- Net income of $3.2 million, or $0.33 per share for the third quarter of 2012, an increase of $822,000, or $0.08 per share, compared to the same quarter in 2011
- $4.0 million increase in gross margin, led by strong growth in natural gas transmission and distribution operations, higher margins from propane distribution and wholesale marketing activities and increased revenues from the advanced information services business
Dover, Delaware — Chesapeake Utilities Corporation (NYSE: CPK) today announced financial results for the third quarter of 2012. The Company’s net income for the quarter ended September 30, 2012 was $3.2 million, or $0.33 per share. This represents an increase of $822,000, or $0.08 per share, compared to the same quarter in 2011, and quarter-over-quarter increases of 34 percent and 32 percent for net income and earnings per share, respectively.
For the nine months ended September 30, 2012, the Company reported net income of $19.0 million, or $1.97 per share. This represents a decrease of $658,000 in net income, or $0.07 per share, compared to the same period in 2011. Warmer temperatures in 2012, primarily during the first three months of the year, resulted in lower net income of $2.4 million, or $0.25 per share, compared to 2011.
“We are pleased to announce strong third quarter results, representing a 32-percent increase in quarterly earnings per share,” stated Michael P. McMasters, President and Chief Executive Officer of Chesapeake Utilities Corporation. “These quarterly results demonstrate our employees’ continued success in identifying opportunities in all of our businesses and transforming them into growth for the Company and value to our customers and shareholders. Our latest effort to expand natural gas service on the Delmarva Peninsula includes the proposed increase in our natural gas service offerings in the southern part of Delaware and the pending purchase of the propane distribution assets of The Eastern Shore Gas Company and its affiliates (collectively, “ESG”). In our application for the approval of the ESG purchase filed in August with the Maryland Public Service Commission (“PSC”), we also requested approval of a new tariff governing service to all customers in Worcester County, Maryland. Our proposed service offerings in Maryland are aimed at providing energy savings to Worcester County customers, including approximately 11,000 underground propane gas distribution system customers currently served by ESG, regardless of when and if they are actually converted from propane to natural gas service. Also in August, the Florida PSC approved our natural gas infrastructure replacement program. This program provides real-time recovery and return on our investment to replace any aging natural gas infrastructure and to ensure continued safe delivery of natural gas in the future. Our unregulated businesses including BravePoint®, Inc. (“BravePoint”) continue to identify innovative solutions to provide high-quality service to existing and potential customers. Combined with the major expansion initiatives already underway on the Delmarva Peninsula and in Florida, these opportunities provide a positive outlook for our future performance.”
The Company’s operating income for the third quarter of 2012 was $7.6 million, an increase of $2.0 million, compared to the same quarter in 2011. Gross margin increased by $4.0 million, or 12 percent, in the third quarter of 2012, compared to the same quarter in 2011. All of the Company’s segments contributed to this increase. The regulated energy segment generated $2.3 million of this increase, due primarily to growth in the Company’s natural gas transmission and distribution operations. This included $1.0 million in additional gross margin generated by new natural gas transmission and distribution services associated with expansion initiatives in Sussex County, Delaware; Worcester County, Maryland; and Nassau County, Florida. Other customer growth in our natural gas transmission and distribution operations generated $718,000 in additional gross margin. The unregulated energy segment generated $1.1 million of the gross margin increase, due primarily to higher margins from the Florida propane distribution operation and Xeron, Inc. (“Xeron”), the Company’s propane wholesale marketing subsidiary. BravePoint, the Company’s advanced information services subsidiary, generated $594,000 in additional gross margin, $188,000 of which represents increased margin from ProfitZoom™ and Application Evolution™ sales and related services. The remaining increase from BravePoint was generated from higher consulting revenues and other product sales in its core business.
Other operating expenses for the third quarter of 2012 were $30.9 million, an increase of $2.0 million, compared to the same quarter in 2011. Additional costs of $208,000 associated with BravePoint’s growth and $397,000 related to acquisition-related efforts and increased capacity for future growth increased other operating expenses during the quarter. Amortization expense related to the recovery of the acquisition adjustment and merger-related costs associated with the acquisition of Florida Public Utilities Company (“FPU”) increased expenses by $589,000. Higher depreciation and asset removal costs associated with capital investments also added $339,000 in other operating expenses.
The Company’s operating income for the nine months ended September 30, 2012 was $38.1 million, a decrease of $117,000, or 0.3 percent, compared to the same period in 2011. Gross margin increased by $3.4 million, or three percent, for the nine months ended September 30, 2012, compared to the same period in 2011, due largely to $4.6 million in additional gross margin generated by our natural gas transmission and distribution operations from the recent expansion initiatives, new customer growth and additional transmission services provided to an existing industrial customer. Higher retail margins per gallon on propane sales increased gross margin by $922,000 and Eastern Shore Natural Gas Company, Inc. (“Eastern Shore”) generated additional gross margin of $729,000 as a result of new rates implemented in 2011, pursuant to its rate case settlement. BravePoint also generated $1.9 million in additional gross margin, $464,000 of which represents increased margin from ProfitZoom™ and Application Evolution™ sales and related services. The remaining increase from BravePoint was generated from higher consulting revenues and other product sales. These increases more than offset a reduction of: (a) $4.0 million in gross margin from lower customer energy consumption directly attributable to a decrease in heating degree-days of 17 percent and 35 percent on the Delmarva Peninsula and in Florida, respectively; and (b) $575,000 due to the absence of a one-time gain recorded in the first quarter of 2011 related to the proceeds received in an antitrust litigation settlement with a major propane supplier.
Other operating expenses for the nine months ended September 30, 2012 were $91.6 million, an increase of $3.5 million, compared to the same period in 2011. $1.8 million of the increase represented amortization expense related to the recovery of the FPU acquisition adjustment and merger-related costs. BravePoint’s other operating expenses increased by $937,000, due primarily to higher employee-related costs to support increased services. Higher depreciation and asset removal costs associated with capital investments also added $900,000 in other operating expenses.
Matters discussed in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company’s most recent report on Form 10-K, as amended, and 10-Q for further information on the risks and uncertainties related to the Company’s forward-looking statements.
The discussions of the results use the term “gross margin,” a non-Generally Accepted Accounting Principles (“GAAP”) financial measure, which management uses to evaluate the performance of the Company’s business segments. For an explanation of the calculation of “gross margin,” see the footnote to the Financial Summary.
Unless otherwise noted, earnings per share information is presented on a diluted basis.
Chesapeake Utilities Corporation will host a conference call on November 8, 2012, at 10:30 a.m. Eastern Time to discuss the Company’s financial results for the third quarter ended September 30, 2012. To participate in this call, dial 866.821.5457 and reference Chesapeake Utilities Corporation’s 2012 Third Quarter Financial Results Conference Call. To access the replay recording of this call, please visit the Company’s website at https://chpk.com/investors/events-presentations/.
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About Chesapeake Utilities Corporation
Chesapeake Utilities Corporation is a diversified utility company engaged in natural gas distribution, transmission and marketing, electric distribution, propane gas distribution and wholesale marketing, advanced information services and other related services. Information about Chesapeake’s businesses is available at www.chpk.com.
For more information, contact:
Beth W. Cooper
Senior Vice President & Chief Financial Officer