Chesapeake Utilities(US:CPK)2025-05-07 20:37PART I—FINANCIAL INFORMATION Financial Statements Chesapeake Utilities reported Q1 2025 revenue of $298.7 million and net income of $50.9 million, with assets at $3.66 billion Condensed Consolidated Statements of Income Q1 2025 vs Q1 2024 Income Statement Highlights | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $298.7 | $245.7 | +21.6% | | Operating Income | $86.8 | $79.6 | +9.0% | | Net Income | $50.9 | $46.2 | +10.2% | | Diluted EPS | $2.21 | $2.07 | +6.8% | Condensed Consolidated Balance Sheets Balance Sheet Summary | Account | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Assets | $3,664.6 | $3,577.0 | | Net property, plant and equipment | $2,828.2 | $2,735.9 | | Total current assets | $199.6 | $204.3 | | Total Liabilities & Equity | $3,664.6 | $3,577.0 | | Total stockholders' equity | $1,447.3 | $1,390.2 | | Long-term debt, net | $1,260.0 | $1,261.7 | | Short-term borrowing | $215.4 | $196.5 | Condensed Consolidated Statements of Cash Flows Q1 2025 vs Q1 2024 Cash Flow Summary | Activity | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $85.0 | $97.3 | | Net cash used in investing activities | ($113.1) | ($74.7) | | Net cash provided by (used in) financing activities | $20.9 | ($25.8) | | Net Decrease in Cash | ($7.2) | ($3.2) | Notes to Condensed Consolidated Financial Statements - The company's business is seasonal, with revenues and earnings typically higher in the first and fourth quarters due to increased energy consumption for heating32 - The company operates two reportable segments: Regulated Energy and Unregulated Energy. For Q1 2025, the Regulated Energy segment generated $60.5 million in operating income, while the Unregulated Energy segment generated $26.3 million8785 - The company utilizes derivative instruments, including propane and interest rate swaps, to manage commodity price and interest rate risks. As of March 31, 2025, the company had cash flow hedges for 6.3 million gallons of propane and interest rate swaps with a notional amount of $100.0 million108109110 - As of March 31, 2025, the company had total long-term debt of $1.286 billion and short-term borrowings of $215.4 million under its $450.0 million revolving credit facility123127 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management reported strong Q1 2025 net income of $50.9 million, driven by consumption and regulatory programs Results of Operations Q1 2025 vs Q1 2024 Adjusted Results | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted Gross Margin | $182.4M | $164.5M | +$17.9M | | Operating Income | $86.8M | $79.6M | +$7.2M | | Adjusted Net Income (Non-GAAP) | $51.1M | $46.8M | +$4.3M | | Adjusted EPS - Diluted (Non-GAAP) | $2.22 | $2.10 | +$0.12 | - Key drivers for the $17.9 million increase in Adjusted Gross Margin included higher customer consumption ($5.5M), increased demand for virtual pipeline services ($3.6M), contributions from regulated infrastructure programs ($3.4M), and organic natural gas growth ($2.2M)158 - Operating expenses increased primarily due to higher depreciation and amortization ($5.2M) from growth projects and increased payroll and benefits expenses ($4.5M)158 Segment Analysis - Regulated Energy Segment: Operating income increased by $2.4 million (4.1%) to $60.5 million in Q1 2025. Adjusted gross margin grew by $9.6 million, driven by regulated infrastructure programs ($3.4M), natural gas customer growth ($2.2M), and transmission service expansions ($2.2M)191193 - Unregulated Energy Segment: Operating income improved by $4.9 million to $26.3 million in Q1 2025. The $8.5 million increase in adjusted gross margin was primarily due to higher propane customer consumption from colder weather ($4.2M) and increased demand for virtual pipeline services ($3.6M)200201 Major Projects and Initiatives Estimated Annual Adjusted Gross Margin from Major Initiatives (in millions) | Initiative Category | 2025 Estimate | 2026 Estimate | | :--- | :--- | :--- | | Pipeline Expansions | $22.1 | $42.3 | | CNG/RNG/LNG Transportation | $20.0 | $20.7 | | Regulatory Initiatives | $40.8 | $56.0 | | Total | $82.9 | $119.0 | - The company is advancing numerous growth projects, including the Worcester Resiliency Upgrade, various Florida pipeline expansions (Wildlight, Newberry, East Coast Reinforcement), and Renewable Natural Gas (RNG) supply projects163164165166 - Key regulatory initiatives driving growth include Florida's GUARD and FCG's SAFE infrastructure programs, Eastern Shore's Capital Cost Surcharge, and recent rate cases in Maryland, Delaware, and Florida178179181183 Financial Position, Liquidity and Capital Resources 2025 Forecasted Capital Expenditures | Segment | Low (in millions) | High (in millions) | | :--- | :--- | :--- | | Regulated Energy | $305.0 | $345.0 | | Unregulated Energy | $19.0 | $28.0 | | Other | $1.0 | $2.0 | | Total | $325.0 | $375.0 | - The company's equity to total capitalization ratio, including short-term debt, was 49% as of March 31, 2025, slightly below its target range of 50% to 60%215 - As of March 31, 2025, the company had $215.4 million in short-term borrowings outstanding and $227.0 million of available credit under its $450.0 million revolving credit facility220224 Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates and commodity prices using hedging and recovery mechanisms - Interest rate risk is managed through debt refinancing decisions and the use of interest rate swap agreements to mitigate short-term borrowing rate fluctuations238 - Regulated operations have limited commodity price risk due to PSC-authorized fuel cost recovery mechanisms239 - Unregulated propane operations use storage (up to 8.5 million gallons) and forward/hedging contracts to mitigate commodity price risk240241 Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Management's evaluation concluded that disclosure controls and procedures were effective as of March 31, 2025249 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls250 PART II—OTHER INFORMATION Legal Proceedings Routine legal and regulatory proceedings are not expected to materially impact the company's financial position or results - The company states that the ultimate outcome of its current legal and regulatory proceedings is not expected to have a material effect on its financial condition or results251 Risk Factors No material changes to risk factors were reported, referring to the 2024 Annual Report on Form 10-K for details - The report does not introduce new risk factors and refers to the risk factors disclosed in the 2024 Annual Report on Form 10-K252 Unregistered Sales of Equity Securities and Use of Proceeds The company purchased 607 common shares at $119.90 for a Rabbi Trust, not part of a public repurchase program Q1 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2025 | 607 | $119.90 | | Feb 1 - Feb 28, 2025 | 0 | N/A | | Mar 1 - Mar 31, 2025 | 0 | N/A | | Total | 607 | $119.90 | - The company does not have any publicly announced plans or programs to repurchase its shares254 Defaults Upon Senior Securities The company reported no defaults on its senior securities during the period - None255 Other Information No director or officer adopted or terminated Rule 10b5-1 trading arrangements in Q1 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement in Q1 2025256 Exhibits Exhibits include CEO and CFO certifications and XBRL data files filed with the Form 10-Q - The exhibits filed with this report include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and various XBRL instance and taxonomy documents257