Ladies and gentlemen, thank you for standing by. And welcome to the Chesapeake Utilities First Quarter 2020 Earnings Conference Call. At this time, all participants line are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to your speaker today, Beth Cooper. Thank you. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us today to review our first quarter results. With me on the call today are Jeff Householder, President and Chief Executive Officer; and Jim Moriarty, Executive Vice President, General Counsel, Corporate Secretary and Chief Risk and Compliance Officer. We also have other members of our management team joining us virtually.Today's presentation can be accessed on our website under the Investors section and Events and Webcast subsection or via our IR app. After our prepared remarks, we will be happy to take your questions.To begin the theme of our 2019 annual report is driven by energy, delivering energy. The annual report cover and the first page of this presentation highlight the behaviors and values our employees exhibit every day. We designed the cover long before anyone had ever heard about a coronavirus pandemic. The words convey two distinct, but complementary messages. Commitment, agility, safety leadership, team, collaboration, service, adaptability and community speak volumes about Chesapeake's ability to meet any challenge head on and prevail.Strategy growth, sustainability, solutions, strength, improvement, performance and value are the attributes that have driven the company to double in size twice over the past decade. The values and operating philosophy represented by these words are the foundation of everything we do.The COVID-19 pandemic has changed the way we conduct business day-to-day, but it has not changed our strategy, our ability to safely deliver energy services to our customers, or our commitment to strategic growth.Moving to slide 2. Let me remind you that matters discussed in this conference call may include forward-looking statements that involve risks and uncertainties. Forward-looking statements and projections could differ materially from our actual results. The Safe Harbor for forward-looking statements section of the company's 2019 annual report on Form 10-K and our quarterly report on Form 10-Q for the first quarter provide further information on the factors that could cause such statements to differ from our actual results.In our first quarter Form 10-Q, we highlight the risks and uncertainties related to the COVID-19 pandemic that could cause actual future results to differ materially from those expressed in any forward-looking statements, including but not limited to the duration and scope of the COVID-19 pandemic, and impact on the demand for our services; our ability to obtain needed materials and supplies, actions taken in response to the pandemic, including mandatory business closures and restrictions of on-site commercial interactions, the pace of recovery and the impact on economic conditions.Now, I would like to turn the call over to Jeff to provide some opening remarks on our first quarter performance, more details on our COVID-19 response and some insights on our outlook going forward. Jeff?

Thank you, Beth, and good afternoon and thank all of you for joining our call for the first quarter of 2020. I'd like to first touch upon our strong performance for the quarter. The milder winter weather decreased customer consumption, but we successfully overcame that shortfall largely due to our continuing growth initiatives.Our first quarter 2020 net income rose to $28.9 million, or $1.76 per share as shown on slide 3. Growth in our natural gas distribution business both organically and from new pipeline expansions, strong contributions from Boulden gas acquired in December of 2019, and increased retail propane margins per gallon were the primary drivers. It's worth noting that results for the quarter do not reflect the benefit of electric rate relief for costs incurred from Hurricanes, Michael and Dorian.We reached a settlement with the Florida Office of Public Council, on the recovery costs and are collecting rates on an interim basis, until we receive final approval from the Florida PSC. We're reserving the full interim rate margins, until we receive that final approval, which is expected during the second half of this year. Property sales of two facilities that were no longer needed also contributed to quarter one results. Beth will provide a more detailed discussion of the first quarter results later in the call.Also, we continue to make significant capital investments to ensure future growth with a total of $41 million in spending recorded during the first quarter. We've continued to progress on our expansion projects and our time lines for placing our major projects into service, have not been impacted by the social distancing requirements, imposed within our service territories.This morning, our Board of Directors expressed their continued confidence in the strong fundamentals and positive outlook for our business by declaring a new annualized dividend of…

Thank you Jeff, and good afternoon everyone. Turning to slide 5. Each of the states where we operate has closed non-essential businesses and schools and issued stay-at-home orders. We have worked closely with state governments and our industry associate… [Technical Difficulty]

Okay. Beth?

Yes.

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Okay. There you go. Yes. We lose one of the speakers.

Okay. I can -- I'll pick up from there. And then…

Okay.

Okay? So Jim was actually had referred to slide 5 and he was starting to talk a little bit about the governmental and regulatory actions. So in each of the states where we operate the states have essentially closed non-essential businesses and schools and issued stay-at-home orders. We have worked closely with state governments and our industry associations to ensure that our energy delivery businesses are designated as essential and that our critical employees are exempt from the stay-at-home orders.Nevertheless, we have worked hard to carefully implement the stay-at-home, remote work orders when possible. Approximately 80% of our non-field services personnel are now working from home.I'm now going to turn the call back over to Jim.

Thank you, Beth. We are also closely monitoring all guidance from the Centers for Disease Control, OSHA and numerous policy regulatory and health agencies in the individual states in which we operate. We actively participate in discussions with our elected representatives on the federal state and local levels.Slide 5 provides a summary of our operations by state along with the latest guidance from those states on their planning and the legislation and executive orders on COVID-19-related restrictions and reopenings. The effort in some states to reopen businesses and relax stay-at-home orders has begun. Most states appear to be following a three-phase reopening process beginning with certain retail stores and restaurants. Some are including gyms, hair salons, golf courses and beaches opening in some limited capacity in Phase 1. None of the states have reopened schools or are allowing large gatherings. A few are letting their stay-at-home orders continue and others are letting them expire.I have not yet seen any state issue a date when a Phase 2 opening of other businesses and a termination of most stay-at-home orders may begin. Every state is continuing to require social distancing and limited large gatherings, most require face coverings in public. We serve states that are reopening; Florida, Ohio, Pennsylvania, and Virginia are all taking Phase 1 steps. Delaware and Maryland are planning, but have not yet announced Phase 1 reopening dates as of this morning.As the process for reopening the economy continues to unfold, state-by-state or region-by-region, we will continue to do what we have always done, evaluate the facts and do what is best for our employees, our customers, and the communities that we serve.As to slide six, on the regulatory side in this unprecedented period, we continue to monitor daily the federal state and local actions that could impact our…

Thanks Jim. Slide seven discusses the key business factors associated with COVID-19. We saw lower margins in March attributable to COVID-19 but we offset the reduced margins with lower expenses. So, far during the second quarter, it appears that commercial industrial margins are somewhat lower than normal. However, the residential margins have been higher, in part due to colder weather, but perhaps also driven by more usage by customers who've been at home rather than that commercial or industrial locations.We are capturing COVID-19-related expenses such as personal protective equipment, the cost of sanitizing, high use workplaces, the incremental pay we implemented for our employees that are on the front line, et cetera.On the flip side, we're seeing decreases in other expenses such as travel, meals, conferences, and interest. There's been no meaningful impact on our supply chain other than the PPE items everyone is trying to acquire. The effects on our pension expenses have not yet been significant in part because we began derisking our frozen Chesapeake pension plan during the fourth quarter of 2019. We have not delayed funding of our pension plans as allowed for in the 2020 CARES Act.On the capital investment side, work is progressing largely as planned on the projects budgeted in our 2020 capital spending plan. We have not experienced any material delays to-date and do not anticipate any at the present time. As a result we remain comfortable with our previous capital guidance for 2020.Finally, to ensure that we have more than adequate liquidity to continue to fund our growth, we have secured additional short-term debt capacity and are in the process of renewing several long-term debt shelf facilities. I want our investors to rest assured that our balance sheet remains strong and we have more than adequate financing available to support our…

Thanks, Jeff. Turning to slide 11. Net income for the first quarter was $28.9 million or $1.76 per share. As we reported in our earnings release yesterday, this was a significant accomplishment in the face of temperatures that were 20% and 17% warmer on the Delmarva Peninsula and in Ohio respectively as compared to the first quarter of 2019. Florida's temperatures although less weather-sensitive because of the larger mix of commercial and industrial customers were still 7% warmer than normal. In addition, as Jeff mentioned there was no regulatory relief from Hurricanes Michael and Dorian included in our first quarter results. We have fully reserved the interim rate relief which began in January pending approval of the final rates.We were able to achieve strong performance for the quarter despite these factors as a result of many other positive accomplishments including, increased gross margin from ongoing pipeline expansion projects, incremental margins associated with the Boulden acquisition from December of last year, organic growth in the natural gas distribution operations, higher propane retail margins per gallon and gains from two office and operations facility sales. Detailed discussions of our results for the quarter are provided in our press release and Form 10-Q both of which were filed yesterday.The key variances in net income and earnings per share for the first quarters of 2020 and 2019 are highlighted on slides 12 and 13. We continue to report earnings on a continuing and discontinued basis. The focus of these reconciliations are on a continuing operations basis. Earnings from continuing operations for the first quarter of 2020 were $1.77 per share compared to first quarter 2019 earnings per share of $1.75 per share.Adjustments for unusual items reduced first quarter 2020 earnings by $0.09 per share compared to first quarter 2019 as the impact of warmer…

Thank you very much, Beth. As shown on slide 21, Chesapeake utilities is strongly committed to sound governance principles and the highest standards of ethical conduct. This is how we work every day. These values are aligned with our established culture that engages all of our team members. ESG is embedded throughout our company, in every part of our DNA, starting with our Board of Directors who guide us and extending throughout the organization. We continue to honor our responsibility to operate in a safe and environmentally-friendly manner, that furthers our stewardship and facilitates sustainable practices.Towards that end, we have a cross-functional team that is focused on advancing our current ESG platform, refining our metrics and goals, and ensuring successful communications of the company's ESG strategy.On slide 22, we highlight just a few of our many ESG accomplishments and accolades that demonstrate our commitment and focus to conduct business with environmental responsibility and always with safety at top of mind, support the betterment of our communities and the customers we serve, and engage encourage and promote, our diverse and high performing team to continue to contribute in meaningful ways.We are strongly committed to operating in an ecologically positive manner while ensuring that the communities we serve continue receiving the value and benefits of clean and affordable energy delivery services.Our businesses strive to identify solutions for more efficient energy use, generate savings for our customers and reduce carbon emissions within our business operations and the communities we serve.As Jeff pointed out in the President's letter in our annual report, we have been able to extend our systems to previously unserved and underserved areas, which has accelerated the conversion of thousands of gold – coal, oil, kerosene and wood burning appliances to clean and affordable natural gas. We also actively support the use of high-efficiency appliances through rebate programs.On the electric side, our distribution utility purchases power from one of the most efficient combined heat and power plants in the United States and from a wholesale supplier that operates the largest renewable energy fleet in Florida. And back on Delmarva, Sharp Energy, our propane distribution business is one of the largest auto gas suppliers in the Northeast displacing diesel fuel by providing a cleaner safer fuel for school buses and fleet vehicles.On slide 23, we have highlighted just a few of the many solutions relied upon across our energy delivery businesses to reduce our community's carbon footprint. We are excited about new opportunities like those involving renewable natural gas that we are pursuing, which will further advance our environmental stewardship.I appreciate being with all of you today and turn the call back to Jeff.

Well, once again, Jim, Jeff and I would like to thank you all for joining us. I will close today's call by highlighting our outstanding track record of dividend growth.As we noted earlier and as shown on slide 24, our Board of Directors announced an 8.6% increase in our annualized dividend yesterday. This increase reflects their confidence in our continued ability to produce growth in earnings per share that is well-above the industry average.Our five-year average dividend growth of 8.9% is among the top five in the utility industry and is in line with our five-year average growth in earnings per share of 8.5%. Superior dividend growth is a critical component of our financial strategy and our commitment to deliver industry-leading returns to our shareholders over the long-term.From Jeff, Jim and myself, we thank you for your support and interest in our company. It means more than we could ever say in this phone call. We see numerous opportunities for continued growth in the businesses we operate today and are committed to ensuring the safety and health of our employees, while we manage the challenges of COVID-19 to ensure continued reliability and excellence for our customers, our communities and our shareholders.We would now be happy to take any questions.

[Operator Instructions] We have our first question from Brian Russo with Sidoti. Please ask your question.

Hi, good afternoon.

Hi, good afternoon. How are you?

Good. Thank you. Hope all is well on your end.

Yeah.

Just how much year-to-date have you or in total have you reserved in interim rates due to the hurricanes?

We have not -- right now, we have not Brian actually disclosed any information. We have fully reserved what the PSC has allowed us to implement, which is the -- actually the amount that was filed for. And so we have fully reserved that at this time. Information about the full amount of our request is actually out in our filing on the PSC's website. But once we have final rates that and they're determined certainly that information in regards to the final rate we'll have that disclosed.

Got it. So from an accounting perspective, you get final approval and then you'll book that on the income statement in that reporting period.

Yeah. Yes.

Yeah, okay. Okay. And then the Marlin first quarter 2020 versus first quarter 2019 decline in margin was that expected? Because it seems that you're still committed to the $1 million increase in margin in 2020 over 2019?

Yes, great question. It was expected. Last year, we had -- at the time, we had just purchased Marlin and we were coming into the beginning of last year. And so we -- there were several large-scale emergency-type projects that arose and were one-time large events then you don't always -- you can't always plan for those type of emergency-type events to reoccur.But what we're looking at and why we feel comfortable are with the projects that we see on the drawing board. And you'll recall that the business model for Marlin has shifted a little bit to where we have a larger portion of that business with more contracts that have a recurring nature type of a portion of them. So we feel confident with what we see in our pipeline and I'll use that term loosely but in our pipeline of projects that we see and the opportunities before us we have not come off of our guidance for the year in any way at this time.

Okay, great. And just curious and with the understanding that the second quarter is a shoulder quarter for most of your companies, the $400,000 of COVID expense, right, not netted against lower other operating expenses, but what was that from? Was that like PPE and other type of response costs, or was that actual like sales degradation you were starting to see?

Brian, well so you'll recall that, we had about $400,000 of lower margin offset by $400,000 of lower cost. So the lower costs were coming from things like less travel in the latter part of March less conferences. There were a lot of things that had to shift and be canceled and there were just various things like that. And so those were able to offset where we started to see some margin degradation at the end of the month. In terms of primarily, you're going to have that in the small commercial and industrial side of the business.

Okay, got it. And so that might carry on into April or May, or it's not on the residential side because it's a short period, but that could be extended into April, May and June for example at that rate.

It depends on -- certainly it depends on each of the state's orders. What I would say is that also I wouldn't say -- you commented about April and May. Those can be -- those are shoulder months as you said, I think most of us can see that April has been colder than years past. And so there's going to be low debt results from that colder weather in April. Some of that will offset some of the impact on the C&I side.But you have started to see some of the state orders being lifted in certain places. So in Florida, for example, things are starting to open back up. In Maryland, some things are starting to happen in Delaware as well, Ohio, et cetera. So things are starting to. So I think it's a little difficult at this time. We are standing up dashboards to -- and we have stood up dashboards that monitor the consumption so we can look at that.But some of the offsets are certainly, Brian going to continue to be in the environment that we operate just like Jeff said, we're not rushing back to business as normal. So travel is not going to be at the pace that it was previously -- in previous years, right? Those types of costs are still going to be lower. So that's going to offset some of what may happen on the margin side. And for us, again, as we look at that, we still feel comfortable as we look out over the longer-term with the guidance that we've provided out.And I think there's so many factors we try to lay them out on -- Jeff covered them in terms of margin, expenses beyond travel, there's interest savings. There's things that are all going to factor into what the quarter comes out looking like. And then finally, whatever, regulatory orders are stood up in some of the states that are currently in the process of looking at those types of things.

Okay, got it. And just in terms of that debt expansion, I noticed in the Q, you've estimated credit losses of $1.42 million as of March 30th? Does that capture any of the COVID pandemic, or -- and is some of that recovered in mechanisms in Maryland? Just trying to triangulate that disclosure during the Q?

As of the end of March, there is nothing that has been factored in regards to COVID-19. In the sense of the Maryland regulatory relief, there wasn't substantial dollars given that regulatory order for us to put in a regulatory asset. So we will look at that as we get year-to-date through June.I think we will have to revisit that the implications of anything on the bad debt side. But that's going to need to once again take into consideration whatever regulatory orders are out there.And from our perspective, we certainly want to work with our customers and we have loads of programs and we have our sharing program that provides financial assistance, we've committed dollars to that. We have budget programs. We work with customers to spread their bills out over a period of time. So I think just rushing to and saying yes there will be some bad debt exposure out of this there has to be. But there's going to be multiple mechanisms including whatever may come on the regulatory side, whatever may come in terms of how we're able to help customers and enable them to approach some of these programs. And so I think again as we get through the second quarter, I think we'll be able to provide more transparency about what it looks like. And -- but we will be working with our customers, and again we'll reevaluate it at the end of that time.

Okay. That's great. And then just the 8.6% dividend increase announcement today that combined with the 2022 reaffirmation of the EPS guidance range. It kind of -- it seems to me at least that the payout is going to remain in that low 40% level. So that implies that, you see a lot of growth opportunities. And you mentioned a few like CNG and Marlin. But are there other Boulden or OHL, O-H-L type acquisitions that you see in the pipeline?

Well, we are continuing, as Jeff talked about earlier, -- I mean we are continuing to look at growth opportunities. That's really been one of the most -- one of the great things even during the situation that we find ourselves in that number one, our expansion projects are still continuing. And in some cases, we're even doing a few projects ahead of when they might have been on the drawing board, because of some of the states actually doing work in some of our jurisdictions.But the other part of it is, yes, we will continue to pursue new opportunities. As we've stated in the past, certainly acquisitions that make sense. We are interested in. Similarly, we've expressed interest given Marlin's capabilities beyond CNG to look at RNG and LNG. And so, I think you can expect, Brian that we're continuing to look at a lot of things. And we again affirmed our CapEx guidance for this year and Jeff reaffirmed our CapEx guidance through 2022. And so, we're still -- our foot is still on the pedal and we're still pushing forward.

Okay, great. Thank you very much.

Thank you. Have a great afternoon and evening.

Okay. Thank you, Brian. [Operator Instructions] Okay. There are no questions as of the moment. Beth?

Thank you. Well, I'd like to close by saying just a few words. While our commitment to generating increased shareholder value remains at the forefront of our decision-making, equally as important during this unprecedented time have been the decisions and actions, we have taken as a company to maintain the safety and well-being of our employees and their families, to ensure delivery of the essential services our customers expect from us, and to provide financial support in these challenging times to our local communities.We've responded in this way, not because it's the right thing to do, but because we have always done so each and every day. Rest assured we will keep doing the right thing each and every day.Thank you again for joining our call today. I know it's late at the end of the day, and for your interest in our company. We are proud of what our team has accomplished for our shareholders in the past and we remain committed to working hard every day to deliver superior shareholder returns in the future. Please stay safe out there, and we look forward to talking with you next quarter. Thank you so much. Good night.

Ladies and gentlemen, this concludes today's conference call. Thank you so much for participating. You may now disconnect.