What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 213 added, 200 removed, 832 unchanged (33% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

35 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

13 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Assets June 30,

Assets September 30,

2021 December 31,

35 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities June 30,

Capitalization and Liabilities September 30,

2021 December 31,

37 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

24 unchanged sentences

Proceeds from sale of assets 727 4,320

Acquisitions, net of cash acquired — ( 15,629 )

Proceeds from the sale of discontinued operations — 200

7 unchanged sentences

Net advances (repayments) under line of credit agreements 16,392 ( 29,385 )

Repayment of long-term debt, net of offering fees — ( 13 )

Proceeds from long-term debt, net of offering fees 9,590 89,827

Repayment of long-term debt ( 10,099 ) ( 40,100 )

Net cash used in financing activities ( 28,175 ) ( 14,819 )

Net cash (used in) / provided by financing activities ( 2,321 ) 16,742

Net Increase (Decrease) in Cash and Cash Equivalents 2,387 ( 3,929 )

12 unchanged sentences

Compensation Treasury

Balance at March 31, 2020 16,433,105 $ 7,998 $ 259,521 $ 322,804 $ ( 6,194 ) $ 5,468 $ ( 5,468 ) $ 584,129

Balance at June 30, 2020 16,463,808 $ 8,013 $ 263,272 $ 326,454 $ ( 4,462 ) $ 5,659 $ ( 5,659 ) $ 593,277

Net income — — — 9,261 — — — 9,261

5 unchanged sentences

Treasury stock activities — — — — — ( 25 ) 25 —

Balance at June 30, 2020 16,463,808 $ 8,013 $ 263,272 $ 326,454 $ ( 4,462 ) $ 5,659 $ ( 5,659 ) $ 593,277

Balance at September 30, 2020 16,696,492 $ 8,126 $ 283,836 $ 328,357 $ ( 3,629 ) $ 5,634 $ ( 5,634 ) $ 616,690

Balance at December 31, 2019 16,403,776 $ 7,984 $ 259,253 $ 300,607 $ ( 6,267 ) $ 4,543 $ ( 4,543 ) $ 561,577

7 unchanged sentences

Cumulative effect of the adoption of ASU 2016-13 — — — ( 30 ) — — — ( 30 )

Balance at September 30, 2020 16,696,492 $ 8,126 $ 283,836 $ 328,357 $ ( 3,629 ) $ 5,634 $ ( 5,634 ) $ 616,690

Balance at June 30, 2021 17,567,928 $ 8,550 $ 357,520 $ 374,936 $ 558 $ 7,203 $ ( 7,203 ) $ 741,564

Balance at March 31, 2021 17,521,493 $ 8,528 $ 350,875 $ 369,623 $ ( 2,638 ) $ 6,992 $ ( 6,992 ) $ 726,388

Net income — — — 12,475 — — — 12,475

5 unchanged sentences

Treasury stock activities — — — — — ( 17 ) 17 —

Balance at June 30, 2021 17,567,928 $ 8,550 $ 357,520 $ 374,936 $ 558 $ 7,203 $ ( 7,203 ) $ 741,564

Balance at September 30, 2021 17,587,834 $ 8,560 $ 361,066 $ 378,897 $ 2,439 $ 7,186 $ ( 7,186 ) $ 750,962

Balance at December 31, 2020 17,461,841 $ 8,499 $ 348,482 $ 342,969 $ ( 2,865 ) $ 5,679 $ ( 5,679 ) $ 697,085

6 unchanged sentences

Treasury stock activities — — — — — 1,507 ( 1,507 ) —

Balance at June 30, 2021 17,567,928 $ 8,550 $ 357,520 $ 374,936 $ 558 $ 7,203 $ ( 7,203 ) $ 741,564

Balance at September 30, 2021 17,587,834 $ 8,560 $ 361,066 $ 378,897 $ 2,439 $ 7,186 $ ( 7,186 ) $ 750,962

(1) 2,000,000 shares of preferred stock at $ 0.01 par value have been authorized.

1 unchanged sentence

accordingly, no information has been included in the statements of stockholders’ equity.

(2) Includes 117,193 , 105,087 , 107,141 , and 95,329 shares at June 30, 2021, December 31, 2020, June 30, 2020 and December 31, 2019, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(2) Includes 114,016 , 105,087 , 104,119 , and 95,329 shares at September 30, 2021, December 31, 2020, September 30, 2020 and December 31, 2019, respectively, held in a Rabbi Trust related to our Non-Qualified Deferred Compensation Plan.

(3) Includes amounts for shares issued for directors’ compensation.

(4) The shares issued under the SICP are net of shares withheld for employee taxes.

For the six months ended June 30, 2021 and 2020, we withheld 14,020 and 10,319 shares, respectively, for employee taxes.

For the nine months ended September 30, 2021 and 2020, we withheld 14,020 and 10,319 shares, respectively, for employee taxes.

The accompanying notes are an integral part of these financial statements.

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Chesapeake Utilities is considered an “essential business,” which has allowed us to continue operational activities and construction projects while adhering to the social distancing restrictions that were in place.

At this time, restrictions continue to be lifted as vaccines have become more available in the United States.

At this time, restrictions continue to be lifted as vaccines have become widely available in the United States.

For example, the state of emergency in Florida was terminated in May 2021 followed by Delaware and Maryland in July 2021, resulting in reduced restrictions.

Despite these positive state orders and in light of the continued emergence and growing prevalence of the new variants of COVID-19, we continue to operate under our pandemic response plan, monitor developments affecting employees, customers, suppliers, stockholders and take all precautions warranted to operate safely and to comply with the CDC, Occupational Safety and Health Administration, in order to protect our employees, customers and the communities.

The expiration of the states of emergency in our service territories has concluded our ability to defer incremental pandemic related costs for consideration through the applicable regulatory process.

Despite these positive state orders and in light of the continued emergence and growing prevalence of the new variants of COVID-19, we continue to operate under our pandemic response plan, monitor developments affecting employees, customers, suppliers, and stockholders and take all precautions warranted to operate safely and to comply with the CDC, Occupational Safety and Health Administration, in order to protect our employees, customers and the communities we serve.

Refer to Note 5 , Rates and Other Regulatory Activities , for further information on the regulated assets established as a result of the incremental expenses incurred associated with COVID-19.

2 unchanged sentences

Calculation of Earnings Per Share

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

16 unchanged sentences

Diluted Earnings Per Share $ 0.71 $ 0.56 $ 3.45 $ 2.97

Escambia Meter Station Asset Purchase

In June 2021, Peninsula Pipeline purchased the Escambia Meter Station from Florida Power and Light for $ 7.5 million and entered into a Transportation Service Agreement with Gulf Power Company to provide up to 530,000 Dts/d of firm service from an interconnect with FGT to Florida Power & Light Company’s Crist Lateral pipeline which provide gas supply to a natural gas fired power plant owned by Florida Power & Light in Pensacola, Florida.

Acquisition of Western Natural Gas

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We accounted for this acquisition as a business combination within our Unregulated Energy segment beginning in the fourth quarter of 2020.

There are multiple strategic benefits to this acquisition including it:

(i) expanded our propane territory serviced in Florida and (ii) included an established customer base with additional opportunities for future growth.

There are multiple strategic benefits to this acquisition including:

(i) expansion of our propane territory serviced in Florida and (ii) establishment of a customer base with additional opportunities for future growth.

In connection with this acquisition, we recorded $ 3.5 million in property plant and equipment, $ 1.4 million in intangible assets associated with customer relationships and non-compete agreements and $ 1.8 million in goodwill, all of which is deductible for income tax purposes.

1 unchanged sentence

The purchase price allocation will be finalized in the fourth quarter of 2021.

For the three months ended June 30, 2021, Western Natural Gas generated operating revenue and income of $ 0.6 million and $ 0.1 million, respectively.

For the six months ended June 30, 2021, Western Natural Gas generated operating revenue and income of $ 1.4 million and $ 0.3 million, respectively.

For the three months ended September 30, 2021, Western Natural Gas generated operating revenue and income of $ 0.5 million and $ 0.1 million, respectively.

For the nine months ended September 30, 2021, Western Natural Gas generated operating revenue and income of $ 1.9 million and $ 0.4 million, respectively.

Acquisition of Elkton Gas

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All of the assets and liabilities are recorded in the Regulated Energy segment.

The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions.

The purchase price allocation will be finalized in the third quarter of 2021.

For the three months ended June 30, 2021, Elkton Gas generated operating revenue and income of $ 0.5 million and $ 0.3 million, respectively.

For the six months ended June 30, 2021, Elkton Gas generated operating revenue and income of $ 3.1 million and $ 0.9 million, respectively.

Upon reaching the end of the acquisition measurement period, we recognized offsetting adjustments to the acquisition date fair values of several of the assets acquired and liabilities assumed.

These adjustments did not result in a change to our previously recognized amount of goodwill.

For the three months ended September 30, 2021, Elkton Gas generated operating revenue and loss of $ 0.9 million and less than $ 0.1 million, respectively.

For the nine months ended September 30, 2021, Elkton Gas generated operating revenue and income of $ 4.7 million and $ 0.7 million, respectively.

Revenue Recognition

2 unchanged sentences

Typically, our customers pay for the goods and/or services we provide in the month following the satisfaction of our performance obligation.

The following table displays our revenue from continuing operations by major source based on product and service type for the three months ended June 30, 2021 and 2020:

Three months ended June 30, 2021 Three months ended June 30, 2020

The following table displays our revenue from continuing operations by major source based on product and service type for the three months ended September 30, 2021 and 2020:

Three months ended September 30, 2021 Three months ended September 30, 2020

(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total

26 unchanged sentences

$ 80,396 $ 32,109 $ ( 5,170 ) $ 107,335 $ 82,762 $ 22,714 $ ( 4,057 ) $ 101,419

(1) Total operating revenues for the three months ended June 30, 2021, include other revenue (revenues from sources other than contracts with customers) of $ 0.1 million and $ 0.09 million for our Regulated and Unregulated Energy segments, respectively, and $ 0.1 million and $ 0.04 million for our Regulated and Unregulated Energy segments, respectively, for the three months ended June 30, 2020.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper and late fees.

The following table displays our revenue from continuing operations by major source based on product and service type for the six months ended June 30, 2021 and 2020:

Six months ended June 30, 2021 Six months ended June 30, 2020

(1) Total operating revenues for the three months ended September 30, 2021, include other revenue (revenues from sources other than contracts with customers) of $ 0.1 million for both Regulated and Unregulated Energy segments, respectively, and $ 0.2 million and $ 0.05 million for our Regulated and Unregulated Energy segments, respectively, for the three months ended September 30, 2020.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

The following table displays our revenue from continuing operations by major source based on product and service type for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30, 2021 Nine months ended September 30, 2020

(in thousands) Regulated Energy Unregulated Energy Other and Eliminations Total Regulated Energy Unregulated Energy Other and Eliminations Total

26 unchanged sentences

$ 282,503 $ 141,642 $ ( 14,541 ) $ 409,604 $ 259,235 $ 104,466 $ ( 12,541 ) $ 351,160

(1) Total operating revenues for the six months ended June 30, 2021, include other revenue (revenues from sources other than contracts with customers) of $( 0.2 ) million and $ 0.2 million for our Regulated and Unregulated Energy segments, respectively, and $ 0.8 million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively, for the six months ended June 30, 2020.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper and late fees.

(1) Total operating revenues for the nine months ended September 30, 2021, include other revenue (revenues from sources other than contracts with customers) of $( 0.1 ) million and $ 0.3 million for our Regulated and Unregulated Energy segments, respectively, and $ 1.0 million and $ 0.2 million for our Regulated and Unregulated Energy segments, respectively, for the nine months ended September 30, 2020.

The sources of other revenues include revenue from alternative revenue programs related to revenue normalization for the Maryland division and Sandpiper Energy and late fees.

Contract balances

The timing of revenue recognition, customer billings and cash collections results in trade receivables, unbilled receivables (contract assets), and customer advances (contract liabilities) in our condensed consolidated balance sheets.

The balances of our trade receivables, contract assets, and contract liabilities as of June 30, 2021 and December 31, 2020 were as follows:

The balances of our trade receivables, contract assets, and contract liabilities as of September 30, 2021 and December 31, 2020 were as follows:

Trade Receivables Contract Assets (Current) Contract Assets (Non-current) Contract Liabilities (Current)

9 unchanged sentences

Our performance obligation is satisfied over the term of the respective retail-offering plan on a ratable basis.

For the three months ended June 30, 2021 and 2020, we recognized revenue of $ 0.2 million.

For each of the six months ended June 30, 2021 and 2020, we recognized revenue of $ 0.6 million.

For the three months ended September 30, 2021 and 2020, we recognized revenue of $ 0.2 million.

For each of the nine months ended September 30, 2021 and 2020, we recognized revenue of $ 0.8 million, respectively.

Remaining performance obligations

Our businesses have long-term fixed fee contracts with customers in which revenues are recognized when performance obligations are satisfied over the contract term.

Revenue for these businesses for the remaining performance obligations, at June 30, 2021, are expected to be recognized as follows:

Revenue for these businesses for the remaining performance obligations, at September 30, 2021, are expected to be recognized as follows:

(in thousands) 2021 2022 2023 2024 2025 2026 2027 and thereafter

7 unchanged sentences

and Peninsula Pipeline and Aspire Energy Express, our intrastate pipeline subsidiaries, are subject to regulation (excluding cost of service) by the Florida PSC and Public Utilities Commission of Ohio, respectively.

There were no material regulatory activities in the second quarter of 2021.

See the discussion below under COVID-19 impact .

Strategic Infrastructure Development and Enhancement (“STRIDE”) plan:

In March 2021, Elkton Gas filed a strategic infrastructure development and enhancement plan with the Maryland PSC.

The STRIDE plan proposes to

increase the speed of Elkton Gas' Aldyl-A pipeline replacement program and to recover the costs of the plan in the form of fixed charge rider through a proposed five-year surcharge.

Under Elkton Gas’ proposed STRIDE plan, the Aldyl-A pipelines would be replaced by 2023.

In June 2021, we reached a settlement with the Maryland PSC Staff and the Maryland Office of the Peoples Counsel.

The settlement agreement is currently being reviewed by a Maryland Public Utilities Law Judge, who must issue a final recommendation to the Commission.

A final order is expected in August 2021.

The STRIDE plan accelerates

Elkton Gas' Aldyl-A pipeline replacement program as costs of the plan are recovered through a fixed charge rider which is effective for five years.

Under Elkton Gas’ STRIDE plan, the Aldyl-A pipelines will be fully replaced by 2023.

In July 2021, Elkton Gas reached a settlement with the Maryland PSC Staff and the Maryland Office of Public Counsel that approved Elkton Gas’ STRIDE plan.

The STRIDE plan allows for recovery of the associated revenue requirement through a monthly surcharge, which was implemented effective September 4, 2021.

Hurricane Michael:

In October 2018, Hurricane Michael passed through FPU's electric distribution operation's service territory in Northwest Florida and caused widespread and severe damage to FPU's infrastructure resulting in the loss of electric service to 100 percent of its customers in the Northwest Florida service territory.

In August 2019, FPU filed a limited proceeding requesting recovery of storm-related costs associated with Hurricane Michael (capital and expenses) through a change in base rates.

FPU also requested treatment and recovery of certain storm-related costs as regulatory assets for items currently not allowed to be recovered through the storm reserve as well as the recovery of capital replaced as a result of the storm.

Recovery of these costs includes a component of an overall return on capital additions and regulatory assets.

In March 2020, we filed an update to our original filing to account for actual charges incurred through December 2019, revised the amortization period of the storm-related costs from 30 years as originally requested to 10 years, and included costs related to Hurricane Dorian of approximately $ 1.2 million in this filing.

In late 2019, the Florida PSC approved an interim rate increase, subject to refund, effective January 1, 2020, associated with the restoration effort following Hurricane Michael.

We fully reserved these interim rates, pending a final resolution and settlement of the limited proceeding.

In September 2020, the Florida PSC approved a settlement agreement between FPU and the Office of the Public Counsel regarding final cost recovery and rates associated with Hurricane Michael.

In late 2019, the Florida PSC approved an interim rate increase for FPU electric division's limited proceeding, subject to refund, effective January 1, 2020, associated with the restoration effort following Hurricane Michael.

We fully reserved these interim rates, pending a final resolution and settlement.

In September 2020, the Florida PSC approved a settlement agreement between FPU and the Florida OPC regarding final cost recovery and rates associated with Hurricane Michael.

The settlement agreement allowed us to:

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West Palm Beach Expansion Project:

In June 2019, Peninsula Pipeline filed with the Florida PSC for approval of its Transportation Service Agreement with FPU.

Peninsula Pipeline will construct several new interconnection points and pipeline expansions in Palm Beach County, Florida, which will enable FPU to serve an industrial research park and several new residential developments.

Peninsula Pipeline will provide transportation service to FPU, increasing reliability, system pressure as well as introducing diversity in fuel source for natural gas to serve the increased demand in these areas.

The petition was approved by the Florida PSC at the August 6, 2019 Agenda.

Interim services began in the fourth quarter of 2019.

We expect to complete the remainder of the project in phases through the fourth quarter of 2021.

In August 2019, the Florida PSC approved Peninsula Pipeline’s Transportation Service Agreement with FPU.

Peninsula Pipeline is constructing several new interconnection points and pipeline expansions in Palm Beach County, Florida, which will enable FPU to serve an industrial research park and several new residential developments.

Peninsula Pipeline will provide transportation service to FPU, increasing reliability and system pressure as well as introducing diversity in the fuel source for natural gas to serve the increased demand in these areas.

Interim services began in the fourth quarter of 2019 and we expect to complete the remainder of the project in phases through the fourth quarter of 2021.

Winter Haven Expansion Project:

1 unchanged sentence

As part of this agreement, Peninsula Pipeline will construct a new interconnect with FGT and a new regulator station for CFG.

CFG will use the additional firm service to support new incremental load due to growth in the area, including providing service to a new can manufacturing facility, as well as provide reliability and operational benefits to CFG’s existing distribution system in the area.

CFG will use the additional firm service to support new incremental load due to growth, including providing service to a new can manufacturing facility, as well as provide reliability and operational benefits to CFG’s existing distribution system in the area.

In connection with Peninsula Pipeline’s new regulator station, CFG is also extending its distribution system to connect to the new station.

The Transportation Service Agreement was approved by the Florida PSC in September 2021.

Escambia Meter Station:

In June 2021, Peninsula Pipeline purchased the Escambia Meter Station from Florida Power and Light and entered into a Transportation Service Agreement with Gulf Power Company to provide up to 530,000 Dts/d of firm service from an interconnect with FGT to Florida Power & Light Company’s Crist Lateral pipeline, which provides gas supply to their natural gas fired power plant owned by Florida Power & Light in Pensacola,

As required by Peninsula Pipeline’s tariff and Florida Statutes, Peninsula Pipeline filed the required company and customer affidavits with the Florida PSC in June 2021.

In June 2021, Peninsula Pipeline purchased the Escambia Meter Station from Florida Power & Light Company and entered into a Transportation Service Agreement with Gulf Power Company for up to 530,000 Dts/d of firm service from an interconnect with FGT to Florida Power & Light Company’s Crist Lateral pipeline, which provides gas supply to their natural gas fired power plant in Pensacola, Florida.

Beachside Pipeline Extension:

In June 2021, Peninsula Pipeline and Florida City Gas entered into a Transportation Service Agreement for an incremental 10,176 Dts/d of firm service in Indian River County, Florida, to support Florida City Gas’ growth along the Indian River's barrier island.

As part of this agreement, Peninsula Pipeline will construct approximately 11.33 miles of pipeline from its existing pipeline in the Sebastian, Florida area, which will travel east under the Intercoastal Waterway ("ICW") and southward on the barrier island.

As part of this agreement, Peninsula Pipeline will construct 11.3 miles of pipeline from its existing pipeline in the Sebastian, Florida area, which will travel east under the Intercoastal Waterway ("ICW") and southward on the barrier island.

As required by Peninsula Pipeline’s tariff and Florida Statutes, Peninsula Pipeline filed the required company and customer affidavits with the Florida PSC in June 2021.

Construction commenced in June 2021 and the expected in-service date is December 2022.

Eastern Shore

2 unchanged sentences

The order approved the construction and operation of new facilities that will provide an additional 14,300 Dts/d of firm service to four customers.

Facilities to be constructed include six miles of pipeline looping in Delaware;

This includes six miles of pipeline looping in Delaware;

13 miles of new mainline extension in Sussex County, Delaware and Wicomico and Somerset Counties in Maryland;

1 unchanged sentence

The benefits of this project include:

(i) additional natural gas transmission pipeline infrastructure in eastern Sussex County, Delaware, and (ii) extension of Eastern Shore’s pipeline system, for the first time, into Somerset County, Maryland.

Construction on the project began in January 2020, and Eastern Shore anticipates that this project will be fully in-service by the end of 2021.

(i) additional natural gas transmission pipeline infrastructure in eastern Sussex County, Delaware, and (ii) extension of Eastern

Shore’s pipeline system, for the first time, into Somerset County, Maryland.

The project is now fully in service as the construction of the Somerset County, Maryland expansion was completed in the third quarter of 2021.

Capital Cost Surcharge:

In June 2021, Eastern Shore filed with the FERC a capital cost surcharge to recover capital costs associated with two mandated highway relocate projects that required the replacement of existing Eastern Shore facilities.

In June 2021, Eastern Shore submitted a filing with the FERC regarding a capital cost surcharge to recover capital costs associated with two mandated highway relocate projects that required the replacement of existing Eastern Shore facilities.

The capital cost surcharge is an approved item in the settlement of Eastern Shore’s last rate case.

In conjunction with the filing of this surcharge, pursuant to the settlement agreement, a true-up of the existing surcharge to reflect additional depreciation was included in this filing.

In conjunction with the filing of this surcharge, pursuant to the settlement agreement, a cumulative adjustment to the existing surcharge to reflect additional depreciation was included in this filing.

The FERC issued an order approving the surcharge as filed on July 7, 2021.

The combined revised surcharge will become effective July 15, 2021.

The combined revised surcharge became effective July 15, 2021.

COVID-19 Impact

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In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.

These restrictions significantly impacted economic conditions in the United States in 2020 and continued into 2021.

These restrictions significantly impacted economic conditions in the United States in 2020 and have continued through the third quarter of 2021.

Chesapeake Utilities is considered an “essential business,” which has allowed us to continue operational activities and construction projects with appropriate safety precautions and personal protective equipment, while being mindful of the social distancing restrictions that were in place.

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The additional operating expenses we incurred support the ongoing delivery of our essential services during these unprecedented times.

At this time, restrictions continue to be lifted as vaccines have become more available in the United States.

For example, the state of emergency in Florida was terminated in May followed by Delaware and Maryland in July, resulting in reduced restrictions.

Despite these positive state orders and in light of the continued emergence and growing prevalence of new variants of COVID-19, we continue to operate under our pandemic response plan, monitor developments affecting employees, customers, suppliers, stockholders and take all precautions warranted to operate safely and to comply with the CDC, Occupational Safety and Health Administration, in order to protect our employees, customers and the communities.

At this time, restrictions are gradually being lifted as vaccines are widely available in the United States.

The state of emergency in Florida was terminated in May followed by Delaware and Maryland in July.

Despite these positive state orders and in light of the prevalence of new variants of COVID-19, we continue to operate under our pandemic response plan, monitor developments affecting employees, customers, suppliers, stockholders and take all precautions warranted to operate safely and to comply with the CDC and the Occupational Safety and Health Administration, with a goal of minimizing further exposure for our employees, customers and the communities.

In April 2020, the Maryland PSC issued an order that authorized utilities to establish a regulatory asset to record prudently incurred incremental costs related to COVID-19, beginning on March 16, 2020.

current catastrophic health emergency is outside the control of the utility and is a non-recurring event.

The Maryland PSC is working on a plan that will provide funds to assist with the repayment of arrearages for customers in need and those impacted by COVID-19.

Chesapeake Utilities – Maryland Division, Sandpiper Energy, and Elkton Gas will receive funds in the third quarter of 2021 to credit the accounts of those customers experiencing financial hardship in becoming current on their past due balances.

The Maryland PSC found that the creation of a regulatory asset for COVID-19 related expenses will facilitate the recovery of those costs prudently incurred to serve customers during the COVID-19 pandemic, and that the deferral of such costs is appropriate because the current catastrophic health emergency is outside the control of the utility and is a non-recurring event.

The Maryland PSC has reviewed and issued guidance regarding the distribution of funds and the manner in which the utilities will allocate the funds to customers with eligible arrearages.

Chesapeake Utilities – Maryland Division, Sandpiper Energy, and Elkton Gas received $ 0.3 million in the third quarter of 2021 to credit the accounts of those customers experiencing financial hardship in becoming current on their past due balances.

In May 2020, the Delaware PSC issued an order that authorized Delaware utilities to establish a regulatory asset to record COVID-19 related incremental costs incurred to ensure customers have essential utility services, for the period beginning on March 24, 2020 and ending 30 days after the state of emergency ends.

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The creation of the regulatory asset for COVID-19 related costs offers utilities the ability to seek recovery of those costs.

Funds to assist with individual customer arrearages have become available through the Delaware State Housing Authority.

We are working to ensure that customers know how to seek this support and then apply it to their overdue utility bills.

In October 2020, the Florida PSC approved a joint petition of our natural gas and electric distribution utilities in Florida to establish a regulatory asset to record incremental expenses incurred due to COVID-19.

The regulatory asset will allow us to seek recovery of these costs in the next base rate proceedings.

In November 2020, the Office of Public Counsel filed a protest to the order approving the establishment of this regulatory asset treatment, contending that the order should be a reversed or modified and to request a hearing on the protest.

The Company’s Florida regulated business units reached a settlement with Office of Public Counsel in June 2021.

In November 2020, the Florida OPC filed a protest to the order approving the establishment of this regulatory asset treatment, contending that the order should be reversed or modified and to request a hearing on the protest.

The Company’s Florida regulated business units reached a settlement with the Florida OPC in June 2021.

The settlement allows the units to establish a regulatory asset in a total amount of $ 2.1 million as of June 30, 2021.

This amount includes COVID-19 related incremental expenses for bad debt write-offs, personnel protective equipment, cleaning and business information services for remote work.

Our Florida regulated business units will amortize the amount over two years and recover the regulatory asset through the Purchased Gas Adjustment and Swing Service mechanisms for the natural gas business units and through the Fuel Purchased Power Cost Recovery clause for the electric division.

This settlement agreement was approved by the Florida PSC on July 8, 2021.

This amount includes COVID-19 related incremental

expenses for bad debt write-offs, personnel protective equipment, cleaning and business information services for remote work.

Our Florida regulated business units will amortize the regulatory asset over two years and recover it through the Purchased Gas Adjustment and Swing Service mechanisms for the natural gas business units and through the Fuel Purchased Power Cost Recovery clause for the electric division.

This settlement agreement was approved by the Florida PSC on July 8, 2021 and the final order was issued on July 22, 2021.

In the fourth quarter of 2020, we began recording regulatory assets based on the net incremental expense resulting from the COVID-19 pandemic for our natural gas distribution and electric business units as authorized by the Delaware, Maryland and Florida PSCs.

As of June 30, 2021 our total COVID-19 regulatory asset balance was $ 1.6 million.

As of September 30, 2021 and December 31, 2020, our total COVID-19 regulatory asset balance was $ 2.3 million and $ 1.9 million, respectively.

Summary TCJA Table

Customer rates for our regulated businesses were adjusted as approved by the regulators, prior to 2020 with the exception of Elkton Gas, which implemented a one-time bill credit in May 2020.

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of June 30, 2021 and December 31, 2020:

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of September 30, 2021 and December 31, 2020:

Amount (in thousands)

Operation and Regulatory Jurisdiction June 30, 2021 December 31, 2020 Status

Operation and Regulatory Jurisdiction September 30, 2021 December 31, 2020 Status

Eastern Shore (FERC) $ 34,190 $ 34,190 Will be addressed in Eastern Shore's next rate case filing.

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and Winter Haven, Key West, Pensacola, Sanford and West Palm Beach, Florida.

As of June 30, 2021 and December 31, 2020, we had approximately $ 5.6 million and $ 5.9 million, respectively, in environmental liabilities related to FPU’s four MGP sites in Key West, Pensacola, Sanford and West Palm Beach.

As of September 30, 2021 and December 31, 2020, we had approximately $ 5.4 million and $ 5.9 million, respectively, in environmental liabilities related to FPU’s four MGP sites in Key West, Pensacola, Sanford and West Palm Beach.

FPU has approval to recover, from insurance and through customer rates, up to $ 14.0 million of its environmental costs related to its MGP sites.

As of June 30, 2021 and December 31, 2020, we had recovered approximately $ 12.6 million and $ 12.4 million, respectively, leaving approximately $ 1.4 million and $ 1.6 million, respectively, in regulatory assets for future recovery of environmental costs from FPU’s customers.

As of September 30, 2021 and December 31, 2020, we had recovered approximately $ 12.7 million and $ 12.4 million, respectively, leaving approximately $ 1.3 million and $ 1.6 million, respectively, in regulatory assets for future recovery of environmental costs from FPU’s customers.

Environmental liabilities for our MGP sites are recorded on an undiscounted basis based on the estimate of future costs provided by independent consultants.

1 unchanged sentence

Remediation is ongoing for the MGPs in Winter Haven and Key West in Florida and in Seaford, Delaware and the remaining clean-up costs are estimated to be between $ 0.3 million to $ 0.9 million for these three sites.

Environmental Protection Agency has approved a "site-wide ready for anticipated use" status for the Sanford, Florida MGP site, which is the final step before delisting a site.

The Environmental Protection Agency has approved a "site-wide ready for anticipated use" status for the Sanford, Florida MGP site, which is the final step before delisting a site.

The remaining remediation expenses for the Sanford MGP site are immaterial.

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The agreements were effective as of April 1, 2020 and expire in March 2023.

FPU natural gas distribution operations and Eight Flags have entered into separate asset management agreements with Emera Energy Services, Inc.

FPU natural gas distribution operations and Eight Flags have separate asset management agreements with Emera Energy Services, Inc.

to manage their natural gas transportation capacity.

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Failure to comply with the ratios specified in the Gulf Power agreement could also result in FPU having to provide an irrevocable letter of credit.

As of June 30, 2021, FPU was in compliance with all of the requirements of its fuel supply contracts.

As of September 30, 2021, FPU was in compliance with all of the requirements of its fuel supply contracts.

Eight Flags provides electricity and steam generation services through its CHP plant located on Amelia Island, Florida.

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The Board of Directors has authorized us to issue corporate guarantees securing obligations of our subsidiaries and to obtain letters of credit securing our subsidiaries' obligations.

The maximum authorized liability under such guarantees and letters of credit as of June 30, 2021 was $ 20.0 million.

The aggregate amount guaranteed at June 30, 2021 was approximately $ 8.0 million with the guarantees expiring on various dates through March 30, 2022.

As of June 30, 2021, we have issued letters of credit totaling approximately $ 4.8 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through October 5, 2021.

We have not drawn on these letters of credit as of June 30, 2021 and do not anticipate that the counterparties will draw upon these letters of credit.

The maximum authorized liability under such guarantees and letters of credit as of September 30, 2021 was $ 20.0 million.

The aggregate amount guaranteed at September 30, 2021 was approximately $ 8.0 million with the guarantees expiring on various dates through September 24, 2022.

As of September 30, 2021, we have issued letters of credit totaling approximately $ 4.6 million related to the electric transmission services for FPU's electric division, the firm transportation service agreement between TETLP and our Delaware and Maryland divisions and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through September 30, 2022.

We have not drawn on these letters of credit as of September 30, 2021 and do not anticipate that the counterparties will draw upon these letters of credit.

We expect that they will be renewed to the extent necessary in the future.

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Effective in the third quarter of 2019, the natural gas marketing and related services subsidiary (PESCO), previously reported in the Unregulated Energy segment, was reflected in discontinued operations.

The remainder of our operations are presented as “Other businesses and eliminations,” which consists of unregulated subsidiaries that own real estate leased to Chesapeake Utilities, as well as certain corporate costs not allocated to other operations.

The remainder of our operations is presented as “Other businesses and eliminations,” which consists of unregulated subsidiaries that own real estate leased to Chesapeake Utilities, as well as certain corporate costs not allocated to other operations.

The following table presents financial information about our reportable segments:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

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(1) All significant intersegment revenues are billed at market rates and have been eliminated from consolidated operating revenues.

(in thousands) June 30, 2021 December 31, 2020

(in thousands) September 30, 2021 December 31, 2020

Identifiable Assets

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In the third and fourth quarters of 2020, we issued 0.3 million shares at an average price per share of $ 86.12 and received net proceeds of $ 22.0 million under the DRIP.

In the first six months of 2021, we issued less than 0.1 million shares at an average price per share of $ 113.51 and received net proceeds of $ 4.5 million under the DRIP.

In the first nine months of 2021, we issued less than 0.1 million shares at an average price per share of $ 116.63 and received net proceeds of $ 6.6 million under the DRIP.

In October 2021, we issued less than 0.1 million shares at an average price per share of $ 127.40 and received net proceeds of $ 1.8 million under the DRIP.

We used the net proceeds from the ATM equity program and the DRIP, after deducting the commissions or other fees and related offering expenses payable by us, for general corporate purposes, including, but not limited to, financing of capital expenditures, repayment of short-term debt, financing acquisitions, investing in subsidiaries, and general working capital purposes.

1 unchanged sentence

Defined benefit pension and postretirement plan items, unrealized gains (losses) of our propane swap agreements designated as commodity contracts cash flow hedges, and the unrealized gains (losses) of our interest rate swap agreements designated as cash flow hedges are the components of our accumulated other comprehensive income (loss).

The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of June 30, 2021 and 2020.

The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of September 30, 2021 and 2020.

All amounts in the following tables are presented net of tax.

8 unchanged sentences

Net current-period other comprehensive income 192 5,094 18 5,304

As of June 30, 2021 $ ( 5,018 ) $ 5,600 $ ( 24 ) $ 558

As of September 30, 2021 $ ( 4,954 ) $ 7,403 $ ( 10 ) $ 2,439

(in thousands)

As of December 31, 2019 $ ( 4,933 ) $ ( 1,334 ) $ — $ ( 6,267 )

Other comprehensive income/(loss) before reclassifications — 2,770 ( 29 ) $ 2,741

Other comprehensive income before reclassifications — 3,594 23 3,617

Amounts reclassified from accumulated other comprehensive income/(loss) 198 ( 1,144 ) ( 33 ) ( 979 )

Net prior-period other comprehensive income/(loss) 198 2,450 ( 10 ) 2,638

As of June 30, 2020 $ ( 4,801 ) $ 376 $ ( 37 ) $ ( 4,462 )

The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2021 and 2020.

As of September 30, 2020 $ ( 4,735 ) $ 1,116 $ ( 10 ) $ ( 3,629 )

The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

Deferred gains or losses for our commodity contracts and interest rate swap cash flow hedges are recognized in earnings upon settlement.

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

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See Note 13, Derivative Instruments , for additional details.

Amortization of defined benefit pension and postretirement plan items are included in other expense, net gains and losses on propane swap agreements, natural gas swaps, and natural gas futures contracts are included in cost of sales, the realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income.

Amortization of defined benefit pension and postretirement plan items are included in other expense, net gains and losses on propane swap agreements contracts are included in cost of sales, the realized gain or loss on interest rate swap agreements is recognized as a component of interest charges in the accompanying condensed consolidated statements of income.

The income tax benefit is included in income tax expense in the accompanying condensed consolidated statements of income.

Employee Benefit Plans

Net periodic benefit costs for our pension and post-retirement benefits plans for the three and six months ended June 30, 2021 and 2020 are set forth in the following tables:

Net periodic benefit costs for our pension and post-retirement benefits plans for the three and nine months ended September 30, 2021 and 2020 are set forth in the following tables:

Pension Plan FPU

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Postretirement

For the Three Months Ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020

For the Three Months Ended September 30, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020

(in thousands)

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Postretirement

For the Six Months Ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020

For the Nine Months Ended September 30, 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020

(in thousands)

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Total periodic cost (benefit) $ 162 $ 207 $ ( 738 ) $ ( 276 ) $ 57 $ 63 $ ( 9 ) $ 3 $ 12 $ 36

We expect to record $ 0.7 million in pension and post-retirement benefits for 2021.

In 2019, we began executing a de-risking strategy for the Chesapeake Pension Plan.

In line with this strategy, we have decided to fully terminate the Chesapeake Pension Plan, which we expect to be complete in the fourth quarter of 2021 and will recognize the necessary expense associated with the termination of the Chesapeake Pension Plan at that time.

The components of our net periodic costs have been recorded or reclassified to other expense, net in the condensed consolidated statements of income.

Pursuant to a Florida PSC order, FPU continues to record, as a regulatory asset, a portion of the unrecognized postretirement benefit costs related to its regulated operations after the FPU merger.

The portion of the unrecognized pension and postretirement benefit costs related to FPU’s unregulated operations and Chesapeake Utilities' operations is recorded to accumulated other comprehensive loss.

In 2019, we executed a de-risking strategy for the Chesapeake Pension Plan.

As a result of this strategy, we are planning to terminate the Chesapeake Pension Plan in the fourth quarter of 2021.

The following tables present the amounts included in the regulatory asset and accumulated other comprehensive loss that were recognized as components of net periodic benefit cost during the three and six months ended June 30, 2021 and 2020:

For the Three Months Ended June 30, 2021 Chesapeake

Pursuant to their respective regulatory orders, FPU and Chesapeake Utilities continue to record, as a regulatory asset, a portion of their unrecognized postretirement benefit costs related to their regulated operations.

The following tables present the amounts included in the regulatory asset and accumulated other comprehensive income that were recognized as components of net periodic benefit cost during the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended September 30, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

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Total recognized in net periodic benefit cost 60 155 7 ( 9 ) ( 2 ) 211

Recognized from accumulated other comprehensive loss/(gain) (1)

Recognized from accumulated other comprehensive (income)/loss (1)

60 29 7 ( 9 ) — 87

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Total $ 60 $ 155 $ 7 $ ( 9 ) $ ( 2 ) $ 211

For the Three Months Ended June 30, 2020 Chesapeake

For the Three Months Ended September 30, 2020 Chesapeake

Plan Chesapeake SERP Chesapeake

4 unchanged sentences

Total recognized in net periodic benefit cost 65 135 5 ( 7 ) — 198

Recognized from accumulated other comprehensive loss/(gain) (1)

Recognized from accumulated other comprehensive (income)/loss (1)

65 26 5 ( 7 ) — 89

1 unchanged sentence

Total $ 65 $ 135 $ 5 $ ( 7 ) $ — $ 198

For the Six Months Ended June 30, 2021 Chesapeake

For the Nine Months Ended September 30, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

4 unchanged sentences

Total recognized in net periodic benefit cost 180 465 21 ( 27 ) ( 6 ) 633

Recognized from accumulated other comprehensive loss/(gain) (1)

Recognized from accumulated other comprehensive (income)/loss (1)

180 87 21 ( 27 ) ( 1 ) 260

1 unchanged sentence

Total $ 180 $ 465 $ 21 $ ( 27 ) $ ( 6 ) $ 633

For the Six Months Ended June 30, 2020 Chesapeake

For the Nine Months Ended September 30, 2020 Chesapeake

Plan Chesapeake SERP Chesapeake

4 unchanged sentences

Total recognized in net periodic benefit cost 195 405 15 ( 21 ) — 594

Recognized from accumulated other comprehensive loss/(gain) (1)

Recognized from accumulated other comprehensive (income)/loss (1)

195 78 15 ( 21 ) — 267

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(1) See Note 9 , Stockholders' Equity .

During the three and six months ended June 30, 2021, we contributed approximately $ 0.1 million to the Chesapeake Pension Plan and approximately $ 0.5 million to the FPU Pension Plan.

We expect to contribute approximately $ 0.3 million and $ 2.1 million, respectively, to the Chesapeake Pension Plan and FPU Pension Plans during 2021, which represents the minimum annual contribution payments required.

During the three and nine months ended September 30, 2021, we contributed approximately $ 0.2 million and $ 0.3 million, respectively to the Chesapeake Pension Plan and approximately $ 0.5 million and $ 1.3 million, respectively, to the FPU Pension Plan.

We expect to contribute approximately $ 2.1 million to the FPU Pension Plan during 2021, which represents the minimum annual contribution payments required.

We will make all required contributions to the Chesapeake Pension Plan so that it can be terminated before the end of the year.

The Chesapeake SERP, the Chesapeake Postretirement Plan and the FPU Medical Plan are unfunded and are expected to be paid out of our general funds.

Cash benefits paid under the Chesapeake SERP for the three and six months ended June 30, 2021 were immaterial and $ 0.1 million, respectively.

Cash benefits paid under the Chesapeake SERP for the three and nine months ended September 30, 2021 were immaterial and $ 0.1 million, respectively.

We expect to pay total cash benefits of approximately $ 0.2 million under the Chesapeake SERP in 2021.

Cash benefits paid under the Chesapeake Postretirement Plan, primarily for medical claims for the three and six months ended June 30, 2021 were immaterial and $ 0.2 million, respectively.

Cash benefits paid under the Chesapeake Postretirement Plan, primarily for medical claims for the three and nine ended September 30, 2021 were immaterial and $ 0.2 million, respectively.

We estimate that approximately $ 0.2 million will be paid for such benefits under the Chesapeake Postretirement Plan in 2021.

Cash benefits paid under the FPU Medical Plan, primarily for medical claims for the three and six months ended June 30, 2021, were immaterial.

Cash benefits paid under the FPU Medical Plan, primarily for medical claims for the three and nine months ended September 30, 2021, were $ 0.1 million.

We estimate that approximately $ 0.1 million will be paid for such benefits under the FPU Medical Plan in 2021.

The investment balances at June 30, 2021 and December 31, 2020, consisted of the following:

(in thousands) June 30,

The investment balances at September 30, 2021 and December 31, 2020, consisted of the following:

(in thousands) September 30,

2021 December 31,

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We classify these investments as trading securities and report them at their fair value.

For the three months ended June 30, 2021 and 2020, we recorded a net unrealized gain of approximately $ 0.6 million and $ 1.4 million, respectively, in other income, net in the condensed consolidated statements of income related to these investments.

For the six months ended June 30, 2021 and 2020, we recorded a net unrealized gain of approximately $ 1.0 million and a net unrealized loss of approximately $ 0.1 million, respectively, in other expense, net in the condensed consolidated statements of income related to these investments.

For the three months ended September 30, 2021 and 2020, we recorded an immaterial net unrealized loss and a net unrealized gain of $ 0.6 million, respectively, in other income, net in the condensed consolidated statements of income related to these investments.

For the nine months ended September 30, 2021 and 2020, we recorded net unrealized gains of approximately $ 1.0 million and $ 0.4 million, respectively, in other expense, net in the condensed consolidated statements of income related to these investments.

For the investment in the Rabbi Trust, we also have recorded an associated liability, which is included in other pension and benefit costs in the consolidated balance sheets and is adjusted each period for the gains and losses incurred by the investments in the Rabbi Trust.

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The compensation cost is based primarily on the fair value of the shares awarded, using the estimated fair value of each share on the date it was granted and the number of shares to be issued at the end of the service period.

The table below presents the amounts included in net income related to share-based compensation expense for the three and six months ended June 30, 2021 and 2020:

Three Months Ended Six Months Ended

June 30, June 30,

The table below presents the amounts included in net income related to share-based compensation expense for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

10 unchanged sentences

accordingly, 6,830 shares, with a weighted average fair value of $ 117.11 per share, were issued and vested in 2021.

At June 30, 2021, there was approximately $ 0.7 million of unrecognized compensation expense related to shares granted to non-employee directors.

At September 30, 2021, there was approximately $ 0.5 million of unrecognized compensation expense related to shares granted to non-employee directors.

This expense will be recognized over the remaining service period ending in May of 2022.

On October 15, 2021, a newly appointed member of the Board of Directors received a pro-rated retainer of 342 shares of common stock under the SICP to serve as a non-employee director through the 2022 Annual Meeting of Stockholders.

The shares awarded to the non-employee director immediately vested upon issuance in October 2021, had a weighted average fair value of $ 129.09 per share, and will be expensed over the remaining service period ending on the date of the 2022 Annual Meeting of Stockholders.

Key Employees

The table below presents the summary of the stock activity for awards to key employees for the six months ended June 30, 2021:

The table below presents the summary of the stock activity for awards to key employees for the nine months ended September 30, 2021:

Number of Shares Weighted Average

4 unchanged sentences

Forfeited ( 5,384 ) $ 93.39

Outstanding—June 30, 2021 194,107 $ 94.61

In February 2021, we granted awards of 66,612 shares of common stock to key employees under the SICP.

The shares granted are multi-year awards that will vest at the end of the three-year service period ending December 31, 2023.

All of these stock awards are earned based upon the successful achievement of long-term financial results, which comprise market-based and performance-based conditions or targets.

Outstanding—September 30, 2021 196,057 $ 94.15

During the nine months ended September 30, 2021, we granted awards of 68,562 shares of common stock to key employees under the SICP, including awards granted in February 2021 and to key employees appointed in officer positions.

The shares granted are multi-year awards that will vest no later than the three-year service period ending December 31, 2023.

All of these stock awards are earned based upon the successful achievement of long-term financial results, which are comprised of market-based and performance-based conditions or targets.

The fair value of each performance-based condition or target is equal to the market price of our common stock on the grant date of each award.

3 unchanged sentences

Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $ 1.5 million.

At June 30, 2021, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 23.4 million.

At June 30, 2021, there was approximately $ 6.1 million of unrecognized compensation cost related to these awards, which will be recognized as expense for the remainder of 2021 through 2023.

At September 30, 2021, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 23.5 million.

At September 30, 2021, there was approximately $ 5.6 million of unrecognized compensation cost related to these awards, which will be recognized through 2023.

Stock Options

There were no stock options outstanding or issued during the six months ended June 30, 2021 and 2020.

There were no stock options outstanding or issued during the nine months ended September 30, 2021 and 2020.

Derivative Instruments

5 unchanged sentences

We have also entered into interest rate swap agreements to mitigate risk associated with changes in short-term borrowing rates.

As of June 30, 2021, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

As of September 30, 2021, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

Volume of Derivative Activity

As of June 30, 2021, the volume of our commodity derivative contracts were as follows:

As of September 30, 2021, the volume of our commodity derivative contracts were as follows:

Business unit Commodity Contract Type Quantity hedged (in millions) Designation Longest Expiration date of hedge

2 unchanged sentences

Sharp entered into futures and swap agreements to mitigate the risk of fluctuations in wholesale propane index prices associated with the propane volumes that are expected to be purchased and/or sold during the heating season.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in

June 2021 through June 2024) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in September 2021 through June 2024) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices.

If the index prices are lower than the swap prices, Sharp will pay the difference.

1 unchanged sentence

The change in the fair value of the swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss) and later recognized in the statement of income in the same period and in the same line item as the hedged transaction.

We expect to reclassify approximately $ 5.4 million from accumulated other comprehensive income to earnings during the next 12 -month period ended June 30, 2022.

We expect to reclassify approximately $ 6.2 million from accumulated other comprehensive income to earnings during the next 12 -month period ended September 30, 2022.

Interest Rate Swap Activities

We manage interest rate risk by entering into derivative contracts to hedge the variability in cash flows attributable to changes in the short-term borrowing rates.

In the fourth quarter of 2020, we entered into interest rate swaps with notional amount of $ 60.0 million through December 2021 with pricing of 0.20 and 0.205 percent for the period associated with our outstanding borrowing under the Revolver.

In the fourth quarter of 2020, we entered into two $ 30.0 million interest rate swaps with a total notional amount of $ 60.0 million through September and December 2021 with pricing of 0.205 and 0.20 percent, respectively, for the period associated with our outstanding borrowing under the Revolver.

In February 2021, we entered into an additional interest rate swap with a notional amount of $ 40.0 million through December 2021 with pricing of 0.17 percent.

4 unchanged sentences

When the interest rate swaps settle, the realized gain or loss will be recorded in the income statement and recognized as a component of interest charges.

We expect to reclassify less than $ 0.1 million from accumulated other comprehensive (loss) to earnings during the next 12 -month period ended June 30, 2022.

We expect to reclassify less than $ 0.1 million from accumulated other comprehensive (loss) to earnings during the next 12 -month period ended September 30, 2022.

Broker Margin

1 unchanged sentence

Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin, and variation margin that fluctuates based on the daily mark-to-market relative to maintenance margin requirements.

We currently maintain a broker margin account for Sharp, with the balance related to the account is as follows:

(in thousands) Balance Sheet Location June 30, 2021 December 31, 2020

Sharp Other Current Liabilities $ 4,808 $ 1,505

We currently maintain a broker margin account for Sharp as follows:

(in thousands) Balance Sheet Location September 30, 2021 December 31, 2020

Sharp Other Accrued Liabilities $ 6,094 $ 1,505

Financial Statements Presentation

1 unchanged sentence

We did not have any derivative contracts with a credit-risk-related contingency.

The fair values of the derivative contracts recorded in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020, are as follows:

The fair values of the derivative contracts recorded in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, are as follows:

Derivative Assets

Fair Value As Of

(in thousands) Balance Sheet Location June 30, 2021 December 31, 2020

(in thousands) Balance Sheet Location September 30, 2021 December 31, 2020

Derivatives designated as fair value hedges

5 unchanged sentences

Fair Value As Of

(in thousands) Balance Sheet Location June 30, 2021 December 31, 2020

(in thousands) Balance Sheet Location September 30, 2021 December 31, 2020

Derivatives designated as fair value hedges

6 unchanged sentences

Amount of Gain (Loss) on Derivatives:

Location of Gain For the Three Months Ended June 30, For the Six Months Ended June 30,

Location of Gain For the Three Months Ended September 30, For the Nine Months Ended September 30,

(in thousands) (Loss) on Derivatives 2021 2020 2021 2020

18 unchanged sentences

Financial Assets and Liabilities Measured at Fair Value

The following tables summarize our financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements, by level, within the fair value hierarchy as of June 30, 2021 and December 31, 2020:

Fair Value Measurements Using:

As of June 30, 2021 Fair Value Quoted Prices in

As of September 30, 2021 Fair Value Quoted Prices in

Active Markets

22 unchanged sentences

Derivative liabilities $ 127 $ — $ 127 $ —

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the six months ended June 30, 2021 and 2020:

Six months ended June 30,

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the nine months ended September 30, 2021 and 2020:

Nine months ended September 30,

(in thousands)

6 unchanged sentences

Investment income from the Level 3 investments is reflected in other expense, (net) in the condensed consolidated statements of income.

At June 30, 2021, there were no non-financial assets or liabilities required to be reported at fair value.

At September 30, 2021, there were no non-financial assets or liabilities required to be reported at fair value.

We review our non-financial assets for impairment at least on an annual basis, as required.

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The fair value of short-term debt approximates the carrying value due to its near-term maturities and because interest rates approximate current market rates (Level 3 measurement).

At June 30, 2021, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 512.9 million, compared to the estimated fair value of $ 541.5 million.

At September 30, 2021, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 522.5 million, compared to the estimated fair value of $ 561.9 million.

At December 31, 2020, long-term debt, which includes the current maturities but excludes debt issuance costs, had a carrying value of approximately $ 523.0 million, compared to a fair value of approximately $ 548.5 million.

3 unchanged sentences

Our outstanding long-term debt is shown below:

June 30, December 31,

September 30, December 31,

(in thousands) 2021 2020

12 unchanged sentences

2.96% note, due August 15, 2035 40,000 40,000

Equipment security note

2.46% note, due September 29, 2031 9,590 —

debt issuance costs ( 825 ) ( 901 )

2 unchanged sentences

Total long-term debt, net of current maturities $ 505,459 $ 508,499

Notes Purchase Agreement

On August 25, 2021, we entered into a Note Purchase Agreement (“Note Agreement”) with multiple lenders to issue $ 50.0 million in uncollateralized senior notes.

Under the Note Agreement, we will issue the senior notes on January 25, 2022 at a rate of 2.49 percent for a 15-year term.

These senior notes, when issued, will have similar covenants and default provisions as the existing senior notes, and will have an annual principal payment beginning in the sixth year after the issuance.

The proceeds received from the issuances of the senior notes will be used to reduce our short-term borrowings under our lines of credit and to fund capital expenditures.

Equipment Security Note

On September 24, 2021, we entered into an Equipment Financing Agreement with Banc of America Leasing & Capital, LLC to issue $ 9.6 million in sustainable financing to finance the purchase of equipment by our subsidiary, Marlin Gas Services.

The equipment security note bears a 2.46 percent interest rate and has a term of ten years.

Under the terms of the agreement, we granted a security interest in the equipment to the lender, to serve as collateral.

Shelf Agreements

We have entered into Shelf Agreements with Prudential, MetLife and NYL, whom are under no obligation to purchase any unsecured debt.

The following table summarizes our Shelf Agreements at June 30, 2021:

The following table summarizes our Shelf Agreements at September 30, 2021:

(in thousands) Total Borrowing Capacity Less:

8 unchanged sentences

150,000 ( 140,000 ) — 10,000

Total Shelf Agreements as of June 30, 2021 $ 670,000 $ ( 360,000 ) $ — $ 310,000

Total Shelf Agreements as of September 30, 2021

$ 670,000 $ ( 360,000 ) $ — $ 310,000

(1) The Prudential, MetLife and NYL Shelf Agreements expire in April 2023, May 2023 and November 2021, respectively.

2 unchanged sentences

We are authorized by our Board of Directors to borrow up to $ 400.0 million of short-term debt, as required.

At June 30, 2021 and December 31, 2020, we had $ 169.3 million and $ 175.6 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 1.11 percent and 1.28 percent.

Included in the June 30, 2021 balance, is $ 100.0 million in short-term debt for which we have entered into interest rate swap agreements.

In the fourth quarter of 2020, we entered into interest rate swaps with a notional amount of $ 60.0 million through December 2021 with pricing of 0.20 and 0.205 percent for the period associated with our outstanding borrowing under the Revolver.

In February 2021, we entered into an additional interest rate swap with a notional amount of $ 40.0 million

through December 2021 with pricing of 0.17 percent.

Our short-term borrowing is based on the 30-day LIBOR rate.

The interest rate swaps are cash settled monthly as the counter-party pays us the 30-day LIBOR rate less the fixed rate.

In September 2020, we entered into a $ 375.0 million syndicated Revolver with six participating lenders.

As a result of entering into the Revolver, in September 2020, we terminated and paid all outstanding balances under the previously existing bilateral lines of credit and the previous revolving credit facility.

At September 30, 2021 and December 31, 2020, we had $ 192.0 million and $ 175.6 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 0.82 percent and 1.28 percent.

Included in the September 30, 2021 balance, is $ 70.0 million in short-term debt for which we have entered into interest rate swap agreements.

In August 2021, we amended and restated our Revolver into a multi-tranche facility totaling $ 400.0 million with multiple participating lenders.

The two tranches of the facility consist of a $ 200.0 million 364-day short-term debt tranche and a $ 200.0 million five-year tranche, both of which have three (3) one-year extension options, which can be authorized by our Chief Financial Officer.

We are eligible to establish the repayment term for individual borrowings under the five year tranche of the facility and to the extent that an individual loan under the revolver exceeded 12 months, the outstanding balance would be classified as a component of long-term debt.

The availability of funds under the Revolver is subject to conditions specified in the credit agreement, all of which we currently satisfy.

1 unchanged sentence

We are required by the financial covenants in the Revolver to maintain, at the end of each fiscal year, a funded indebtedness ratio of no greater than 65 percent.

As of June 30, 2021, we are in compliance with this covenant.

The Revolver expires on September 29, 2021 and is available to provide funds for our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures.

Borrowings under the Revolver are subject to a pricing grid, including the commitment fee and the interest rate charged.

Our pricing is adjusted each quarter based upon total indebtedness to total capitalization ratio.

As of June 30, 2021, the pricing under the Revolver included an unused commitment fee of 0.15 percent and an interest rate of 1.0 percent over LIBOR.

Our available credit under the Revolver at June 30, 2021 was $ 200.9 million.

As of June 30, 2021, we had issued $ 4.8 million in letters of credit to various counterparties under the syndicated Revolver.

As of September 30, 2021, we are in compliance with this covenant.

The 364-day tranche of the Revolver expires in August 2022 and the five-year tranche expires in August 2026 both are available to provide funds for our short-term cash needs to meet seasonal working capital requirements and to temporarily fund portions of our capital expenditures.

Borrowings under both tranches of the Revolver are subject to a pricing grid, including the commitment fee and the interest rate charged.

Our pricing is adjusted each quarter based upon a total indebtedness to total capitalization ratio.

As of September 30, 2021, the pricing under the 364-day tranche of the Revolver does not include an unused commitment fee and maintains an interest rate of 0.70 percent over LIBOR.

As of September 30, 2021, the pricing under the five-year tranche of the Revolver included an unused commitment fee of 0.09 percent and an interest rate of 0.95 percent over LIBOR.

Our total available credit under the Revolver at September 30, 2021 was $ 203.4 million.

As of September 30, 2021, we had issued $ 4.6 million in letters of credit to various counterparties under the syndicated Revolvers.

These letters of credit are not included in the outstanding short-term borrowings and we do not anticipate that they will be drawn upon by the counterparties.

The letters of credit reduce the available borrowings under our syndicated Revolver.

In the fourth quarter of 2020, we entered into two $ 30.0 million interest rate swaps with a notional amount of $ 60.0 million through September and December 2021 at a pricing of 0.205 and 0.20 percent, respectively.

In February 2021, we entered into an additional interest rate swap with a notional amount of $ 40.0 million through December 2021 with pricing of 0.17 percent.

Our short-term borrowing is based on the 30-day LIBOR rate.

The interest rate swaps are cash settled monthly as the counter-party pays us the 30-day LIBOR rate less the fixed rate.

We have entered into lease arrangements for office space, land, equipment, pipeline facilities and warehouses.

10 unchanged sentences

The exercise of lease renewal options is at our sole discretion.

The amounts disclosed in our consolidated balance sheet at June 30, 2021, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options.

The amounts disclosed in our consolidated balance sheet at September 30, 2021, pertaining to the right-of-use assets and lease liabilities, are measured based on our current expectations of exercising our available renewal options.

Our existing leases are not subject to any restrictions or covenants that would preclude our ability to pay dividends, obtain financing or enter into additional leases.

As of June 30, 2021, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations.

As of September 30, 2021, we have not entered into any leases, which have not yet commenced, that would entitle us to significant rights or create additional obligations.

The following table presents information related to our total lease cost included in our consolidated statements of income:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

( in thousands) Classification 2021 2020 2021 2020

2 unchanged sentences

(1) Includes short-term leases and variable lease costs, which are immaterial .

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at June 30, 2021 and December 31, 2020:

(in thousands) Balance sheet classification June 30, 2021 December 31, 2020

The following table presents the balance and classifications of our right of use assets and lease liabilities included in our condensed consolidated balance sheet at September 30, 2021 and December 31, 2020:

(in thousands) Balance sheet classification September 30, 2021 December 31, 2020

Operating lease assets Operating lease right-of-use assets $ 9,602 $ 11,194

2 unchanged sentences

Total lease liabilities $ 10,105 $ 11,619

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating and financing leases at June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating and financing leases at September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

Weighted-average remaining lease term ( in years )

2 unchanged sentences

Operating leases 3.8 % 3.8 %

The following table presents additional information related to cash paid for amounts included in the measurement of lease liabilities included in our condensed consolidated statements of cash flows as of June 30, 2021 and 2020:

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2021 2020

Operating cash flows from operating leases $ 1,399 $ 1,435

The following table presents the future undiscounted maturities of our operating and financing leases at June 30, 2021 and for each of the next five years and thereafter:

The following table presents the future undiscounted maturities of our operating and financing leases at September 30, 2021 and for each of the next five years and thereafter:

(in thousands) Operating

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements