XML 97 R12.htm IDEA: XBRL DOCUMENT v3.19.3
Discontinued Operations (Notes)
 9 Months Ended
Sep. 30, 2019
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
Discontinued Operations

In September of 2019, we initiated a plan to sell a majority of the assets of PESCO, our natural gas marketing subsidiary. This was done in an effort to enable us to focus on the strategies that support our core energy delivery business. To date, we have executed the following three separate transactions to sell PESCO’s assets and contracts:
•
PESCO’s Florida retail operations were sold to Gas South. The initial closing for the transaction was completed in November 2019 with subsequent closings expected for December 2019 and January 2020.
•
PESCO’s other non-Florida retail operations and contracts were sold to UET in October 2019.
•
PESCO’s Mid-Atlantic wholesale contracts and Chesapeake Utilities’ Delaware division, Maryland division and Sandpiper Energy asset management agreements were sold to NJRES in October 2019.

In addition to these transactions, we are actively marketing PESCO’s producer services portfolio and are targeting a sale by the end of 2019. We expect to recognize a pre-tax gain ranging from $5.0 million to $7.0 million in connection with the closing of the three transactions during the fourth quarter of 2019.

As a result of the sales agreements, we began to report PESCO as discontinued operations during the third quarter of 2019, we began to exclude PESCO's performance from continuing operations and segment results for all periods presented
and classified its assets and liabilities as held for sale. The assets and liabilities of PESCO are presented as current and noncurrent assets and liabilities of a business held for sale in the condensed consolidated balance sheets.

Additionally, amounts for operating revenues and costs of sales which had previously been eliminated in consolidation related to intercompany sales and purchases have been grossed up and are now reflected as a component of operating revenues and costs of sales for all periods presented. We have recast these amounts because upon completion of the sales transactions, we will continue to provide and receive services from the buyers.

A summary of discontinued operations presented in the condensed consolidated statements of income includes the following:

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
(in thousands)
 
2019 (1)

2018 (2)
 
2019 (1)

2018 (2)
Operating revenues
 
$
34,271
 
 
$
51,619

 
$
152,573
 
 
$
181,976
 
Cost of sales
 
33,763
 
 
50,888

 
149,464
 
 
177,463
 
Other operating expenses
 
1,361
 
 
1,574

 
4,818
 
 
4,791
 
Operating loss

(853
)
 
(843
)
 
(1,709
)
 
(278
)
Interest and other expense
 
75
 
 
80

 
243
 
 
248
 
Loss from Discontinued Operations before income taxes

(928
)
 
(923
)
 
(1,952
)
 
(526
)
Income tax benefit
 
(304
)
 
(371
)
 
(564
)
 
(187
)
Loss from Discontinued Operations, net of tax

$
(624
)
 
$
(552
)
 
$
(1,388
)
 
$
(339
)
(1) Included in operating revenues and cost of sales for the three and nine months ended September 30, 2019, is $4.3 million and $19.1 million respectively, representing amounts which had been previously eliminated in consolidation related to intercompany activity that will continue with the buyers after the disposition of the assets of PESCO.
(2) Included in operating revenues and cost of sales for the three and nine months ended September 30, 2018 is $4.7 million and $22.1 million respectively, representing amounts which had been previously eliminated in consolidation related to intercompany activity that will continue with the buyers after the disposition of the assets of PESCO.

The assets and liabilities of the discontinued operations classified as held for sale in the condensed consolidated balance sheet include the following:
 
 
September 30,
 
December 31,
(in thousands)
 
2019
 
2018
Property, plant and equipment
 
$
1,203
 
 
$
1,242
 
Less: accumulated depreciation
 
(334
)
 
(206
)
Net property, plant and equipment (1)
 
869
 
 
1,036
 
Current assets
 
21,155
 
 
52,681
 
Deferred charges and other assets (1)
 
6,310
 
 
6,626
 
Assets of Discontinued Operations held for sale
 
$
28,334
 
 
$
60,343
 
 
 
 
 
 
 
Current liabilities
 
$
18,110
 
 
$
48,672
 
Liabilities of Discontinued Operations held for sale
 
$
18,110
 
 
$
48,672
 
Net assets
 
$
10,224
 
 
$
11,671
 
(1) These balances have been combined within the condensed consolidated balance sheets to arrive at non-current assets held for sale.
     
We have elected not to separately disclose discontinued operations on the condensed consolidated statement of cash flows. The following table summarizes significant statement of cash flow data related to the discontinued operations of PESCO:
 
 
Nine Months Ended
 
 
September 30,
(in thousands)
 
2019
 
2018
Depreciation and amortization
 
$
437

 
$
437

Property, plant and equipment expenditures
 
$
—

 
$
72

Deferred income taxes
 
$
513

 
$
403

Realized gain on commodity contracts
 
$
623

 
$
3,295



Our Delmarva Peninsula natural gas distribution operations had asset management agreements with PESCO to manage their natural gas transportation and storage capacity. The agreements were effective as of April 1, 2017, and each expire on March 31, 2020. As a result of the sale of the assets of PESCO, effective October 1, 2019, these agreements are now managed by NJRES through the remainder of the contract term. In addition to the asset management agreements, our Eastern Shore subsidiary had several firm transportation and capacity arrangements with PESCO which were included in the assets sold to UET. Eastern Shore will continue to fulfill these arrangements throughout the remainder of their contractual term. These agreements currently have expiration dates of March 31, 2020 and November 30, 2021.