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Chesapeake Utilities Corporation Announces Continued Strong Performance for the Second Quarter Ended June 30, 2010

August 5, 2010

DOVER, Del., Aug. 5 /PRNewswire-FirstCall/ — Chesapeake Utilities Corporation (NYSE: CPK) today announced increased financial results for the quarter ended June 30, 2010. The Company’s net income for the quarter ended June 30, 2010 was $3.3 million, or $0.35 per share (diluted), an increase of $2.5 million, or $0.23 per share (diluted), compared to $806,000, or $0.12 per share (diluted), for the quarter ended June 30, 2009. The increased results for the second quarter of 2010 included $1.8 million of net income recorded by the Company’s new subsidiary, Florida Public Utilities Company (“FPU”), as a result of the merger on October 28, 2009. Additionally, the results for the second quarter of 2010 reflected a decrease in merger-related costs of $1.0 million ($599,000 net of tax), compared to the second quarter of 2009. Quarterly results for Chesapeake’s legacy businesses reflect continued growth and expansion of the natural gas distribution and transmission operations on the Delmarva Peninsula, a rate increase in Chesapeake’s Florida division and improved results from the advanced information services business. These increases were partially offset by a decline in volumes and margins from the propane businesses.

The Company’s net income for the six months ended June 30, 2010 was $17.3 million, or $1.82 per share (diluted), an increase of $7.9 million, or $0.46 per share (diluted), compared to $9.4 million, or $1.36 per share (diluted), for the same period in 2009. The increased results for the six months ended June 30, 2010 included $6.2 million of net income recorded by FPU. Also, the results for the six months ended June 30, 2010 reflected a decrease in merger-related costs of $1.1 million ($655,000 net of tax), compared to the same period in 2009. The year-to-date results from Chesapeake’s legacy businesses reflect the strong performance by the regulated energy businesses as a result of continued growth and expansion on the Delmarva Peninsula, the benefits of the Florida division rate increase and improved results from the advanced information services business.

“Our strong results in the second quarter and year-to-date reflect both the success of our team in integrating the Chesapeake-FPU merger, as well as the significant growth in our Delmarva natural gas distribution and transmission businesses,” stated John R. Schimkaitis, Vice Chairman and Chief Executive Officer of Chesapeake Utilities Corporation. “We remain optimistic about achieving and exceeding our goal of accretion from the merger in the first year after closing. Additionally, we remain excited about the potential for future growth given the continued integration and the opportunities for growth across our lines of business.”

The discussions of the results for the periods ended June 30, 2010 and 2009, use the term “gross margin,” a non-Generally Accepted Accounting Principles (“GAAP”) financial measure, which management uses to evaluate the performance of the Company’s business segments. For an explanation of the calculation of “gross margin,” see the footnote to the Supplemental Income Statement Data chart below. In addition, certain information is presented, which, for comparison purposes, includes only FPU’s results of operations for the periods ended June 30, 2010 and, in some cases, FPU’s results for the same periods in 2009, which was prior to the merger. Certain other information is presented, which, for comparison purposes, excludes results of operations of FPU from the consolidated results of operations and all merger-related costs incurred in connection with the FPU merger for the periods presented. Although non-GAAP measures are not intended to replace the GAAP measures for evaluation of Chesapeake’s performance, Chesapeake believes that the portions of the presentation which include only the FPU results, or which exclude the FPU results for the post-merger period and merger-related costs, provide helpful comparisons for an investor’s evaluation purposes.

Highlights for the second quarter of 2010 included:

  • Successful integration between Chesapeake and FPU continued during the quarter, and the merger is expected to be accretive in 2010 – the first year of operation after the merger. During the second quarter, the Company completed the integration of the Florida propane operations and the billing and customer service functions.
  • In June 2010, Jeff Householder joined FPU as president, bringing his extensive knowledge and experience of the Florida energy market to FPU.
  • The rate increase for Chesapeake’s Florida division approved in December 2009 contributed approximately $574,000 to gross margin for the quarter ended June 30, 2010.
  • The rate increase for FPU’s natural gas distribution operation contributed approximately $1.3 million to gross margin for the quarter ended June 30, 2010.
  • Eastern Shore Natural Gas Company (“ESNG”), the Company’s natural gas transmission subsidiary, generated additional gross margin of $370,000 from new transportation services.
  • Growth in residential, commercial and industrial customers for the Delmarva natural gas distribution operations contributed to a period-over-period increase in gross margin of $256,000.
  • The Delmarva natural gas distribution operations entered into agreements to provide natural gas service to two industrial customers located in southern Delaware. The anticipated annual margin from these services equates to approximately 1,575 average residential heating customers once the services begin in the fourth quarter of 2010 and early 2011. These services further extend the Delmarva natural gas distribution and transmission infrastructure, bringing cost-effective and environmentally friendly natural gas to new areas on the Delmarva Peninsula and creating additional opportunities for growth.
  • The Company’s advanced information services subsidiary, BravePoint, generated operating income of $230,000 in the second quarter of 2010, compared to an operating loss of $240,000 in the same period in 2009, due to increased billable consulting hours and lower operating costs.
  • A lower retail margin per gallon during the second quarter of 2010 compared to the same period in 2009 decreased the gross margin of the Delmarva propane distribution operation by $290,000. Retail margins for the first half of 2009 benefited from the $939,000 loss recorded in late 2008 on a swap agreement for the 2008/2009 winter Pro-Cap (propane price cap) program. This loss lowered the propane inventory costs and, therefore, increased retail margins during the first half of 2009. Retail margins for the first half of 2010 returned to more normal levels.
  • Xeron, the Company’s propane wholesale marketing subsidiary, experienced a quarter-over-quarter decrease in its gross margin of $225,000 as a result of decreased trading activity. Lower trading volumes from lower demand in the wholesale propane market have led to greater uncertainty in propane wholesale prices, reducing Xeron’s trading activity.
  • ESNG received the American Gas Association’s Safety Achievement Award for the seventh consecutive year.

As a result of the merger with FPU, the Company changed its operating segments in the fourth quarter of 2009 to better reflect how the chief operating decision maker (the Company’s Chief Executive Officer) reviews the various operations of the Company. The discussions of operating results below reflect the Company’s revised segments. The regulated energy segment is composed of the Company’s natural gas distribution, electric distribution and natural gas transmission operations. The unregulated energy segment is composed of the Company’s natural gas marketing, propane distribution and propane wholesale marketing operations. The “other” segment is composed of the Company’s advanced information services operation, other subsidiaries that own property which is leased to other affiliates, unallocated corporate costs and eliminations.

Comparative results for the quarters ended June 30, 2010 and 2009

Operating income increased by $4.9 million, or 172 percent, from $2.9 million to $7.8 million for the current quarter. Operating income for the Company included $3.7 million in operating income from FPU for the period.

Regulated Energy

Operating income for the regulated energy segment for the second quarter of 2010 was $8.3 million, an increase of $4.2 million, or 103 percent, compared to the same period in 2009. An increase in gross margin of $13.7 million was partially offset by an increase in operating expenses of $9.5 million. Items contributing to the period-over-period increase in gross margin are listed in the following table:


    (in thousands)
    Gross margin for the three months ended June 30, 2009           $14,584
    -----------------------------------------------------           -------

    Factors contributing to the gross margin increase for the
     three months ended June 30, 2010:

        Margin from FPU operations                                   12,808
        Change in rates                                                 674
        Net customer growth                                             231
        New transportation services                                     161
        Other                                                           (17)
        Decreased customer consumption                                 (107)
    Gross margin for the three months ended June 30, 2010           $28,334
    -----------------------------------------------------           -------

  • FPU’s natural gas and electric distribution operations generated $8.3 million and $4.5 million, respectively, in gross margin for the period. Gross margin from FPU’s natural gas distribution operation in the quarter was positively affected by a rate increase of approximately $8.0 million approved by the Florida Public Service Commission (“Florida PSC”) in 2009.
  • A rate increase of approximately $2.5 million approved by the Florida PSC in 2009 increased gross margin for Chesapeake’s Florida natural gas distribution division by $574,000.

There was also a $100,000 net increase in margins from changes in customers’ rates and rate classifications, primarily for certain commercial and industrial customers with negotiated rates.

  • The Delmarva natural gas distribution operation experienced growth in residential, commercial and industrial customers, which contributed $256,000 to the gross margin.

Chesapeake’s natural gas distribution operation in Florida experienced a decline in gross margin of $25,000 due primarily to the loss of several large industrial customers as a result of plant closings in 2009.

  • New transportation services implemented by ESNG in November 2009 as a result of the completion of its latest expansion program generated additional gross margin of $254,000 for the quarter. A new expansion project completed in May 2010 also generated additional gross margin of $40,000 for the quarter and is expected to generate annualized gross margin of $343,000. New firm transportation service for an industrial customer for the period from November 2009 to October 2012 generated additional gross margin of $76,000 for the quarter.

ESNG’s gross margin in the second quarter of 2009 included $106,000 attributable to a temporary increase in service to one industrial customer, which did not recur in 2010. Also offsetting these margin increases were decreased margins of $103,000 in the quarter resulting from expired transportation service contracts in November 2009 and April 2010.

  • Non-weather-related customer consumption for the Delmarva natural gas distribution operation and Chesapeake’s Florida division decreased gross margin by $63,000 and $44,000, respectively.

Other operating expenses for the regulated energy segment increased by $9.5 million in the second quarter of 2010. Other operating expenses of FPU’s regulated energy operations for the period were $9.6 million, which was the primary factor contributing to the increase for the segment.

Unregulated Energy

Operating loss for the unregulated energy segment for the second quarter of 2010 was $791,000, compared to an operating income of $2,000 for the same period in 2009. An increase in gross margin of $860,000 was more than fully offset by a $1.7 million increase in operating expenses. Items contributing to the period-over-period increase in gross margin are listed in the following table:


    (in thousands)
    Gross margin for the three months ended June 30, 2009     $4,687
    -----------------------------------------------------     ------

    Factors contributing to the gross margin increase for the
     three months ended June 30, 2010:

        Margin from FPU operations                             1,886
        Net customer growth                                       61
        Natural gas marketing                                    (89)
        Unfavorable weather                                     (140)
        Propane wholesale marketing                             (225)
        Decreases in margin per retail gallon                   (290)
        Other volume decrease                                   (343)
    Gross margin for the three months ended June 30, 2010     $5,547
    -----------------------------------------------------     ------

  • FPU’s unregulated energy operation, which is primarily its propane distribution operation, recorded $2.2 million to gross margin for the period, which includes approximately $310,000 of gross margin generated from customers previously served by Chesapeake’s Florida propane distribution operation.
  • The addition of 454 community gas system customers since the second quarter of 2009 and 1,000 additional customers acquired in February 2010 as part of the purchase of the operating assets of a propane distributor serving Northampton and Accomack counties in Virginia contributed $35,000 and $26,000 to gross margin, respectively.
  • The Company’s natural gas marketing subsidiary, Peninsula Energy Services Company, Inc. (“PESCO”), experienced a decrease in gross margin of $89,000, due primarily to decreased spot sales to one industrial customer on the Delmarva Peninsula. Spot sales are not predictable and therefore, are not included in the Company’s long-term financial plans or forecasts.
  • The nine-percent warmer temperatures on the Delmarva Peninsula in the second quarter of 2010 compared to the same period in 2009, resulted in a decrease of $140,000 in propane gross margin.
  • Xeron experienced a $225,000 decrease in gross margin for the second quarter of 2010 as a result of decreased trading activity. Lower trading volumes in the wholesale propane market have led to greater uncertainty, reducing Xeron’s trading activity.
  • A lower retail margin per gallon during the second quarter of 2010 compared to the same period in 2009 decreased gross margin of the Delmarva propane distribution operation by $290,000. Retail margins for the first half of 2009 benefited from the $939,000 loss recorded in late 2008 on a swap agreement for the 2008/2009 winter Pro-Cap (propane price cap) program. This loss lowered the propane inventory costs and, therefore, increased retail margins during the first half of 2009. Retail margins for the first half of 2010 returned to more normal levels.
  • Non-weather-related propane volumes sold in the second quarter of 2010 decreased by 709,000 gallons, or 15 percent, and provided for a decrease in gross margin of $343,000. The decrease in non-weather-related volumes was primarily related to lower consumption and the timing of propane deliveries based on propane prices and weather.

Other operating expenses for the unregulated energy segment increased by $1.7 million in the second quarter of 2010. Other operating expenses of FPU’s unregulated energy operations for the period were $1.8 million, which was the primary factor contributing to the increase for the segment.

Other

Operating income for the “other” segment for the second quarter of 2010 was $244,000, compared to an operating loss of $1.2 million for the same period in 2009. During the second quarter of 2010, gross margin increased by $294,000, primarily from BravePoint, and operating expenses decreased by $1.2 million, due primarily to lower merger-related transaction costs.

BravePoint reported a profitable second quarter in 2010, with an increase in gross margin of $278,000 and a decrease in other operating expenses of $192,000, compared to the same period in 2009. Gross margin for BravePoint increased as a result of a 20-percent increase in the number of billable consulting hours and an increase in revenue and gross margin from its professional database monitoring and support solution services. A decrease in other operating expenses for the “other” segment was attributable to lower merger-related costs expensed in the second quarter and cost containment actions, including layoffs and compensation adjustments, implemented in 2009 by BravePoint.

Interest Expense

Interest expense for the second quarter of 2010 increased by approximately $732,000, or 47 percent, compared to the same period in 2009. The primary drivers of the increased interest expense are related to FPU, including:

  • An increase in long-term interest expense of $467,000 is related to interest on FPU’s first mortgage bonds.
  • Interest expense from a new term loan facility was $162,000 for the second quarter of 2010. Two series of the FPU bonds, 4.9 percent and 6.85 percent, were redeemed at the end of January 2010 using this new term loan facility.
  • Additional interest expense of $190,000 is related to interest on deposits from FPU’s customers.

Offsetting the increased interest expense from FPU was lower non-FPU-related interest expense from Chesapeake’s unsecured senior notes, as the principal balances decreased from scheduled repayments, the absence of any additional short-term interest expense as a result of the timing of our capital expenditures and the increased cash flow generated from ordinary operating activities.

On June 29, 2010, the Company entered into an agreement with a lender to issue up to $36 million in uncollateralized senior notes. The Company will issue $29 million of the uncollateralized senior notes prior to July 2012 to permanently finance the redemption of two series of the FPU bonds. The remaining $7 million will be issued prior to May 2013.

Comparative results for the six months ended June 30, 2010 and 2009

Operating income increased by $14.3 million, or 76 percent, to $33.2 million for the first six months of 2010, compared to the same period in 2009. Operating income for the Company included $11.7 million in operating income from FPU for the period.

Regulated Energy

Operating income for the regulated energy segment for the first six months of 2010 was $25.8 million, an increase of $12.2 million, or 90 percent, compared to the same period in 2009. An increase in gross margin of $31.9 million was offset by an increase in operating expenses of $19.7 million. Items contributing to the period-over-period increase in gross margin are listed in the following table:


    (in thousands)
    Gross margin for the six months ended June 30, 2009           $34,252
    ---------------------------------------------------           -------

    Factors contributing to the gross margin increase for the
     six months ended June 30, 2010:

        Margin from FPU operations                                 29,266
        Change in rates                                             1,296
        Net customer growth                                           656
        Favorable weather                                             557
        New transportation services                                   483
        Other                                                           8
        Decreased customer consumption                               (325)
    Gross margin for the six months ended June 30, 2010           $66,193
    ---------------------------------------------------           -------

  • FPU’s natural gas and electric distribution operations generated $20.2 million and $9.1 million, respectively, in gross margin for the period. Gross margin from FPU’s natural gas distribution operation for the six months ended June 30, 2010 was positively affected by a rate increase of approximately $8.0 million approved by the Florida PSC in 2009 and colder weather during the first quarter of 2010.
  • Gross margin for Chesapeake’s Florida division also experienced an increase in gross margin of $1.2 million from a rate increase of approximately $2.5 million approved by the Florida PSC in 2009. Changes in other customer rates, primarily related to the Company’s natural gas transmission operation, increased gross margin by $125,000.
  • The Delmarva natural gas distribution operation experienced growth in residential, commercial and industrial customers, which contributed $699,000 to the gross margin increase. Residential, commercial and industrial growth by the Delaware division contributed $360,000, $119,000 and $114,000, respectively, to the gross margin increase, and $106,000 of the gross margin increase was generated from overall customer growth in the Maryland division. The Delmarva natural gas distribution operation experienced a two-percent increase in average residential customers since the first half of 2009.

Chesapeake’s natural gas distribution operation in Florida experienced a decline in gross margin of $43,000 due primarily to the loss of several large industrial customers as a result of plant closings in 2009.

  • Colder weather on the Delmarva Peninsula generated an additional $311,000 of gross margin as heating degree-days increased by two percent for the first six months of 2010 compared to the same period in 2009. Colder weather during the first quarter of 2010 contributed to an increase in gross margin of $246,000 by Chesapeake’s Florida division.
  • New transportation services implemented by ESNG in November 2009 as a result of the completion of its latest expansion program generated additional gross margin of $508,000 for the first six months of 2010. A new expansion project completed in May 2010 also contributed additional gross margin of $40,000 for the period and is expected to generate annualized gross margin of $343,000. New transportation service for an industrial customer for the period from November 2009 to October 2012 generated additional gross margin of $228,000 for the six months ended June 30, 2010.

ESNG’s gross margin in the first half of 2010 included $107,000 attributable to a temporary increase in service from one industrial customer during the second quarter of 2009, which did not recur in 2010. Also offsetting these margin increases were decreased margins of $186,000 in the first half of 2010, resulting from expired transportation service contracts in November 2009 and April 2010.

  • Non-weather-related customer consumption for the Delmarva natural gas distribution operation and Chesapeake’s Florida division decreased gross margin by $298,000 and $27,000, respectively.

Other operating expenses for the regulated energy segment increased by $19.7 million in the six months ended June 30, 2010, $19.3 million of which was related to other operating expenses of FPU’s regulated energy operations for the period, which was the primary factor contributing to the increase for the segment.

Unregulated Energy

Operating income for the unregulated energy segment for the first six months of 2010 was $7.0 million, an increase of $375,000, or six percent, compared to the same period in 2009. An increase in gross margin of $3.9 million was partially offset by a $3.5 million increase in operating expenses. Items contributing to the period-over-period increase in gross margin are listed in the following table:


    (in thousands)
    Gross margin for the six months ended June 30, 2009       $16,993
    ---------------------------------------------------       -------

    Factors contributing to the gross margin increase for the
     six months ended June 30, 2010:

        Margin from FPU operations                              4,938
        Net customer growth                                       239
        Propane wholesale marketing                               179
        Miscellaneous fees and other                              128
        Other                                                     (59)
        Natural gas marketing                                    (688)
        Decreases in margin per retail gallon                    (872)
    Gross margin for the six months ended June 30, 2010       $20,858
    ---------------------------------------------------       -------

  • FPU’s unregulated energy operation, which is primarily its propane distribution operation, recorded $5.7 million to gross margin for the period, which included approximately $800,000 of gross margin generated from customers previously served by Chesapeake’s Florida propane distribution operation.
  • The addition of 422 community gas system customers since the first half of 2009 generated $125,000 of additional gross margin. In February 2010, Sharp Energy acquired the operating assets of a propane distributor in Virginia, including approximately 1,000 customers. These new customers contributed approximately $114,000 in gross margin during the first six months of 2010.
  • Xeron experienced a $179,000 increase in gross margin during the first six months of 2010 compared to the same period in 2009. Xeron benefited from increased propane price fluctuations in early 2010.
  • Other fees increased by $128,000 in the first six months of 2010, due primarily to continued growth and successful implementation of various customer loyalty programs by the Delmarva propane distribution operation.
  • Spot sales decreased during the first half of 2010 compared to the same period in 2009 due primarily to one industrial customer on the Delmarva Peninsula, reducing gross margin by $688,000. Spot sales are not predictable and, therefore, are not included in our long-term financial plans or forecasts.
  • A lower retail margin per gallon during the first half of 2010 compared to the same period in 2009 contributed to decreased gross margin of $872,000. Retail margins for the first half of 2009 benefited from the $939,000 loss recorded in late 2008 on a swap agreement for the 2008/2009 winter Pro-Cap (propane price cap) program. This loss lowered the propane inventory costs and, therefore, increased retail margins during the first half of 2009. Retail margins for the first half of 2010 returned to more normal levels.

Other operating expenses for the unregulated energy segment increased by $3.5 million in the first six months of 2010. Other operating expenses of FPU’s unregulated energy operations were $3.9 million, which was the primary factor contributing to the increase for the segment.

Other

Operating income for the “other” segment for the first six months of 2010 was $366,000, compared to an operating loss of $1.4 million for the same period in 2009. Increased operating income of $610,000 from BravePoint and decreased merger-related transition costs of $1.1 million contributed to this increase.

BravePoint reported an increase in gross margin of $267,000 due primarily to increased billable consulting hours and higher sales from its professional database monitoring and support solution services. Other operating expenses decreased by $1.5 million as a result of lower merger-related costs expensed in the six months ended June 30, 2010 compared to the same period in 2009 and a decrease in BravePoint’s operating expenses due to cost containment actions implemented in 2009.

Interest Expense

Interest expense for the first six months of 2010 increased by approximately $1.5 million, or 45 percent, compared to the same period in 2009. The primary drivers of the increased interest expense are related to FPU, including:

  • An increase in long-term interest expense of $1.1 million is related to interest on FPU’s first mortgage bonds.
  • Interest expense from a new term loan facility was $216,000 for the first half of 2010. Two series of the FPU bonds, 4.9 percent and 6.85 percent, were redeemed at the end of January 2010 using this new term loan facility.
  • Additional interest expense of $370,000 is related to interest on deposits from FPU’s customers.

Offsetting the increased interest expense from FPU was lower non-FPU-related interest expense from Chesapeake’s unsecured senior notes, as the principal balances decreased from scheduled repayments, the absence of any additional short-term interest expense as a result of the timing of our capital expenditures and the increased cash flow generated from ordinary operating activities.

On June 29, 2010, the Company entered into an agreement with a lender to issue up to $36 million in uncollateralized senior notes. The Company will issue $29 million of the uncollateralized senior notes prior to July 2012 to permanently finance the redemption of two series of the FPU bonds. The remaining $7 million will be issued prior to May 2013.

             Chesapeake Utilities Corporation and Subsidiaries
          Condensed Consolidated Statements of Income (Unaudited)
               For the Periods Ended June 30, 2010 and 2009
             (in thousands, except shares and per share data)
                                  Second Quarter       Year to Date
                                  --------------       ------------

                                     2010       2009      2010       2009
                                     ----       ----      ----       ----
    Operating Revenues
    Regulated Energy              $52,740    $18,869  $144,367    $71,050
    Unregulated Energy             24,615     19,830    83,885     69,225
    Other                           2,706      2,135     5,069      5,038
    Total Operating Revenues       80,061     40,834   233,321    145,313
    ------------------------       ------     ------   -------    -------

    Operating Expenses
       Regulated energy cost of
        sales                      24,406      4,285    78,174     36,798
       Unregulated energy and
        other cost of sales        20,384     16,182    65,475     54,891
       Operations                  18,160     11,575    36,855     23,820
       Transaction-related
        costs                          92      1,090       111      1,204
       Maintenance                  1,789        716     3,489      1,332
       Depreciation and
        amortization                5,038      2,413    10,661      4,797
       Other taxes                  2,431      1,717     5,397      3,649
     Total operating expenses      72,300     37,978   200,162    126,491
     ------------------------      ------     ------   -------    -------
    Operating Income                7,761      2,856    33,159     18,822
    Other income, net of
     other expenses                   (11)        12       103         45
    Interest charges                2,305      1,573     4,667      3,215
    Income Before Income
     Taxes                          5,445      1,295    28,595     15,652
    Income taxes                    2,105        489    11,281      6,253
    ------------                    -----        ---    ------      -----
    Net Income                     $3,340       $806   $17,314     $9,399
    ==========                     ======       ====   =======     ======

    Weighted Average Shares
     Outstanding:
      Basic                     9,467,222  6,862,248 9,443,708  6,847,543
      Diluted                   9,557,352  6,868,717 9,550,670  6,963,132

    Earnings Per Share of
     Common Stock:
      Basic                         $0.35      $0.12     $1.83      $1.37
      Diluted                       $0.35      $0.12     $1.82      $1.36
      -------                       -----      -----     -----      -----

           Chesapeake Utilities Corporation and Subsidiaries
             Supplemental Income Statement Data (Unaudited)
              For the Periods Ended June 30, 2010 and 2009
            (in thousands, except shares and per share data)
                                        Second
                                       Quarter        Year to Date
                                       -------        ------------

    Chesapeake and Subsidiaries       2010      2009     2010      2009
    ---------------------------       ----      ----     ----      ----
    Gross Margin (1)
      Regulated Energy             $28,334   $14,584  $66,193   $34,252
      Unregulated Energy             5,547     4,687   20,858    16,993
      Other                          1,390     1,096    2,621     2,379
     Total Gross Margin            $35,271   $20,367  $89,672   $53,624
     ==================            =======   =======  =======   =======

    Operating Income (Loss)
       Regulated Energy             $8,308    $4,086  $25,824   $13,583
       Unregulated Energy             (791)        2    6,969     6,594
       Other                           244    (1,232)     366    (1,355)
     Total Operating Income         $7,761    $2,856  $33,159   $18,822
     ======================         ======    ======  =======   =======

    Heating Degree-Days - Delmarva
     Peninsula
      Actual                           428       470    2,971     2,923
      10-year average (normal)         495       494    2,831     2,800
      ------------------------         ---       ---    -----     -----

    Heating Degree-Days - Florida
      Actual                             9        25      941       604
      10-year average (normal)          23        32      587       546
      ------------------------         ---       ---      ---       ---

    Cooling Degree-Days - Florida
      Actual                         1,043       953    1,045     1,009
      10-year average (normal)         880       894      952       961
      ------------------------         ---       ---      ---       ---
    (1) "Gross margin" is determined by deducting the cost of sales from
    operating revenue. Cost of sales
    includes the purchased fuel cost for natural gas, electricity and
    propane and the cost of labor spent on
    direct revenue-producing activities. Gross margin should not be
    considered an alternative to operating
    income or net income, which is determined in accordance with
    Generally Accepted Accounting Principles
    ("GAAP"). Chesapeake believes that gross margin, although a non-GAAP
    measure, is useful and
    meaningful to investors as a basis for making investment decisions.
    It provides investors with information
    that demonstrates the profitability achieved by the Company under its
    allowed rates for regulated
    operations and under its competitive pricing structure for non-
    regulated segments. Chesapeake's
    management uses gross margin in measuring its business units'
    performance and has historically
    analyzed and reported gross margin information publicly. Other
    companies may calculate gross margin in
    a different manner.

The following presents FPU’s results of operations for the three and six months ended June 30, 2010, included in Chesapeake’s consolidated results. The information presented below is for comparison purposes and is not intended to replace the GAAP measures for evaluation of Chesapeake’s performance.


                              Second         Year to
    (in thousands)            Quarter          Date
    --------------           -------          -------
    FPU Stand-alone               2010           2010
    ---------------               ----           ----
    Gross Margin (1)
    Regulated Energy
      Natural Gas               $8,344        $20,175
      Electric                   4,464          9,091
    Unregulated Energy
      Propane and other          2,219          5,697
     Total Gross Margin        $15,027        $34,963
     ==================        =======        =======

    Operating Income
    Regulated Energy
      Natural Gas               $2,230         $7,671
      Electric                   1,000          2,248
    Unregulated Energy
      Propane and other            450          1,811
     Total Operating
      Income                    $3,680        $11,730
     ===============            ======        =======
    (1) "Gross margin" is determined by deducting the cost of sales from
    operating revenue. Cost of sales includes the purchased fuel cost for
    natural gas, electricity and propane and the cost of labor spent on
    direct
    revenue-producing activities. Gross margin should not be considered
    an
    alternative to operating income or net income, which is determined in
    accordance with Generally Accepted Accounting Principles ("GAAP").
    Chesapeake believes that gross margin, although a non-GAAP
    measure, is useful and meaningful to investors as a basis for making
    investment decisions. It provides investors with information that
    demonstrates the profitability achieved by the Company under its
    allowed rates for regulated operations and under its competitive
    pricing
    structure for non-regulated segments. Chesapeake's management uses
    gross margin in measuring its business units' performance and has
    historically analyzed and reported gross margin information publicly.
    Other companies may calculate gross margin in a different manner.

                           Chesapeake Utilities Corporation and Subsidiaries
                           Distribution Utility Statistical Data (Unaudited)
                     For the Three Months Ended June 30, 2010
                     ----------------------------------------
                     Delmarva    Chesapeake                        FPU
                        NG       Florida NG       FPU NG        Electric
                  Distribution    Division    Distribution   Distribution
                  -------------               -------------  -------------
    Operating
     Revenues
    (in
     thousands)
    -----------
      Residential        $7,286        $1,109        $5,267        $10,150
      Commercial          4,304           911         8,681         10,315
      Industrial            734         1,170         2,139          2,565
      Other (1)          (2,063)          432        (2,622)        (1,124)
    ----------           ------           ---        ------         ------
    Total
     Operating
     Revenues           $10,261        $3,622       $13,465        $21,906

    Volume (in
     Mcfs/MWHs)
    -----------
      Residential       369,760        74,398       290,991         67,871
      Commercial        458,499       339,054       761,649         75,231
      Industrial        481,873     3,814,830       514,681         20,710
      Other              60,879             -      (177,664)        17,898
      -----              ------           ---      --------         ------
    Total             1,371,011     4,228,282     1,389,657        181,710

    Average
     customers
    ----------
      Residential        47,431        13,418        47,163         23,584
      Commercial          5,043         1,121         4,500          7,381
      Industrial            166            58           581              3
      Other                   7             -             -              -
      -----
    Total                52,647        14,597        52,244         30,968
    -----                ------        ------        ------         ------


                          For the Three Months Ended June 30,
                                             2009
                            ------------------------------------
                                 Chesapeake                         FPU
                     Delmarva      Florida                        Electric
                        NG            NG          FPU NG       Distribution
                  Distribution     Division  Distribution(2)         (2)
                  -------------  ----------- ----------------  -------------
    Operating
     Revenues
    (in
     thousands)
    -----------
      Residential        $9,231         $898           $4,527         $9,310
      Commercial          5,658          732            6,597          9,300
      Industrial            834        1,123            1,480          1,834
      Other (1)          (3,465)         258           (2,154)        (3,205)
    ----------           ------          ---           ------         ------
    Total
     Operating
     Revenues           $12,258       $3,011          $10,450        $17,239

    Volume (in
     Mcfs/MWHs)
    -----------
      Residential       447,416       76,893          270,945         66,211
      Commercial        481,806      265,075          703,495         74,789
      Industrial        414,993    4,000,531          455,808         16,330
      Other              88,616            -                -         20,713
      -----
    Total             1,432,831    4,342,499        1,430,248        178,043

    Average
     customers
    ----------
      Residential        46,756       13,342           47,048         23,707
      Commercial          5,025        1,120            4,495          7,390
      Industrial            140           63              535              2
      Other                  10            -                1              -
      -----
    Total                51,931       14,525           52,079         31,099
    -----                ------       ------           ------         ------
    (1) Operating revenues from "Other" sources include unbilled revenue,
    under (over) recoveries of fuel cost, conservation revenue, other
    miscellaneous
    charges, fees for billing services provided to third-parties and
    adjustments for pass-through taxes.
    (2) Operating revenue, volume and average customer information for
    FPU-Natural Gas Distribution and FPU-Electric Distribution are
    presented for
    comparative purposes only.  They represent the FPU results from the
    period prior to the merger with Chesapeake and, therefore, they are
    not included in
    Chesapeake's consolidated results.

                          Chesapeake Utilities Corporation and Subsidiaries
                          Distribution Utility Statistical Data (Unaudited)
                      For the Six Months Ended June 30, 2010
                      --------------------------------------
                     Delmarva    Chesapeake                        FPU
                        NG       Florida NG       FPU NG        Electric
                  Distribution    Division    Distribution   Distribution
                  -------------               -------------  -------------
    Operating
     Revenues
    (in
     thousands)
    -----------
      Residential       $30,430        $2,633       $14,333        $24,557
      Commercial         17,086         1,940        20,748         20,714
      Industrial          1,810         2,394         4,410          4,555
      Other (1)          (2,917)          962        (2,863)        (3,665)
    ----------           ------           ---        ------         ------
    Total
     Operating
     Revenues           $46,409        $7,929       $36,628        $46,161

    Volume (in
     Mcfs/
     MWHs)
    ----------
      Residential     2,056,174       253,559       845,888        164,899
      Commercial      1,751,364       721,972     1,757,666        150,222
      Industrial      1,053,215     7,402,857     1,116,263         39,580
      Other             141,950             -      (151,376)        11,645
      -----             -------           ---      --------         ------
    Total             5,002,703     8,378,388     3,568,441        366,346

    Average
     customers
    ----------
      Residential        47,808        13,441        47,090         23,558
      Commercial          5,113         1,121         4,490          7,381
      Industrial            164            59           577              3
      Other                   6             -             -              -
      -----
    Total                53,091        14,621        52,157         30,942
    -----                ------        ------        ------         ------


                               For the Six Months Ended June 30,
                                                 2009
                                 ----------------------------------
                                    Chesapeake
                       Delmarva       Florida                         FPU
                          NG             NG          FPU NG        Electric
                    Distribution      Division    Distribution   Distribution
                    -------------   -----------             (2)            (2)
                                                           ---            ---
    Operating
     Revenues
    (in
     thousands)
    -----------
      Residential         $36,565        $2,019        $12,838        $20,281
      Commercial           21,467         1,563         18,696         18,068
      Industrial            1,891         2,282          2,897          3,821
      Other (1)            (2,551)          681         (4,269)        (3,205)
    ----------             ------           ---         ------         ------
    Total
     Operating
     Revenues             $57,372        $6,545        $30,162        $38,965

    Volume (in
     Mcfs/
     MWHs)
    ----------
      Residential       2,014,722       209,390        750,612        147,129
      Commercial        1,669,502       609,633      1,693,303        145,835
      Industrial          795,476     7,722,468        938,442         36,640
      Other               185,590             -              -         13,684
      -----
    Total               4,665,290     8,541,491      3,382,357        343,288

    Average
     customers
    ----------
      Residential          47,068        13,408         47,072         23,706
      Commercial            5,080         1,112          4,492          7,395
      Industrial              143            63            523              2
      Other                     7             -              1              -
      -----
    Total                  52,298        14,583         52,088         31,103
    -----                  ------        ------         ------         ------
    (1) Operating revenues from "Other" sources include unbilled revenue,
    under (over) recoveries of fuel cost, conservation revenue, other
    miscellaneous
    charges, fees for billing services provided to third-parties and
    adjustments for pass-through taxes.
    (2) Operating revenue, volume and average customer information for
    FPU-Natural Gas Distribution and FPU-Electric Distribution are
    presented for
    comparative purposes only.  They represent the FPU results from the
    period prior to the merger with Chesapeake and, therefore, they are
    not included in
    Chesapeake's consolidated results.

          Chesapeake Utilities Corporation and Subsidiaries

          Condensed Consolidated Balance Sheets  (Unaudited)
                                                June     December
    Assets                                       30,        31,
    ------                                        2010        2009
                                                  ----        ----
     (in thousands, except shares and per share data)

     Property, Plant and Equipment
       Regulated energy                       $471,803    $463,856
       Unregulated energy                       59,548      61,360
       Other                                    16,162      16,054
     Total property, plant and equipment       547,513     541,270
     Less:  Accumulated depreciation and
      amortization                            (114,018)   (107,318)
     Plus:  Construction work in progress        5,362       2,476
     Net property, plant and equipment         438,857     436,428
     ---------------------------------         -------     -------

     Investments                                 2,030       1,959
     -----------                                 -----       -----

     Current Assets
       Cash and cash equivalents                 9,266       2,828
       Accounts receivable (less allowance
        for uncollectible
          accounts of $1,313 and $1,609,
           respectively)                        47,448      70,029
       Accrued revenue                           8,976      12,838
       Propane inventory, at average cost        6,538       7,901
       Other inventory, at average cost          3,443       3,149
       Regulatory assets                            50       1,205
       Storage gas prepayments                   3,831       6,144
       Income taxes receivable                     479       2,614
       Deferred income taxes                     1,601       1,498
       Prepaid expenses                          2,457       5,843
       Mark-to-market energy assets                814       2,379
       Other current assets                        148         147
     Total current assets                       85,051     116,575
     --------------------                       ------     -------

     Deferred Charges and Other Assets
       Goodwill                                 34,782      34,095
       Other intangible assets, net              3,690       3,951
       Long-term receivables                       181         343
       Regulatory assets                        21,052      19,860
       Other deferred charges                    3,693       3,891
     Total deferred charges and other
      assets                                    63,398      62,140
     --------------------------------           ------      ------

     Total Assets                             $589,336    $617,102
     ============                             ========    ========

                Chesapeake Utilities Corporation and Subsidiaries

                Condensed Consolidated Balance Sheets  (Unaudited)
                                                        June
    Capitalization and Liabilities                       30,    December 31,
    ------------------------------                        2010           2009
                                                          ----           ----
     (in thousands, except shares and per share data)

     Capitalization
       Stockholders' equity
         Common stock, par value $0.4867 per share
           (authorized 25,000,000 and 12,000,000
            shares, respectively)                       $4,612         $4,572
         Additional paid-in capital                    146,123        144,502
         Retained earnings                              74,395         63,231
         Accumulated other comprehensive loss           (2,444)        (2,524)
         Deferred compensation obligation                  757            739
         Treasury stock                                   (757)          (739)
     Total stockholders' equity                        222,686        209,781

     Long-term debt, net of current
      maturities                                        97,558         98,814
     Total capitalization                              320,244        308,595
     --------------------                              -------        -------

     Current Liabilities
       Current portion of long-term debt                 8,125         35,299
       Short-term borrowing                             29,100         30,023
       Accounts payable                                 36,153         51,948
       Customer deposits and refunds                    26,105         24,960
       Accrued interest                                  1,628          1,887
       Dividends payable                                 3,127          2,959
       Accrued compensation                              3,580          3,445
       Regulatory liabilities                           10,340          8,882
       Mark-to-market energy liabilities                   574          2,514
       Other accrued liabilities                        11,250          8,683
     Total current liabilities                         129,982        170,600
     -------------------------                         -------        -------

     Deferred Credits and Other Liabilities
       Deferred income taxes                            70,284         66,923
       Deferred investment tax credits                     148            193
       Regulatory liabilities                            3,449          4,154
       Environmental liabilities                         9,463         11,104
       Other pension and benefit costs                  16,544         17,505
       Accrued asset removal cost -Regulatory
        liability                                       34,233         33,214
       Other liabilities                                 4,989          4,814
     Total deferred credits and other
      liabilities                                      139,110        137,907
     --------------------------------                  -------        -------

     Total Capitalization and Liabilities             $589,336       $617,102
     ====================================             ========       ========

Matters discussed in this release may include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements. Please refer to the Safe Harbor for Forward-Looking Statements in the Company’s most recent report on Form 10-Q for further information on the risks and uncertainties related to the Company’s forward-looking statements.

Chesapeake Utilities Corporation is a diversified utility company engaged in natural gas distribution, transmission and marketing, electric distribution, propane gas distribution and wholesale marketing, advanced information services and other related services. Information about Chesapeake’s businesses is available at www.chpk.com.


    For more information, contact:
    Beth W. Cooper
    Senior Vice President & Chief Financial Officer
    302.734.6799

SOURCE Chesapeake Utilities Corporation


Source: newswire



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