Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

Acquisition of Diversified Energy

On December 15, 2021, Sharp acquired the propane operating assets of Diversified Energy for approximately $37.5 million, net of cash acquired. In connection with this acquisition, we recorded a $2.1 million liability which is subject to the seller's adherence to various provisions contained in the purchase agreement through the first anniversary of the transaction closing. Included with the acquisition, was approximately $1.7 million of working capital from the Seller consisting predominantly of accounts receivable and propane inventory. We accounted for this acquisition as a business combination within our Unregulated Energy Segment beginning in the fourth quarter of 2021. There are multiple strategic benefits to this acquisition including it: (i) expands our propane service territory into North Carolina, South Carolina, Pennsylvania, and Virginia and (ii) includes an established customer base with opportunities for future growth. Through this acquisition, the Company expands its operating footprint into North Carolina and South Carolina and our propane business will add approximately 19,000 residential, commercial and agricultural customers, along with distribution of approximately 10.0 million gallons of propane annually. In connection with this acquisition, we recorded $23.1 million in property plant and equipment, $6.2 million in intangible assets associated with customer relationships and non-compete agreements and $5.9 million in goodwill, all of which is deductible for income tax purposes. The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions. In January 2022, we received a $0.8 million customary post-closing working capital true-up provision related to the working capital valuation at the time of closing.

Acquisition of Western Natural Gas

In October 2020, Sharp acquired certain propane operating assets of Western Natural Gas, which provides propane distribution service throughout Jacksonville, Florida and the surrounding communities, for approximately $6.7 million, net of cash acquired. Additionally, the purchase price included $0.3 million of working capital. We accounted for this acquisition as a business combination within our Unregulated Energy Segment beginning in the fourth quarter of 2020. There are multiple strategic

benefits to this acquisition including: (i) expansion of our propane service territory in Florida and (ii) establishment of a customer base with additional opportunities for future growth.

In connection with this acquisition, we recorded $3.5 million in property plant and equipment, $1.4 million in intangible assets associated with customer relationships and non-compete agreements and $1.8 million in goodwill, all of which is deductible for income tax purposes.

Acquisition of Elkton Gas

In July 2020, we closed on the acquisition on of Elkton Gas, which provides natural gas distribution service to approximately 7,000 residential and commercial customers within a franchised area of Cecil County, Maryland for approximately $15.6 million, net of cash acquired. Additionally, the purchase price included $0.6 million of working capital. Elkton Gas’ territory is contiguous to our franchised service territory in Cecil County, Maryland.

In connection with this acquisition, we recorded $15.9 million in property, plant and equipment, $0.6 million in accounts receivable, $2.6 million in other liabilities, $2.6 million in regulatory liabilities and $4.3 million in goodwill, all of which is deductible for income tax purposes. All of the assets and liabilities are recorded in the Regulated Energy segment. Upon reaching the end of the acquisition measurement period, we recognized offsetting adjustments to the acquisition date fair values of several of the assets acquired and liabilities assumed. These adjustments did not materially impact our previously recognized amount of goodwill.

These acquisitions generated the following operating revenues and income: