What changed in this filing

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Item 1. Financial Statements

2022-05-03 compared with 2021-11-03 · 199 added, 367 removed, 678 unchanged (45% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

(in thousands, except shares and per share data)

4 unchanged sentences

Operating Expenses

Regulated Energy cost of sales 15,294 16,271 72,785 67,490

Unregulated Energy and other cost of sales 12,072 5,640 55,578 30,250

Regulated natural gas and electric costs 45,442 43,043

Unregulated propane and natural gas costs 51,738 31,254

Operations 42,794 39,437

Maintenance 4,264 4,042

Gain from settlement — — — ( 130 )

Depreciation and amortization 16,977 15,365

2 unchanged sentences

Operating Income 54,865 51,597

Other income (expense), net 339 ( 40 ) 2,180 2,997

Other income, net 913 375

Interest charges 5,339 5,105

Income from Continuing Operations Before Income Taxes 15,477 12,782 81,334 65,063

Income Taxes on Continuing Operations 2,993 3,502 20,563 16,082

Income from Continuing Operations 12,484 9,280 60,771 48,981

Income (Loss) from Discontinued Operations, Net of Tax ( 9 ) ( 19 ) ( 17 ) 165

Income Before Income Taxes 50,439 46,867

Income Taxes 13,506 12,401

Net Income $ 36,933 $ 34,466

2 unchanged sentences

Diluted 17,761,119 17,553,167

Basic Earnings Per Share of Common Stock:

Earnings from Continuing Operations $ 0.71 $ 0.56 $ 3.46 $ 2.97

Earnings from Discontinued Operations — — — 0.01

Basic Earnings Per Share of Common Stock $ 0.71 $ 0.56 $ 3.46 $ 2.98

Diluted Earnings Per Share of Common Stock:

Earnings from Continuing Operations $ 0.71 $ 0.56 $ 3.45 $ 2.96

Earnings from Discontinued Operations — — — 0.01

Diluted Earnings Per Share of Common Stock $ 0.71 $ 0.56 $ 3.45 $ 2.97

Earnings Per Share of Common Stock:

Basic $ 2.09 $ 1.97

Diluted $ 2.08 $ 1.96

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

1 unchanged sentence

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

(in thousands)

6 unchanged sentences

Unrealized gain on commodity contract cash flow hedges, net of tax of $185 and $63, respectively 529 166

Unrealized gain/(loss) on interest rate swap cash flow hedges, net of tax of $5, $10, $6 and $(4), respectively 14 27 18 ( 10 )

Unrealized loss on interest rate swap cash flow hedges, net of tax of $(1) — ( 2 )

Total Other Comprehensive Income, net of tax 547 227

3 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Assets September 30,

Assets March 31,

2022 December 31,

35 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities September 30,

Capitalization and Liabilities March 31,

2022 December 31,

6 unchanged sentences

Retained earnings 421,344 393,072

Accumulated other comprehensive income (loss) 2,439 ( 2,865 )

Accumulated other comprehensive income 1,850 1,303

Deferred compensation obligation 6,477 7,240

28 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

5 unchanged sentences

Deferred income taxes 7,398 6,334

Gain on sale of discontinued operations — ( 200 )

Realized gain on commodity contracts and sale of assets ( 4,274 ) ( 3,514 )

Unrealized (gain) loss on investments/commodity contracts ( 949 ) ( 432 )

Unrealized loss (gain) on investments/commodity contracts 541 ( 389 )

Employee benefits and compensation ( 260 ) ( 173 )

14 unchanged sentences

Proceeds from sale of assets 219 394

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

Proceeds from the sale of discontinued operations — 200

Environmental expenditures ( 267 ) ( 247 )

8 unchanged sentences

Repayment of long-term debt ( 213 ) —

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

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

Net cash used in financing activities ( 38,953 ) ( 26,459 )

Net Increase in Cash and Cash Equivalents 232 2,076

Cash and Cash Equivalents—Beginning of Period 4,976 3,499

11 unchanged sentences

Compensation Treasury

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

Other comprehensive gain — — — — 833 — — 833

Dividend declared ($0.440 per share) — — — ( 7,358 ) — — — ( 7,358 )

Dividend reinvestment plan 232,684 113 19,420 — — — — 19,533

Share-based compensation and tax benefit (3)(4)

— — 1,144 — — — — 1,144

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

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

1 unchanged sentence

Other comprehensive income — — — — 227 — — 227

Dividend declared ($1.285 per share) — — — ( 21,366 ) — — — ( 21,366 )

Dividend reinvestment plan 258,260 126 21,693 — — — — 21,819

Share-based compensation and tax benefit (3) (4)

34,456 16 2,890 — — — — 2,906

Treasury stock activities — — — — — 1,091 ( 1,091 ) —

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

Net income — — — 12,475 — — — 12,475

Other comprehensive income — — — — 1,881 — — 1,881

Dividend declared ($0.480 per share) — — — ( 8,514 ) — — — ( 8,514 )

Dividends declared ($0.440 per share) — — — ( 7,812 ) — — — ( 7,812 )

Dividend reinvestment plan 20,511 10 2,204 — — — — 2,214

2 unchanged sentences

Treasury stock activities — — — — — 1,313 ( 1,313 ) —

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

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

Balance at December 31, 2021 17,655,410 $ 8,593 $ 371,162 $ 393,072 $ 1,303 $ 7,240 $ ( 7,240 ) $ 774,130

1 unchanged sentence

Other comprehensive income — — — — 547 — — 547

Dividend declared ($1.400 per share) — — — ( 24,826 ) — — — ( 24,826 )

Dividend reinvestment plan 80,022 39 9,247 — — — — 9,286

Dividends declared ($0.480 per share) — — — ( 8,661 ) — — — ( 8,661 )

Issuance under various plans (5)

24,960 12 3,410 — — — — 3,422

Share-based compensation and tax benefit (3) (4)

1 unchanged sentence

Treasury stock activities — — — — — ( 763 ) 763 —

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

Balance at March 31, 2022 17,719,388 $ 8,624 $ 373,694 $ 421,344 $ 1,850 $ 6,477 $ ( 6,477 ) $ 805,512

(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 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.

(2) Includes 107,518 , 116,238 , 116,751 , and 105,087 shares at March 31, 2022, December 31, 2021, March 31, 2021 and December 31, 2020, 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 nine months ended September 30, 2021 and 2020, we withheld 14,020 and 10,319 shares, respectively, for employee taxes.

For the three months ended March 31, 2022 and 2021, we withheld 21,832 and 14,020 shares, respectively, for employee taxes.

(5) Includes the Retirement Savings Plan, DRIP and ATM equity issuances.

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

13 unchanged sentences

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.

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 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.

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.

FASB Statements and Other Authoritative Pronouncements

There are no new accounting pronouncements issued that are applicable to us.

These restrictions significantly impacted economic conditions in the United States beginning in 2020 and to a lesser extent have continued into 2022.

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

At this time, restrictions have predominantly been lifted as vaccines have become widely available in the United States.

Previously existing states of emergency in all of our service territories expired during the second and third quarters of 2021 eliminating a majority of restrictions initially implemented to slow the spread of the virus.

The expiration of the states of emergency along with the settlement of our limited proceeding in Florida, has concluded our ability to defer incremental pandemic related costs for consideration through the applicable regulatory process.

We have adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational and Safety and Health Administration, as new developments occur.

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

Recent Accounting Standards Yet to be Adopted

Reference Rate Reform - (ASC 848) - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which was subsequently amended by ASU 2021-01.

The standard provides relief for companies preparing for the discontinuation of interest rates, such as LIBOR, and allows optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform.

The amendments included in this ASU are to be applied prospectively, and are not expected to have a material impact on our financial position or results of operations.

Calculation of Earnings Per Share

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

(in thousands, except shares and per share data)

Calculation of Basic Earnings Per Share:

Income from Continuing Operations $ 12,484 $ 9,280 $ 60,771 $ 48,981

Income/(Loss) from Discontinued Operations ( 9 ) ( 19 ) ( 17 ) 165

Net Income $ 36,933 $ 34,466

Weighted average shares outstanding 17,678,060 17,485,866

Basic Earnings Per Share from Continuing Operations $ 0.71 $ 0.56 $ 3.46 $ 2.97

Basic Earnings Per Share from Discontinued Operations — — — 0.01

Basic Earnings Per Share $ 2.09 $ 1.97

Calculation of Diluted Earnings Per Share:

Net Income $ 36,933 $ 34,466

Reconciliation of Denominator:

2 unchanged sentences

Adjusted denominator—Diluted 17,761,119 17,553,167

Diluted Earnings Per Share from Continuing Operations $ 0.71 $ 0.56 $ 3.45 $ 2.96

Diluted Earnings Per Share from Discontinued Operations — — — 0.01

Diluted Earnings Per Share $ 2.08 $ 1.96

Acquisition of Western Natural Gas

In October 2020, Sharp acquired certain propane operating assets of Western Natural Gas, which provides propane distribution service throughout Jacksonville, Florida and the surrounding communities, for approximately $ 6.7 million, net of cash acquired.

Additionally, the purchase price included $ 0.3 million of working capital.

We recorded contingent consideration of $ 0.3 million related to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing.

Acquisition of Diversified Energy

On December 15, 2021, Sharp acquired the propane operating assets of Diversified Energy for approximately $ 37.5 million, net of cash acquired.

In connection with this acquisition, we recorded a $ 2.1 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing.

Included with the acquisition, was approximately $ 1.7 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory.

We accounted for this acquisition as a business combination within our Unregulated Energy Segment beginning in the fourth quarter of 2021.

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 January 2022, we recorded a post-closing true-up of $ 0.8 million related to the provision for working capital valuation at the time of closing.

There were multiple strategic benefits to this acquisition including it:

(i) expands our propane service territory into North Carolina and South Carolina (ii) builds upon our existing propane presence in Virginia and Pennsylvania, and (iii) includes an established customer base with opportunities for future growth.

Through this acquisition, the Company added approximately 19,000 residential, commercial and agricultural customers, along with expected distribution of approximately 10.0 million gallons of propane annually.

In connection with this acquisition, we recorded $ 23.1 million in property plant and equipment, $ 6.2 million in intangible assets associated with customer relationships and non-compete agreements and $ 5.9 million in goodwill, all of which is deductible for income tax purposes.

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 fourth quarter of 2021.

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

In July 2020, we closed on the acquisition of Elkton Gas, which provides natural gas distribution service to approximately 7,000 residential and commercial customers within a franchised area of Cecil County, Maryland for approximately, $ 15.6 million, net of cash acquired.

Additionally, the purchase price included $ 0.6 million of working capital.

Elkton Gas’ territory is contiguous to our franchised service territory in Cecil County, Maryland.

In connection with this acquisition, we recorded $ 15.9 million in property, plant and equipment, $ 0.6 million in accounts receivable, $ 2.6 million in other liabilities, $ 2.6 million in regulatory liabilities and $ 4.3 million in goodwill, all of which is deductible for income tax purposes.

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

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.

The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions and finalization prior to the first anniversary of the transaction closing.

For the three months ended March 31, 2022, Diversified Energy generated operating revenue and operating income of $ 10.4 million and $ 1.5 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 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

Energy distribution

Delaware natural gas division $ 7,849 $ — $ — $ 7,849 $ 7,243 $ — $ — $ 7,243

Florida natural gas division 8,015 — — 8,015 7,309 — — 7,309

FPU electric distribution 23,121 — — 23,121 29,051 — — 29,051

FPU natural gas distribution 22,012 — — 22,012 19,935 — — 19,935

Maryland natural gas division 2,432 — — 2,432 2,824 — — 2,824

Sandpiper natural gas/propane operations 3,553 — — 3,553 3,290 — — 3,290

Elkton Gas 915 — — 915 623 — — 623

Total energy distribution 67,897 — — 67,897 70,275 — — 70,275

Energy transmission

Aspire Energy — 5,255 — 5,255 — 3,449 — 3,449

Aspire Energy Express 47 — — 47 — — — —

Eastern Shore 18,558 — — 18,558 18,389 — — 18,389

Peninsula Pipeline 6,776 — — 6,776 6,433 — — 6,433

Total energy transmission 25,381 5,255 — 30,636 24,822 3,449 — 28,271

Energy generation

Eight Flags — 4,583 — 4,583 — 3,882 — 3,882

Propane operations

Propane delivery operations — 20,680 — 20,680 — 13,710 — 13,710

Energy delivery services

Marlin Gas Services — 1,678 — 1,678 — 1,708 — 1,708

Other and eliminations

Eliminations ( 12,882 ) ( 87 ) ( 5,302 ) ( 18,271 ) ( 12,335 ) ( 35 ) ( 4,188 ) ( 16,558 )

Other — — 132 132 — — 131 131

Total other and eliminations ( 12,882 ) ( 87 ) ( 5,170 ) ( 18,139 ) ( 12,335 ) ( 35 ) ( 4,057 ) ( 16,427 )

Total operating revenues (1)

$ 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 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

The following table displays our revenue by major source based on product and service type for the three months ended March 31, 2022 and 2021:

Three months ended March 31, 2022 Three months ended March 31, 2021

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

18 unchanged sentences

Propane delivery operations — 75,606 — 75,606 — 55,264 — 55,264

Energy delivery services

Compressed Natural Gas Services

Marlin Gas Services — 2,209 — 2,209 — 2,352 — 2,352

5 unchanged sentences

$ 127,891 $ 101,292 $ ( 6,303 ) $ 222,880 $ 121,197 $ 74,759 $ ( 4,769 ) $ 191,187

(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.

(1) Total operating revenues for the three months ended March 31, 2022, include other revenue (revenues from sources other than contracts with customers) of $ 0.1 million for both Regulated and Unregulated Energy segments, respectively, and $( 0.3 ) million and $ 0.1 million for our Regulated and Unregulated Energy segments, respectively, for the three months ended March 31, 2021.

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.

1 unchanged sentence

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 September 30, 2021 and December 31, 2020 were as follows:

The balances of our trade receivables, contract assets, and contract liabilities as of March 31, 2022 and December 31, 2021 were as follows:

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

8 unchanged sentences

Contract liabilities are included in other accrued liabilities in the condensed consolidated balance sheets and relate to non-refundable prepaid fixed fees for our Mid-Atlantic propane delivery operation's retail offerings.

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

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.

Our performance obligation is satisfied over the term of the respective customer retail program on a ratable basis.

For the three months ended March 31, 2022 and 2021, we recognized revenue of $ 0.4 million.

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 September 30, 2021, are expected to be recognized as follows:

Revenue for these businesses for the remaining performance obligations, at March 31, 2022, are expected to be recognized as follows:

(in thousands) 2022 2023 2024 2025 2026 2027 2028 and thereafter

8 unchanged sentences

See the discussion below under COVID-19 impact .

Ocean City Maryland Reinforcement:

In March 2022, we filed a Section 7(f) - Request for Service Area Determination with the FERC regarding plans to extend our natural gas facilities across the Delaware/Maryland state line from

Sussex County, Delaware, to Worcester County, Maryland, to provide a secondary feed to Sandpiper Energy, Inc.'s (Sandpiper) system.

We anticipate resolution of this filing in the second quarter of 2022.

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 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.

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.

1 unchanged sentence

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

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:

(a) refund the over-collection of interim rates through the fuel clause;

(b) record regulatory assets for storm costs in the amount of $ 45.8 million including interest which will be amortized over six years;

and (d) collect an annual increase in revenue of $ 3.3 million to recover capital costs associated with new plant and a regulatory asset for cost of removal and undepreciated plant.

The new base rates and storm surcharge were effective on November 1, 2020.

Electric Depreciation Study:

In September 2019, FPU filed a petition, with the Florida PSC, for approval of its consolidated electric depreciation rates.

The petition was joined to the Hurricane Michael docket, and was approved at the Florida PSC Agenda in September 2020.

The approved rates were retroactively applied effective January 1, 2020.

West Palm Beach Expansion Project:

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:

4 unchanged sentences

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 & 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.

Construction commenced in February 2021 and the expected in-service date is the second quarter of 2022.

Beachside Pipeline Extension:

2 unchanged sentences

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.

Construction commenced in June 2021 and the expected in-service date is early 2023.

Eastern Shore

Del-Mar Energy Pathway Project:

In December 2019, the FERC issued an order approving the construction of the Del-Mar Energy Pathway project.

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.

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;

and new pressure control and delivery stations in these counties.

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.

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

Southern Expansion Project:

In January 2022, Eastern Shore submitted a prior notice filing with the FERC pursuant to blanket certificate procedures, regarding its proposal to install an additional compressor unit and related facilities at Eastern Shore's existing compressor station in Bridgeville, Sussex County, Delaware.

The project will enable Eastern Shore to provide additional firm natural gas transportation service to an existing shipper on Eastern Shore's pipeline system, with a projected in-service date by November 2022.

We are currently in the midst of the comment and protest phase of the filing of the application process.

Capital Cost Surcharge :

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.

The capital cost surcharge was an approved item in Eastern Shore’s last rate case.

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.

4 unchanged sentences

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.

In response to the COVID-19 pandemic and related restrictions, we experienced reduced consumption of energy largely in the commercial and industrial sectors, higher bad debt expenses and incremental expenses associated with COVID-19, including expenditures associated with personal protective equipment and premium pay for field personnel.

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

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.

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.

The state of emergency was lifted July 12, 2021.

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

These restrictions significantly impacted economic conditions in the United States in 2020 and continued to impact economic conditions, to a lesser extent, through 2021.

Chesapeake Utilities is considered an “essential business,” which 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.

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

In April and May 2020, we were authorized by the Maryland and Delaware PSCs, respectively, to record regulatory assets for COVID-19 related costs which offers us the ability to seek recovery of those costs.

In July 2021, the Florida PSC issued an order that approved incremental expenses we incurred due to COVID-19.

The order allowed us to establish a regulatory asset in a total amount of $ 2.1 million as of June 30, 2021 for natural gas and electric distribution operations.

The regulatory asset is amortized over two years and is recovered through the Purchased Gas Adjustment and Swing Service mechanisms for our natural gas distribution businesses and through the Fuel Purchased Power Cost Recovery clause for our electric division.

As of March 31, 2022 and December 31, 2021, our total COVID-19 regulatory asset balance was $ 2.0 million and $ 2.3 million, respectively.

In 2021 and 2022, restrictions were gradually lifted as vaccines became widely available in the United States.

The various state of emergencies associated with the COVID-19 pandemic that were previously declared in our service territories have been terminated and we have adjusted our operating practices accordingly to ensure the safety of our operations and will take the necessary actions to comply with the CDC, and the Occupational Safety and Health Administration, as new developments occur.

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 September 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 March 31, 2022 and December 31, 2021:

Amount (in thousands)

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

Operation and Regulatory Jurisdiction March 31, 2022 December 31, 2021 Status

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

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FPU Natural Gas (excludes Fort Meade and Indiantown) (Florida PSC) $ 19,086 $ 19,189 Same treatment on a net basis as Chesapeake Florida Gas Division (above).

FPU Fort Meade and Indiantown Divisions $ 274 $ 309 Same treatment on a net basis as Chesapeake Florida Gas Division (above).

FPU Fort Meade and Indiantown Divisions (Florida PSC) $ 268 $ 271 Same treatment on a net basis as Chesapeake Florida Gas Division (above).

FPU Electric (Florida PSC) $ 5,176 $ 5,237 In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates.

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

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.

As of March 31, 2022 and December 31, 2021, we had approximately $ 4.9 million and $ 5.2 million, respectively, in environmental liabilities related to the former MGP sites.

As of March 31, 2022 and December 31, 2021, we have cumulative regulatory assets of $ 1.1 million and $ 1.3 million, respectively, in regulatory assets for future recovery of environmental costs for customers.

Specific 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 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.

As of March 31, 2022 and December 31, 2021, we had recovered approximately $ 13.0 million and $ 12.9 million, respectively, leaving approximately $ 1.0 million and $ 1.1 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.

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Other Commitments and Contingencies

Natural Gas and Electric

Natural Gas, Electric and Propane Supply

In March 2020, our Delmarva Peninsula natural gas distribution operations entered into asset management agreements with a third party to manage their natural gas transportation and storage capacity.

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If FPU fails to meet this ratio, it must provide an irrevocable letter of credit or pay all amounts outstanding under the agreement within five business days.

FPU’s electric supply agreement with Gulf Power requires FPU to meet the following ratios based on the average of the prior six quarters:

FPU’s electric supply agreement with Gulf Power requires FPU to meet the following ratios based on the average of the prior

six quarters:

(a) funds from operations interest coverage ratio (minimum of two times), and (b) total debt to total capital (maximum of 65 percent).

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

As of March 31, 2022, 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 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.

The maximum authorized liability under such guarantees and letters of credit as of March 31, 2022 was $ 20.0 million.

The aggregate amount guaranteed at March 31, 2022 was approximately $ 13.1 million with the guarantees expiring on various dates through March 30, 2023.

As of March 31, 2022, we have issued letters of credit totaling approximately $ 5.3 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, the capacity agreement between NEXUS and Aspire, and our current and previous primary insurance carriers.

These letters of credit have various expiration dates through October 25, 2022.

There have been no draws on these letters of credit as of March 31, 2022.

We do not anticipate that the counterparties will draw upon these letters of credit, and we expect that they will be renewed to the extent necessary in the future.

Segment Information

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These operations are unregulated as to their rates and services.

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 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 Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

(in thousands)

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Interest charges 5,339 5,105

Income from Continuing Operations before Income Taxes 15,477 12,782 81,334 65,063

Income Taxes on Continuing Operations 2,993 3,502 20,563 16,082

Income from Continuing Operations 12,484 9,280 60,771 48,981

Income (Loss) from Discontinued Operations, Net of Tax ( 9 ) ( 19 ) ( 17 ) 165

Income before Income Taxes 50,439 46,867

Income Taxes 13,506 12,401

Net Income $ 36,933 $ 34,466

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

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

(in thousands) March 31, 2022 December 31, 2021

Identifiable Assets

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In August 2020, we filed a prospectus supplement under the shelf registration statement for an ATM equity program under which we may issue and sell shares of our common stock up to an aggregate offering price of $ 75.0 million.

In the third and fourth quarters of 2020, we issued 0.7 million shares of common stock at an average price per share of $ 82.93 and received net proceeds of approximately $ 61.0 million, after deducting commissions and other fees of $ 1.5 million.

We maintain an effective shelf registration statement with the SEC for the issuance of shares under our DRIP.

Depending on our capital needs and subject to market conditions, in addition to other possible debt and equity offerings, we may issue additional shares under the direct stock purchase component of the DRIP.

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 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.

In 2021, we issued just over 0.1 million shares at an average price per share of $ 125.71 and received net proceeds of $ 15.2 million under the DRIP.

In the first three months of 2022, we issued less than 0.1 million shares at an average price per share of $ 137.45 and received net proceeds of $ 3.2 million under the DRIP.

We used the net proceeds, after fees, 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.

Accumulated Other Comprehensive Gain (Loss)

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 September 30, 2021 and 2020.

The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of March 31, 2022 and 2021.

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

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Postretirement Cash Flow Cash Flow

Plan Items Hedges Hedges Total

Plan Items Hedges Hedges (1)

(in thousands)

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Net current-period other comprehensive income 18 529 — 547

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

As of March 31, 2022 $ ( 3,250 ) $ 5,100 $ — $ 1,850

(in thousands)

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Net prior-period other comprehensive income/(loss) 63 166 ( 2 ) 227

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.

As of March 31, 2021 $ ( 5,083 ) $ 2,475 $ ( 30 ) $ ( 2,638 )

( 1) All of our interest rate swaps expired at December 31, 2021 .

The following table presents amounts reclassified out of accumulated other comprehensive income (loss) for the three months ended March 31, 2022 and 2021.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

(in thousands)

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( 43 ) ( 104 )

( 106 ) ( 108 ) ( 317 ) ( 323 )

Total before income taxes ( 24 ) ( 85 )

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Employee Benefit Plans

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

Pension Plan Chesapeake SERP Chesapeake

Postretirement

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

(in thousands)

Interest cost $ 34 $ 46 $ 429 $ 518 $ 12 $ 16 $ 6 $ 8 $ 6 $ 10

Expected return on plan assets ( 40 ) ( 42 ) ( 830 ) ( 745 ) — — — — — —

Amortization of prior service credit — — — — — — ( 19 ) ( 19 ) — —

Amortization of net (gain) loss 60 65 155 135 7 5 10 12 ( 2 ) —

Net periodic cost (benefit) 54 69 ( 246 ) ( 92 ) 19 21 ( 3 ) 1 4 10

Amortization of pre-merger regulatory asset — — — — — — — — — 2

Total periodic cost (benefit) $ 54 $ 69 $ ( 246 ) $ ( 92 ) $ 19 $ 21 $ ( 3 ) $ 1 $ 4 $ 12

Net periodic benefit costs for our pension and post-retirement benefits plans for the three months ended March 31, 2022 and 2021 are set forth in the following tables:

Pension Plan FPU

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Postretirement

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

For the Three Months Ended March 31, 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

(in thousands)

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Amortization of net (gain) loss — 60 124 155 7 7 12 8 — ( 2 )

Net periodic cost (benefit) 162 207 ( 738 ) ( 276 ) 57 63 ( 9 ) 3 12 30

Amortization of pre-merger regulatory asset — — — — — — — — — 6

Total periodic cost (benefit) $ — $ 54 $ ( 284 ) $ ( 246 ) $ 20 $ 19 $ ( 1 ) $ ( 5 ) $ 6 $ 4

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.

In line with this strategy, we fully terminated the Chesapeake Pension Plan during the fourth quarter of 2021, and as of December 31, 2021, there were no remaining assets in the Chesapeake Pension Plan.

Accordingly, a portion of the pension settlement expense associated with the termination was allocated to our Regulated Energy operations and was recorded as regulatory assets, previously approved in all of the impacted jurisdictions.

The remaining portion of the pension settlement expense totaling $ 0.6 million was recorded in other expense in our consolidated statement of income in the fourth quarter 2021 which reflected the amount allocated to our Unregulated Energy operations or was deemed not recoverable through the regulatory process.

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

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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 income.

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

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 19 ) $ — $ ( 19 )

Net loss 60 155 7 10 ( 2 ) 230

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

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

60 29 7 ( 9 ) — 87

Recognized from regulatory asset — 126 — — ( 2 ) 124

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

For the Three Months Ended September 30, 2020 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 19 ) $ — $ ( 19 )

Net loss 65 135 5 12 — 217

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

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

65 26 5 ( 7 ) — 89

Recognized from regulatory asset — 109 — — — 109

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

For the Nine Months Ended September 30, 2021 Chesapeake

For the Three Months Ended March 31, 2022 Chesapeake

Plan Chesapeake SERP Chesapeake

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Total $ — $ 124 $ 7 $ ( 7 ) $ — $ 124

For the Nine Months Ended September 30, 2020 Chesapeake

For the Three Months Ended March 31, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

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(1) See Note 9 , Stockholders' Equity .

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.

During the three months ended March 31, 2022, we did not contribute to the FPU Pension Plan.

We expect to contribute approximately $ 0.3 million to the FPU Pension Plan during 2022, 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 nine months ended September 30, 2021 were immaterial and $ 0.1 million, respectively.

Cash benefits paid under the Chesapeake SERP for the three months ended March 31, 2022 were immaterial.

We expect to pay total cash benefits of approximately $ 0.2 million under the Chesapeake SERP in 2022.

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.

Cash benefits paid under the Chesapeake Postretirement Plan, primarily for medical claims for the three months ended March 31, 2022 were $ 0.1 million.

We estimate that approximately $ 0.1 million will be paid for such benefits under the Chesapeake Postretirement Plan in 2022.

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.

Cash benefits paid under the FPU Medical Plan, primarily for medical claims for the three months ended March 31, 2022, were immaterial.

We estimate that approximately $ 0.1 million will be paid for such benefits under the FPU Medical Plan in 2022.

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

(in thousands) September 30,

The investment balances at March 31, 2022 and December 31, 2021, consisted of the following:

(in thousands) March 31,

2022 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 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 three months ended March 31, 2022 and 2021, we recorded a net unrealized loss of $ 0.5 million and a net unrealized gain of $ 0.4 million, respectively, in other income, 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 nine months ended September 30, 2021 and 2020:

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

The table below presents the amounts included in net income related to share-based compensation expense for the three months ended March 31, 2022 and 2021:

Three Months Ended

(in thousands)

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

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.

These shares vested immediately 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.

At March 31, 2022, there was approximately $ 0.1 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.

Key Employees

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

The table below presents the summary of the stock activity for awards to key employees for the three months ended March 31, 2022:

Number of Shares Weighted Average

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Expired 557 $ 91.42

Forfeited ( 5,384 ) $ 93.39

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.

Outstanding—March 31, 2022 200,487 $ 105.32

During the three months ended March 31, 2022, we granted awards of 63,382 shares of common stock to key employees under the SICP, including awards granted in February 2022 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, 2024.

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For the market-based conditions, we used the Monte Carlo valuation to estimate the fair value of each market-based award granted.

In March 2021, upon the election of certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in February 2021 for the performance period ended December 31, 2020, remitted the cash to the appropriate taxing authorities, and paid the balance of such awarded shares to each such executive officer.

In March 2022, upon the election by certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that vested and were paid in February 2022 for the performance period ended December 31, 2021, paid the balance of such awarded shares to each such executive officer net cash remitted to the appropriate taxing authorities.

We withheld 21,832 shares, based on the value of the shares on their award date.

Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $ 2.8 million.

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.

At March 31, 2022, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 27.6 million.

At March 31, 2022, there was approximately $ 9.4 million of unrecognized compensation cost related to these awards, which will be recognized through 2024.

Stock Options

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

There were no stock options outstanding or issued during the three months ended March 31, 2022 and 2021.

Derivative Instruments

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Our propane distribution operations may also enter into fair value hedges of their inventory or cash flow hedges of their future purchase commitments in order to mitigate the impact of wholesale price fluctuations.

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

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

Occasionally, we may enter into interest rate swap agreements to mitigate risk associated with changes in short-term borrowing rates.

As of March 31, 2022, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

Volume of Derivative Activity

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

As of March 31, 2022, 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

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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 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.

Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in March 2022 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 contract prices, Sharp will pay the difference.

We designated and accounted for the propane swaps as cash flows hedges.

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

We expect to reclassify approximately $ 4.3 million from accumulated other comprehensive income to earnings during the next 12 -month period ended March 31, 2023.

Interest Rate Swap Activities

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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.

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

At December 31, 2021 all of our interest rate swaps had expired and we have not entered into any new derivative contracts associated with our outstanding short-term borrowings.

We designated and accounted for interest rate swaps as cash flows hedges.

Accordingly, unrealized gains and losses associated with the interest rate swaps are recorded as a component of accumulated other comprehensive income (loss).

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 September 30, 2022.

Accordingly, unrealized gains and losses associated with the interest rate swaps were recorded as a component of accumulated other comprehensive income

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

Broker Margin

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

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

(in thousands) Balance Sheet Location March 31, 2022 December 31, 2021

Sharp Other Accrued Liabilities $ 3,669 $ 4,081

2 unchanged sentences

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 September 30, 2021 and December 31, 2020, are as follows:

Fair values of the derivative contracts recorded in the consolidated balance sheets as of March 31, 2022 and December 31, 2021, are as follows:

Derivative Assets

Fair Value As Of

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

Derivatives designated as fair value hedges

Propane put options Derivative assets, at fair value $ — $ 14

(in thousands) Balance Sheet Location March 31, 2022 December 31, 2021

Derivatives not designated as hedging instruments

Propane swap agreements Derivative assets, at fair value $ — $ 16

Derivatives designated as cash flow hedges

Propane swap agreements Derivative assets, at fair value 7,516 7,060

Total asset derivatives $ 12,185 $ 3,269

Total Derivative Assets $ 7,516 $ 7,076

Derivative Liabilities

Fair Value As Of

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

Derivatives designated as fair value hedges

Propane put options Derivative liabilities, at fair value $ — $ 23

(in thousands) Balance Sheet Location March 31, 2022 December 31, 2021

Derivatives designated as cash flow hedges

Propane swap agreements Derivative liabilities, at fair value $ 484 $ 743

Interest rate swap agreements Derivative liabilities, at fair value 15 40

Total liability derivatives $ 1,969 $ 127

The effects of gains and losses from derivative instruments on the condensed consolidated financial statements are as follows:

Amount of Gain (Loss) on Derivatives:

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

Location of Gain For the Three Months Ended March 31,

(in thousands) (Loss) on Derivatives 2022 2021

Derivatives not designated as hedging instruments

Propane swap agreements Unregulated propane and natural gas costs $ 56 $ —

Derivatives designated as fair value hedges

Propane put options Cost of sales $ — $ — $ ( 24 ) $ —

Propane put options Unregulated propane and natural gas costs — ( 24 )

Derivatives designated as cash flow hedges

Propane swap agreements Cost of sales 681 116 4,183 1,581

Propane swap agreements Other comprehensive income 2,491 1,022 7,039 3,385

Propane swap agreements Revenues ( 826 ) —

Propane swap agreements Unregulated propane and natural gas costs 3,547 3,047

Propane swap agreements Other comprehensive income (loss) 714 229

Interest rate swap agreements

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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 September 30, 2021 and December 31, 2020:

Fair Value Measurements Using:

As of September 30, 2021 Fair Value Quoted Prices in

As of March 31, 2022 Fair Value Quoted Prices in

Active Markets

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Derivative liabilities $ 743 $ — $ 743 $ —

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,

The following table sets forth the summary of the changes in the fair value of Level 3 investments for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

(in thousands)

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

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

At March 31, 2022, 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 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 March 31, 2022, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 618.6 million, compared to the estimated fair value of $ 584.2 million.

At December 31, 2021, long-term debt, which includes the current maturities but excludes debt issuance costs, had a carrying value of approximately $ 568.8 million, compared to a fair value of approximately $ 597.2 million.

3 unchanged sentences

Our outstanding long-term debt is shown below:

September 30, December 31,

March 31, December 31,

(in thousands) 2022 2021

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

2.49% notes Due January 25, 2037 50,000 50,000

2.95% notes Due March 15, 2042 50,000 —

Equipment security note

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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.

On March 15, 2022 we issued 2.95 percent Senior Notes due March 15, 2042 to MetLife in the aggregate principal amount of $ 50 million.

We used the proceeds received from the issuances of the Senior Notes to reduce short-term borrowings under the revolving credit facility and to fund capital expenditures.

These Senior Notes have similar covenants and default provisions as the existing senior notes, and have an annual principal payment beginning in the eleventh year after the issuance.

Equipment Security Note

3 unchanged sentences

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 September 30, 2021:

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

The following table summarizes our Shelf Agreements at March 31, 2022:

(in thousands) Total Borrowing Capacity Less:

6 unchanged sentences

150,000 ( 50,000 ) — 100,000

NYL Shelf Agreement (1)

150,000 ( 140,000 ) — 10,000

Total Shelf Agreements as of September 30, 2021

Total Shelf Agreements as of March 31, 2022

$ 520,000 $ ( 270,000 ) $ — $ 250,000

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

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

The Uncollateralized Senior Notes, Shelf Agreements or Shelf Notes set forth certain business covenants to which we are subject when any note is outstanding, including covenants that limit or restrict our ability, and the ability of our subsidiaries, to incur indebtedness, or place or permit liens and encumbrances on any of our property or the property of our subsidiaries.

1 unchanged sentence

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

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.

At March 31, 2022 and December 31, 2021, we had $ 140.9 million and $ 221.6 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 1.17 percent and 0.83 percent, respectively.

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

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

As of March 31, 2022, 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.

1 unchanged sentence

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.

As of March 31, 2022, 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 March 31, 2022, 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 March 31, 2022 was $ 256.3 million.

As of March 31, 2022, we had issued $ 5.3 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.

3 unchanged sentences

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.

At December 31, 2021, all of our interest rate swaps had expired and we have not entered into any new derivative contracts associated with our outstanding short-term borrowings.

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

These lease arrangements enable us to better conduct business operations in the regions in which we operate.

Office space is leased to provide adequate workspace for our employees in several locations throughout the Mid-Atlantic, Mid-West and in Florida.

Office space is

leased to provide adequate workspace for our employees in several locations throughout our service territories.

We lease land at various locations throughout our service territories to enable us to inject natural gas into underground storage and distribution systems, for bulk storage capacity, for our propane operations and for storage of equipment used in repairs and maintenance of our infrastructure.

7 unchanged sentences

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

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.

The amounts disclosed in our consolidated balance sheet at March 31, 2022, 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 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.

As of March 31, 2022, 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 Nine Months Ended

September 30, September 30,

Three Months Ended

( in thousands) Classification 2022 2021

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 September 30, 2021 and December 31, 2020:

(in thousands) Balance sheet classification September 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 March 31, 2022 and December 31, 2021:

(in thousands) Balance sheet classification March 31, 2022 December 31, 2021

Operating lease assets Operating lease right-of-use assets $ 16,231 $ 10,139

2 unchanged sentences

Total lease liabilities $ 16,713 $ 10,567

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

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating and financing leases at March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

Weighted-average remaining lease term ( in years )

2 unchanged sentences

Operating leases 3.4 % 3.6 %

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 September 30, 2021 and 2020:

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2022 2021

Operating cash flows from operating leases $ 609 $ 471

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:

The following table presents the future undiscounted maturities of our operating and financing leases at March 31, 2022 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