UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-11590 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securitie ...

| --- | --- | --- | --- | |--------------------------|--------------------|-------|-------| | | | | | | | | | | | | First Quarter 2022 | | | | Earnings Conference Call | | | | | | MAY 4, 2022 | | | Today's Presenters | --- | --- | --- | --- | --- | --- | |-------|----------------------------------------------------------------------------------------------------------------------------|--------------------------------------|-------|-------|-------| | | | | | | | | | Jeff Householder | | | | | | | President, ...

Financial Data and Key Metrics Changes - The company reported earnings of $2.08 per share for Q1 2022, an increase of 6.1% compared to Q1 2021 [10][27] - Adjusted gross margin increased by $8.8 million or 7.5% during the quarter [30] - Net income for the quarter was $36.9 million, reflecting a 7.2% increase [30] Business Line Data and Key Metrics Changes - The Regulated Energy segment saw adjusted gross margin up 5.5% year-over-year, driven by pipeline expansions and organic growth [34] - The Unregulated Energy segment achieved an 11.6% increase in adjusted gross margin, primarily due to contributions from diversified energy and increased margins in propane distribution [36] Market Data and Key Metrics Changes - Delmarva and Florida service territories generated residential customer growth of 5.3% and 4.0%, respectively [19] - The company continues to monitor market factors impacting new home builds, with no current slowdown observed in Delmarva or Florida [20] Company Strategy and Development Direction - The company plans to deploy $175 million to $200 million in new capital investment in 2022, focusing on pipeline expansions and sustainable energy projects [11][62] - The North Ocean City Connector Pipeline project was announced to support growth and reliability in the region [15][45] Management's Comments on Operating Environment and Future Outlook - Management acknowledged inflationary pressures and supply chain challenges but expressed confidence in long-term growth and capital guidance [9][12] - The company remains committed to its five growth platforms and sees a bright future despite challenges such as rising rates and inflation [63] Other Important Information - The Board announced an 11.5% increase in the annualized dividend per share, aligning with earnings growth [17][60] - The company is actively pursuing renewable energy projects and enhancing its ESG disclosures [25][51] Q&A Session Summary Question: Details on the North Ocean City Connector project - Management confirmed the project supports growth and increases system reliability, contributing an estimated $400,000 in gross margin in the first year [66][67][68] Question: Customer growth rates in Florida - Management indicated that customer growth in Florida is expected to improve over the long term, with ongoing developments in the area [72][73] Question: Capital expenditure guidance - Management stated that the majority of capital investments are focused on natural gas distribution, with ongoing infrastructure programs also contributing [75][78] Question: Impact of inflation on unregulated businesses - Management noted that while inflation presents challenges, there are opportunities for margin growth in the unregulated segment [86][89] Question: Drivers of the Florida base rate filing - Management explained that the filing is driven by the need to consolidate tariffs and recover investments made over the past decade [93][96]

[FORM 10-Q Details](index=1&type=section&id=FORM10-Q_Details) This section provides an overview of the company's quarterly report filing, including its period and SEC classification [Filing Information](index=1&type=section&id=Filing_Information) This section details the company's quarterly report filing status, confirming SEC compliance and its classification as a large accelerated filer - The registrant is filing a Quarterly Report on Form 10-Q for the period ended **March 31, 2022**[2](index=2&type=chunk) - The company has filed all required reports in the preceding 12 months and met filing requirements for the past 90 days[3](index=3&type=chunk) - The registrant is classified as a **Large accelerated filer**[4](index=4&type=chunk) [Glossary of Definitions](index=4&type=section&id=GLOSSARY_OF_DEFINITIONS) This section provides definitions for key terms and acronyms used throughout the financial report [Key Terms and Acronyms](index=4&type=section&id=Key_Terms_and_Acronyms) This section defines financial measures, company subsidiaries, regulatory bodies, and industry-specific terms used in the report - **Adjusted Gross Margin** is a non-GAAP measure, excluding depreciation, amortization, and certain O&M expenses from operating revenues[8](index=8&type=chunk) - Key subsidiaries include **Aspire Energy**, **Eastern Shore Natural Gas Company**, **Florida Public Utilities Company (FPU)**, **Marlin Gas Services**, **Peninsula Pipeline Company**, and **Sharp Energy, Inc**[8](index=8&type=chunk)[9](index=9&type=chunk) - Regulatory bodies include **FASB**, **FERC**, and **PSC**[8](index=8&type=chunk)[9](index=9&type=chunk) [PART I—FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and related disclosures [ITEM 1. FINANCIAL STATEMENTS](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents unaudited condensed consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and equity, with detailed notes [Condensed Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)) This statement provides a summary of the company's revenues, expenses, and net income for the reported periods Condensed Consolidated Statements of Income (Unaudited) | Metric (in thousands) | March 31, 2022 | March 31, 2021 | | :-------------------- | :------------- | :------------- | | Total Operating Revenues | $222,880 | $191,187 | | Total Operating Expenses | $168,015 | $139,590 | | Operating Income | $54,865 | $51,597 | | Net Income | $36,933 | $34,466 | | Basic EPS | $2.09 | $1.97 | | Diluted EPS | $2.08 | $1.96 | - **Net Income increased by $2.467 million (7.16%)** from **$34.466 million** in Q1 2021 to **$36.933 million** in Q1 2022[13](index=13&type=chunk) - **Diluted Earnings Per Share increased by $0.12 (6.12%)** from **$1.96** in Q1 2021 to **$2.08** in Q1 2022[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) This statement presents net income and other comprehensive income components, leading to total comprehensive income Condensed Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in thousands) | March 31, 2022 | March 31, 2021 | | :-------------------- | :------------- | :------------- | | Net Income | $36,933 | $34,466 | | Total Other Comprehensive Income, net of tax | $547 | $227 | | Comprehensive Income | $37,480 | $34,693 | - **Total Other Comprehensive Income, net of tax, more than doubled** from **$227 thousand** in Q1 2021 to **$547 thousand** in Q1 2022, driven by higher unrealized gains on commodity contract cash flow hedges[15](index=15&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (Unaudited) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total Assets | $2,109,629 | $2,114,869 | | Total Stockholders' Equity | $805,512 | $774,130 | | Long-term debt, net of current maturities | $597,878 | $549,903 | | Total Capitalization | $1,403,390 | $1,324,033 | | Total Current Liabilities | $279,713 | $376,433 | - **Total Stockholders' Equity increased by $31.382 million (4.05%)** from December 31, 2021, to March 31, 2022[25](index=25&type=chunk) - **Total Current Liabilities decreased significantly by $96.720 million (25.7%)** from December 31, 2021, to March 31, 2022, mainly due to reduced short-term borrowings[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This statement details the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric (in thousands) | March 31, 2022 | March 31, 2021 | | :-------------------- | :------------- | :------------- | | Net cash provided by operating activities | $69,120 | $80,382 | | Net cash used in investing activities | $(29,935) | $(51,847) | | Net cash used in financing activities | $(38,953) | $(26,459) | | Net Increase in Cash and Cash Equivalents | $232 | $2,076 | - **Net cash provided by operating activities decreased by $11.262 million (14.01%)** year-over-year[29](index=29&type=chunk) - **Net cash used in investing activities decreased by $21.912 million (42.26%)** year-over-year, mainly due to lower property, plant, and equipment expenditures[29](index=29&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) This statement outlines changes in the company's equity accounts, including retained earnings and comprehensive income Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Total Stockholders' Equity | $805,512 | $774,130 | | Retained Earnings | $421,344 | $393,072 | | Accumulated Other Comprehensive Income | $1,850 | $1,303 | - **Retained earnings increased by $28.272 million**, driven by **net income of $36.933 million**, partially offset by **dividends declared of $8.661 million**[32](index=32&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Summary of Accounting Policies](index=13&type=section&id=1.%20Summary%20of%20Accounting%20Policies) This note outlines the basis of financial statement presentation, COVID-19 impact, and recent accounting standards - The financial statements comply with **SEC rules and GAAP**, with certain information condensed for interim periods[41](index=41&type=chunk) - **COVID-19 restrictions have largely lifted**, ending the deferral of pandemic-related costs for regulatory recovery[43](index=43&type=chunk) - **ASU 2020-04 (Reference Rate Reform)** is not expected to materially impact financial position or results[45](index=45&type=chunk) [2. Earnings Per Share](index=14&type=section&id=2.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share for the reported periods Earnings Per Share Calculation | Metric | March 31, 2022 | March 31, 2021 | | :----- | :------------- | :------------- | | Net Income | $36,933 | $34,466 | | Basic EPS | $2.09 | $1.97 | | Diluted EPS | $2.08 | $1.96 | | Weighted average shares outstanding (Basic) | 17,678,060 | 17,485,866 | | Adjusted denominator (Diluted) | 17,761,119 | 17,553,167 | [3. Acquisitions](index=14&type=section&id=3.%20Acquisitions) This note details the December 2021 acquisition of Diversified Energy's propane assets, outlining its strategic benefits and financial impact - **Sharp Energy acquired Diversified Energy's propane assets for approximately $37.5 million**, expanding into North and South Carolina[47](index=47&type=chunk) - The acquisition added approximately **19,000 customers** and is expected to distribute **10.0 million gallons of propane annually**[47](index=47&type=chunk) Diversified Energy Financial Contribution (Q1 2022) | Metric | Amount (in thousands) | | :-------------- | :-------------------- | | Operating Revenue | $10,400 | | Operating Income | $1,500 | [4. Revenue Recognition](index=14&type=section&id=4.%20Revenue%20Recognition) This note explains revenue recognition policies, presenting revenue by major source, contract balances, and remaining performance obligations - Revenue is recognized upon satisfaction of performance obligations, typically delivery or transportation of energy products[49](index=49&type=chunk) Total Operating Revenues by Segment (in thousands) | Segment | March 31, 2022 | March 31, 2021 | | :------ | :------------- | :------------- | | Regulated Energy | $127,891 | $121,197 | | Unregulated Energy | $101,292 | $74,759 | | Other and Eliminations | $(6,303) | $(4,769) | | **Total Operating Revenues** | **$222,880** | **$191,187** | Remaining Performance Obligations (in thousands) | Year | Eastern Shore and Peninsula Pipeline | Natural gas distribution operations | FPU electric distribution | Total | | :--- | :----------------------------------- | :---------------------------------- | :------------------------ | :---- | | 2022 | $35,359 | $5,010 | $489 | $40,858 | | 2023 | $44,475 | $5,681 | $652 | $50,808 | | 2024 | $39,677 | $5,458 | $652 | $45,787 | | 2025 | $33,050 | $4,928 | $275 | $38,253 | | 2026 | $29,467 | $4,745 | $275 | $34,487 | | 2027 | $25,228 | $4,406 | $275 | $29,909 | | 2028 and thereafter | $179,247 | $27,089 | $275 | $206,611 | [5. Rates and Other Regulatory Activities](index=16&type=section&id=5.%20Rates%20and%20Other%20Regulatory%20Activities) This note details regulatory oversight, recent activities, pipeline expansions, infrastructure plans, and COVID-19 cost recovery resolution - The company's operations are regulated by **state PSCs** (Delaware, Maryland, Florida) and **FERC** (Eastern Shore)[58](index=58&type=chunk) - Key regulatory projects include **Ocean City Maryland Reinforcement**, **Elkton Gas' STRIDE plan**, **Peninsula Pipeline's Winter Haven Expansion** and **Beachside Pipeline Extension**, and **Eastern Shore's Southern Expansion**[60](index=60&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - The **total COVID-19 regulatory asset balance was $2.0 million** as of March 31, 2022, with recovery over two years[69](index=69&type=chunk) [6. Environmental Commitments and Contingencies](index=18&type=section&id=6.%20Environmental%20Commitments%20and%20Contingencies) This note addresses environmental liabilities from former MGP sites, detailing investigation, assessment, remediation efforts, and cost recovery mechanisms - The company has environmental liabilities of approximately **$4.9 million** as of March 31, 2022, related to seven former MGP sites[73](index=73&type=chunk) - Regulatory assets for future environmental cost recovery totaled **$1.1 million** as of March 31, 2022[73](index=73&type=chunk) - Remediation is ongoing for MGPs in Winter Haven, Key West, and Seaford, with estimated remaining clean-up costs between **$0.3 million to $0.9 million**[73](index=73&type=chunk) [7. Other Commitments and Contingencies](index=19&type=section&id=7.%20Other%20Commitments%20and%20Contingencies) This note outlines contractual commitments, including energy supply agreements and corporate guarantees for subsidiary obligations - The company has asset management agreements for natural gas transportation and storage, with some capacity released to third parties, creating contingent liabilities[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - FPU's electric supply contracts require maintaining specific creditworthiness ratios, which FPU complied with as of **March 31, 2022**[77](index=77&type=chunk)[79](index=79&type=chunk) - Corporate guarantees for subsidiary obligations totaled approximately **$13.1 million** as of March 31, 2022, with an authorized maximum liability of **$20.0 million**[80](index=80&type=chunk) [8. Segment Information](index=20&type=section&id=8.%20Segment%20Information) This note describes the company's Regulated Energy and Unregulated Energy segments, providing financial information for each - The company operates in two segments: **Regulated Energy** (natural gas/electric distribution and transmission) and **Unregulated Energy** (transmission, generation, propane, CNG distribution)[82](index=82&type=chunk) Segment Operating Revenues and Income (in thousands) | Metric | Regulated Energy (2022) | Unregulated Energy (2022) | Other & Eliminations (2022) | Regulated Energy (2021) | Unregulated Energy (2021) | Other & Eliminations (2021) | | :----- | :---------------------- | :------------------------ | :-------------------------- | :---------------------- | :------------------------ | :-------------------------- | | Operating Revenues, Unaffiliated Customers | $124,058 | $98,822 | - | $120,721 | $70,466 | - | | Operating Income | $34,681 | $20,046 | $138 | $32,637 | $18,983 | $(23) | Identifiable Assets by Segment (in thousands) | Segment | March 31, 2022 | December 31, 2021 | | :------ | :------------- | :---------------- | | Regulated Energy | $1,620,209 | $1,629,191 | | Unregulated Energy | $440,936 | $439,114 | | Other businesses and eliminations | $48,484 | $46,564 | | **Total identifiable assets** | **$2,109,629** | **$2,114,869** | [9. Stockholders' Equity](index=22&type=section&id=9.%20Stockholders'%20Equity) This note details common stock issuances via ATM and DRIP, and breaks down accumulated other comprehensive gain (loss) components - In Q1 2022, the company issued less than **0.1 million shares** at an average price of **$137.45**, generating **$3.2 million** in net proceeds under the DRIP[88](index=88&type=chunk) - **Accumulated other comprehensive income increased from $1.303 million to $1.850 million**, primarily due to **$547 thousand** in net current-period other comprehensive income[91](index=91&type=chunk) Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (in thousands) | Item | March 31, 2022 | March 31, 2021 | | :--- | :------------- | :------------- | | Amortization of defined benefit pension and postretirement plan items (net of tax) | $(18) | $(63) | | Gains on commodity contracts cash flow hedges (net of tax) | $1,969 | $2,205 | | Gains on interest rate swap cash flow hedges (net of tax) | $0 | $3 | | **Total reclassifications for the period** | **$1,951** | **$2,145** | [10. Employee Benefit Plans](index=24&type=section&id=10.%20Employee%20Benefit%20Plans) This note details net periodic benefit costs for pension and post-retirement plans, the Chesapeake Pension Plan termination, and benefit cost recognition - The **Chesapeake Pension Plan was fully terminated in Q4 2021**, with a portion of settlement expense recorded as regulatory assets and **$0.6 million** allocated to Unregulated Energy[97](index=97&type=chunk) Total Recognized in Net Periodic Benefit Cost (in thousands) | Plan | March 31, 2022 | March 31, 2021 | | :--- | :------------- | :------------- | | Chesapeake Pension Plan | $0 | $60 | | FPU Pension Plan | $124 | $155 | | Chesapeake SERP | $7 | $7 | | Chesapeake Postretirement Plan | $(7) | $(11) | | FPU Medical Plan | $0 | $(2) | | **Total** | **$124** | **$209** | - The company expects to contribute approximately **$0.3 million** to the FPU Pension Plan in 2022 and pay **$0.2 million** in cash benefits under the Chesapeake SERP[101](index=101&type=chunk)[102](index=102&type=chunk) [11. Investments](index=25&type=section&id=11.%20Investments) This note summarizes investment balances in Rabbi trusts and equity securities, and the recognition of unrealized gains or losses Investment Balances (in thousands) | Investment Type | March 31, 2022 | December 31, 2021 | | :-------------- | :------------- | :---------------- | | Rabbi trust | $11,534 | $12,069 | | Equity securities | $27 | $26 | | **Total** | **$11,561** | **$12,095** | - A **net unrealized loss of $0.5 million** was recorded in Q1 2022, compared to a **net unrealized gain of $0.4 million** in Q1 2021, related to these investments[103](index=103&type=chunk) [12. Share-Based Compensation](index=25&type=section&id=12.%20Share-Based%20Compensation) This note details share-based compensation expense for directors and key employees, including stock activity and unrecognized costs Share-Based Compensation Expense (in thousands) | Category | March 31, 2022 | March 31, 2021 | | :------- | :------------- | :------------- | | Awards to non-employee directors | $234 | $188 | | Awards to key employees | $1,979 | $1,688 | | **Total compensation expense** | **$2,213** | **$1,876** | - **Total compensation expense increased by $337 thousand (17.96%)** year-over-year[106](index=106&type=chunk) - As of March 31, 2022, approximately **$9.4 million of unrecognized compensation cost** for key employee awards remains, to be recognized through 2024[113](index=113&type=chunk) [13. Derivative Instruments](index=27&type=section&id=13.%20Derivative%20Instruments) This note describes the company's use of derivative contracts to manage commodity price and interest rate risks, including propane swaps and expired interest rate swaps - The company uses derivative contracts to manage risks from **natural gas, electricity, and propane price fluctuations**, and **interest rate risk**[115](index=115&type=chunk) - **Sharp Energy uses propane futures and swap agreements as cash flow hedges** to mitigate wholesale propane price fluctuations, with **$4.3 million** expected to be reclassified to earnings in the next 12 months[116](index=116&type=chunk) - All interest rate swap agreements expired at **December 31, 2021**, with no new derivative contracts for short-term borrowings[117](index=117&type=chunk) [14. Fair Value of Financial Instruments](index=30&type=section&id=14.%20Fair%20Value%20of%20Financial%20Instruments) This note outlines the fair value hierarchy and summarizes fair value measurements for financial assets and liabilities, including investments and derivatives - The fair value hierarchy categorizes inputs into **Level 1** (quoted prices), **Level 2** (observable inputs), and **Level 3** (unobservable inputs)[127](index=127&type=chunk) Fair Value of Financial Assets and Liabilities (in thousands) | Category | March 31, 2022 (Total Fair Value) | December 31, 2021 (Total Fair Value) | | :------- | :-------------------------------- | :----------------------------------- | | Total Assets | $19,077 | $19,171 | | Total Liabilities | $484 | $743 | - Long-term debt had a carrying value of approximately **$618.6 million** and an estimated fair value of **$584.2 million** as of March 31, 2022, calculated using a Level 3 discounted cash flow methodology[130](index=130&type=chunk) [15. Long-Term Debt](index=32&type=section&id=15.%20Long-Term%20Debt) This note details outstanding long-term debt, including senior notes, an equipment security note, and available shelf agreement capacity Total Long-Term Debt (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :----- | :------------- | :---------------- | | Total long-term debt | $617,595 | $567,865 | | Less: current maturities | $(19,717) | $(17,962) | | **Total long-term debt, net of current maturities** | **$597,878** | **$549,903** | - On **March 15, 2022**, the company issued **$50 million of 2.95% Senior Notes** due March 15, 2042, to MetLife, for reducing short-term borrowings and funding capital expenditures[133](index=133&type=chunk) Remaining Borrowing Capacity Under Shelf Agreements (in thousands) | Shelf Agreement | Total Borrowing Capacity | Amount of Debt Issued | Remaining Borrowing Capacity | | :-------------- | :----------------------- | :-------------------- | :--------------------------- | | Prudential | $370,000 | $(220,000) | $150,000 | | MetLife | $150,000 | $(50,000) | $100,000 | | **Total** | **$520,000** | **$(270,000)** | **$250,000** | [16. Short-Term Borrowings](index=33&type=section&id=16.%20Short-Term%20Borrowings) This note details short-term borrowings, including outstanding amounts, interest rates, and the multi-tranche revolving credit facility - **Short-term borrowings decreased from $221.6 million to $140.9 million** with a weighted average interest rate of **1.17%**[137](index=137&type=chunk) - The **$400.0 million Revolver facility** includes a **$200.0 million 364-day tranche** (expires August 2022) and a **$200.0 million five-year tranche** (expires August 2026)[138](index=138&type=chunk)[141](index=141&type=chunk) - **Total available credit under the Revolver was $256.3 million** at March 31, 2022, after accounting for **$5.3 million** in issued letters of credit[141](index=141&type=chunk) [17. Leases](index=33&type=section&id=17.%20Leases) This note describes lease arrangements for assets like office space and equipment, presenting lease costs, right-of-use assets, and future maturities - The company leases **office space, land, equipment, pipeline facilities, and warehouses** to support operations[143](index=143&type=chunk)[144](index=144&type=chunk) Operating Lease Financial Information (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :----- | :------------- | :---------------- | | Operating lease cost (Q1) | $651 | $523 | | Operating lease right-of-use assets | $16,231 | $10,139 | | Total lease liabilities | $16,713 | $10,567 | - The **weighted-average remaining lease term for operating leases was 8.76 years** with a weighted-average discount rate of **3.4%** as of March 31, 2022[147](index=147&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=36&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial condition, operations, and liquidity for Q1 2022, discussing performance drivers, strategic initiatives, and outlook [Safe Harbor for Forward-Looking Statements](index=36&type=section&id=Safe%20Harbor%20for%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including **regulatory changes, market conditions, and operational hazards**[151](index=151&type=chunk) - Key risk factors include **legislative and regulatory initiatives, legal outcomes, climate change impact, project authorization timing, and cybersecurity risks**[151](index=151&type=chunk) [Introduction](index=37&type=section&id=Introduction) This introduction outlines Chesapeake Utilities' business model as a diversified energy delivery company and its growth strategy - **Chesapeake Utilities is a diversified energy delivery company** focused on growing regulated energy earnings and investing in higher-return businesses[154](index=154&type=chunk)[155](index=155&type=chunk) - Growth strategy platforms include **optimizing existing businesses, pipeline expansions, Marlin Gas Services growth, strategic propane acquisitions, and sustainable energy opportunities**[156](index=156&type=chunk) - **Adjusted Gross Margin**, a non-GAAP measure, is used to assess business unit performance and profitability under regulated rates and competitive pricing[159](index=159&type=chunk) [2022 to 2021 Gross Margin (GAAP) Variance – Regulated Energy](index=38&type=section&id=2022%20to%202021%20Gross%20Margin%20(GAAP)%20Variance%20%E2%80%93%20Regulated%20Energy) This section analyzes the GAAP Gross Margin variance for the Regulated Energy segment between Q1 2022 and Q1 2021 - **Gross Margin (GAAP) for the Regulated Energy segment increased by $3.4 million (5.9%) to $61.2 million** in Q1 2022[163](index=163&type=chunk) - The increase was driven by **pipeline expansions (Eastern Shore, Peninsula Pipeline), Guernsey pipeline contributions, natural gas distribution growth, and the Escambia Meter acquisition**[163](index=163&type=chunk) - These gains were partially offset by **higher depreciation, amortization, payroll, and employee-related costs**[163](index=163&type=chunk) [2022 to 2021 Gross Margin (GAAP) Variance – Unregulated Energy](index=38&type=section&id=2022%20to%202021%20Gross%20Margin%20(GAAP)%20Variance%20%E2%80%93%20Unregulated%20Energy) This section analyzes the GAAP Gross Margin variance for the Unregulated Energy segment between Q1 2022 and Q1 2021 - **Gross Margin (GAAP) for the Unregulated Energy segment increased by $3.3 million (11.2%) to $32.3 million** in Q1 2022[164](index=164&type=chunk) - Growth was attributed to the **Diversified Energy acquisition, increased propane margins and service fees, and higher rates for Aspire Energy**[164](index=164&type=chunk) - Increased depreciation, amortization, property taxes, payroll, and vehicle expenses (due to higher fuel costs) partially offset these increases[164](index=164&type=chunk) [Results of Operations for the Three Months Ended March 31, 2022](index=39&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031,%202022) This section provides a comprehensive overview of the company's operational performance for the first quarter of 2022 [Overview](index=39&type=section&id=Overview) This overview reiterates the company's diversified energy business model and updates on lifted COVID-19 restrictions and cost deferrals - **Chesapeake Utilities is a diversified energy company** providing natural gas, electricity, propane distribution, transmission, and other energy services[166](index=166&type=chunk) - **COVID-19 restrictions have largely lifted**, concluding the company's ability to defer incremental pandemic-related costs for regulatory consideration[168](index=168&type=chunk) [Environmental, Social and Governance Initiatives](index=39&type=section&id=Environmental,%20Social%20and%20Governance%20Initiatives) This section highlights the company's ESG commitment, including its inaugural sustainability report and recent advancements in environmental, social, and governance areas - **Chesapeake Utilities published its inaugural sustainability report in February 2022**, outlining commitments to a lower carbon future, diverse workplace, community sustainability, and ethical operations[169](index=169&type=chunk) - Recent environmental advancements include the **first test of hydrogen and natural gas blend for power generation** and **Marlin Gas Services' first CNG fueling station distributing RNG**[171](index=171&type=chunk) - The company established an **Environmental Sustainability Office (ESO)** and an **ESG Committee (ESGC)** in Q1 2022 to advance strategic ESG initiatives[171](index=171&type=chunk)[173](index=173&type=chunk) [Operational Highlights](index=41&type=section&id=Operational%20Highlights) This section summarizes Q1 2022 financial performance, detailing drivers of increased net income and operating income, and offsetting factors Q1 2022 Operational Highlights (in thousands, except per share) | Metric | March 31, 2022 | March 31, 2021 | Increase (decrease) | | :----- | :------------- | :------------- | :------------------ | | Total Adjusted Gross Margin | $125,700 | $116,890 | $8,810 | | Total Operating Income | $54,865 | $51,597 | $3,268 | | Net Income | $36,933 | $34,466 | $2,467 | | Diluted Earnings Per Share | $2.08 | $1.96 | $0.12 | - Higher performance was driven by **2021 acquisitions (Diversified Energy, Escambia Meter Station), pipeline expansion projects, regulated infrastructure investments, natural gas distribution growth, and increased margins/fees from propane and Aspire Energy**[175](index=175&type=chunk) - Offsetting factors included **reduced propane consumption, higher depreciation, amortization, property taxes, and increased operating expenses** from growth initiatives and acquisitions[175](index=175&type=chunk) [Summary of Key Factors](index=43&type=section&id=Summary%20of%20Key%20Factors) This section summarizes the key factors influencing the company's financial performance, including major projects and other drivers [Recently Completed and Ongoing Major Projects and Initiatives](index=43&type=section&id=Recently%20Completed%20and%20Ongoing%20Major%20Projects%20and%20Initiatives) This section outlines adjusted gross margin contributions from pipeline expansions, virtual pipeline solutions, RNG infrastructure, acquisitions, and regulatory initiatives Adjusted Gross Margin from Major Projects and Initiatives (in thousands) | Category | Q1 2022 | Q1 2021 | FY 2021 | FY 2022 Estimate | FY 2023 Estimate | | :------- | :------ | :------ | :------ | :--------------- | :--------------- | | Pipeline Expansions | $3,325 | $2,098 | $9,500 | $14,363 | $19,125 | | Virtual Pipeline Solutions (CNG/RNG/LNG) | $2,142 | $2,077 | $7,566 | $8,500 | $9,500 | | RNG Infrastructure | $91 | $0 | $0 | $1,000 | $1,000 | | Acquisitions | $4,225 | $0 | $1,186 | $12,300 | $13,000 | | Regulatory Initiatives | $5,442 | $4,201 | $18,220 | $21,056 | $21,765 | | **Total** | **$15,225** | **$8,376** | **$36,472** | **$57,219** | **$64,390** | - The **Del-Mar Energy Pathway project**, placed into service in Q4 2021, generated an additional **$0.8 million** in adjusted gross margin for Q1 2022 and is estimated to generate **$7.0 million annually** in 2022[183](index=183&type=chunk)[184](index=184&type=chunk) - The **Diversified Energy acquisition contributed $4.0 million in adjusted gross margin** in Q1 2022 and is expected to generate **$11.3 million in 2022** and **$12.0 million in 2023**[197](index=197&type=chunk) [Other major factors influencing adjusted gross margin](index=46&type=section&id=Other%20major%20factors%20influencing%20adjusted%20gross%20margin) This section discusses the impact of weather conditions and natural gas distribution customer growth on adjusted gross margin - **Weather conditions resulted in a $0.4 million decrease in adjusted gross margin** for Q1 2022 compared to Q1 2021[207](index=207&type=chunk) - **Natural gas distribution customer growth generated $1.2 million of additional adjusted gross margin** in Q1 2022, driven by **residential growth of 5.3% on the Delmarva Peninsula and 4.0% in Florida**[211](index=211&type=chunk) Customer Growth Adjusted Gross Margin (in thousands) | Region | Residential | Commercial and industrial | Total Customer Growth | | :----- | :---------- | :------------------------ | :-------------------- | | Delmarva Peninsula | $760 | $0 | $760 | | Florida | $375 | $59 | $434 | [Regulated Energy Segment](index=48&type=section&id=Regulated%20Energy%20Segment) This section analyzes the financial performance of the Regulated Energy segment, including revenue, adjusted gross margin, and operating income Regulated Energy Segment Performance (in thousands) | Metric | March 31, 2022 | March 31, 2021 | Increase (decrease) | | :----- | :------------- | :------------- | :------------------ | | Revenue | $127,891 | $121,197 | $6,694 | | Adjusted gross margin | $82,449 | $78,154 | $4,295 | | Operating income | $34,681 | $32,637 | $2,044 | - **Operating income increased by $2.0 million (6.3%)** due to pipeline expansions, natural gas distribution growth, regulated infrastructure programs, and the Escambia Meter Station acquisition[214](index=214&type=chunk) - **Operating expenses increased by $2.3 million**, primarily from higher depreciation, amortization, property taxes, payroll, and employee-related expenses[214](index=214&type=chunk)[220](index=220&type=chunk) [Unregulated Energy Segment](index=51&type=section&id=Unregulated%20Energy%20Segment) This section analyzes the financial performance of the Unregulated Energy segment, including revenue, adjusted gross margin, and operating income Unregulated Energy Segment Performance (in thousands) | Metric | March 31, 2022 | March 31, 2021 | Increase (decrease) | | :----- | :------------- | :------------- | :------------------ | | Revenue | $101,292 | $74,759 | $26,533 | | Adjusted gross margin | $43,284 | $38,776 | $4,508 | | Operating Income | $20,046 | $18,983 | $1,063 | - **Operating results increased by $1.1 million (5.6%)** driven by the Diversified Energy acquisition, margin improvement from Aspire Energy, and increased propane margins and service fees[223](index=223&type=chunk)[224](index=224&type=chunk) - Offsetting factors included **reduced propane consumption** and **increased operating expenses** from the acquisition, employee-related costs, depreciation, and vehicle expenses due to rising fuel costs[224](index=224&type=chunk)[228](index=228&type=chunk) [OTHER INCOME, NET](index=52&type=section&id=OTHER%20INCOME,%20NET) This section details the components and changes in other income, net, for the reported period - **Other income, net, increased by $0.5 million** in Q1 2022 compared to Q1 2021, including non-operating investment income, interest income, late fees, and gains/losses from asset sales and pension expenses[229](index=229&type=chunk) [INTEREST CHARGES](index=52&type=section&id=INTEREST%20CHARGES) This section analyzes the changes in interest charges, identifying key drivers such as new debt and short-term borrowing fluctuations - **Interest charges increased by $0.2 million** in Q1 2022, primarily due to a **$0.3 million increase from a 2022 long-term debt placement** and a **$0.1 million amortization credit/increase** from a regulatory liability[230](index=230&type=chunk) - A **$0.2 million decrease in interest expense** from lower outstanding short-term borrowings partially offset the increase[230](index=230&type=chunk) - The **interest rate on the Revolver increased by 0.34%** due to Federal Reserve rate hikes, indicating potential future increases in interest charges[230](index=230&type=chunk) [INCOME TAXES](index=52&type=section&id=INCOME%20TAXES) This section provides an overview of the company's income tax expense and effective tax rate for the period - **Income tax expense was $13.5 million** in Q1 2022, up from **$12.4 million** in Q1 2021[231](index=231&type=chunk) - The **effective income tax rate was 26.8%** for Q1 2022, compared to **26.5%** for Q1 2021[231](index=231&type=chunk) [FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES](index=53&type=section&id=FINANCIAL%20POSITION,%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section analyzes the company's financial position, liquidity, and capital resources, including funding strategies and capital expenditures [Capital Requirements and Funding](index=53&type=section&id=Capital%20Requirements%20and%20Funding) This section discusses capital requirements for plant and equipment, and funding sources like cash from operations, short-term borrowings, and debt/equity issuances - Capital requirements are driven by **investments in new plant and equipment, debt retirement, and seasonal working capital needs**[233](index=233&type=chunk) - Funding sources include **cash from operations, short-term borrowings, and potential long-term debt and equity issuances** (e.g., ATM equity program, DRIP)[233](index=233&type=chunk) - **Capital expenditures for Q1 2022 were $25.6 million**, with a full-year 2022 forecast between **$175 million and $200 million**[235](index=235&type=chunk)[236](index=236&type=chunk) [Capital Structure](index=54&type=section&id=Capital%20Structure) This section details the company's capital structure, including the equity to total capitalization ratio, and its financial strategy - The company aims to maintain an **equity to total capitalization ratio (including short-term borrowings) between 50% and 60%**[240](index=240&type=chunk) - As of March 31, 2022, the **equity to total capitalization ratio (including short-term borrowings) was 52%**[240](index=240&type=chunk) Capitalization (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :----- | :------------- | :---------------- | | Long-term debt, net of current maturities | $597,878 (43%) | $549,903 (42%) | | Stockholders' equity | $805,512 (57%) | $774,130 (58%) | | **Total capitalization, excluding short-term debt** | **$1,403,390 (100%)** | **$1,324,033 (100%)** | | Short-term debt | $140,865 (9%) | $221,634 (14%) | | Long-term debt, including current maturities | $617,595 (39%) | $567,865 (36%) | | Stockholders' equity | $805,512 (52%) | $774,130 (50%) | | **Total capitalization, including short-term debt** | **$1,563,972 (100%)** | **$1,563,629 (100%)** | [Shelf Agreements](index=54&type=section&id=Shelf%20Agreements) This section summarizes the company's shelf agreements with Prudential and MetLife, detailing borrowing capacity and available funds Shelf Agreements Summary (in thousands) | Shelf Agreement | Total Borrowing Capacity | Amount of Debt Issued | Remaining Borrowing Capacity | | :-------------- | :----------------------- | :-------------------- | :--------------------------- | | Prudential | $370,000 | $(220,000) | $150,000 | | MetLife | $150,000 | $(50,000) | $100,000 | | **Total** | **$520,000** | **$(270,000)** | **$250,000** | - The **Prudential and MetLife Shelf Agreements expire in April 2023 and May 2023**, respectively[242](index=242&type=chunk) [Short-term Borrowings](index=55&type=section&id=Short-term%20Borrowings) This section updates on short-term borrowings, including outstanding amounts, revolving credit facility structure, and financial covenant compliance - **Short-term borrowings decreased from $221.6 million to $140.9 million** with a weighted average interest rate of **1.17%**[245](index=245&type=chunk) - The **$400.0 million Revolver facility** includes a **$200.0 million 364-day tranche** (expires August 2022) and a **$200.0 million five-year tranche** (expires August 2026)[246](index=246&type=chunk)[248](index=248&type=chunk) - The company complied with its financial covenant to maintain a **funded indebtedness ratio of no greater than 65%** as of March 31, 2022[247](index=247&type=chunk) [Long-Term Debt](index=55&type=section&id=Long-Term%20Debt) This section details the issuance of new long-term debt in March 2022 and the allocation of its proceeds - On **March 15, 2022**, the company issued **$50 million of 2.95% Senior Notes** due March 15, 2042, to MetLife[251](index=251&type=chunk) - Proceeds from the Senior Notes issuance were used to **reduce short-term borrowings** and **fund capital expenditures**[251](index=251&type=chunk) [Cash Flows](index=55&type=section&id=Cash%20Flows) This section summarizes and analyzes cash flows from operating, investing, and financing activities for Q1 2022 Summary of Cash Flows (in thousands) | Activity | March 31, 2022 | March 31, 2021 | | :------- | :------------- | :------------- | | Net cash provided by operating activities | $69,120 | $80,382 | | Net cash used in investing activities | $(29,935) | $(51,847) | | Net cash used in financing activities | $(38,953) | $(26,459) | | Net increase in cash and cash equivalents | $232 | $2,076 | - Operating cash flows were primarily impacted by **net income (adjusted for non-cash items), deferred taxes, changes in regulatory assets/liabilities, and working capital changes**[254](index=254&type=chunk)[255](index=255&type=chunk) - Financing activities included **$82.0 million in repayments under lines of credit, $49.7 million from long-term debt, $3.2 million from stock issuance under DRIP, and $8.3 million for dividend payments**[257](index=257&type=chunk) [Off-Balance Sheet Arrangements](index=56&type=section&id=Off-Balance%20Sheet%20Arrangements) This section describes the company's off-balance sheet arrangements, including corporate guarantees and letters of credit - The **maximum authorized liability for corporate guarantees and letters of credit was $20.0 million** as of March 31, 2022[258](index=258&type=chunk) - The **aggregate guaranteed amount was approximately $13.1 million**, expiring through March 30, 2023[258](index=258&type=chunk) - **Letters of credit totaling approximately $5.3 million were issued**, with no draws as of March 31, 2022, and expected renewals[259](index=259&type=chunk) [Contractual Obligations](index=56&type=section&id=Contractual%20Obligations) This section summarizes commodity purchase contract obligations, noting no material changes from the prior annual report - No material change in contractual obligations from the **2021 Annual Report on Form 10-K**, except for commodity purchase obligations[260](index=260&type=chunk) Commodity Purchase Contract Obligations (in thousands) | Period | Less than 1 year | 1 - 3 years | Total | | :----- | :--------------- | :---------- | :---- | | Purchase obligations - Commodity | $26,157 | $16,848 | $43,005 | [Rates and Regulatory Matters](index=57&type=section&id=Rates%20and%20Regulatory%20Matters) This section refers to Note 5 for detailed information on the company's regulatory matters across its various regulated operations - The company's natural gas and electric distribution operations are regulated by **state PSCs**, and its transmission subsidiaries by **FERC or state commissions**[262](index=262&type=chunk) - Significant regulatory matters are fully described in **Note 5** to the condensed consolidated financial statements[262](index=262&type=chunk) [Recent Authoritative Pronouncements on Financial Reporting and Accounting](index=57&type=section&id=Recent%20Authoritative%20Pronouncements%20on%20Financial%20Reporting%20and%20Accounting) This section directs readers to Note 1 for information on recent accounting developments and their financial statement impact - Recent accounting developments and their impact on financial position, results of operations, and cash flows are described in **Note 1, Summary of Accounting Policies**[263](index=263&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=58&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, including interest rate, commodity price, wholesale credit, and inflation impacts [INTEREST RATE RISK](index=58&type=section&id=INTEREST%20RATE%20RISK) This section addresses the company's exposure to interest rate fluctuations and its strategies for mitigation - Long-term debt exposes the company to potential losses from **changes in interest rates**, influencing refinancing decisions and financing costs[267](index=267&type=chunk) - **Interest rate swap agreements** are utilized to mitigate short-term borrowing rate risk[267](index=267&type=chunk) [COMMODITY PRICE RISK](index=58&type=section&id=COMMODITY%20PRICE%20RISK) This section discusses the company's exposure to commodity price fluctuations across its regulated and unregulated segments - Regulated energy distribution businesses have **limited commodity price risk** due to fuel cost recovery mechanisms[268](index=268&type=chunk) - Unregulated propane operations face commodity price risk, mitigated by **propane storage and forward contracts**, guided by a Risk Management Policy[269](index=269&type=chunk)[270](index=270&type=chunk) - **Aspire Energy faces commodity price risk**, primarily in winter, if natural gas purchases and sales are unbalanced, mitigated by procuring firm capacity and seeking new producers[271](index=271&type=chunk) [WHOLESALE CREDIT RISK](index=59&type=section&id=WHOLESALE%20CREDIT%20RISK) This section addresses the credit risks associated with counterparties to commodity derivative contracts - The **Risk Management Committee reviews credit risks** associated with counterparties to commodity derivative contracts[274](index=274&type=chunk) [INFLATION](index=59&type=section&id=INFLATION) This section discusses the impact of inflation on the company's costs and its strategies for mitigation - **Inflation affects costs of supply, labor, products, and services**[275](index=275&type=chunk) - Mitigation strategies include **seeking periodic rate increases for regulated operations** and **adjusting propane sales prices**[275](index=275&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=59&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The **CEO and CFO concluded that disclosure controls and procedures were effective** as of March 31, 2022[276](index=276&type=chunk) - There were **no material changes in internal control over financial reporting** during the quarter ended March 31, 2022[277](index=277&type=chunk) [PART II—OTHER INFORMATION](index=60&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part contains additional information not included in the financial statements, such as legal proceedings and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=60&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states the company's involvement in legal and regulatory proceedings, with management believing no material financial impact - The company is involved in **legal actions and claims** arising in the normal course of business, and **regulatory proceedings** concerning rates[279](index=279&type=chunk) - Management believes the ultimate disposition of these proceedings and claims will **not materially affect the company's financial position, results of operations, or cash flows**[279](index=279&type=chunk) [ITEM 1A. RISK FACTORS](index=60&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers readers to the Annual Report on Form 10-K for a comprehensive discussion of risk factors affecting the business - Readers should consider the risk factors described in **Part I, 'Item 1A. Risk Factors' of the 2021 Annual Report on Form 10-K**[280](index=280&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=60&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports on shares purchased for dividend reinvestment in Rabbi Trust accounts and confirms no publicly announced share repurchase plans - **390 shares were purchased on the open market in January 2022 at an average price of $142.49 per share** for dividend reinvestment in Rabbi Trust accounts[282](index=282&type=chunk) - The company has **no publicly announced plans or programs to repurchase its shares**, other than for the purposes described[282](index=282&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=60&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms that there were no defaults upon senior securities during the reporting period - There were **no defaults upon senior securities**[282](index=282&type=chunk) [ITEM 5. OTHER INFORMATION](index=60&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that no other information is reported - **No other information is reported** in this section[283](index=283&type=chunk) [ITEM 6. EXHIBITS](index=61&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Quarterly Report, including CEO/CFO certifications and XBRL documents - Exhibits include **certifications from the Chief Executive Officer and Chief Financial Officer** pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[286](index=286&type=chunk)[287](index=287&type=chunk) - **XBRL Instance Document and Taxonomy Extension documents** (Schema, Calculation, Definition, Label, Presentation Linkbase) are filed[286](index=286&type=chunk)[288](index=288&type=chunk) [SIGNATURES](index=62&type=section&id=SIGNATURES) This section contains the official signatures certifying the accuracy and completeness of the report [Report Signature](index=62&type=section&id=Report%20Signature) This section contains the signature of Beth W. Cooper, Executive Vice President, CFO, Treasurer, and Assistant Corporate Secretary, certifying the report filing - The report is signed by **Beth W. Cooper, Executive Vice President, Chief Financial Officer, Treasurer and Assistant Corporate Secretary**, on **May 3, 2022**[292](index=292&type=chunk)

Chesapeake Utilities Corporation (NYSE:CPK) Q4 2021 Earnings Conference Call February 24, 2022 4:00 PM ET Company Participants Jeff Householder – President and Chief Executive Officer Beth Cooper – Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary James Moriarty – Executive Vice President, General Counsel, Corporate Secretary, and Chief Policy and Risk Officer Alex Whitelam – Head of Investor Relations Conference Call Participants Tate Sullivan – Maxim Group Brian Russo – S ...

Part I [Item 1. Business](index=10&type=section&id=Item%201.%20Business) Chesapeake Utilities is a diversified energy delivery company, balancing stable regulated operations with higher-return unregulated and sustainable energy ventures - The Company's core strategy is to grow earnings from its stable regulated energy foundation and invest in related non-regulated businesses that offer opportunities for higher returns[18](index=18&type=chunk) - Key growth platforms include optimizing existing businesses, pursuing pipeline expansions, growing Marlin Gas Services' CNG/LNG/RNG transport business, strategic propane acquisitions, and participating in sustainable energy opportunities[19](index=19&type=chunk) [Regulated Energy](index=10&type=section&id=Regulated%20Energy) The Regulated Energy segment, encompassing natural gas and electric distribution and transmission, provides stable earnings and growth through regulated rates and infrastructure programs Regulated Energy Operations - 2021 Financials | Operations | Areas Served | Net Income (in thousands) | Total Assets (in thousands) | | :--- | :--- | :--- | :--- | | **Natural Gas Distribution** | | | | | Delmarva Natural Gas | Delaware/Maryland | $12,283 | $350,196 | | Florida Natural Gas | Florida | $16,040 | $481,573 | | **Natural Gas Transmission** | | | | | Eastern Shore | Delaware/Maryland/Pennsylvania | $21,369 | $482,161 | | Peninsula Pipeline | Florida | $10,898 | $140,494 | | Aspire Energy Express | Ohio | $119 | $7,503 | | **Electric Distribution** | | | | | FPU | Florida | $5,441 | $167,264 | | **Total Regulated Energy** | | **$66,150** | **$1,629,191** | - The cost of natural gas or electricity is passed through to customers via PSC-approved fuel cost recovery mechanisms, meaning the company's adjusted gross margin is generally not impacted by fluctuations in commodity costs[22](index=22&type=chunk) - The company utilizes various PSC-approved surcharge mechanisms, such as Florida's Gas Reliability Infrastructure Program (GRIP), to achieve accelerated recovery of costs for system improvements and expansions[32](index=32&type=chunk)[33](index=33&type=chunk) [Unregulated Energy](index=16&type=section&id=Unregulated%20Energy) The Unregulated Energy segment, including propane, transmission, generation, and mobile gas services, offers higher returns through diverse operations across the Eastern U.S Unregulated Energy Operations - 2021 Financials | Operations | Area Served | Net Income (in thousands) | Total Assets (in thousands) | | :--- | :--- | :--- | :--- | | Propane Operations | DE, MD, VA, PA, NC, SC, FL | $11,651 | $197,340 | | Energy Transmission (Aspire Energy) | Ohio | $3,060 | $141,473 | | Energy Generation (Eight Flags) | Florida | $1,900 | $38,060 | | Marlin Gas Services | The Eastern U.S. | $370 | $61,567 | | **Total** | | **$16,981** | **$438,440** | - Propane operations sold **68.4 million gallons** to approximately **69,000 customers** in 2021, competing with other distributors on price and service[49](index=49&type=chunk)[50](index=50&type=chunk) - Aspire Energy in Ohio derives most of its revenue from long-term supply agreements, serving over **22,000 end-use customers**, and recently completed a pipeline project to transport Renewable Natural Gas (RNG) from a landfill[53](index=53&type=chunk) - Marlin Gas Services provides mobile CNG, LNG, and RNG transport and virtual pipeline solutions, serving utilities and pipelines across the eastern U.S[57](index=57&type=chunk) [Human Capital Initiatives](index=18&type=section&id=Human%20Capital%20Initiatives) The company prioritizes human capital through a strong culture of equity, diversity, and inclusion, comprehensive safety programs, and board-level ESG oversight - As of December 31, 2021, the company had **1,007 employees**, with **110** represented by two labor unions[62](index=62&type=chunk) - The company has established an Equity, Diversity and Inclusion (EDI) Council and supports multiple Employee Resource Groups (ERGs) to build a more diverse and inclusive workforce[64](index=64&type=chunk)[65](index=65&type=chunk) - Chesapeake Utilities is designated as an "essential business," allowing continued operations during the COVID-19 pandemic under a formal response plan[66](index=66&type=chunk) - The company emphasizes workplace safety, highlighted by the completion of its 'Safety Town' training facility in Delaware, with plans for a second facility in Florida[72](index=72&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse financial, operational, regulatory, and environmental risks, including market access, commodity price volatility, weather sensitivity, cybersecurity, and compliance costs - **Financial Risks:** Instability in financial markets could impact access to capital for growth projects. Fluctuations in propane prices could negatively affect results if costs cannot be fully passed on to customers[82](index=82&type=chunk)[83](index=83&type=chunk) - **Operational Risks:** The business is sensitive to weather, as warmer winters reduce demand for natural gas and propane. It also faces competition from other energy suppliers and alternative fuels. Cybersecurity attacks pose a significant threat to operating systems and data security[91](index=91&type=chunk)[94](index=94&type=chunk)[99](index=99&type=chunk) - **Regulatory, Legal, and Environmental Risks:** The company's utility operations are subject to regulation by PSCs and FERC, which can impact rates and cost recovery. Compliance with environmental laws, particularly for remediation of former Manufactured Gas Plant (MGP) sites, may be significant. Climate change presents risks through potential regulation of greenhouse gas emissions and more severe weather events[121](index=121&type=chunk)[124](index=124&type=chunk)[129](index=129&type=chunk) [Item 2. Properties](index=29&type=section&id=Item%202.%20Properties) The company's properties include extensive infrastructure across its service territories, comprising thousands of miles of regulated pipelines and unregulated propane storage and gathering facilities Regulated Energy Infrastructure (Miles) | Operations | Miles | | :--- | :--- | | **Natural Gas Distribution** | | | Delmarva Natural Gas (Natural gas pipelines) | 1,934 | | Central Florida Gas and FPU (Natural gas pipelines) | 3,030 | | **Natural Gas Transmission** | | | Eastern Shore | 516 | | Peninsula Pipeline | 144 | | **Electric Distribution** | | | FPU | 906 | | **Total** | **6,562** | Unregulated Energy Infrastructure | Operations | Gallons or miles | | :--- | :--- | | **Propane distribution** | | | Propane storage capacity (gallons in millions) | 8.9 | | Underground propane distribution mains (miles) | 198 | | **Unregulated Energy Transmission (Aspire Energy)** | | | Natural gas pipelines (miles) | 2,800 | Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Chesapeake Utilities' common stock (CPK) trades on the NYSE, boasts a 61-year dividend history, and has significantly outperformed market indices over five years - The company has paid a cash dividend to its common stock stockholders for **61 consecutive years**[148](index=148&type=chunk) Dividends Per Share | Year | Dividends Per Share | | :--- | :--- | | 2021 | $1.880 | | 2020 | $1.725 | - A **$100 investment** on December 31, 2016, would have grown to **$237** by December 31, 2021, compared to **$160** for the industry index and **$233** for the S&P 500 Index[153](index=153&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Chesapeake Utilities reported significant net income and EPS growth in 2021, driven by pipeline expansions, organic growth, acquisitions, and increased consumption, supported by substantial capital investments Consolidated Financial Highlights (from Continuing Operations) | Metric (in thousands, except EPS) | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Operating Income | $131,112 | $112,723 | $18,389 | | Income from Continuing Operations | $83,467 | $70,642 | $12,825 | | Diluted EPS from Continuing Operations | $4.73 | $4.21 | $0.52 | Adjusted Gross Margin (Non-GAAP) by Segment (in thousands) | Segment | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Regulated Energy | $283,183 | $260,752 | $22,431 | | Unregulated Energy | $99,969 | $89,746 | $10,223 | | **Total** | **$383,017** | **$350,260** | **$32,757** | - Key drivers for the **$0.52 increase** in diluted EPS from continuing operations included contributions from pipeline expansions, organic customer growth, recent acquisitions, and increased consumption, partially offset by higher operating expenses and the dilutive effect of equity offerings[175](index=175&type=chunk) [Summary of Key Factors and Major Projects](index=39&type=section&id=Summary%20of%20Key%20Factors%20and%20Major%20Projects) The company's growth is driven by major pipeline expansions, Renewable Natural Gas (RNG) projects, strategic acquisitions, and regulatory initiatives contributing to adjusted gross margin Projected Adjusted Gross Margin from Major Projects (in thousands) | Initiative Type | 2021 (Actual) | 2022 (Estimate) | | :--- | :--- | :--- | | Pipeline Expansions | $17,064 | $22,383 | | CNG Transportation | $7,566 | $8,500 | | RNG Transportation | $0 | $1,000 | | Acquisitions | $6,506 | $18,021 | | Regulatory Initiatives | $29,712 | $32,802 | | **Total** | **$60,848** | **$82,706** | - The acquisition of Diversified Energy in December 2021 is expected to add **$11.3 million** in adjusted gross margin in 2022, expanding the company's propane footprint into North and South Carolina[193](index=193&type=chunk) - The company is engaged in multiple Renewable Natural Gas (RNG) projects, including transporting RNG from landfills and poultry waste, which are expected to generate **$1.0 million** in adjusted gross margin in 2022[188](index=188&type=chunk)[189](index=189&type=chunk)[192](index=192&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a sound capital structure, funding its capital-intensive business through operations, debt, and equity, supported by a substantial revolving credit facility Capital Expenditures (in thousands) | Year | Amount | | :--- | :--- | | 2021 (Actual) | $227,809 | | 2022 (Forecast) | $175,000 - $200,000 | - The company's target ratio of equity to total capitalization (including short-term debt) is between **50% and 60%**, with the ratio approximately **50%** as of December 31, 2021[247](index=247&type=chunk) - The company has a **$400 million** unsecured revolving credit facility, amended in August 2021, consisting of a **$200 million** 364-day tranche and a **$200 million** five-year tranche[253](index=253&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk through debt refinancing and swaps, while commodity price risk is mitigated by fuel cost recovery mechanisms in regulated operations and derivatives in unregulated propane - Regulated energy operations have limited commodity price risk due to PSC-authorized fuel cost recovery mechanisms that pass prudently incurred costs to customers[288](index=288&type=chunk) - Unregulated propane operations are exposed to commodity price risk and use storage (**8.9 million gallons** capacity) and derivative instruments to hedge price fluctuations[289](index=289&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=61&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements and the independent auditor's unqualified opinion, highlighting the goodwill impairment assessment as a critical audit matter - The independent auditor, Baker Tilly US, LLP, issued an **unqualified opinion**, stating the financial statements are presented fairly in all material respects and that the company maintained effective internal control over financial reporting as of December 31, 2021[296](index=296&type=chunk) - The auditor identified the goodwill impairment assessment for the Energy Transmission and Supply Services (Aspire Energy), Mid-Atlantic Propane, Florida Propane, and Marlin Gas Services reporting units as a critical audit matter due to the significant judgments and assumptions required by management[304](index=304&type=chunk)[305](index=305&type=chunk) Key Financial Statement Data (Year Ended Dec 31, 2021, in thousands) | Metric | Amount | | :--- | :--- | | Total Operating Revenues | $569,968 | | Operating Income | $131,112 | | Net Income | $83,466 | | Total Assets | $2,114,869 | | Total Stockholders' Equity | $774,130 | | Net Cash from Operating Activities | $150,504 | [Item 9A. Controls and Procedures](index=114&type=section&id=Item%209A.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and its internal control over financial reporting were effective as of December 31, 2021[557](index=557&type=chunk)[560](index=560&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended December 31, 2021, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[558](index=558&type=chunk) Part III [Items 10-14](index=115&type=section&id=Items%2010-14) Information for Items 10-14, covering governance, compensation, and security ownership, is incorporated by reference from the company's 2022 Proxy Statement - Information regarding Directors, Executive Officers, and Corporate Governance (Item 10) is incorporated by reference from the 2022 Proxy Statement[566](index=566&type=chunk) - Details on Executive Compensation (Item 11) are incorporated by reference from the 2022 Proxy Statement[566](index=566&type=chunk) - Security ownership details (Item 12) and information on related transactions and director independence (Item 13) are incorporated by reference from the 2022 Proxy Statement[567](index=567&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=115&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including key agreements, bylaws, and CEO/CFO certifications - This item lists all financial statements, schedules, and exhibits filed with the annual report, including key debt agreements, compensation plans, and required CEO/CFO certifications[568](index=568&type=chunk)[572](index=572&type=chunk) [Item 16. Form 10-K Summary](index=122&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided for this item - No summary is provided for Item 16[580](index=580&type=chunk)

Chesapeake Utilities Corporation (NYSE:CPK) Q3 2021 Earnings Conference Call November 4, 2021 4:00 PM ET Company Participants Alex Whitelam – Head of Investor Relations Jeff Householder – President and Chief Executive Officer Beth Cooper – Executive Vice President, Chief Financial Officer and Assistant Corporate Secretary Jim Moriarty – Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer Conference Call Participants Tate Sullivan – Maxim Group Brian Russo – Sidot ...

Table of Contents Common Stock - par value per share $0.4867 CPK New York Stock Exchange, Inc. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-11590 Indicate by check mark whether th ...

Chesapeake Utilities Corporation (NYSE:CPK) Q2 2021 Earnings Conference Call August 5, 2021 4:00 PM ET Company Participants Beth Cooper - Chief Financial Officer Jeff Householder - President and Chief Executive Officer Jim Moriarty - Executive Vice President, General Counsel, Corporate Secretary and Chief Policy and Risk Officer Conference Call Participants Tate Sullivan - Maxim Group Brian Russo - Sidoti Roger Liddell - Clear Harbor Asset Management Operator Greetings and welcome to the Chesapeake Utilitie ...

| --- | --- | |-------|-------| | | | | | | Presenters Jeff Householder President & CEO Beth Cooper Executive Vice President, CFO and Asst. Secretary Jim Moriarty Executive Vice President, General Counsel , Corporate Secretary and Chief Policy and Risk Officer 2 Forward Looking Statements and Other Disclosures Safe Harbor Statement Some of the Statements in this document concerning future Company performance will be forwardlooking within the meanings of the securities laws. Actual results may materially dif ...