately placed $20 million of its 7.83% Senior Notes, due in 2015, is incorporated by reference to Exhibit 4.4 of our Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-11590. | |
• Exhibit 4.5 | Note Agreement entered into by Chesapeake on October 31, 2002, pursuant to which Chesapeake privately placed $30 million of its 6.64% Senior Notes, due in 2017, is incorporated herein by reference to Exhibit 2 of our Current Report on Form 8-K, filed November 6, 2002, File No. 001-11590. | |
• Exhibit 4.6 | Note Agreement entered into by Chesapeake on October 18, 2005, pursuant to which Chesapeake, on October 12, 2006, privately placed $20 million of its 5.5% Senior Notes, due in 2020, with Prudential Investment Management, Inc., is incorporated herein by reference to Exhibit 4.1 of our Annual Report on Form 10-K for the year ended December 31, 2005, File No. 001-11590. | |
• Exhibit 4.7 | Note Agreement entered into by Chesapeake on October 31, 2008, pursuant to which Chesapeake, on October 31, 2008, privately placed $30 million of its 5.93% Senior Notes, due in 2023, with General American Life Insurance Company and New England Life Insurance Company, is incorporated by reference to Exhibit 4.7 of our Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-11590. | |
• Exhibit 4.8 | Form of Indenture of Mortgage and Deed of Trust between Florida Public Utilities Company and the trustee, dated September 1, 1942 for the First Mortgage Bonds, is incorporated herein by reference to Exhibit 7-A of Florida Public Utilities Company’s Registration No. 2-6087. | |
• Exhibit 4.9 | Sixteenth Supplemental Indenture entered into by Chesapeake Utilities Corporation and Florida Public Utilities Company, on December 1, 2009, pursuant to which Chesapeake Utilities Corporation, on December 1, 2009 guaranteed the secured First Mortgage Bonds of Florida Public Utilities Company under the Merger Agreement, is filed herewith. | |
• Exhibit 4.10 | Fifteenth Supplemental Indenture entered into by Florida Public Utilities Company on November 1, 2001, pursuant to which Florida Public Utilities Company, on November 1, 2001, privately placed $14,000,000 of its 4.90% First Mortgage Bonds, is incorporated herein by reference to Exhibit 4(c) of Florida Public Utilities Company’s Annual Report on Form 10-K for the year ended December 31, 2001, File No. 001-10608. | |
• Exhibit 4.11 | Fourteenth Supplemental Indenture entered into by Florida Public Utilities Company on September 1, 2001, pursuant to which Florida Public Utilities Company, on September 1, 2001, privately placed $15,000,000 of its 6.85% First Mortgage Bonds, is incorporated herein by reference to Exhibit 4(b) of Florida Public Utilities Company’s Annual Report on Form 10-K for the year ended December 31, 2001, File No. 001-10608. | |
• Exhibit 4.12 | Thirteenth Supplemental Indenture entered into by Florida Public Utilities Company on June 1, 1992, pursuant to which Florida Public Utilities, on May 1, 1992, privately placed $8,000,000 of its 9.08% First Mortgage Bonds, is incorporated herein by reference to Exhibit 4 to Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended June 30, 1992. | |
• Exhibit 4.13 | Twelfth Supplemental Indenture entered into by Florida Public Utilities on May 1, 1988, pursuant to which Florida Public Utilities Company, on May 1, 1988, privately placed $10,000,000 and $5,000,000 of its 9.57% First Mortgage Bonds and 10.03% First Mortgage Bonds, respectively, are incorporated herein by reference to Exhibit 4 to Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended June 30, 1988. |
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• Exhibit 10.1* | Chesapeake Utilities Corporation Cash Bonus Incentive Plan, dated January 1, 2005, is incorporated herein by reference to Exhibit 10.3 of our Annual Report on Form 10-K for the year ended December 31, 2004, File No. 001-11590. | |
• Exhibit 10.2* | Chesapeake Utilities Corporation Directors Stock Compensation Plan, adopted in 2005, is incorporated herein by reference to our Proxy Statement dated March 28, 2005, in connection with our Annual Meeting held on May 5, 2005, File No. 001-11590. | |
• Exhibit 10.3* | Chesapeake Utilities Corporation Employee Stock Award Plan, adopted in 2005, is incorporated herein by reference to our Proxy Statement dated March 28, 2005, in connection with our Annual Meeting held on May 5, 2005, File No. 001-11590. | |
• Exhibit 10.4* | Chesapeake Utilities Corporation Performance Incentive Plan, adopted in 2005, is incorporated herein by reference to our Proxy Statement dated March 28, 2005, in connection with our Annual Meeting held on May 5, 2005, File No. 001-11590. | |
• Exhibit 10.5* | Chesapeake Utilities Corporation Deferred Compensation Plan, amended and restated as of January 1, 2009, is incorporated herein by reference to Exhibit 10.5 of our Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-11590. | |
• Exhibit 10.6 | First Amendment to the Chesapeake Utilities Corporation Deferred Compensation Plan, dated December 28, 2010, is filed herewith. | |
• Exhibit 10.7* | Executive Employment Agreement dated December 31, 2009, by and between Chesapeake Utilities Corporation and John R. Schimkaitis, is incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed January 7, 2010, File No. 001-11590. | |
• Exhibit 10.8* | Consulting Agreement dated January 3, 2011, by and between Chesapeake Utilities Corporation and John R. Schimkaitis, is filed herewith. | |
• Exhibit 10.9* | Executive Employment Agreement dated January 14, 2011, by and between Chesapeake Utilities Corporation and Michael P. McMasters, is incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K, filed January 21, 2011, File No. 001-11590. | |
• Exhibit 10.10* | Executive Employment Agreement dated December 31, 2009, by and between Chesapeake Utilities Corporation and Stephen C. Thompson, is incorporated herein by reference to Exhibit 10.3 of our Current Report on Form 8-K, filed January 7, 2010, File No. 001-11590. | |
• Exhibit 10.11* | Executive Employment Agreement dated December 31, 2009, by and between Chesapeake Utilities Corporation and Beth W. Cooper, is incorporated herein by reference to Exhibit 10.4 of our Current Report on Form 8-K, filed January 7, 2010, File No. 001-11590. | |
• Exhibit 10.12* | Executive Employment Agreement dated December 31, 2009, by and between Chesapeake Utilities Corporation and Joseph Cummiskey, is incorporated herein by reference to Exhibit 10.5 of our Current Report on Form 8-K, filed January 7, 2010, File No. 001-11590. | |
• Exhibit 10.13* | Executive Employment Agreement dated March 3, 2011, by and between Chesapeake Utilities Corporation and Elaine B. Bittner, is filed herewith. | |
• Exhibit 10.14* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2009, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and John R. Schimkaitis, is incorporated herein by reference to Exhibit 10.11 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. |
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• Exhibit 10.15* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2010, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and John R. Schimkaitis, is incorporated herein by reference to Exhibit 10.12 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.16* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2009, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Michael P. McMasters, is incorporated herein by reference to Exhibit 10.13 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.17* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2010, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Michael P. McMasters, is incorporated herein by reference to Exhibit 10.14 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.18* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2009, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Stephen C. Thompson, is incorporated herein by reference to Exhibit 10.15 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.19* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2010, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Stephen C. Thompson, is incorporated herein by reference to Exhibit 10.16 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.20* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2009, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Beth W. Cooper, is incorporated herein by reference to Exhibit 10.17 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.21* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2010, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Beth W. Cooper, is incorporated herein by reference to Exhibit 10.18 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.22* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2009, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and S. Robert Zola, is incorporated herein by reference to Exhibit 10.19 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.23* | Performance Share Agreement dated January 23, 2008 for the period 2008 to 2010, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and S. Robert Zola, is incorporated herein by reference to Exhibit 10.20 of our Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-11590. | |
• Exhibit 10.24* | Form of Performance Share Agreement effective January 7, 2009 for the period 2009 to 2011, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and each of John R. Schimkaitis, Michael P. McMasters, Beth W. Cooper and Stephen C. Thompson, is incorporated herein by reference to Exhibit 10.26 on Form 10-K for the year ended December 31, 2008, File No. 001-11590. |
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• Exhibit 10.25* | Form of Performance Share Agreement effective January 6, 2010 for the period 2010 to 2012, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and each of John R. Schimkaitis, Michael P. McMasters, Beth W. Cooper, Stephen C. Thompson, and Joseph Cummiskey is incorporated herein by reference to Exhibit 10.24 on Form 10-K for the year ended December 31, 2009, File No. 001-11590 | |
• Exhibit 10.26* | Performance Share Agreement dated January 20, 2010 for the period 2010 to 2011, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and Joseph Cummiskey is incorporated herein by reference to Exhibit 10.24 on Form 10-K for the year ended December 31, 2009, File No. 001-11590. | |
• Exhibit 10.27* | Form of Performance Share Agreement effective January 14, 2011 for the period 2011 to 2013, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and each of Michael P. McMasters, Beth W. Cooper, Stephen C. Thompson, Joseph Cummiskey, and Elaine B. Bittner, is incorporated herein by reference to Exhibit 10.2 of our Current Report on Form 8-K, filed January 21, 2011, File No. 001-11590. | |
• Exhibit 10.28* | Form of Performance Share Agreement effective January 14, 2011 for the period 2011 to 2012, pursuant to Chesapeake Utilities Corporation Performance Incentive Plan by and between Chesapeake Utilities Corporation and each of Michael P. McMasters and Elaine B. Bittner, is filed herewith. | |
• Exhibit 10.29* | Chesapeake Utilities Corporation Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2009, is incorporated herein by reference to Exhibit 10.27 of our Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-11590. | |
• Exhibit 10.30* | First Amendment to the Chesapeake Utilities Corporation Supplemental Executive Retirement Plan as amended and restated effective January 1, 2009, is filed herewith. | |
• Exhibit 10.31* | Chesapeake Utilities Corporation Supplemental Executive Retirement Savings Plan, as amended and restated effective January 1, 2009, is incorporated herein by reference to Exhibit 10.28 of our Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-11590. | |
• Exhibit 10.32* | First Amendment to the Chesapeake Utilities Corporation Supplemental Executive Retirement Savings Plan, dated October 28, 2010, is incorporated herein by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the period ended September 30, 2010, File No. 001-11590. | |
• Exhibit 10.33 | Amended and Restated Electric Service Contract between Florida Public Utilities Company and JEA dated November 6, 2008, is incorporated herein by reference to Exhibit 10.1 of Florida Public Utilities Company’s Current Report on Form 8-K, filed on November 6, 2008, File No. 001-10908. | |
• Exhibit 10.34 | Networking Operating Agreement between Florida Public Utilities Company and Southern Company Services, Inc. dated December 27, 2007 and amended on June 3, 2008, is incorporated herein by reference to Exhibit 10.3 of Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2008, File No. 001-10608. | |
• Exhibit 10.35 | Network Integration Transmission Service Agreement between Florida Public Utilities Company and Southern Company Services, Inc. dated December 27, 2007 and amended on June 3, 2008, is incorporated herein by reference to Exhibit 10.4 of Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2008, File No. 001-10608. |
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• Exhibit 10.36 | Form of Service Agreement for Firm Transportation Service between Florida Public Utilities Company and Florida Gas Transmission Company, LLC dated November 1, 2007 for the period November 2007 to February 2016 (Contract No. 107033), is incorporated herein by reference to Exhibit 10.1 of Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, File No. 001-10608. | |
• Exhibit 10.37 | Form of Service Agreement for Firm Transportation Service between Florida Public Utilities Company and Florida Gas Transmission Company, LLC dated November 1, 2007 for the period November 2007 to March 2022 (Contract No. 107034), is incorporated herein by reference to Exhibit 10.2 of Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, File No. 001-10608. | |
• Exhibit 10.38 | Form of Service Agreement for Firm Transportation Service between Florida Public Utilities Company and Florida Gas Transmission Company, LLC dated November 1, 2007 for the period November 2007 to February 2022 (Contract No. 107035), is incorporated herein by reference to Exhibit 10.3 of Florida Public Utilities Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007, File No. 001-10608. | |
• Exhibit 10.39 | Term Note Agreement entered into by Chesapeake Utilities Corporation on March 16, 2010, pursuant to the $29 million credit facility with PNC Bank, N.A., is incorporated herein by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the period ended March 31, 2010, File No. 001-11590. | |
• Exhibit 10.40 | Precedent Agreement between Chesapeake Utilities Corporation and Texas Eastern Transmission LP, dated April 8, 2010 is incorporated herein by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the period ended March 31, 2010, File No. 001-11590. | |
• Exhibit 10.41 | Form of Franchise Agreement between Florida Public Utilities Company and the city of Marianna, effective February 1, 2010, is filed herewith. | |
• Exhibit 10.42 | Form of Service Agreement for Generation Services entered into by Florida Public Utilities Company and Gulf Power Company, dated December 28, 2006, effective January 1, 2008 is hereby incorporated by reference as Exhibit 10(s) on Florida Public Utilities Company’s Annual Report on Form 10-K for the year ended December 31, 2006, file No. 001-10608. | |
• Exhibit 10.43 | Amendment to Form of Service Agreement for Generation Services entered into by Florida Public Utilities Company and Gulf Power Company, effective January 25, 2011, is filed herewith. | |
• Exhibit 12 | Computation of Ratio of Earning to Fixed Charges is filed herewith. | |
• Exhibit 14.1 | Code of Ethics for Financial Officers is filed herewith. | |
• Exhibit 14.2 | Business Code of Ethics and Conduct is filed herewith. | |
• Exhibit 21 | Subsidiaries of the Registrant is filed herewith. | |
• Exhibit 23.1 | Consent of Independent Registered Public Accounting Firm is filed herewith. | |
• Exhibit 31.1 | Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to Exchange Act Rule 13a-14(a) and 15d — 14(a), dated March 8, 2011, is filed herewith. | |
• Exhibit 31.2 | Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to Exchange Act Rule 13a-14(a) and 15d — 14(a), dated March 8, 2011, is filed herewith. | |
• Exhibit 32.1 | Certificate of Chief Executive Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350, dated March 8, 2011, is filed herewith. | |
• Exhibit 32.2 | Certificate of Chief Financial Officer of Chesapeake Utilities Corporation pursuant to 18 U.S.C. Section 1350, dated March 8, 2011, is filed herewith. |
* | Management contract or compensatory plan or agreement. |
Chesapeake Utilities Corporation 2010 Form 10-K Page 123
Table of Contents
Chesapeake Utilities Corporation | ||||
By: | /s/ Michael P. Mcmasters | |||
Michael P. McMasters, | ||||
President and Chief Executive Officer Date: March 8, 2011 |
/s/ Ralph J. Adkins | /s/ Michael P. McMasters | |||
Chairman of the Board and Director | President, Chief Executive Officer and Director | |||
Date: March 2, 2011 | Date: March 8, 2011 | |||
/s/ Beth W. Cooper | /s/ Eugene H. Bayard | |||
and Chief Financial Officer | Date: March 2, 2011 | |||
(Principal Financial and Accounting Officer) | ||||
Date: March 8, 2011 | ||||
/s/ Richard Bernstein | /s/ Thomas J. Bresnan | |||
Date: March 2, 2011 | Date: March 7, 2011 | |||
/s/ Thomas P. Hill, Jr. | /s/ Dennis S, Hudson, III | |||
Date: March 2, 2011 | Date: March 2, 2011 | |||
/s/ Paul L. Maddock, Jr. | /s/ J. Peter Martin | |||
Date: March 2, 2011 | Date: March 2, 2011 | |||
/s/ Joseph E. Moore, Esq | /s/ Calvert A. Morgan, Jr | |||
Date: March 2, 2011 | Date: March 2, 2011 | |||
/s/ Dianna F. Morgan | /s/ John Schimkaitis | |||
Date: March 2, 2011 | Vice Chairman of the Board and Director Date: March 2, 2011 |
Chesapeake Utilities Corporation 2010 Form 10-K Page 124
Table of Contents
Stockholders of Chesapeake Utilities Corporation
/s/ ParenteBeard LLC | ||
Malvern, Pennsylvania | ||
March 8, 2011 |
Table of Contents
Schedule I
Parent Company Condensed Financial Statements
Chesapeake Utilities Corporation (Parent)
Condensed Balance Sheets
December 31, | December 31, | |||||||
Assets | 2010 | 2009 | ||||||
(in thousands) | ||||||||
Total property, plant and equipment | $ | 202,807 | $ | 191,440 | ||||
Less: Accumulated depreciation and amortization | (49,223 | ) | (46,297 | ) | ||||
Plus: Construction work in progress | 1,492 | 1,338 | ||||||
Net property, plant and equipment | 155,076 | 146,481 | ||||||
Investments, at fair value | 2,368 | 1,959 | ||||||
Investments in subsidiaries | 179,580 | 160,150 | ||||||
Current Assets | ||||||||
Cash and cash equivalents | 4,229 | 973 | ||||||
Accounts receivable (less allowance for uncollectible accounts of $432 and $458, respectively) | 11,623 | 9,356 | ||||||
Accrued revenue | 6,458 | 4,936 | ||||||
Accounts receivable from affiliates | 74,663 | 56,587 | ||||||
Propane inventory, at average cost | 635 | 624 | ||||||
Other inventory, at average cost | 970 | 971 | ||||||
Regulatory assets | 51 | 1,205 | ||||||
Storage gas prepayments | 5,084 | 6,144 | ||||||
Income taxes receivable | 4,003 | 822 | ||||||
Deferred income taxes | 369 | 1,909 | ||||||
Prepaid expenses | 2,310 | 3,047 | ||||||
Other current assets | 176 | 79 | ||||||
Total current assets | 110,571 | 86,653 | ||||||
Deferred Charges and Other Assets | ||||||||
Long-term receivables | 133 | 331 | ||||||
Regulatory assets | 2,820 | 3,610 | ||||||
Other deferred charges | 603 | 479 | ||||||
Total deferred charges and other assets | 3,556 | 4,420 | ||||||
Total Assets | $ | 451,151 | $ | 399,663 | ||||
Table of Contents
Schedule I
Parent Company Condensed Financial Statements
Chesapeake Utilities Corporation (Parent)
Condensed Balance Sheets
December 31, | December 31, | |||||||
Capitalization and Liabilities | 2010 | 2009 | ||||||
(in thousands) | ||||||||
Capitalization | ||||||||
Stockholders’ equity | ||||||||
Common stock, par value $0.4867 per share (authorized 25,000,000 and 12,000,000 shares, respectively) | $ | 4,635 | $ | 4,572 | ||||
Additional paid-in capital | 148,159 | 144,502 | ||||||
Retained earnings | 76,805 | 63,231 | ||||||
Accumulated other comprehensive loss | (3,134 | ) | (2,865 | ) | ||||
Deferred compensation obligation | 777 | 739 | ||||||
Treasury stock | (777 | ) | (739 | ) | ||||
Total stockholders’ equity | 226,465 | 209,440 | ||||||
Long-term debt, net of current maturities | 71,682 | 79,611 | ||||||
Total capitalization | 298,147 | 289,051 | ||||||
Current Liabilities | ||||||||
Current portion of long-term debt | 7,727 | 6,636 | ||||||
Short-term borrowing | 63,958 | 30,023 | ||||||
Accounts payable | 10,401 | 9,157 | ||||||
Customer deposits and refunds | 7,619 | 4,410 | ||||||
Accrued interest | 1,015 | 1,003 | ||||||
Dividends payable | 3,143 | 2,959 | ||||||
Accrued compensation | 3,377 | 2,450 | ||||||
Regulatory liabilities | 2,432 | 5,934 | ||||||
Other accrued liabilities | 2,635 | 1,647 | ||||||
Total current liabilities | 102,307 | 64,219 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred income taxes | 20,999 | 16,494 | ||||||
Deferred investment tax credits | 122 | 157 | ||||||
Regulatory liabilities | 709 | 695 | ||||||
Environmental liabilities | 358 | 531 | ||||||
Other pension and benefit costs | 5,045 | 5,674 | ||||||
Accrued asset removal cost — Regulatory liability | 18,805 | 18,248 | ||||||
Other liabilities | 4,659 | 4,594 | ||||||
Total deferred credits and other liabilities | 50,697 | 46,393 | ||||||
Other commitments and contingencies | ||||||||
Total Capitalization and Liabilities | $ | 451,151 | $ | 399,663 | ||||
Table of Contents
Schedule I
Parent Company Condensed Financial Statements
Chesapeake Utilities Corporation (Parent)
Condensed Statements of Income
For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Operating Revenues | $ | 95,764 | $ | 101,577 | $ | 103,733 | ||||||
Operating Expenses | ||||||||||||
Cost of sales | 52,295 | 62,339 | 65,446 | |||||||||
Operations | 19,919 | 18,487 | 16,039 | |||||||||
Transaction-related costs | 660 | 1,478 | 1,153 | |||||||||
Maintenance | 1,165 | 1,535 | 1,303 | |||||||||
Depreciation and amortization | 4,365 | 4,194 | 3,918 | |||||||||
Other taxes | 3,788 | 3,564 | 3,380 | |||||||||
Total operating expenses | 82,192 | 91,597 | 91,239 | |||||||||
Operating Income | 13,572 | 9,980 | 12,494 | |||||||||
Income from equity investments | 19,430 | 12,042 | 7,781 | |||||||||
Other loss, net of other expenses | (30 | ) | (30 | ) | (106 | ) | ||||||
Interest charges | 2,837 | 3,066 | 3,026 | |||||||||
Income Before Income Taxes | 30,135 | 18,926 | 17,143 | |||||||||
Income taxes | 4,079 | 3,029 | 3,536 | |||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Table of Contents
Schedule I
Parent Company Condensed financial statements
Chesapeake Utilities Corporation (Parent)
Condensed Statement of Cash Flows
For the Years Ended December 31, | 2010 | 2009 | 2008 | |||||||||
(in thousands) | ||||||||||||
Operating Activities | ||||||||||||
Net Income | $ | 26,056 | $ | 15,897 | $ | 13,607 | ||||||
Adjustments to reconcile net income to net operating cash: | ||||||||||||
Equity earnings in subsidiaries | (19,382 | ) | (12,042 | ) | (7,781 | ) | ||||||
Depreciation and amortization | 4,366 | 4,190 | 3,918 | |||||||||
Depreciation and accretion included in other costs | 1,878 | 1,773 | 1,389 | |||||||||
Deferred income taxes, net | 6,901 | 2,821 | 5,147 | |||||||||
Unrealized (gain) loss on investments | (113 | ) | (212 | ) | 509 | |||||||
Employee benefits and compensation | (169 | ) | 1,217 | 152 | ||||||||
Share based compensation | 1,155 | 1,306 | 820 | |||||||||
Other, net | (46 | ) | 8 | 11 | ||||||||
Changes in assets and liabilities: | ||||||||||||
Purchase of investments | (297 | ) | (146 | ) | (201 | ) | ||||||
Accounts receivable and accrued revenue | (3,814 | ) | (16,770 | ) | (3,016 | ) | ||||||
Propane inventory, storage gas and other inventory | 1,050 | 3,383 | (3,854 | ) | ||||||||
Regulatory assets | 1,716 | (1,825 | ) | 606 | ||||||||
Prepaid expenses and other current assets | 653 | (1,050 | ) | (516 | ) | |||||||
Other deferred charges | (180 | ) | (72 | ) | (8 | ) | ||||||
Long-term receivables | 198 | 181 | 199 | |||||||||
Accounts payable and other accrued liabilities | 1,636 | 9,832 | 3,323 | |||||||||
Income taxes receivable | (3,858 | ) | 2,791 | (3,113 | ) | |||||||
Accrued interest | 12 | (20 | ) | 158 | ||||||||
Customer deposits and refunds | 3,208 | (1,147 | ) | 34 | ||||||||
Accrued compensation | 823 | 352 | 377 | |||||||||
Regulatory liabilities | (3,488 | ) | 3,603 | (2,379 | ) | |||||||
Other liabilities | 64 | 886 | (23 | ) | ||||||||
Net cash provided by operating activities | 18,369 | 14,956 | 9,359 | |||||||||
Investing Activities | ||||||||||||
Property, plant and equipment expenditures | (13,969 | ) | (12,615 | ) | (16,328 | ) | ||||||
Proceeds from investments | — | 1,000 | 500 | |||||||||
Cash acquired in the merger, net of cash paid | — | (16 | ) | — | ||||||||
Environmental expenditures | 54 | (86 | ) | (480 | ) | |||||||
Net cash used in investing activities | (13,915 | ) | (11,717 | ) | (16,308 | ) | ||||||
Financing Activities | ||||||||||||
Change in receivable/payable with affiliates | (18,051 | ) | 13,379 | 4,302 | ||||||||
Common stock dividends | (11,013 | ) | (7,957 | ) | (7,810 | ) | ||||||
Issuance of stock for Dividend Reinvestment Plan | 568 | 392 | (118 | ) | ||||||||
Change in cash overdrafts due to outstanding checks | 3,256 | 835 | (684 | ) | ||||||||
Net borrowing (repayment) under line of credit agreements | 1,579 | (3,812 | ) | (11,980 | ) | |||||||
Other short-term borrowing | 29,100 | — | — | |||||||||
Proceeds from issuance of long-term debt | — | — | 29,961 | |||||||||
Repayment of long-term debt | (6,637 | ) | (6,637 | ) | (7,637 | ) | ||||||
Net cash provided by (used in) financing activities | (1,198 | ) | (3,800 | ) | 6,034 | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 3,256 | (561 | ) | (915 | ) | |||||||
Cash and Cash Equivalents — Beginning of Period | 973 | 1,534 | 2,449 | |||||||||
Cash and Cash Equivalents — End of Period | $ | 4,229 | $ | 973 | $ | 1,534 | ||||||
Table of Contents
Schedule I
Parent Company Condensed Financial Statements
Table of Contents
Schedule II
Valuation and Qualifying Accounts
Balance at | Additions | |||||||||||||||||||
Beginning of | Charged to | Other | Balance at End | |||||||||||||||||
For the Year Ended December 31, | Year | Income | Accounts(1) | Deductions(2) | of Year | |||||||||||||||
Reserve Deducted From Related Assets | ||||||||||||||||||||
Reserve for Uncollectible Accounts | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
2010 | $ | 1,609 | $ | 1,129 | $ | 181 | $ | (1,725 | ) | $ | 1,194 | |||||||||
2009 | $ | 1,159 | $ | 1,138 | $ | 616 | $ | (1,304 | ) | $ | 1,609 | |||||||||
2008 | $ | 952 | $ | 1,186 | $ | 241 | $ | (1,220 | ) | $ | 1,159 | |||||||||
(1) | Recoveries. | |
(2) | Uncollectible accounts charged off. |