Chesapeake Utilities Corp. (CPK, Financial) filed Quarterly Report for the period ended 2010-09-30.
Chesapeake Utilities Corp. has a market cap of $353.1 million; its shares were traded at around $37.35 with a P/E ratio of 14.5 and P/S ratio of 1.3. The dividend yield of Chesapeake Utilities Corp. stocks is 3.6%. Chesapeake Utilities Corp. had an annual average earning growth of 2% over the past 10 years.CPK is in the portfolios of Mario Gabelli of GAMCO Investors, Jim Simons of Renaissance Technologies LLC.
Our results for the third quarter of 2010 included approximately $2.4 million of operating income and $1.1 million of net income reported by FPU. Included in the operating income and net income reported by FPU for the period were the effects of transferring propane distribution customers previously served by Chesapeake in Florida to FPU after the merger in an effort to integrate operations and approximately two months of operations from Indiantown Gas Company, whose operating assets were purchased by FPU on August 9, 2010. Pursuant to the acquisition method of accounting, we consolidated FPUs results into our consolidated results from October 28, 2009, which is the effective date of the merger. Therefore, our consolidated results for the third quarter of 2009 did not include any results from FPU.
During the third quarter of 2010, we expensed approximately $68,000 ($41,000 net of tax) of merger-related costs, which are included in the Other segment. Merger-related costs expensed in the third quarter of 2010 primarily reflected our costs to integrate operations of Chesapeake and FPU, including certain termination benefits offered to employees, net of the portion we expect to recover through future rates when we complete the appropriate rate proceedings. During the third quarter of 2009, we reported a net credit of $675,000 ($223,000 net of tax) of merger-related costs as we deferred certain previously expensed merger-related costs, which we will seek to recover through future rates.
Growth. The average number of Delmarva natural gas residential customers increased by two percent in the third quarter of 2010, compared to the same period in 2009. This growth and an increase in commercial and industrial customers contributed approximately $138,000 in period-over-period additional gross margin. This additional gross margin for the quarter includes $24,000 generated from service to a new industrial customer in southern Delaware, which began in the third quarter of 2010. Additionally, service to another industrial customer is expected to begin in late 2010 or early 2011. Services to these new industrial customers in southern Delaware are expected to add annual margin equivalent to 1,575 average residential heating customers.
New transportation services and new expansion facilities placed in service in late 2009 and during 2010 by our natural gas transmission subsidiary, ESNG, contributed an additional gross margin of $390,000 in the third quarter of 2010 compared to the same period in 2009. Also during the current quarterly period, but not affecting results for the period, ESNG received the approval from the FERC to begin construction of an eight-mile mainline extension to interconnect ESNGs system with TETLPs mainline facilities. ESNG has executed Precedent Agreements with our Delaware and Maryland divisions that will result in 17-year firm transportation services associated with this project. The Precedent Agreements provide a three-year phase-in of service from 20,000 Dts per day in the first year to 40,000 Dts per year by the third year of the service at ESNGs current tariff rate for service in that area. Estimated annualized margin from this project is $2.2 million based on 20,000 Dts per day and $4.3 million based on 40,000 Dts per day. ESNG expects to complete construction in December 2010 and commence service no later than January 2011.
Advanced Information Services. Our advanced information services subsidiary, BravePoint, generated $258,000 in operating income in the third quarter of 2010, compared to an operating loss of $103,000 reported in the same period of 2009. Increased billable consulting hours in 2010 and higher revenue from its professional database monitoring, support solution services and product sales contributed to the increased period-over-period operating results.
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Chesapeake Utilities Corp. has a market cap of $353.1 million; its shares were traded at around $37.35 with a P/E ratio of 14.5 and P/S ratio of 1.3. The dividend yield of Chesapeake Utilities Corp. stocks is 3.6%. Chesapeake Utilities Corp. had an annual average earning growth of 2% over the past 10 years.CPK is in the portfolios of Mario Gabelli of GAMCO Investors, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Our net income for the quarter ended September 30, 2010 was $1.6 million, or $0.17 per share (diluted). This represents an increase of $1.3 million, or $0.13 per share (diluted), compared to a net income of $308,000, or $0.04 per share (diluted), as reported in the same period in 2009. Our natural gas distribution and propane distribution operations typically experience seasonal losses or reduced earnings during the third quarter because customers do not require natural gas or propane for heating purposes during the summer months.Our results for the third quarter of 2010 included approximately $2.4 million of operating income and $1.1 million of net income reported by FPU. Included in the operating income and net income reported by FPU for the period were the effects of transferring propane distribution customers previously served by Chesapeake in Florida to FPU after the merger in an effort to integrate operations and approximately two months of operations from Indiantown Gas Company, whose operating assets were purchased by FPU on August 9, 2010. Pursuant to the acquisition method of accounting, we consolidated FPUs results into our consolidated results from October 28, 2009, which is the effective date of the merger. Therefore, our consolidated results for the third quarter of 2009 did not include any results from FPU.
During the third quarter of 2010, we expensed approximately $68,000 ($41,000 net of tax) of merger-related costs, which are included in the Other segment. Merger-related costs expensed in the third quarter of 2010 primarily reflected our costs to integrate operations of Chesapeake and FPU, including certain termination benefits offered to employees, net of the portion we expect to recover through future rates when we complete the appropriate rate proceedings. During the third quarter of 2009, we reported a net credit of $675,000 ($223,000 net of tax) of merger-related costs as we deferred certain previously expensed merger-related costs, which we will seek to recover through future rates.
Growth. The average number of Delmarva natural gas residential customers increased by two percent in the third quarter of 2010, compared to the same period in 2009. This growth and an increase in commercial and industrial customers contributed approximately $138,000 in period-over-period additional gross margin. This additional gross margin for the quarter includes $24,000 generated from service to a new industrial customer in southern Delaware, which began in the third quarter of 2010. Additionally, service to another industrial customer is expected to begin in late 2010 or early 2011. Services to these new industrial customers in southern Delaware are expected to add annual margin equivalent to 1,575 average residential heating customers.
New transportation services and new expansion facilities placed in service in late 2009 and during 2010 by our natural gas transmission subsidiary, ESNG, contributed an additional gross margin of $390,000 in the third quarter of 2010 compared to the same period in 2009. Also during the current quarterly period, but not affecting results for the period, ESNG received the approval from the FERC to begin construction of an eight-mile mainline extension to interconnect ESNGs system with TETLPs mainline facilities. ESNG has executed Precedent Agreements with our Delaware and Maryland divisions that will result in 17-year firm transportation services associated with this project. The Precedent Agreements provide a three-year phase-in of service from 20,000 Dts per day in the first year to 40,000 Dts per year by the third year of the service at ESNGs current tariff rate for service in that area. Estimated annualized margin from this project is $2.2 million based on 20,000 Dts per day and $4.3 million based on 40,000 Dts per day. ESNG expects to complete construction in December 2010 and commence service no later than January 2011.
Advanced Information Services. Our advanced information services subsidiary, BravePoint, generated $258,000 in operating income in the third quarter of 2010, compared to an operating loss of $103,000 reported in the same period of 2009. Increased billable consulting hours in 2010 and higher revenue from its professional database monitoring, support solution services and product sales contributed to the increased period-over-period operating results.
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