- Net income rose 39 percent to $14.9 million, or $1.54 per share
- Colder temperatures in the first quarter of 2013, compared to the same quarter in 2012, resulted in a $3.2 million quarter-over-quarter increase in gross margin
- Higher retail propane margins per gallon generated $2.1 million in additional gross margin
- Growth from the natural gas businesses generated $1.5 million in additional gross margin
Dover, Delaware — Chesapeake Utilities Corporation (NYSE: CPK) today reported first quarter financial results, including a 39-percent increase in net income to $14.9 million for the first quarter of 2013 from $10.7 million for the same quarter in 2012. The Company’s first quarter earnings per share rose to $1.54 in 2013 from $1.11 in 2012.
“We begin 2013 with strong first quarter financial results, which reflect colder temperatures coupled with additional gross margin generated from natural gas expansions completed in 2012 and sustained propane retail prices from the fourth quarter of 2012,” stated Michael P. McMasters, President and Chief Executive Officer of Chesapeake Utilities Corporation. “We look forward to more growth in 2013, both in our natural gas and propane distribution businesses, resulting from acquisitions and implementing new programs in Delaware and Maryland that facilitate expansion of our services,” Mr. McMasters added. “In February, our Florida propane distribution subsidiary added approximately 3,000 residential and commercial customers as a result of the acquisition of the operating assets of Glades Gas. In February and March, we obtained the necessary approvals from the Federal Energy Regulatory Commission for construction of new facilities to provide additional services to two large natural gas transmission customers, and we expect to complete construction and commence the new services in the fourth quarter of 2013. In April, we reached a settlement regarding our regulatory filing for the purchase of the operating assets of Eastern Shore Gas Company and its affiliates in Maryland. We also made progress towards resolving our regulated filing for our proposed natural gas expansion service offerings in Delaware. Decisions in these cases by the Maryland and Delaware Public Service Commissions, respectively, are expected in mid-2013. These service offerings will support further expansion of our natural gas service to meet the energy needs of residents and businesses in Worcester County, Maryland and southeastern Sussex County, Delaware.”
Operating Results for the Three Months Ended March 31, 2013
The Company’s operating income for the three months ended March 31, 2013 was $26.6 million, an increase of $6.5 million, or 32 percent, compared to the same quarter in 2012. Gross margin increased by $8.4 million, or 17 percent, in the first quarter of 2013, compared to the same quarter in 2012. Approximately $3.2 million of the gross margin increase was the result of colder weather during the first quarter of 2013 on the Delmarva Peninsula and in Florida, compared to the same quarter in 2012. Other operating expenses increased by $1.9 million, or six percent, in the first quarter of 2013, compared to the same quarter in 2012.
Operating income for the regulated energy segment increased by $2.5 million, or 17 percent, to $17.3 million for the three months ended March 31, 2013, compared to the same quarter in 2012. An increase in gross margin of $3.3 million was partially offset by an increase in other operating expenses of $819,000. The significant components of the gross margin increase included:
- $1.5 million due to natural gas growth resulting from: (a) major service expansions initiated in 2012 and January 2013 in Sussex County, Delaware; Worcester and Cecil Counties, Maryland; and Nassau County, Florida; and (b) additional residential, commercial and industrial customer growth on the Delmarva Peninsula and in Florida; and
- $1.2 million as a result of higher consumption by natural gas and electric customers due to colder temperatures.
The increase in other operating expenses is due primarily to $502,000 in higher depreciation expense, asset removal costs and property taxes associated with capital expenditures to support growth and maintain system integrity.
Operating income for the unregulated energy segment increased by $4.2 million, or 82 percent, to $9.4 million for the three months ended March 31, 2013, compared to the same quarter in 2012. An increase in gross margin of $5.0 million was partially offset by an increase in other operating expenses of $806,000. The significant components of the gross margin increase included:
- $2.1 million due to colder weather causing higher consumption by propane customers, and $391,000 in higher propane sales volume due to the timing of deliveries to bulk-delivery customers;
- $2.1 million as a result of strong retail propane margins per gallon through the first quarter of 2013, as the decline in propane costs in late 2012 and early 2013 outpaced the slight decline in retail prices driven by competition and other market conditions; and
- $220,000 in additional gross margin generated from the acquisition of the operating assets of Glades Gas Co., Inc. (“Glades”) in February 2013, which added approximately 3,000 residential and commercial propane distribution customers in Florida.
The increase in other operating expenses is due primarily to a higher accrual for incentive bonuses as a result of the first quarter’s performance and increased costs related to propane tank and other maintenance activities.
The “other” segment, which consists primarily of BravePoint®, Inc. (“BravePoint”), the Company’s advanced information services subsidiary, reported an operating loss of $125,000 for the three months ended March 31, 2013, compared to operating income of $121,000 in the same quarter in 2012. Gross margin was $1.9 million for both the first quarters of 2013 and 2012. Other operating expenses increased by $273,000 to $2.0 million in the first quarter of 2013 due primarily to higher payroll and related costs associated with BravePoint.
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 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 May 3, 2013, at 10:30 a.m. Eastern Time to discuss the Company’s financial results for the quarter ended March 31, 2013. To participate in this call, dial 866.821.5457 and reference Chesapeake Utilities Corporation’s First Quarter 2013 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/.
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