[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
51-0064146
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Page
|
|
Part I -- Financial Information |
5
|
Item
1. Financial Statements
|
5
|
Notes
to Condensed Consolidated Financial Statements
|
11
|
1.
Basis of Presentation
|
11
|
2.
Comprehensive Income (Loss)
|
11
|
3.
Calculation of Earnings Per Share
|
11
|
4.
Commitments and Contingencies
|
12
|
Environmental
Matters
|
12
|
Other
Commitments and Contingencies
|
14
|
5.
Recent Authoritative Pronouncements on Financial Reporting and
Accounting
|
16
|
6.
Segment Information
|
16
|
7.
Employee Benefit Plans
|
17
|
8.
Investments
|
17
|
9.
Stockholders' Equity
|
18
|
10.
Long-Term Debt
|
18
|
11.
Subsequent Event
|
18
|
Item
2. Management's Discussion and Analysis of Financial Condition
and Results
of Operations
|
19
|
Business
Description
|
19
|
Results
of Operations for the Quarter Ended September 30, 2005
|
20
|
Consolidated
Overview
|
20
|
Natural
Gas Distribution and Transmission
|
21
|
Propane
|
22
|
Advanced
Information Services
|
23
|
Other
Business Operations and Eliminations
|
24
|
Discontinued
Operations
|
24
|
Income
Taxes
|
24
|
Interest
Expense
|
24
|
Results
of Operations for the Nine Months Ended September
30,
2005
|
25
|
Consolidated
Overview
|
25
|
Natural
Gas Distribution and Transmission
|
26
|
Propane
|
27
|
Advanced
Information Services
|
28
|
Other
Business Operations and Eliminations
|
29
|
Discontinued
Operations
|
29
|
Income
Taxes
|
29
|
Interest
Expense
|
29
|
Financial
Position, Liquidity and Capital Resources
|
29
|
Off-Balance
Sheet Arrangements
|
31
|
Contractual
Obligations
|
32
|
Environmental
Matters
|
32
|
Other
Matters
|
32
|
Regulatory
Matters
|
32
|
Competition
|
34
|
Recent
Pronouncements
|
35
|
Inflation
|
35
|
Cautionary
Statement
|
35
|
Page
|
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
36
|
Item
4. Controls and Procedures
|
37
|
Evaluation
of Disclosure Controls and Procedures
|
37
|
Changes
in Internal Control Over Financial Reporting
|
37
|
Part II -- Other Information |
38
|
Signatures |
39
|
Chesapeake
Utilities Corporation and Subsidiaries
|
|||||||
Condensed
Consolidated Statements of Income (Unaudited)
|
|||||||
For
the Three Months Ended September 30,
|
2005
|
2004
|
|||||
Operating
Revenues
|
$
|
35,155,121
|
$
|
26,614,699
|
|||
Operating
Expenses
|
|||||||
Cost
of sales, excluding costs below
|
21,931,397
|
14,799,555
|
|||||
Operations
|
9,842,393
|
8,208,729
|
|||||
Maintenance
|
461,586
|
459,917
|
|||||
Depreciation
and amortization
|
1,889,266
|
1,842,484
|
|||||
Other
taxes
|
1,129,628
|
1,021,276
|
|||||
Total
operating expenses
|
35,254,270
|
26,331,961
|
|||||
Operating
Income
|
(99,149
|
)
|
282,738
|
||||
Other
income net of other expenses
|
19,493
|
38,358
|
|||||
Interest
charges
|
1,272,196
|
1,325,398
|
|||||
Income
Before Income Taxes
|
(1,351,852
|
)
|
(1,004,302
|
)
|
|||
Income
taxes
|
(658,078
|
)
|
(420,131
|
)
|
|||
Income
from Continuing Operations
|
(693,774
|
)
|
(584,171
|
)
|
|||
Loss
from discontinued operations, net of tax benefit of $39,375
|
-
|
(72,041
|
)
|
||||
Net
Income
|
($693,774
|
)
|
($656,212
|
)
|
|||
Earnings
Per Share of Common Stock:
|
|||||||
Basic
|
|||||||
From
continuing operations
|
($0.12
|
)
|
($0.10
|
)
|
|||
From
discontinued operations
|
-
|
(0.01
|
)
|
||||
Net
Income
|
($0.12
|
)
|
($0.11
|
)
|
|||
Diluted
|
|||||||
From
continuing operations
|
($0.12
|
)
|
($0.10
|
)
|
|||
From
discontinued operations
|
-
|
(0.01
|
)
|
||||
Net
Income
|
($0.12
|
)
|
($0.11
|
)
|
|||
Cash
Dividends Declared Per Share of Common Stock:
|
$
|
0.285
|
$
|
0.280
|
Chesapeake
Utilities Corporation and Subsidiaries
|
|||||||
Condensed
Consolidated Statements of Income (Unaudited)
|
|||||||
For
the Nine Months Ended September 30,
|
2005
|
2004
|
|||||
Operating
Revenues
|
$
|
155,220,746
|
$
|
124,670,031
|
|||
Operating
Expenses
|
|||||||
Cost
of sales, excluding costs below
|
101,395,287
|
75,442,474
|
|||||
Operations
|
29,383,467
|
25,999,216
|
|||||
Maintenance
|
1,279,821
|
1,256,054
|
|||||
Depreciation
and amortization
|
5,701,357
|
5,464,279
|
|||||
Other
taxes
|
3,730,675
|
3,363,169
|
|||||
Total
operating expenses
|
141,490,607
|
111,525,192
|
|||||
Operating
Income
|
13,730,139
|
13,144,839
|
|||||
Other
income net of other expenses
|
330,354
|
215,051
|
|||||
Interest
charges
|
3,823,140
|
3,980,395
|
|||||
Income
Before Income Taxes
|
10,237,353
|
9,379,495
|
|||||
Income
taxes
|
3,902,407
|
3,578,614
|
|||||
Income
from Continuing Operations
|
6,334,946
|
5,800,881
|
|||||
Loss
from discontinued operations, net of tax benefit of $47,052
|
-
|
(87,228
|
)
|
||||
Net
Income
|
$
|
6,334,946
|
$
|
5,713,653
|
|||
Earnings
Per Share of Common Stock:
|
|||||||
Basic
|
|||||||
From
continuing operations
|
$
|
1.09
|
$
|
1.01
|
|||
From
discontinued operations
|
-
|
(0.01
|
)
|
||||
Net
Income
|
$
|
1.09
|
$
|
1.00
|
|||
Diluted
|
|||||||
From
continuing operations
|
$
|
1.07
|
$
|
1.00
|
|||
From
discontinued operations
|
-
|
(0.01
|
)
|
||||
Net
Income
|
$
|
1.07
|
$
|
0.99
|
|||
Cash
Dividends Declared Per Share of Common Stock:
|
$
|
0.850
|
$
|
0.835
|
Chesapeake
Utilities Corporation and Subsidiaries
|
|||||||
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
|||||||
For
the Nine Months Ended September 30,
|
2005
|
2004
|
|||||
Operating
Activities
|
|||||||
Net
Income
|
$
|
6,334,946
|
$
|
5,713,653
|
|||
Adjustments
to reconcile net income to net operating cash:
|
|||||||
Depreciation
and amortization
|
5,701,357
|
5,464,279
|
|||||
Depreciation
and accretion included in other costs
|
2,006,725
|
1,915,459
|
|||||
Deferred
income taxes, net
|
(922,436
|
)
|
2,931,381
|
||||
Unrealized
(loss) gain on commodity contracts
|
(630,560
|
)
|
(235,341
|
)
|
|||
Employee
benefits and compensation
|
1,333,364
|
1,167,607
|
|||||
Other,
net
|
(2,508
|
)
|
(13,072
|
)
|
|||
Changes
in assets and liabilities:
|
|||||||
Sale
(purchase) of investments
|
(1,183,889
|
)
|
25,983
|
||||
Accounts
receivable and accrued revenue
|
4,828,373
|
3,003,200
|
|||||
Propane
inventory, storage gas and other inventory
|
(5,432,158
|
)
|
(5,283,626
|
)
|
|||
Regulatory
assets
|
686,280
|
794,299
|
|||||
Prepaid
expenses and other current assets
|
(478,959
|
)
|
(979,920
|
)
|
|||
Other
deferred charges
|
(40,790
|
)
|
(61,041
|
)
|
|||
Long-term
receivables
|
141,222
|
379,227
|
|||||
Accounts
payable and other accrued liabilities
|
1,553,540
|
2,824,841
|
|||||
Income
taxes receivable
|
92,960
|
2,973
|
|||||
Accrued
interest
|
897,342
|
1,001,174
|
|||||
Customer
deposits and refunds
|
305,828
|
193,674
|
|||||
Accrued
compensation
|
108,797
|
(922,332
|
)
|
||||
Regulatory
liabilities
|
1,999,920
|
776,932
|
|||||
Environmental
and other liabilities
|
129,956
|
(81,623
|
)
|
||||
Net
cash provided by operating activities
|
17,429,310
|
18,617,727
|
|||||
Investing
Activities
|
|||||||
Property,
plant and equipment expenditures
|
(18,415,780
|
)
|
(12,087,461
|
)
|
|||
Change
in intangibles
|
-
|
45,572
|
|||||
Environmental
recoveries and other
|
205,689
|
38,001
|
|||||
Net
cash used by investing activities
|
(18,210,091
|
)
|
(12,003,888
|
)
|
|||
Financing
Activities
|
|||||||
Common
stock dividends
|
(4,334,574
|
)
|
(4,146,376
|
)
|
|||
Issuance
of stock for Dividend Reinvestment Plan
|
282,451
|
172,741
|
|||||
Net
purchase of treasury stock
|
-
|
(193,625
|
)
|
||||
Change
in cash overdrafts due to outstanding checks
|
842,674
|
235,038
|
|||||
Net
borrowing (repayment) under line of credit agreements
|
4,779,169
|
(3,515,256
|
)
|
||||
Repayment
of long-term debt
|
(1,794,596
|
)
|
(1,378,458
|
)
|
|||
Net
cash used by financing activities
|
(224,876
|
)
|
(8,825,936
|
)
|
|||
Net
Decrease in Cash and Cash Equivalents
|
(1,005,657
|
)
|
(2,212,097
|
)
|
|||
Cash
and Cash Equivalents — Beginning of Period
|
1,611,761
|
3,108,501
|
|||||
Cash
and Cash Equivalents — End of Period
|
$
|
606,104
|
$
|
896,404
|
Chesapeake
Utilities Corporation and Subsidiaries
|
|||||||
Condensed
Consolidated Balance Sheets (Unaudited)
|
|||||||
Assets
|
September
30, 2005
|
December
31, 2004
|
|||||
Property,
Plant and Equipment
|
|||||||
Natural
gas distribution and transmission
|
$
|
205,938,258
|
$
|
198,306,668
|
|||
Propane
|
40,118,462
|
38,344,983
|
|||||
Advanced
information services
|
1,317,105
|
1,480,779
|
|||||
Other
plant
|
8,881,774
|
9,368,153
|
|||||
Total
property, plant and equipment
|
256,255,599
|
247,500,583
|
|||||
Less:
Accumulated depreciation and amortization
|
(77,525,145
|
)
|
(73,213,605
|
)
|
|||
Plus:
Construction work in progress
|
10,305,782
|
2,766,209
|
|||||
Net
property, plant and equipment
|
189,036,236
|
177,053,187
|
|||||
Investments
|
1,589,177
|
386,422
|
|||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
606,104
|
1,611,761
|
|||||
Accounts
receivable (less allowance for uncollectible accounts of $821,136
and
$610,819, respectively)
|
35,059,713
|
36,938,688
|
|||||
Accrued
revenue
|
2,280,556
|
5,229,955
|
|||||
Propane
inventory, at average cost
|
7,058,323
|
4,654,119
|
|||||
Other
inventory, at average cost
|
1,661,922
|
1,056,530
|
|||||
Regulatory
assets
|
1,960,853
|
2,435,284
|
|||||
Storage
gas prepayments
|
7,507,944
|
5,085,382
|
|||||
Income
taxes receivable
|
626,117
|
719,078
|
|||||
Deferred
income taxes receivable
|
625,336
|
-
|
|||||
Prepaid
expenses
|
2,229,758
|
1,759,643
|
|||||
Other
current assets
|
917,750
|
459,908
|
|||||
Total
current assets
|
60,534,376
|
59,950,348
|
|||||
Deferred
Charges and Other Assets
|
|||||||
Goodwill
|
674,451
|
674,451
|
|||||
Other
intangible assets, net
|
209,134
|
219,964
|
|||||
Long-term
receivables
|
1,067,813
|
1,209,034
|
|||||
Other
regulatory assets
|
1,267,505
|
1,542,741
|
|||||
Other
deferred charges
|
902,913
|
902,281
|
|||||
Total
deferred charges and other assets
|
4,121,816
|
4,548,471
|
|||||
Total
Assets
|
$
|
255,281,605
|
$
|
241,938,428
|
Chesapeake
Utilities Corporation and Subsidiaries
|
|||||||
Condensed
Consolidated Balance Sheets (Unaudited)
|
|||||||
Capitalization
and Liabilities
|
September
30, 2005
|
December
31, 2004
|
|||||
Capitalization
|
|||||||
Stockholders'
equity
|
|||||||
Common
Stock, par value $.4867 per share; (authorized 12,000,000 shares)
(1)
|
$
|
2,851,468
|
$
|
2,812,538
|
|||
Additional
paid-in capital
|
38,870,261
|
36,854,717
|
|||||
Retained
earnings
|
40,398,608
|
39,015,087
|
|||||
Accumulated
other comprehensive income
|
(527,246
|
)
|
(527,246
|
)
|
|||
Deferred
compensation obligation
|
783,925
|
816,044
|
|||||
Treasury
stock
|
(784,704
|
)
|
(1,008,696
|
)
|
|||
Total
stockholders' equity
|
81,592,312
|
77,962,444
|
|||||
Long-term
debt, net of current maturities
|
62,083,364
|
66,189,454
|
|||||
Total
capitalization
|
143,675,676
|
144,151,898
|
|||||
Current
Liabilities
|
|||||||
Current
portion of long-term debt
|
4,929,092
|
2,909,091
|
|||||
Short-term
borrowing
|
10,623,601
|
5,001,758
|
|||||
Accounts
payable
|
32,022,577
|
30,938,272
|
|||||
Customer
deposits and refunds
|
4,984,046
|
4,678,218
|
|||||
Accrued
interest
|
1,498,436
|
601,095
|
|||||
Dividends
payable
|
1,669,822
|
1,617,245
|
|||||
Deferred
income taxes payable
|
-
|
571,876
|
|||||
Accrued
compensation
|
3,012,713
|
2,680,370
|
|||||
Regulatory
liabilities
|
2,588,525
|
571,111
|
|||||
Other
accrued liabilities
|
2,088,206
|
1,800,540
|
|||||
Total
current liabilities
|
63,417,018
|
51,369,576
|
|||||
Deferred
Credits and Other Liabilities
|
|||||||
Deferred
income taxes payable
|
23,630,621
|
23,350,414
|
|||||
Deferred
investment tax credits
|
396,797
|
437,909
|
|||||
Other
regulatory liabilities
|
1,771,007
|
1,578,374
|
|||||
Environmental
liabilities
|
393,833
|
461,656
|
|||||
Accrued
pension costs
|
3,002,654
|
3,007,949
|
|||||
Accrued
asset removal cost
|
16,289,372
|
15,024,849
|
|||||
Other
liabilities
|
2,704,627
|
2,555,803
|
|||||
Total
deferred credits and other liabilities
|
48,188,911
|
46,416,954
|
|||||
Commitments
and Contingencies
(Note 4)
|
|||||||
Total
Capitalization and Liabilities
|
$
|
255,281,605
|
$
|
241,938,428
|
|||
(1)
Shares issued were 5,858,965 and 5,778,976 for 2005 and 2004,
respectively.
|
|||||||
Shares
outstanding were 5,858,941 and 5,769,558 for 2005 and 2004,
respectively.
|
Chesapeake
Utilities Corporation and Subsidiaries
|
|||||||
Condensed
Consolidated Statements of Stockholders' Equity (Unaudited)
|
|||||||
For
the Nine Months Ended September 30, 2005
|
For
the Twelve Months Ended December 31, 2004
|
||||||
Common
Stock
|
|||||||
Balance
— beginning of period
|
$
|
2,812,538
|
$
|
2,754,748
|
|||
Dividend
Reinvestment Plan
|
14,549
|
20,125
|
|||||
Retirement
Savings Plan
|
6,885
|
19,058
|
|||||
Conversion
of debentures
|
8,347
|
9,060
|
|||||
Performance
shares and options exercised
|
9,149
|
9,547
|
|||||
Balance
— end of period
|
$
|
2,851,468
|
$
|
2,812,538
|
|||
Additional
Paid-in Capital
|
|||||||
Balance
— beginning of period
|
$
|
36,854,717
|
$
|
34,176,361
|
|||
Dividend
Reinvestment Plan
|
838,858
|
996,715
|
|||||
Retirement
Savings Plan
|
457,959
|
946,319
|
|||||
Conversion
of debentures
|
283,148
|
307,940
|
|||||
Performance
shares and options exercised
|
435,579
|
427,382
|
|||||
Balance
— end of period
|
$
|
38,870,261
|
$
|
36,854,717
|
|||
Retained
Earnings
|
|||||||
Balance
— beginning of period
|
$
|
39,015,087
|
$
|
36,008,246
|
|||
Net
income
|
6,334,946
|
9,428,767
|
|||||
Cash
dividends declared
|
(4,951,425
|
)
|
(6,403,450
|
)
|
|||
Loss
on issuance of treasury stock
|
-
|
(18,476
|
)
|
||||
Balance
— end of period
|
$
|
40,398,608
|
$
|
39,015,087
|
|||
Accumulated
Other Comprehensive Income
|
|||||||
Balance
— beginning of period
|
($527,246
|
)
|
-
|
||||
Minimum
pension liability adjustment, net of tax
|
-
|
(527,246
|
)
|
||||
Balance
— end of period
|
($527,246
|
)
|
($527,246
|
)
|
|||
Deferred
Compensation Obligation
|
|||||||
Balance
— beginning of period
|
$
|
816,044
|
$
|
913,689
|
|||
New
deferrals
|
119,816
|
296,790
|
|||||
Payout
of deferred compensation
|
(151,935
|
)
|
(394,435
|
)
|
|||
Balance
— end of period
|
$
|
783,925
|
$
|
816,044
|
|||
Treasury
Stock
|
|||||||
Balance
— beginning of period
|
($1,008,696
|
)
|
($913,689
|
)
|
|||
New
deferrals related to compensation obligation
|
(119,816
|
)
|
(296,790
|
)
|
|||
Purchase
of treasury stock (1)
|
(173,466
|
)
|
(355,424
|
)
|
|||
Sale
and distribution of treasury stock (2)
|
517,274
|
557,207
|
|||||
Balance
— end of period
|
($784,704
|
)
|
($1,008,696
|
)
|
|||
Total
Stockholders’ Equity
|
$
|
81,592,312
|
$
|
77,962,444
|
|||
(1)
Amount includes shares purchased in the open market for the Company's
Rabbi Trust to secure its obligations
under the Company's Supplemental Executive Retirement Savings Plan
("SERP
plan").
|
|||||||
(2)
Amount includes shares issued to the Company's Rabbi Trust as obligation
under the SERP plan.
|
1. |
Basis
of Presentation
|
2. |
Comprehensive
Income (Loss)
|
3. |
Calculation
of Earnings Per Share
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
For
the Period Ended September 30,
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Calculation
of Basic Earnings Per Share from Continuing Operations:
|
|||||||||||||
Income
from continuing operations
|
($693,774
|
)
|
($584,171
|
)
|
$
|
6,334,946
|
$
|
5,800,881
|
|||||
Weighted
average shares outstanding
|
5,851,926
|
5,752,623
|
5,823,144
|
5,723,178
|
|||||||||
Basic
Earnings Per Share from Continuing Operations
|
($0.12
|
)
|
($0.10
|
)
|
$
|
1.09
|
$
|
1.01
|
|||||
Calculation
of Diluted Earnings Per Share from Continuing Operations:
|
|||||||||||||
Reconciliation
of Numerator:
|
|||||||||||||
Income
from continuing operations — Basic
|
($693,774
|
)
|
($584,171
|
)
|
$
|
6,334,946
|
$
|
5,800,881
|
|||||
Effect
of 8.25% Convertible debentures *
|
-
|
-
|
94,441
|
104,995
|
|||||||||
Adjusted
numerator — Diluted
|
($693,774
|
)
|
($584,171
|
)
|
$
|
6,429,387
|
$
|
5,905,876
|
|||||
Reconciliation
of Denominator:
|
|||||||||||||
Weighted
shares outstanding — Basic
|
5,851,926
|
5,752,623
|
5,823,144
|
5,723,178
|
|||||||||
Effect
of dilutive securities *
|
|||||||||||||
Stock
options
|
-
|
-
|
371
|
1,793
|
|||||||||
Warrants
|
-
|
-
|
11,262
|
7,598
|
|||||||||
8.25%
Convertible debentures
|
-
|
-
|
147,526
|
163,963
|
|||||||||
Adjusted
denominator — Diluted
|
5,851,926
|
5,752,623
|
5,982,303
|
5,896,532
|
|||||||||
Diluted
Earnings Per Share from Continuing Operations
|
($0.12
|
)
|
($0.10
|
)
|
$
|
1.07
|
$
|
1.00
|
|||||
*
Due
to the loss from continuing operations experienced by the Company
for the
three months ended September 30, 2005 and 2004, the effect of the
Company’s stock options, warrants and convertible debentures was
anti-dilutive. Accordingly, no amount has been included above in
respect
to these securities for those periods.
|
4. |
Commitments
and Contingencies
|
5. |
Recent
Authoritative Pronouncements on Financial Reporting and
Accounting
|
6. |
Segment
Information
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
For
the Period Ended September 30,
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Operating
Revenues, Unaffiliated Customers
|
|||||||||||||
Natural
gas distribution and transmission
|
$
|
26,085,513
|
$
|
18,906,565
|
$
|
112,336,038
|
$
|
86,308,792
|
|||||
Propane
|
5,913,760
|
4,721,326
|
33,399,579
|
28,935,988
|
|||||||||
Advanced
information services
|
3,151,372
|
2,986,808
|
9,341,258
|
9,425,251
|
|||||||||
Other
|
4,476
|
-
|
143,871
|
-
|
|||||||||
Total
operating revenues, unaffiliated customers
|
$
|
35,155,121
|
$
|
26,614,699
|
$
|
155,220,746
|
$
|
124,670,031
|
|||||
Intersegment
Revenues (1)
|
|||||||||||||
Natural
gas distribution and transmission
|
$
|
57,466
|
$
|
36,410
|
$
|
141,482
|
$
|
132,400
|
|||||
Propane
distribution and marketing
|
-
|
-
|
668
|
-
|
|||||||||
Advanced
information services
|
2,624
|
16,017
|
13,433
|
38,604
|
|||||||||
Other
|
154,623
|
154,623
|
463,869
|
492,755
|
|||||||||
Total
intersegment revenues
|
$
|
214,713
|
$
|
207,050
|
$
|
619,452
|
$
|
663,759
|
|||||
Operating
Income
|
|||||||||||||
Natural
gas distribution and transmission
|
$
|
1,130,620
|
$
|
1,759,680
|
$
|
12,116,857
|
$
|
11,674,347
|
|||||
Propane
|
(1,425,028
|
)
|
(1,547,622
|
)
|
1,814,135
|
892,459
|
|||||||
Advanced
information services
|
186,425
|
44,698
|
(77,165
|
)
|
376,533
|
||||||||
Other
and eliminations
|
8,834
|
25,982
|
(123,688
|
)
|
201,500
|
||||||||
Total
operating income
|
($99,149
|
)
|
$
|
282,738
|
$
|
13,730,139
|
$
|
13,144,839
|
|||||
(1)
All significant intersegment revenues are billed at market rates
and have
been eliminated
from consolidated revenues.
|
|||||||||||||
|
|||||||||||||
September
30, 2005
|
December
31, 2004
|
||||||||||||
Identifiable
Assets
|
|||||||||||||
Natural
gas distribution and transmission
|
$
|
185,683,845
|
$
|
184,412,301
|
|||||||||
Propane
|
54,025,140
|
47,531,106
|
|||||||||||
Advanced
information services
|
3,333,164
|
2,387,440
|
|||||||||||
Other
|
12,239,456
|
7,379,794
|
|||||||||||
Total
identifiable assets
|
$
|
255,281,605
|
$
|
241,710,641
|
7. |
Employee
Benefit Plans
|
Defined
Benefit Pension Plan
|
Executive
Excess Retirement Benefit Plan
|
Other
Post-Retirement Benefits
|
|||||||||||||||||
For
the Three Months Ended September 30,
|
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||
Service
Cost
|
$
|
0
|
$
|
81,014
|
$
|
0
|
$
|
26,219
|
$
|
1,564
|
$
|
1,339
|
|||||||
Interest
Cost
|
161,435
|
175,307
|
29,915
|
20,750
|
19,468
|
21,720
|
|||||||||||||
Expected
return on plan assets
|
(175,821
|
)
|
(232,100
|
)
|
-
|
-
|
-
|
-
|
|||||||||||
Amortization
of transition amount
|
-
|
(3,776
|
)
|
-
|
-
|
6,964
|
6,964
|
||||||||||||
Amortization
of prior service cost
|
(1,174
|
)
|
(1,174
|
)
|
-
|
696
|
-
|
-
|
|||||||||||
Amortization
of net loss (gain)
|
-
|
-
|
12,329
|
4,137
|
22,072
|
19,725
|
|||||||||||||
Net
periodic benefit cost
|
($15,560
|
)
|
$
|
19,271
|
$
|
42,244
|
$
|
51,802
|
$
|
50,068
|
$
|
49,748
|
Defined
Benefit Pension Plan
|
Executive
Excess Retirement Benefit Plan
|
Other
Post-Retirement Benefits
|
|||||||||||||||||
For
the Nine Months Ended September 30,
|
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||
Service
Cost
|
$
|
0
|
$
|
250,393
|
$
|
0
|
$
|
78,657
|
$
|
4,693
|
$
|
4,016
|
|||||||
Interest
Cost
|
484,305
|
528,761
|
89,744
|
62,252
|
58,404
|
65,162
|
|||||||||||||
Expected
return on plan assets
|
(527,464
|
)
|
(703,878
|
)
|
-
|
-
|
-
|
-
|
|||||||||||
Amortization
of transition amount
|
-
|
(11,328
|
)
|
-
|
-
|
20,894
|
20,894
|
||||||||||||
Amortization
of prior service cost
|
(3,524
|
)
|
(3,524
|
)
|
-
|
2,090
|
-
|
-
|
|||||||||||
Amortization
of net loss (gain)
|
-
|
-
|
36,989
|
12,411
|
66,218
|
59,175
|
|||||||||||||
Net
periodic benefit cost
|
($46,683
|
)
|
$
|
60,424
|
$
|
126,733
|
$
|
155,410
|
$
|
150,209
|
$
|
149,247
|
8. |
Investments
|
9. |
Stockholders’
Equity
|
For
the Nine Months Ended September 30, 2005
|
For
the Twelve Months Ended December 31, 2004
|
||||||
Common
Stock shares issued and outstanding (1)
|
|||||||
Shares
issued — beginning of period balance
|
5,778,976
|
5,660,594
|
|||||
Dividend
Reinvestment Plan (2)
|
29,894
|
40,993
|
|||||
Retirement
Savings Plan
|
14,147
|
39,157
|
|||||
Conversion
of debentures
|
17,149
|
18,616
|
|||||
Performance
shares and options exercised
|
18,799
|
19,616
|
|||||
Shares
issued — end of period balance (3)
|
5,858,965
|
5,778,976
|
|||||
Treasury
shares — beginning of period balance
|
(9,418
|
)
|
-
|
||||
Purchases
|
(4,779
|
)
|
(15,316
|
)
|
|||
Dividend
Reinvestment Plan
|
2,142
|
-
|
|||||
Retirement
Savings Plan
|
12,031
|
-
|
|||||
Other
issuances
|
-
|
5,898
|
|||||
Treasury
Shares — end of period balance
|
(24
|
)
|
(9,418
|
)
|
|||
Total
Shares Outstanding
|
5,858,941
|
5,769,558
|
|||||
(1)
12,000,000 shares are authorized at a par value of $0.4867 per
share.
|
|||||||
(2)
Includes shares purchased with reinvested dividends and optional
cash
payments.
|
|||||||
(3)
Includes 37,306 and 48,175 shares at September 30, 2005 and December
31,
2004, respectively, held by
Rabbi Trusts established by the Company relating to the Supplemental
Executive Retirement Savings Plan.
|
10. |
Long-Term
Debt
|
11. |
Subsequent
Event
|
· |
weather
conditions and weather patterns;
|
· |
regulatory
environment and regulatory
decisions;
|
· |
availability
of natural gas and propane
supplies;
|
· |
natural
gas and propane production levels;
|
· |
interstate
pipeline transportation and storage
capacity;
|
· |
natural
gas and propane prices and the prices of competing fuels, such as
oil and
electricity;
|
· |
changes
in natural gas and propane usage resulting from improved appliance
efficiencies;
|
· |
the
level of capital expenditures for adding new customers and replacing
facilities worn beyond economic
repair;
|
· |
competitive
environment;
|
· |
environmental
matters;
|
· |
economic
conditions and interest rates;
|
· |
inflation
/ deflation;
|
· |
changes
in technology; and
|
· |
changes
in accounting principles.
|
For
the Three Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Net
Loss
|
||||||||||
Continuing
operations
|
($693,774
|
)
|
($584,171
|
)
|
($109,603
|
)
|
||||
Discontinued
operations
|
-
|
(72,041
|
)
|
72,041
|
||||||
Total
Net Loss
|
($693,774
|
)
|
($656,212
|
)
|
($37,562
|
)
|
||||
Diluted
Earnings Per Share
|
||||||||||
Continuing
operations
|
($0.12
|
)
|
($0.10
|
)
|
($0.02
|
)
|
||||
Discontinued
operations
|
-
|
(0.01
|
)
|
0.01
|
||||||
Total
Earnings Per Share
|
($0.12
|
)
|
($0.11
|
)
|
($0.01
|
)
|
For
the Three Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Operating
Income
|
||||||||||
Natural
Gas Distribution & Transmission
|
$
|
1,130,620
|
$
|
1,759,680
|
($629,060
|
)
|
||||
Propane
|
(1,425,028
|
)
|
(1,547,622
|
)
|
122,594
|
|||||
Advanced
Information Services
|
186,425
|
44,698
|
141,727
|
|||||||
Other
& eliminations
|
8,834
|
25,982
|
(17,148
|
)
|
||||||
Operating
(Loss) Income
|
(99,149
|
)
|
282,738
|
(381,887
|
)
|
|||||
Other
Income
|
19,493
|
38,358
|
(18,865
|
)
|
||||||
Interest
Charges
|
1,272,196
|
1,325,398
|
(53,202
|
)
|
||||||
Income
Taxes
|
(658,078
|
)
|
(420,131
|
)
|
(237,947
|
)
|
||||
Net
Loss from Continuing Operations
|
($693,774
|
)
|
($584,171
|
)
|
($109,603
|
)
|
For
the Three Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
26,142,979
|
$
|
18,942,975
|
$
|
7,200,004
|
||||
Cost
of gas
|
16,790,110
|
10,066,381
|
6,723,729
|
|||||||
Gross
margin
|
9,352,869
|
8,876,594
|
476,275
|
|||||||
Operations
& maintenance
|
5,973,138
|
4,976,464
|
996,674
|
|||||||
Depreciation
& amortization
|
1,416,664
|
1,375,472
|
41,192
|
|||||||
Other
taxes
|
832,447
|
764,978
|
67,469
|
|||||||
Other
operating expenses
|
8,222,249
|
7,116,914
|
1,105,335
|
|||||||
Total
Operating Income
|
$
|
1,130,620
|
$
|
1,759,680
|
($629,060
|
)
|
||||
Statistical
Data — Delmarva Peninsula
|
||||||||||
Per
residential customer added:
|
||||||||||
Estimated
gross margin
|
$
|
372
|
$
|
372
|
$
|
0
|
||||
Estimated
other operating expenses
|
$
|
106
|
$
|
104
|
$
|
2
|
||||
Residential
Customer Information
|
||||||||||
Average
number of customers
|
||||||||||
Delmarva
|
36,803
|
33,871
|
2,932
|
|||||||
Florida
|
11,599
|
10,833
|
766
|
|||||||
Total
|
48,402
|
44,704
|
3,698
|
For
the Three Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
5,913,760
|
$
|
4,721,326
|
$
|
1,192,434
|
||||
Cost
of sales
|
3,427,896
|
3,000,115
|
427,781
|
|||||||
Gross
margin
|
2,485,864
|
1,721,211
|
764,653
|
|||||||
Operations
& maintenance
|
3,349,367
|
2,746,898
|
602,469
|
|||||||
Depreciation
& amortization
|
394,317
|
391,099
|
3,218
|
|||||||
Other
taxes
|
167,208
|
130,836
|
36,372
|
|||||||
Other
operating expenses
|
3,910,892
|
3,268,833
|
642,059
|
|||||||
Total
Operating Loss
|
($1,425,028
|
)
|
($1,547,622
|
)
|
$
|
122,594
|
For
the Three Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
3,153,996
|
$
|
3,002,825
|
$
|
151,171
|
||||
Cost
of sales
|
1,710,440
|
1,733,059
|
(22,619
|
)
|
||||||
Gross
margin
|
1,443,556
|
1,269,766
|
173,790
|
|||||||
Operations
& maintenance
|
1,114,599
|
1,083,639
|
30,960
|
|||||||
Depreciation
& amortization
|
31,038
|
32,690
|
(1,652
|
)
|
||||||
Other
taxes
|
111,494
|
108,739
|
2,755
|
|||||||
Other
operating expenses
|
1,257,131
|
1,225,068
|
32,063
|
|||||||
Total
Operating Income
|
$
|
186,425
|
$
|
44,698
|
$
|
141,727
|
For
the Three Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
159,099
|
$
|
154,623
|
$
|
4,476
|
||||
Cost
of sales
|
2,951
|
-
|
2,951
|
|||||||
Gross
margin
|
156,148
|
154,623
|
1,525
|
|||||||
Operations
& maintenance
|
81,589
|
68,694
|
12,895
|
|||||||
Depreciation
& amortization
|
54,448
|
51,263
|
3,185
|
|||||||
Other
taxes
|
18,479
|
16,723
|
1,756
|
|||||||
Other
operating expenses
|
154,516
|
136,680
|
17,836
|
|||||||
Operating
Income - Other
|
1,632
|
17,943
|
(16,311
|
)
|
||||||
Operating
Income - Eliminations
|
7,202
|
8,039
|
(837
|
)
|
||||||
Total
Operating Income
|
$
|
8,834
|
$
|
25,982
|
($17,148
|
)
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Net
Income
|
||||||||||
Continuing
operations
|
$
|
6,334,946
|
$
|
5,800,881
|
$
|
534,065
|
||||
Discontinued
operations
|
-
|
(87,228
|
)
|
87,228
|
||||||
Total
Net Income
|
$
|
6,334,946
|
$
|
5,713,653
|
$
|
621,293
|
||||
Diluted
Earnings Per Share
|
||||||||||
Continuing
operations
|
$
|
1.07
|
$
|
1.00
|
$
|
0.07
|
||||
Discontinued
operations
|
-
|
(0.01
|
)
|
0.01
|
||||||
Total
Earnings Per Share
|
$
|
1.07
|
$
|
0.99
|
$
|
0.08
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Operating
Income
|
||||||||||
Natural
Gas Distribution & Transmission
|
$
|
12,116,857
|
$
|
11,674,347
|
$
|
442,510
|
||||
Propane
|
1,814,135
|
892,459
|
921,676
|
|||||||
Advanced
Information Services
|
(77,165
|
)
|
376,533
|
(453,698
|
)
|
|||||
Other
& eliminations
|
(123,688
|
)
|
201,500
|
(325,188
|
)
|
|||||
Operating
Income
|
13,730,139
|
13,144,839
|
585,300
|
|||||||
Other
Income
|
330,354
|
215,051
|
115,303
|
|||||||
Interest
Charges
|
3,823,140
|
3,980,395
|
(157,255
|
)
|
||||||
Income
Taxes
|
3,902,407
|
3,578,614
|
323,793
|
|||||||
Net
Income from Continuing Operations
|
$
|
6,334,946
|
$
|
5,800,881
|
$
|
534,065
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
112,477,520
|
$
|
86,441,192
|
$
|
26,036,328
|
||||
Cost
of gas
|
75,773,064
|
52,596,322
|
23,176,742
|
|||||||
Gross
margin
|
36,704,456
|
33,844,870
|
2,859,586
|
|||||||
Operations
& maintenance
|
17,670,394
|
15,715,467
|
1,954,927
|
|||||||
Depreciation
& amortization
|
4,262,737
|
4,078,568
|
184,169
|
|||||||
Other
taxes
|
2,654,468
|
2,376,488
|
277,980
|
|||||||
Other
operating expenses
|
24,587,599
|
22,170,523
|
2,417,076
|
|||||||
Total
Operating Income
|
$
|
12,116,857
|
$
|
11,674,347
|
$
|
442,510
|
||||
Statistical
Data — Delmarva Peninsula
|
||||||||||
Heating
degree-days
|
||||||||||
Actual
|
3,138
|
2,964
|
174
|
|||||||
10-year
average (normal)
|
2,853
|
2,840
|
13
|
|||||||
Estimated
gross margin per HDD
|
$
|
2,234
|
$
|
1,800
|
$
|
434
|
||||
Per
residential customer added:
|
||||||||||
Estimated
gross margin
|
$
|
372
|
$
|
372
|
$
|
0
|
||||
Estimated
other operating expenses
|
$
|
106
|
$
|
104
|
$
|
2
|
||||
Residential
Customer Information
|
||||||||||
Average
number of customers
|
||||||||||
Delmarva
|
37,023
|
33,991
|
3,032
|
|||||||
Florida
|
11,643
|
10,830
|
813
|
|||||||
Total
|
48,666
|
44,821
|
3,845
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
33,400,247
|
$
|
28,935,988
|
$
|
4,464,259
|
||||
Cost
of sales
|
19,968,448
|
17,569,606
|
2,398,842
|
|||||||
Gross
margin
|
13,431,799
|
11,366,382
|
2,065,417
|
|||||||
Operations
& maintenance
|
9,830,244
|
8,779,386
|
1,050,858
|
|||||||
Depreciation
& amortization
|
1,194,644
|
1,145,062
|
49,582
|
|||||||
Other
taxes
|
592,776
|
549,475
|
43,301
|
|||||||
Other
operating expenses
|
11,617,664
|
10,473,923
|
1,143,741
|
|||||||
Total
Operating Income
|
$
|
1,814,135
|
$
|
892,459
|
$
|
921,676
|
||||
Statistical
Data — Delmarva Peninsula
|
||||||||||
Heating
degree-days
|
||||||||||
Actual
|
3,138
|
2,964
|
174
|
|||||||
10-year
average (normal)
|
2,853
|
2,840
|
13
|
|||||||
Estimated
gross margin per HDD
|
$
|
1,743
|
$
|
1,691
|
$
|
52
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
9,354,691
|
$
|
9,463,855
|
($109,164
|
)
|
||||
Cost
of sales
|
5,538,195
|
5,276,546
|
261,649
|
|||||||
Gross
margin
|
3,816,496
|
4,187,309
|
(370,813
|
)
|
||||||
Operations
& maintenance
|
3,392,482
|
3,313,835
|
78,647
|
|||||||
Depreciation
& amortization
|
91,167
|
106,365
|
(15,198
|
)
|
||||||
Other
taxes
|
410,012
|
390,576
|
19,436
|
|||||||
Other
operating expenses
|
3,893,661
|
3,810,776
|
82,885
|
|||||||
Total
Operating (Loss) Income
|
($77,165
|
)
|
$
|
376,533
|
($453,698
|
)
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Revenue
|
$
|
607,740
|
$
|
492,755
|
$
|
114,985
|
||||
Cost
of sales
|
115,578
|
-
|
115,578
|
|||||||
Gross
margin
|
492,162
|
492,755
|
(593
|
)
|
||||||
Operations
& maintenance
|
389,623
|
110,343
|
279,280
|
|||||||
Depreciation
& amortization
|
176,089
|
158,401
|
17,688
|
|||||||
Other
taxes
|
73,418
|
46,629
|
26,789
|
|||||||
Other
operating expenses
|
639,130
|
315,373
|
323,757
|
|||||||
Operating
(Loss) Income - Other
|
(146,968
|
)
|
177,382
|
(324,350
|
)
|
|||||
Operating
Income - Eliminations
|
23,280
|
24,118
|
(838
|
)
|
||||||
Total
Operating (Loss) Income
|
($123,688
|
)
|
$
|
201,500
|
($325,188
|
)
|
For
the Nine Months Ended September 30,
|
2005
|
2004
|
Change
|
|||||||
Net
Income
|
$
|
6,334,946
|
$
|
5,713,653
|
$
|
621,293
|
||||
Non-cash
adjustments to net income
|
7,485,942
|
11,230,313
|
(3,744,371
|
)
|
||||||
Changes
in working capital
|
3,608,422
|
1,673,761
|
1,934,661
|
|||||||
Net
cash from operating activties
|
$
|
17,429,310
|
$
|
18,617,727
|
($1,188,417
|
)
|
Payments
Due by Period
|
||||||||||||||||
Purchase
Obligations
|
Less
than 1 year
|
1
- 3 years
|
3
- 5 years
|
More
than 5 years
|
Total
|
|||||||||||
Commodities
(1)
|
$
|
3,010,488
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
3,010,488
|
||||||
Propane
(2)
|
5,286,569
|
-
|
-
|
-
|
5,286,569
|
|||||||||||
Total
Purchase Obligations
|
$
|
8,297,057
|
$
|
0
|
$
|
0
|
$
|
0
|
$
|
8,297,057
|
(1) |
In
addition to the obligations noted above, the natural gas distribution
and
propane distribution operations have agreements with commodity
suppliers
that have provisions that allow the Company to reduce or eliminate
the
quantities purchased. There are no monetary penalties for reducing
the
amounts purchased; however, the propane contracts allow the suppliers
to
reduce the amounts available in the winter season if the Company
does not
purchase specified amounts during the summer season. Under these
contracts, the commodity prices will fluctuate as market prices
fluctuate.
|
(2) |
The
Company has also entered into forward sale contracts in the aggregate
amount of $8.4 million. See Part I, Item 3, “Quantitative and Qualitative
Disclosures about Market Risk,” below for further
information.
|
o |
the
temperature sensitivity of the natural gas and propane
businesses;
|
o |
the
effect of spot, forward and futures market prices on the Company’s
distribution, wholesale marketing and energy trading
businesses;
|
o |
the
effects of competition on the Company’s unregulated and regulated
businesses;
|
o |
the
effect of changes in federal, state or local regulatory and tax
requirements, including
deregulation;
|
o |
the
effect of accounting changes;
|
o |
the
effect of compliance with environmental regulations or the remediation
of
environmental damage;
|
o |
the
effects of general economic conditions on the Company and its
customers;
|
o |
the
ability of the Company’s new and planned facilities and acquisitions to
generate expected revenues; and
|
o |
the
Company’s ability to obtain the rate relief and cost recovery requested
from utility regulators and the timing of the requested regulatory
actions.
|
At
September 30, 2005
|
Quantity
in gallons
|
Estimated
Market Prices
|
Weighted
Average Contract Prices
|
|||||||
Forward
Contracts
|
||||||||||
Sale
|
7,119,000
|
|
$1.1738
— $1.2088
|
|
$1.1272
|
|||||
Purchase
|
4,746,000
|
|
$1.1375
— $1.1875
|
|
$1.1139
|
|||||
Futures
Contracts
|
||||||||||
Sale
|
294,000
|
|
$1.1925
— $1.1925
|
|
$1.1925
|
|||||
Estimated
market prices and weighted average contract prices are in dollars
per
gallon.
|
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publigly Announced Plans
or Programs
(2)
|
Maximum
Number of Shares That May Yet Be Purchased Under the Plans or Programs
(2)
|
||||||||||||
July
1, 2005 through July 31, 2005 (1)
|
2,974
|
|
$31.15
|
0
|
0
|
|||||||||||
August
1, 2005 through August 31, 2005
|
0
|
|
$0.00
|
0
|
0
|
|||||||||||
September
1, 2005 through September 30, 2005
|
0
|
|
$0.00
|
0
|
0
|
|||||||||||
Total
|
2,974
|
|
$31.15
|
0
|
0
|
|||||||||||
(1)
Chesapeake purchased shares of stock on the open market to add
to shares
held in a Rabbi Trust to adjust the
balance to the contractual value. 337 shares were purchased through
executive dividend deferrals and 2,637
shares were purchased for deferred executive compensation
payout.
|
||||||||||||||||
(2)
Chesapeake has no publicly announced plans or programs to repurchase
its
shares.
|
(a) |
Exhibits:
|
· |
Exhibit
31.1 — Certificate of Chief Executive Officer of Chesapeake Utilities
Corporation pursuant to Rule 13a-14(a) under the Securities Exchange
Act
of 1934, dated November 9, 2005.
|
· |
Exhibit
31.2 — Certificate of Chief Financial Officer of Chesapeake Utilities
Corporation pursuant to Rule 13a-14(a) under the Securities Exchange
Act
of 1934, dated November 9, 2005.
|
· |
Exhibit
32.1 — Certificate of Chief Executive Officer of Chesapeake Utilities
Corporation pursuant to 18 U.S.C. Section 1350, dated November 9,
2005
|
· |
Exhibit
32.2 — Certificate of Chief Financial Officer of Chesapeake Utilities
Corporation pursuant to 18 U.S.C. Section 1350, dated November 9,
2005.
|
(b) |
Reports
on Form 8-K:
|
· |
August
5, 2005, furnishing the Company’s earnings press release for the periods
ended June 30, 2005 (Items 2.02 and
9.01).
|