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Acquisitions and Divestitures (Notes) | 9 Months Ended
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Sep. 30, 2020
Discontinued Operations and Disposal Groups [Abstract] |
Business Combination Disclosure [Text Block] | 3. Acquisitions and Divestitures Acquisition of Western Natural Gas Company In October 2020, Sharp acquired certain propane operating assets of Western Natural Gas Company, which provides propane distribution service throughout Jacksonville, Florida and the surrounding communities, for approximately $6.7 million, net of cash acquired. The acquisition will be accounted for 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 it: (i) expands our propane territory serviced in Florida; (ii) includes an established customer base with opportunities for future growth; and (iii) provides opportunities to market additional services and pricing programs to these customers. Acquisition of Elkton Gas In July 2020, we closed on the acquisition 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. Elkton Gas continues to operate out of its existing office with the same local personnel who are now also serving our existing franchised service territory in Cecil County. 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. The amounts recorded in conjunction with the acquisition are preliminary, and subject to adjustment based on contractual provisions. The purchase price allocation will be finalized in the third quarter of 2021. For the three and nine months ended September 30, 2020, Elkton Gas generated operating revenue of $0.6 million and an operating loss of less than $0.1 million, respectively. The immaterial operating loss is reflective of less than a full quarter of results; in addition, the third quarter is typically the warmest quarter of the year. Acquisition of Boulden In December 2019, Sharp acquired certain propane operating assets of Boulden, which provides propane distribution service to approximately 5,200 customers in Delaware, Maryland and Pennsylvania, for approximately $24.6 million, net of cash acquired. Additionally, the purchase price included $0.2 million of working capital. We recorded contingent consideration of $0.6 million related to the seller's adherence to various provisions contained in the contract through the first anniversary of the transaction closing. We accounted for the purchase of the operating assets of Boulden as a business combination and integrated the business into our Sharp operation. There are multiple strategic benefits to this acquisition including it: (i) overlays with the Elkton Gas acquisition to establish an integrated energy delivery platform in Cecil County, Maryland; (ii) includes an established customer base with opportunities for future growth; (iii) enables operational synergies, including supply, for the northern Delmarva Peninsula; and (iv) provides opportunities to market additional services and pricing programs to these customers. In connection with this acquisition, we recorded $8.3 million in property, plant and equipment, $5.1 million in intangible assets associated with customer relationships and non-compete agreements and $11.2 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 and will be finalized in the fourth quarter of 2020. For the three months ended September 30, 2020, Boulden generated operating revenue of $0.4 million and an operating loss of $0.2 million, respectively. For the nine months ended September 30, 2020, Boulden generated operating revenue and income of $4.1 million and $1.2 million, respectively. The third quarter is typically the warmest quarter of the year, with the smallest amount of gallons being delivered during that quarter. Divestiture of PESCO During the fourth quarter of 2019, we sold PESCO's assets and contracts in four separate transactions and exited the natural gas marketing business. As a result of the sales agreements, we began to report PESCO as discontinued operations during the third quarter of 2019, excluded PESCO's performance from continuing operations for all periods presented and classified its assets and liabilities as held for sale where applicable. We received a total of $23.1 million in cash consideration from the buyers, inclusive of working capital of $8.0 million and recognized total pre-tax gain of $7.5 million ($5.4 million after tax) in connection with these transactions of which, $7.3 million of this gain was recognized in the fourth quarter of 2019. Operating revenues and costs of sales from the previous reporting periods, which were previously eliminated in consolidation, have been grossed up and are now reflected as a component of operating revenues and costs of sales for the three and nine months ended September 30, 2019. We recast these amounts because, upon completion of the sales transactions, we continued to provide and receive services from the buyers through the remainder of the contractual terms. A summary of discontinued operations presented in the condensed consolidated statements of income includes the following:
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | Divestiture of PESCO During the fourth quarter of 2019, we sold PESCO's assets and contracts in four separate transactions and exited the natural gas marketing business. As a result of the sales agreements, we began to report PESCO as discontinued operations during the third quarter of 2019, excluded PESCO's performance from continuing operations for all periods presented and classified its assets and liabilities as held for sale where applicable. We received a total of $23.1 million in cash consideration from the buyers, inclusive of working capital of $8.0 million and recognized total pre-tax gain of $7.5 million ($5.4 million after tax) in connection with these transactions of which, $7.3 million of this gain was recognized in the fourth quarter of 2019. Operating revenues and costs of sales from the previous reporting periods, which were previously eliminated in consolidation, have been grossed up and are now reflected as a component of operating revenues and costs of sales for the three and nine months ended September 30, 2019. We recast these amounts because, upon completion of the sales transactions, we continued to provide and receive services from the buyers through the remainder of the contractual terms. 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) |  | 2020 |  | 2019 (1) |  | 2020 |  | 2019 (1)
Operating revenues(1) |  | $ | 3 |  |  | $ | 34,271 |  |  | $ | 26 |  |  | $ | 152,573 |
Cost of sales(1) |  | (40) |  |  | 33,763 |  |  | (39) |  |  | 149,464 |
Other operating expenses |  | 75 |  |  | 1,360 |  |  | 272 |  |  | 4,819 |
Operating loss |  | (32) |  |  | (852) |  |  | (207) |  |  | (1,710) |
Interest and other expense |  | 6 |  |  | (74) |  |  | (23) |  |  | (242) |
Loss from Discontinued Operations before income taxes |  | (26) |  |  | (926) |  |  | (230) |  |  | (1,952) |
Gain on sale of Discontinued Operations |  | — |  |  | — |  |  | 200 |  |  | — |
Income tax benefit |  | (7) |  |  | (296) |  |  | (195) |  |  | (564) |
Gain (Loss) from Discontinued Operations, Net of Tax |  | $ | (19) |  |  | $ | (630) |  |  | $ | 165 |  |  | $ | (1,388) |
(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 continued with the buyers after the disposition of the assets of PESCO. Since the disposition of the assets and contracts of PESCO was completed in the fourth quarter of 2019, there were no assets or liabilities classified as held for sale at September 30, 2020 and December 31, 2019. We have elected not to separately disclose discontinued operations on the condensed consolidated statements of cash flows. The following table summarizes significant statements of cash flows data related to the discontinued operations of PESCO:
|  | Nine Months Ended September 30, 2019
In thousands |  |
Depreciation and amortization |  | $ | 437 |
Deferred income taxes |  | $ | 513 |
Realized gain on commodity contracts |  | $ | (623) |
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 expired on March 31, 2020. As a result of the sale of the assets of PESCO, effective October 1, 2019, these agreements were managed by New Jersey Resource Energy Services Company through the remainder of the contract term. In March 2020, our Delmarva Peninsula natural gas distribution operations entered into asset management agreements with a third party to manage their natural gas transportation and storage capacity. The agreements were effective as of April 1, 2020, and expire on March 31, 2023. In addition to the asset management agreements, Eastern Shore had several firm transportation and capacity arrangements with PESCO, which were included in the assets sold to United Energy Trading, LLC. Eastern Shore will continue to fulfill these arrangements throughout the remainder of their contractual term. These agreements currently have expiration dates of November 30, 2021.

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