What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-03 · 281 added, 142 removed, 735 unchanged (37% of the section changed)

2 unchanged sentences

Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in thousands, except shares and per share data)

26 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in thousands)

5 unchanged sentences

Cash Flow Hedges, net of tax:

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

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

Total Other Comprehensive Income, net of tax 547 227

Unrealized gain (loss) on commodity contract cash flow hedges, net of tax of $(188), $1,193, $(4) and $1,257, respectively ( 498 ) 3,126 32 3,291

Unrealized gain on interest rate swap cash flow hedges, net of tax of $0, $2, $0 and $1, respectively — 6 — 4

Total Other Comprehensive Income (Loss), net of tax ( 480 ) 3,196 67 3,423

Comprehensive Income $ 16,571 $ 17,009 $ 54,052 $ 51,702

2 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Assets March 31,

Assets June 30,

2022 December 31,

35 unchanged sentences

Condensed Consolidated Balance Sheets (Unaudited)

Capitalization and Liabilities March 31,

Capitalization and Liabilities June 30,

2022 December 31,

37 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended

Six Months Ended

(in thousands)

15 unchanged sentences

Accounts payable and other accrued liabilities ( 2,274 ) 6,563

Income taxes (payable) receivable 6,134 6,093

Income taxes receivable 5,107 4,514

Customer deposits and refunds ( 1,999 ) 681

5 unchanged sentences

Proceeds from sale of assets 3,367 497

Acquisitions, net of cash acquired ( 2,006 ) —

Environmental expenditures ( 441 ) ( 395 )

9 unchanged sentences

Net cash used in financing activities ( 60,418 ) ( 28,175 )

Net Increase in Cash and Cash Equivalents 232 2,076

Net Increase (Decrease) in Cash and Cash Equivalents ( 790 ) 1,512

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

11 unchanged sentences

Compensation Treasury

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

Net income — — — 13,813 — — — 13,813

Other comprehensive income — — — — 3,196 — — 3,196

Dividend declared ($0.480 per share) — — — ( 8,500 ) — — — ( 8,500 )

Dividend reinvestment plan 39,605 19 4,602 — — — — 4,621

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

6,830 3 2,043 — — — — 2,046

Treasury stock activities — — — — — 211 ( 211 ) —

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

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 — — — — — 1,524 ( 1,524 ) —

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

Net income — — — 17,051 — — — 17,051

Other comprehensive loss — — — — ( 480 ) — — ( 480 )

Dividend declared ($0.535 per share) — — — ( 9,562 ) — — — ( 9,562 )

Issuance under various plans (5)

8,886 5 1,203 — — — — 1,208

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

6,520 3 1,969 — — — — 1,972

Treasury stock activities — — — — — 541 ( 541 ) —

Balance at June 30, 2022 17,734,794 $ 8,632 $ 376,866 $ 428,833 $ 1,370 $ 7,018 $ ( 7,018 ) $ 815,701

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

7 unchanged sentences

Treasury stock activities — — — — — ( 222 ) 222 —

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

Balance at June 30, 2022 17,734,794 $ 8,632 $ 376,866 $ 428,833 $ 1,370 $ 7,018 $ ( 7,018 ) $ 815,701

(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 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.

(2) Includes 110,835 , 116,238 , 117,193 , and 105,087 shares at June 30, 2022, December 31, 2021, June 30, 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 three months ended March 31, 2022 and 2021, we withheld 21,832 and 14,020 shares, respectively, for employee taxes.

For the six months ended June 30, 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.

18 unchanged sentences

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.

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

We 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.

4 unchanged sentences

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.

Refer to Note 16, Short-Term Borrowings , for further information regarding the expected timing of implementing this update.

Calculation of Earnings Per Share

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in thousands, except shares and per share data)

10 unchanged sentences

Diluted Earnings Per Share $ 0.96 $ 0.78 $ 3.04 $ 2.75

Acquisition of Davenport Energy

On June 13, 2022, Sharp acquired the propane operating assets of Davenport Energy's Siler City propane division for approximately $ 2.0 million.

In connection with this acquisition, we recorded a $ 0.1 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 less than $ 0.1 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory.

Through this acquisition, the Company expands its operating footprint further into North Carolina, where customers will be served by Sharp Energy’s Diversified Energy division.

Sharp added approximately 850 customers, along with expected distribution of approximately 0.4 million gallons of propane annually.

We recorded $ 1.5 million in property plant and equipment, $ 0.5 million in goodwill, and immaterial amounts associated with customer relationships and non-compete agreements, all of which are deductible for income tax purposes.

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.

The financial results associated with this acquisition will be included within Sharp's Diversified Energy division, primarily as a result of their geographic proximity, as well as other synergies they generate due to their service territory.

Acquisition of Diversified Energy

9 unchanged sentences

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.

These acquisitions generated operating revenue and operating loss of $ 4.0 million and $ 0.8 million, respectively, for the three months ended June 30, 2022 .

For the six months ended June 30, 2022, the acquisitions generated operating revenue and operating income of $ 14.3 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 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

The following table displays our revenue by major source based on product and service type for the three months ended June 30, 2022 and 2021:

Three months ended June 30, 2022 Three months ended June 30, 2021

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

26 unchanged sentences

$ 92,193 $ 53,463 $ ( 6,186 ) $ 139,470 $ 80,910 $ 34,773 $ ( 4,601 ) $ 111,082

(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.

(1) Total operating revenues for the three months ended June 30, 2022, include other revenue (revenues from sources other than contracts with customers) of $( 0.1 ) million for Regulated and $ 0.1 million Unregulated Energy segments, respectively, and $ 0.1 million for both our Regulated and Unregulated Energy segments, respectively, for the three months ended June 30, 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.

The following table displays our revenue by major source based on product and service type for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

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

Energy distribution

Delaware natural gas division $ 47,568 $ — $ — $ 47,568 $ 43,340 $ — $ — $ 43,340

Florida natural gas division 19,885 — — 19,885 17,402 — — 17,402

FPU electric distribution 39,394 — — 39,394 37,449 — — 37,449

FPU natural gas distribution 55,837 — — 55,837 50,020 — — 50,020

Maryland natural gas division 14,836 — — 14,836 13,690 — — 13,690

Sandpiper natural gas/propane operations 11,885 — — 11,885 11,885 — — 11,885

Elkton Gas 5,071 — — 5,071 3,830 — — 3,830

Total energy distribution 194,476 — — 194,476 177,616 — — 177,616

Energy transmission

Aspire Energy — 28,844 — 28,844 — 18,484 — 18,484

Aspire Energy Express 632 — — 632 93 — — 93

Eastern Shore 39,196 — — 39,196 38,589 — — 38,589

Peninsula Pipeline 13,549 — — 13,549 13,077 — — 13,077

Total energy transmission 53,377 28,844 — 82,221 51,759 18,484 — 70,243

Energy generation

Eight Flags — 11,455 — 11,455 — 8,502 — 8,502

Propane operations

Propane delivery operations — 110,075 — 110,075 — 78,361 — 78,361

Compressed Natural Gas Services

Marlin Gas Services — 4,589 — 4,589 — 4,340 — 4,340

Other and eliminations

Eliminations ( 27,769 ) ( 207 ) ( 12,706 ) ( 40,682 ) ( 27,268 ) ( 156 ) ( 9,635 ) ( 37,059 )

Other — — 216 216 — — 265 265

Total other and eliminations ( 27,769 ) ( 207 ) ( 12,490 ) ( 40,466 ) ( 27,268 ) ( 156 ) ( 9,370 ) ( 36,794 )

Total operating revenues (1)

$ 220,084 $ 154,756 $ ( 12,490 ) $ 362,350 $ 202,107 $ 109,531 $ ( 9,370 ) $ 302,268

( 1) Total operating revenues for the six months ended June 30, 2022, include other revenue (revenues from sources other than contracts with customers) of $ 0.1 million for Regulated and $ 0.2 million Unregulated Energy segments, respectively, and $( 0.2 ) million and $ 0.2 million for our Regulated and Unregulated Energy segments, respectively, for the six months ended June 30, 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 .

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 March 31, 2022 and December 31, 2021 were as follows:

The balances of our trade receivables, contract assets, and contract liabilities as of June 30, 2022 and December 31, 2021 were as follows:

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

2 unchanged sentences

Balance at 6/30/2022 38,778 18 4,607 724

Increase (decrease) $ ( 5,837 ) $ — $ ( 63 ) $ ( 243 )

Decrease $ ( 17,499 ) $ — $ ( 199 ) $ ( 23 )

Our trade receivables are included in trade and other receivables in the condensed consolidated balance sheets.

4 unchanged sentences

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.

For the three months ended June 30, 2022 and 2021, we recognized revenue of $ 0.3 million and $ 0.2 million.

For the six months ended June 30, 2022 and 2021, we recognized revenue of $ 0.7 million and $ 0.6 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 March 31, 2022, are expected to be recognized as follows:

Revenue for these businesses for the remaining performance obligations, at June 30, 2022, are expected to be recognized as follows:

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

9 unchanged sentences

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.

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.

The project will increase the reliability of the existing distribution system in those areas while also expanding infrastructure to serve new customers.

Construction began in the second quarter of 2022, with estimated completion in the fourth 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.

In March 2021, Elkton Gas filed a STRIDE 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.

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

Under Elkton Gas’ STRIDE plan, the Aldyl-A pipelines will be fully replaced by the end of 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 2021.

We filed the annual STRIDE plan update with the Maryland PSC on November 1, 2021, which was approved for new rates effective January 1, 2022.

Natural Gas Rate Case:

In May 2022, our natural gas distribution businesses in Florida, FPU, FPU-Indiantown division, FPU-Fort Meade division and Chesapeake Utilities CFG division (collectively, “Florida natural gas distribution businesses”) filed a consolidated natural gas rate case with the Florida PSC.

In connection with the application, we are seeking approval of the following:

(i) interim rate relief of approximately $ 7.2 million, subject to refund, pending the outcome of the rate case proceeding;

(ii) permanent rate relief of approximately $ 24.1 million, effective January 1, 2023, (iii) a depreciation study also submitted with filing;

(iv) authorization to make certain changes to tariffs to include the consolidation of rates and rate structure across the businesses and to unify the Florida natural gas distribution businesses under FPU;

(v) authorization to retain the acquisition adjustment recorded at the time of the FPU merger in our revenue requirement;

and (vi) authorization to establish an environmental remediation surcharge for the purposes of addressing future expected remediation costs for FPU MGP sites.

In August 2022, interim rates were approved by the Florida PSC in the amount of approximately $ 7.7 million on an annualized basis, effective for all meter reading in September 2022.

The interim rates are subject to refund pending the final outcome of the rate case proceeding.

The discovery process has commenced and hearing for the proceeding has been scheduled for October 2022.

The outcome of the application is subject to review and approval by the Florida PSC.

Winter Haven Expansion Project:

4 unchanged sentences

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

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

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

Construction commenced in June 2021 and the expected in-service date is first quarter of 2023.

St.Cloud / Twin Lakes Expansion:

In July 2022, Peninsula Pipeline filed a petition with the Florida PSC for approval of its Transportation Service Agreement with our Florida natural gas division, FPU, for an additional 2,400 Dt/d of firm service in the St.

Cloud, Florida area.

As part of this agreement, Peninsula Pipeline will construct a pipeline extension and regulator station for FPU.

The extension will be used to support new incremental load due to growth in the area, including providing service, most immediately, to the residential development Twin Lakes.

The expansion will also improve reliability and operation benefits to FPU's existing distribution system in the area, supporting future growth in the area.

We expect this expansion to be in service by the first quarter of 2023.

Eastern Shore

1 unchanged sentence

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.

We are currently awaiting an order from the FERC on the Company's filing.

Capital Cost Surcharge :

9 unchanged sentences

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.

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

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

3 unchanged sentences

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.

As of June 30, 2022 and December 31, 2021, our total COVID-19 regulatory asset balance was $ 1.8 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.

Storm Protection Plan

In 2020, the Florida PSC implemented the Storm Protection Plan ("SPP") and Storm Protection Plan Cost Recovery ("SPPCR") rules, which require electric utilities to petition the Florida PSC for approval of a Transmission and Distribution Storm Protection Plan that covers the utility’s immediate 10-year planning period with updates to the plan at least every 3 years.

The SPPCR rules allow the utility to file for recovery of associated costs related to its SPP.

The Company’s SPP plan was filed in April 2022, with hearings scheduled for early August 2022.

The SPP cost recovery clause ("SPPCRC") was filed in May 2022 with requested rates effective January 1, 2023.

The SPPCRC hearing is scheduled for November 2022.

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 March 31, 2022 and December 31, 2021:

The following table summarizes the regulatory liabilities related to accumulated deferred taxes ("ADIT") associated with TCJA for our regulated businesses as of June 30, 2022 and December 31, 2021:

Amount (in thousands)

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

Operation and Regulatory Jurisdiction June 30, 2022 December 31, 2021 Status

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

Delaware Division (Delaware PSC) $ 12,551 $ 12,591 PSC approved amortization of ADIT in January 2019.

Maryland Division (Maryland PSC) $ 3,806 $ 3,840 PSC approved amortization of ADIT in May 2018.

Delaware natural gas division (Delaware PSC) $ 12,510 $ 12,591 PSC approved amortization of ADIT in January 2019.

Maryland natural gas division (Maryland PSC) $ 3,772 $ 3,840 PSC approved amortization of ADIT in May 2018.

Sandpiper Energy (Maryland PSC) $ 3,626 $ 3,656 PSC approved amortization of ADIT in May 2018.

Chesapeake Florida Gas Division/Central Florida Gas (Florida PSC) $ 7,986 $ 8,032 PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

Chesapeake Florida natural gas division/CFG (Florida PSC) $ 7,939 $ 8,032 PSC issued order authorizing amortization and retention of net ADIT liability by the Company in February 2019.

FPU natural gas (excludes Fort Meade and Indiantown) (Florida PSC) $ 19,058 $ 19,189 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.

FPU Fort Meade and Indiantown natural gas divisions (Florida PSC) $ 265 $ 271 Same treatment on a net basis as Chesapeake Florida Gas Division (above).

FPU electric division (Florida PSC) $ 5,115 $ 5,237 In January 2019, PSC issued order approving amortization of ADIT through purchased power cost recovery, storm reserve and rates.

Elkton Gas (Maryland PSC) $ 1,074 $ 1,091 PSC approved amortization of ADIT in March 2018.

6 unchanged sentences

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

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 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.

As of June 30, 2022 and December 31, 2021, we had approximately $ 4.8 million and $ 5.2 million, respectively, in environmental liabilities related to the former MGP sites.

As of June 30, 2022 and December 31, 2021, we have cumulative regulatory assets of $ 1.0 million and $ 1.3 million, respectively, 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 June 30, 2022 and December 31, 2021, we had recovered approximately $ 13.1 million and $ 12.9 million, respectively, leaving approximately $ 0.9 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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The remaining remediation expenses for the Sanford MGP site are immaterial.

The following is a summary of our remediation status and estimated costs to implement clean-up of our West Palm Beach Florida site:

Status Estimated Clean-Up Costs

Remedial actions approved by the Florida Department of Environmental Protection have been implemented on the east parcel of the site.

Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected be completed in 2022.

Between $3.3 million to $14.2 million, including costs associated with the relocation of FPU’s operations at this site, and any potential costs associated with future redevelopment of the properties.

The remedial actions approved by the Florida Department of Environmental Protection have been implemented on the east parcel of our West Palm Beach Florida site.

Similar remedial actions have been initiated on the site's west parcel, and construction of active remedial systems are expected to be completed in 2022.

We expect the costs to clean-up the site to be between $3.3 million to $14.2 million, including costs associated with relocation of FPU's operations at this site, and any potential costs associated with future redevelopment of the properties.

Other Commitments and Contingencies

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These agreements are for a 10 -year term that commenced in November 2020 and expire in October 2030.

Chesapeake Utilities' Florida Division has firm transportation service contracts with FGT and Gulfstream.

Chesapeake Utilities' natural gas division, CFG has firm transportation service contracts with FGT and Gulfstream.

Pursuant to a capacity release program approved by the Florida PSC, all of the capacity under these agreements has been released to various third parties.

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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).

1 unchanged sentence

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 March 31, 2022, FPU was in compliance with all of the requirements of its fuel supply contracts.

As of June 30, 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.

4 unchanged sentences

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 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.

The maximum authorized liability under such guarantees and letters of credit as of June 30, 2022 was $ 20.0 million.

The aggregate amount guaranteed related to our subsidiaries at June 30, 2022 was approximately $ 11.4 million with the guarantees expiring on various dates through May 22, 2023.

In addition, the Board has authorized us to issue specific purpose corporate guarantees.

The amount of specific purpose guarantees outstanding at June 30, 2022 was $ 2.0 million.

In July 2022, in connection with the Florida rate case, we entered into a guarantee in the amount of $ 7.1 million with the Florida PSC.

As of June 30, 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.

There have been no draws on these letters of credit as of June 30, 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.

12 unchanged sentences

The following table presents financial information about our reportable segments:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in thousands)

13 unchanged sentences

Operating income 26,469 22,578 81,334 74,175

Other income (expense), net 913 375

Other income, net 2,584 1,453 3,498 1,828

Interest charges 5,825 5,054 11,164 10,159

3 unchanged sentences

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

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

(in thousands) June 30, 2022 December 31, 2021

Identifiable Assets

10 unchanged sentences

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.

In the first six months of 2022, we issued less than 0.1 million shares at an average price per share of $ 137.24 and received net proceeds of $ 4.3 million under the DRIP.

We used the net proceeds from our share issuances, 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 March 31, 2022 and 2021.

The following tables present the changes in the balance of accumulated other comprehensive gain (loss) as of June 30, 2022 and 2021.

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

8 unchanged sentences

Net current-period other comprehensive income 35 32 — 67

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

As of June 30, 2022 $ ( 3,233 ) $ 4,603 $ — $ 1,370

(in thousands)

2 unchanged sentences

Amounts reclassified from accumulated other comprehensive income/(loss) 128 ( 2,534 ) ( 19 ) ( 2,425 )

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

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

Net prior-period other comprehensive income 128 3,291 4 3,423

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

( 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.

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

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in thousands)

2 unchanged sentences

$ 19 $ 19 $ 38 $ 38

( 43 ) ( 106 ) ( 86 ) ( 209 )

Total before income taxes ( 24 ) ( 87 ) ( 48 ) ( 171 )

15 unchanged sentences

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 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 revenue and unregulated propane and natural gas, 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 months ended March 31, 2022 and 2021 are set forth in the following tables:

Net periodic benefit costs for our pension and post-retirement benefits plans for the three and six months ended June 30, 2022 and 2021 are set forth in the following tables:

Pension Plan FPU

1 unchanged sentence

Postretirement

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

For the Three Months Ended June 30, 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

(in thousands)

4 unchanged sentences

Total periodic cost (benefit) $ — $ 54 $ ( 284 ) $ ( 246 ) $ 20 $ 19 $ ( 1 ) $ ( 3 ) $ 6 $ 4

Pension Plan FPU

Pension Plan Chesapeake SERP Chesapeake

Postretirement

For the Six Months Ended June 30, 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021

(in thousands)

Interest cost $ — $ 68 $ 898 $ 858 $ 26 $ 24 $ 12 $ 12 $ 12 $ 12

Expected return on plan assets — ( 80 ) ( 1,714 ) ( 1,660 ) — — — — — —

Amortization of prior service credit — — — — — — ( 38 ) ( 38 ) — —

Amortization of net (gain) loss — 120 248 310 14 14 24 18 — ( 4 )

Total periodic cost (benefit) $ — $ 108 $ ( 568 ) $ ( 492 ) $ 40 $ 38 $ ( 2 ) $ ( 8 ) $ 12 $ 8

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

5 unchanged sentences

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 months ended March 31, 2022 and 2021:

For the Three Months Ended March 31, 2022 Chesapeake

For the Three Months Ended June 30, 2022 Chesapeake

Plan Chesapeake SERP Chesapeake

8 unchanged sentences

Total $ — $ 124 $ 7 $ ( 7 ) $ — $ 124

For the Three Months Ended March 31, 2021 Chesapeake

For the Three Months Ended June 30, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

8 unchanged sentences

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

For the Six months ended June 30, 2022 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 38 ) $ — $ ( 38 )

Net loss — 248 14 24 — 286

Total recognized in net periodic benefit cost — 248 14 ( 14 ) — 248

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

— 48 14 ( 14 ) — 48

Recognized from regulatory asset — 200 — — — 200

Total $ — $ 248 $ 14 $ ( 14 ) $ — $ 248

For the Six months ended June 30, 2021 Chesapeake

Plan Chesapeake SERP Chesapeake

Postretirement

(in thousands)

Prior service credit $ — $ — $ — $ ( 38 ) $ — $ ( 38 )

Net loss 120 310 14 18 ( 4 ) 458

Total recognized in net periodic benefit cost 120 310 14 ( 20 ) ( 4 ) 420

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

120 58 14 ( 20 ) ( 1 ) 171

Recognized from regulatory asset — 252 — — ( 3 ) 249

Total $ 120 $ 310 $ 14 $ ( 20 ) $ ( 4 ) $ 420

( 1) See Note 9 , Stockholders' Equity .

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

During the three and six months ended June 30, 2022, we contributed $ 0.1 million 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.

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 months ended March 31, 2022 were immaterial.

Cash benefits paid under the Chesapeake SERP for the three and six months ended June 30, 2022 were less than $ 0.1 million in both periods.

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 months ended March 31, 2022 were $ 0.1 million.

Cash benefits paid under the Chesapeake Postretirement Plan, primarily for medical claims for both the three and six months ended June 30, 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 months ended March 31, 2022, were immaterial.

Cash benefits paid under the FPU Medical Plan, primarily for medical claims for the three and six months ended June 30, 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 March 31, 2022 and December 31, 2021, consisted of the following:

(in thousands) March 31,

The investment balances at June 30, 2022 and December 31, 2021, consisted of the following:

(in thousands) June 30,

2022 December 31,

3 unchanged sentences

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

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 three months ended June 30, 2022 and 2021, we recorded a net unrealized loss of $ 1.4 million 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 six months ended June 30, 2022 and 2021, we recorded a net unrealized loss of approximately $ 2.0 million and a net unrealized gain of approximately $ 1.0 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.

3 unchanged sentences

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 months ended March 31, 2022 and 2021:

Three Months Ended

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, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

(in thousands)

9 unchanged sentences

accordingly, 6,520 shares, with a weighted average fair value of $ 130.36 per share, were issued and vested in 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.

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.

At June 30, 2022, there was approximately $ 0.7 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 2023.

In July, 2022, we announced the appointment of two new non-employee directors to our current Board.

These newly appointed directors will be granted share-based awards through the SICP that will be pro-rated in accordance with the beginning of their service period.

The associated expense will be recognized in the same manner utilized for our current non-employee directors.

Key Employees

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

The table below presents the summary of the stock activity for awards to key employees for the six months ended June 30, 2022:

Number of Shares Weighted Average

3 unchanged sentences

Expired 557 $ 91.42

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.

Outstanding—June 30, 2022 204,047 $ 102.91

During the six months ended June 30, 2022, we granted awards of 66,942 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.

5 unchanged sentences

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

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.

At June 30, 2022, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $ 26.4 million.

At June 30, 2022, there was approximately $ 8.8 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 three months ended March 31, 2022 and 2021.

There were no stock options outstanding or issued during the six months ended June 30, 2022 and 2021.

Derivative Instruments

5 unchanged sentences

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.

As of June 30, 2022, our natural gas and electric distribution operations did not have any outstanding derivative contracts.

Volume of Derivative Activity

As of March 31, 2022, the volume of our commodity derivative contracts were as follows:

As of June 30, 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

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 March 2022 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 June 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.

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

We expect to reclassify approximately $ 3.8 million from accumulated other comprehensive income to earnings during the next 12 -month period ended June 30, 2023.

Interest Rate Swap Activities

4 unchanged sentences

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.

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 in 2022.

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

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.

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

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

Broker Margin

2 unchanged sentences

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

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

(in thousands) Balance Sheet Location June 30, 2022 December 31, 2021

Sharp Other Accrued Liabilities $ 4,418 $ 4,081

2 unchanged sentences

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

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

Fair values of the derivative contracts recorded in the consolidated balance sheets as of June 30, 2022 and December 31, 2021, are as follows:

Derivative Assets

Fair Value As Of

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

(in thousands) Balance Sheet Location June 30, 2022 December 31, 2021

Derivatives not designated as hedging instruments

5 unchanged sentences

Fair Value As Of

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

(in thousands) Balance Sheet Location June 30, 2022 December 31, 2021

Derivatives designated as cash flow hedges

2 unchanged sentences

Amount of Gain (Loss) on Derivatives:

Location of Gain For the Three Months Ended March 31,

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

(in thousands) (Loss) on Derivatives 2022 2021 2022 2021

9 unchanged sentences

Interest expense — 22 — 26

Interest rate swap agreements Other comprehensive income (loss) — ( 3 )

Interest rate swap agreements Other comprehensive income — 8 — 5

Total $ ( 403 ) $ 4,804 $ 3,088 $ 8,057

9 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 March 31, 2022 and December 31, 2021:

Fair Value Measurements Using:

As of March 31, 2022 Fair Value Quoted Prices in

As of June 30, 2022 Fair Value Quoted Prices in

Active Markets

22 unchanged sentences

Derivative liabilities $ 743 $ — $ 743 $ —

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,

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, 2022 and 2021:

Six months ended June 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 March 31, 2022, there were no non-financial assets or liabilities required to be reported at fair value.

At June 30, 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.

4 unchanged sentences

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 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 June 30, 2022, long-term debt, which includes current maturities but excludes debt issuance costs, had a carrying value of approximately $ 608.3 million, compared to the estimated fair value of $ 540.6 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:

March 31, December 31,

June 30, December 31,

(in thousands) 2022 2021

20 unchanged sentences

Total long-term debt, net of current maturities $ 585,805 $ 549,903

Notes Purchase Agreement

Note Purchase Agreement

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.

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

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

Equipment Security Note

4 unchanged sentences

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:

The following table summarizes our Shelf Agreements at June 30, 2022:

(in thousands) Total Borrowing Capacity Less:

6 unchanged sentences

150,000 ( 50,000 ) — 100,000

Total Shelf Agreements as of March 31, 2022

Total Shelf Agreements as of June 30, 2022

$ 520,000 $ ( 270,000 ) $ — $ 250,000

3 unchanged sentences

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

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.

At June 30, 2022 and December 31, 2021, we had $ 137.0 million and $ 221.6 million, respectively, of short-term borrowings outstanding at a weighted average interest rate of 2.38 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.

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 two tranches of the Revolver 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 Revolver 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.

These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in these agreements.

These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in the Revolver's loan documents.

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 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.

As of June 30, 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 fund 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 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.

As of June 30, 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 June 30, 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.

We are currently in discussions with the various lending institutions regarding the renewal of the 364-day tranche.

At that time, the reference interest rate for the 364-day and five-year tranche will transition from LIBOR which is being retired by financial institutions to the Standard Overnight Financing Rate ("SOFR").

We do not expect this transition to have a material impact on our financial condition.

Our total available credit under the Revolver at June 30, 2022 was $ 257.7 million.

As of June 30, 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.

6 unchanged sentences

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 our service territories.

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 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.

The amounts disclosed in our consolidated balance sheet at June 30, 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 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.

As of June 30, 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

Three Months Ended Six Months Ended

June 30, June 30,

( in thousands) Classification 2022 2021 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 March 31, 2022 and December 31, 2021:

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

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, 2022 and December 31, 2021:

(in thousands) Balance sheet classification June 30, 2022 December 31, 2021

Operating lease assets Operating lease right-of-use assets $ 15,767 $ 10,139

2 unchanged sentences

Total lease liabilities $ 16,308 $ 10,567

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

The following table presents our weighted-average remaining lease terms and weighted-average discount rates for our operating and financing leases at June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

Weighted-average remaining lease term ( in years )

2 unchanged sentences

Operating leases 3.3 % 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 March 31, 2022 and 2021:

Three Months Ended

Six Months Ended

(in thousands) 2022 2021

Operating cash flows from operating leases $ 1,428 $ 936

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:

The following table presents the future undiscounted maturities of our operating and financing leases at June 30, 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