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Chesapeake Utilities Corporation Announces Increased Financial Results for the Third Consecutive Quarter

November 4, 2010

DOVER, Del., Nov. 4, 2010 /PRNewswire-FirstCall/ — Chesapeake Utilities Corporation (NYSE: CPK) today announced increased financial results for both the quarter ended and the nine months ended September 30, 2010. The Company’s results for both periods reflect strong growth in the Company’s legacy businesses, as well as the results of Florida Public Utilities Company (“FPU”), which Chesapeake acquired in October of 2009.

The Company’s net income for the quarter ended September 30, 2010 was $1.6 million, or $0.17 per share (diluted), an increase of $1.3 million, or $0.13 per share (diluted), compared to $308,000, or $0.04 per share (diluted), for the quarter ended September 30, 2009. Chesapeake’s legacy businesses continued to experience strong earnings growth, generating $0.04 per share (diluted) of the increase, a 100 percent increase over the prior year’s earnings per share (diluted) of $0.04. Historically, the third quarter’s results have the greatest seasonal decline. Chesapeake’s legacy business results reflect the impact of the rate increase for the Company’s Central Florida Gas division, strong customer growth on the Delmarva Peninsula (both in the form of residential growth and growth from service to new large commercial/industrial customers), additional margin from continued expansion of natural gas transportation services and improved performance from the advanced information services business. These increases were partially offset by a decline in earnings from the unregulated energy businesses. FPU’s results added $0.09 per share (diluted) to the Company’s overall consolidated results in the current quarter, which is calculated based on the additional shares issued in the merger. With the addition of FPU and its electric business, Chesapeake is now less sensitive to a seasonal decline in the third quarter.

The Company’s net income for the nine months ended September 30, 2010 was $18.9 million, or $1.98 per share (diluted), an increase of $9.2 million, or $0.58 per share (diluted), compared to $9.7 million, or $1.40 per share (diluted), for the same period in 2009. Chesapeake’s legacy businesses generated $1.9 million of additional net income for the nine months ended September 30, 2010, representing increased growth of 20 percent. Earnings per share for the nine months ended September 30, 2010 increased by $0.24 per share (diluted) based upon the performance of the legacy businesses, or approximately 17 percent. Similar to the quarterly results, the strong performance of Chesapeake’s legacy businesses was a direct result of the increased earnings generated by the regulated energy businesses and improved results from the advanced information services business, partially offset by a decline in earnings from the unregulated energy businesses. The results for the nine months ended September 30, 2010 included $7.3 million of net income generated by FPU, or $0.34 per share (diluted) calculated based on the additional shares issued in the merger.

“Our third quarter results reflect strong performance by the regulated energy businesses, both on the Delmarva Peninsula and in Florida. Continued growth and expansion by our Delmarva natural gas distribution and transmission businesses and successful integration of the Florida operations have provided us with an excellent opportunity to achieve and exceed our goal of earnings accretion in the first year after the merger,” stated John R. Schimkaitis, Vice Chairman and Chief Executive Officer of Chesapeake Utilities Corporation. “We are very pleased to report the third consecutive quarter of strong performance. We continue to focus on the integration of our Florida operations to generate benefits from the merger for our customers and shareholders and are excited about the opportunities for growth across our lines of business.”

The discussions of the results for the periods ended September 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. In addition, certain information is presented, which, for comparison purposes, includes only FPU’s results of operations for the periods ended September 30, 2010 and, in some cases, FPU’s results for the same periods in 2009, which were 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 third quarter of 2010 included:

  • The rate increase for Chesapeake’s Florida division, effective in January 2010, contributed approximately $554,000 to gross margin for the quarter ended September 30, 2010.
  • Eastern Shore Natural Gas Company (“ESNG”), the Company’s natural gas transmission subsidiary, generated additional gross margin of $390,000 from new transportation services commencing in late 2009 and during 2010.
  • ESNG received approval from the Federal Energy Regulatory Commission to begin construction of an eight-mile mainline extension to interconnect ESNG’s system with Texas Eastern Transmission LP’s mainline facilities in Lancaster County, Pennsylvania. Currently, ESNG has executed Precedent Agreements with two divisions of the Company that will result in 17 years of transportation services associated with this project. The Precedent Agreements allow a three-year phase-in of service, from 20,000 dekatherms per day in the first year of service to 40,000 dekatherms per day by the third year of service, at ESNG’s current tariff rate for service in that area. Estimated annual margin from this project is $2.2 million based on 20,000 dekatherms per day and $4.3 million based on 40,000 dekatherms per day. ESNG’s service under this project is expected to begin no later than January 2011.
  • Two-percent growth in residential customers and an increase in the number of commercial and industrial customers for the Delmarva natural gas distribution operations contributed to a period-over-period increase in gross margin of $138,000. This increase includes $24,000 in additional gross margin generated from service to a new industrial customer in southern Delaware, which began in the third quarter of 2010. In addition, service to another industrial customer is expected to commence in late 2010 or early 2011. Services to these new industrial customers in southern Delaware are expected to add annual margin equivalent to 1,575 average residential heating customers. In further extending the Delmarva natural gas distribution and transmission infrastructure, the Company is 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 $258,000 in the third quarter of 2010, compared to an operating loss of $103,000 in the same period in 2009, due to increased billable consulting hours and lower operating costs. In September 2010, BravePoint also announced the launch of a new fully-integrated profit management system designed specifically for companies specializing in the fire suppression business.
  • FPU reported $2.4 million of operating income and $1.1 million of net income in the third quarter of 2010, which represent 53 percent and 66 percent, respectively, of the Company’s overall consolidated results for the current quarter. With the addition of FPU, whose entire operations are located in Florida, the Company’s earnings became less sensitive to a seasonal decline in the third quarter. FPU’s earnings for the quarter include $49,000 in gross margin generated from approximately two months of operations of Indiantown Gas Company, whose operating assets were purchased by FPU on August 9, 2010 and which added approximately 700 customers including two large industrial customers.
  • Xeron, the Company’s propane wholesale marketing subsidiary, experienced a decline in gross margin as the absence of significant fluctuations in propane prices and lower wholesale trading volumes reduced the opportunities for Xeron and decreased its trading volume by 13 percent.

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 business, other subsidiaries that own property which is leased to other affiliates, unallocated corporate costs and eliminations.

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

Operating income increased by $2.3 million, or 103 percent, from $2.3 million to $4.6 million for the current quarter. Operating income for the Company included $2.4 million in operating income from FPU for the current quarter. FPU’s results are not included in the third quarter of 2009.

Regulated Energy

Operating income for the regulated energy segment for the third quarter of 2010 was $6.5 million, an increase of $3.6 million, or 120 percent, compared to the same period in 2009. An increase in gross margin of $13.2 million was partially offset by an increase in other operating expenses of $9.6 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 September 30, 2009      $13,027
    ----------------------------------------------------------      -------

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

        Margin from FPU operations                                   12,015
        Change in rates                                                 710
        New transportation services                                     293
        Net customer growth                                             164
        Other                                                            55
    Gross margin for the three months ended September 30, 2010      $26,264
    ----------------------------------------------------------      -------

  • FPU’s natural gas and electric distribution operations generated $7.1 million and $4.9 million, respectively, in gross margin for the period. Gross margin from FPU’s natural gas distribution operation in the current quarter included $49,000 generated from Indiantown Gas Company, which added approximately 700 customers including two large industrial customers.

FPU’s natural gas gross margin for the current quarter reflects an accrual of $500,000 to reserve for regulatory risk. The Company recorded this reserve based on its assessment of the regulatory risk related to FPU’s current earnings and how they may have been affected by various factors, including the benefits, synergies, cost savings and cost increases resulting from the FPU merger. The Company is required to submit by April 29, 2011, data that details such known benefits, synergies, cost savings and cost increases.

  • An annual rate increase of approximately $2.5 million, approved by the Florida PSC in 2009 (effective in January 2010), increased gross margin for Chesapeake’s Florida natural gas distribution division by $554,000 for the current quarter. A net increase from changes in customers’ rates and rate classifications, primarily for certain Delmarva natural gas distribution commercial and industrial customers with negotiated rates, also generated additional gross margin of $156,000 for the current quarter.
  • 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 $60,000 for the current 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 current quarter.

Offsetting these margin increases were decreased margins of $97,000 in the quarter resulting from expired transportation service contracts in November 2009 and April 2010.

  • The Delmarva natural gas distribution operation experienced a two-percent growth in residential customers, which contributed $94,000 to gross margin. Also contributing to the gross margin increase were $44,000 from new commercial and industrial customers on the Delmarva Peninsula and $26,000 from a net increase in the number of customers served by Chesapeake’s Florida division.

Other operating expenses for the regulated energy segment increased by $9.6 million in the third quarter of 2010, largely due to the inclusion of $9.0 million in other operating expenses from FPU’s regulated energy operations for the period.

Unregulated Energy

The unregulated energy segment reported an operating loss for the third quarter of 2010 of $2.2 million, compared to an operating loss of $1.4 million for the same period in 2009. An increase in gross margin of $1.1 million was offset by a $2.0 million increase in other 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 September 30, 2009      $3,300
    ----------------------------------------------------------      ------

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

        Margin from FPU operations                                   1,415
        Natural gas marketing                                          109
        Other                                                           62
        Decreases in margin per retail gallon                         (138)
        Propane wholesale marketing                                   (328)
    Gross margin for the three months ended September 30, 2010      $4,420
    ----------------------------------------------------------      ------

  • FPU’s unregulated energy operation, which is primarily its propane distribution operation, generated $1.7 million in gross margin in the third quarter of 2010, which includes approximately $197,000 of gross margin generated from customers previously served by Chesapeake’s Florida propane distribution operation, which were transferred to FPU after the merger. Chesapeake’s Florida propane distribution operation generated $280,000 in gross margin in the third quarter of 2009.
  • The Company’s natural gas marketing subsidiary, Peninsula Energy Services Company, Inc. (“PESCO”), generated an increase in gross margin of $109,000, due primarily to an increase in spot sales and growth in commercial customers in Florida. Spot sales are not predictable and, therefore, are not included in our long-term financial plans or forecasts.
  • The increase in other gross margin for the current quarter is due primarily to the addition of 455 community gas system customers since the third 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, which contributed $15,000 and $30,000 to gross margin, respectively.
  • Lower retail margins from the Delmarva propane distribution operation decreased gross margin by $138,000 in the current quarter. This decrease was due primarily to a non-recurring propane physical inventory adjustment of $118,000 in the third quarter of 2009, which reduced the cost of propane inventory and increased gross margin for that quarter.
  • Xeron experienced a $328,000 decrease in gross margin for the third quarter of 2010 as a result of a 13-percent decrease in trading volume. Lower trading volumes in the wholesale propane market have contributed to less trading activity for Xeron.

Other operating expenses for the unregulated energy segment increased by $2.0 million in the third quarter of 2010 due primarily to the increase of $1.9 million associated with the inclusion of FPU’s unregulated energy business. Other operating expenses for FPU’s unregulated business in the third quarter of 2010 included a non-recurring charge of $278,000 for the settlement of a class action complaint.

Other

Operating income for the “Other” segment for the third quarter of 2010 was $284,000, compared to an operating income of $647,000 for the same period in 2009. During the third quarter of 2010, gross margin increased by $381,000, primarily from BravePoint, and other operating expenses increased by $744,000, due primarily to deferral of certain previously expensed merger-related costs in the third quarter of 2009.

BravePoint reported operating income of $258,000 in the third quarter of 2010, compared to an operating loss of $103,000 in the third quarter of 2009. Gross margin from BravePoint increased by $374,000 due to an eight-percent increase in billable consulting hours and higher revenue from its professional database monitoring, support solution services and product sales. Other operating expenses from BravePoint increased slightly by $13,000, reflecting the continuing effectiveness of previously implemented cost control efforts.

In the third quarter of 2009, certain previously expensed merger-related costs were deferred as a regulatory asset, as the Company will seek to recover those costs through future rates, and this deferral resulted in reporting a net credit of $675,000 in merger-related costs for that period.

Interest Expense

Interest expense for the third quarter of 2010 increased by approximately $716,000, 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 $456,000 is related to interest on FPU’s first mortgage bonds.
  • Interest expense from a new term loan facility was $140,000 for the third quarter of 2010. Two series of FPU bonds, the 4.9 percent and 6.85 percent series, were redeemed at the end of January 2010, using this new term loan facility.
  • Additional interest expense of $184,000 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 as a result of scheduled repayments, and lower additional short-term interest expense due to the timing of our capital expenditures and the increased cash flow generated from ordinary operating activities.

Comparative results for the nine months ended September 30, 2010 and 2009

Operating income increased by $16.7 million, or 79 percent, to $37.7 million for the first nine months of 2010, compared to the same period in 2009. Operating income for the Company included $14.1 million in operating income from FPU for the period.

Regulated Energy

Operating income for the regulated energy segment for the first nine months of 2010 was $32.4 million, an increase of $15.8 million, or 95 percent, compared to the same period in 2009. An increase in gross margin of $45.2 million was offset by an increase in other operating expenses of $29.4 million. Items contributing to the period-over-period increase in gross margin are listed in the following table:


    (in thousands)
    Gross margin for the nine months ended September 30, 2009      $47,279
    ---------------------------------------------------------      -------

    Factors contributing to the gross margin increase for the nine
     months ended September 30, 2010:

        Margin from FPU operations                                  41,281
        Change in rates                                              2,004
        New transportation services                                    880
        Net customer growth                                            783
        Favorable weather                                              464
        Other                                                           97
        Decreased customer consumption                                (331)
    Gross margin for the nine months ended September 30, 2010      $92,457
    ---------------------------------------------------------      -------

  • FPU’s natural gas and electric distribution operations generated gross margin of $27.3 million and $14.0 million, respectively, for the period. Gross margin from FPU’s natural gas distribution operation for the nine months ended September 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.

FPU’s natural gas gross margin for the current period reflects an accrual of $500,000 to reserve for regulatory risk. The Company recorded this reserve in the third quarter of 2010 based on its assessment of the regulatory risk related to FPU’s current earnings and how they may have been affected by various factors, including the benefits, synergies, cost savings and cost increases resulting from the FPU merger. The Company is required to submit by April 29, 2011, data that details such known benefits, synergies, cost savings and cost increases.

  • Gross margin for Chesapeake’s Florida division also experienced an increase of $1.7 million from an annual rate increase of approximately $2.5 million approved by the Florida PSC in 2009. A net increase from changes in customers’ rates and rate classifications, primarily for natural gas distribution commercial and industrial customers with negotiated rates, and a change in certain customer rates by the natural gas transmission operation also contributed $152,000 and $123,000, respectively, to the gross margin increase.
  • 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 $762,000 for the first nine months of 2010. A new expansion project completed in May 2010 also contributed additional gross margin of $101,000 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 $304,000 for the nine months ended September 30, 2010.

Offsetting these margin increases were primarily the decreased margins of $284,000 for the first nine months of 2010, resulting from the expiration of transportation service contracts in November 2009 and April 2010.

  • The Delmarva natural gas distribution operation experienced growth in residential, commercial and industrial customers, which contributed $798,000 to the gross margin increase. Residential, commercial and industrial growth by the Delaware division contributed $418,000, $145,000 and $137,000, respectively, to the gross margin increase, and $98,000 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 as compared to the first nine months of 2009. Offsetting this increase was a slight decrease in gross margin from a net change in the number of customers served by Chesapeake’s Florida division.
  • Colder weather on the Delmarva Peninsula generated an additional $219,000 of gross margin as heating degree-days increased by one percent for the first nine 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 $245,000 by Chesapeake’s Florida division.
  • A decline in non-weather-related consumption for the Delmarva natural gas distribution operation and Chesapeake’s Florida division decreased gross margin by $310,000 and $21,000, respectively.

Other operating expenses for the regulated energy segment increased by $29.4 million in the nine months ended September 30, 2010, almost entirely due to the inclusion of $28.3 million in other operating expenses of FPU’s regulated energy operations for the period.

Unregulated Energy

Operating income for the unregulated energy segment for the first nine months of 2010 was $4.7 million, a decrease of $501,000, or 10 percent, compared to the same period in 2009. An increase in gross margin of $5.0 million was offset by a $5.5 million increase in other 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 nine months ended September 30, 2009      $20,293
    ---------------------------------------------------------      -------

    Factors contributing to the gross margin increase for the nine
     months ended September 30, 2010:

        Margin from FPU operations                                   6,353
        Volume increase - weather and other                            198
        Miscellaneous fees and other                                   165
        Propane wholesale marketing                                   (149)
        Natural gas marketing                                         (579)
        Decreases in margin per retail gallon                      (1,003)
    Gross margin for the nine months ended September 30, 2010      $25,278
    ---------------------------------------------------------      -------

  • FPU’s unregulated energy operation, which is primarily its propane distribution operation, generated $7.6 million in gross margin for the period, which included approximately $850,000 of gross margin generated from customers previously served by Chesapeake’s Florida propane distribution operation, which were transferred to FPU after the merger. Chesapeake’s Florida propane distribution operation generated $1.2 million in gross margin in the first nine months of 2009.
  • Increased gross margin from volume increases resulted primarily from the addition of 433 community gas system customers, which generated $141,000 of additional gross margin and approximately 1,000 customers added by Sharp Energy from the acquisition of the operating assets of a propane distributor in Virginia in February 2010, which generated $114,000 in gross margin during the first nine months of 2010.
  • Other fees increased by $165,000 in the first nine months of 2010, due primarily to continued growth and increased customer participation in various customer loyalty programs by the Delmarva propane distribution operation.
  • Xeron experienced a $149,000 decrease in gross margin during the first nine months of 2010 compared to the same period in 2009. Xeron’s trading volumes decreased by 14 percent in the nine months ended September 30, 2010 compared to the same period in 2009, as lower trading volumes in the wholesale propane market led to greater uncertainty, reducing Xeron’s trading activity, especially in the second and third quarters.
  • PESCO’s gross margin decreased by $579,000 for the nine months ended September 30, 2010, compared to the same period in 2009, due primarily to a decrease in spot sales related to one industrial customer on the Delmarva Peninsula. Spot sales are not predictable and, therefore, are not included in our long-term financial plans or forecasts.
  • Lower propane retail margin per gallon during the first nine months of 2010, compared to the same period in 2009, contributed to a decrease in gross margin of $1.0 million. Retail margins for the first nine months 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 nine months of 2010 returned to more normal levels.

Other operating expenses for the unregulated energy segment increased by $5.5 million for the first nine months of 2010, due primarily to the increase of $5.3 million associated with the inclusion of FPU’s unregulated energy operations. Other operating expenses for FPU’s unregulated energy operations for the first nine months of 2010 included a non-recurring charge of $278,000 for the settlement of a class action complaint.

Other

Operating income for the “Other” segment for the first nine months of 2010 was $650,000, compared to an operating loss of $709,000 for the same period in 2009. During the nine months ended September 30, 2010, gross margin increased by $623,000, primarily from BravePoint, and operating expenses decreased by $736,000, due to lower operating expenses by BravePoint and lower merger-related costs in 2010.

BravePoint reported operating income of $523,000 in the first nine months of 2010, compared to an operating loss of $448,000 in the same period in 2009. Gross margin from BravePoint increased by $641,000 due to a nine-percent increase in billable consulting hours and higher revenue from its professional database monitoring and support solution services. Operating expenses for BravePoint decreased by $330,000 due to the success of cost containment actions implemented throughout 2009.

Merger-related costs, net of the deferral, decreased by $351,000 as higher costs were incurred during the nine months ended September 30, 2009 to consummate the merger.

Interest Expense

Interest expense for the first nine months of 2010 increased by approximately $2.2 million, or 46 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 $1.5 million is related to interest on FPU’s first mortgage bonds.
  • Interest expense from a new term loan facility was $356,000 for the first nine months of 2010. Two series of FPU bonds, the 4.9 percent and 6.85 percent series, were redeemed at the end of January 2010, using this new term loan facility.
  • Additional interest expense of $553,000 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 as a result of scheduled repayments, and lower additional short-term interest expense due to the timing of our capital expenditures and the increased cash flow generated from ordinary operating activities.

             Chesapeake Utilities Corporation and Subsidiaries
          Condensed Consolidated Statements of Income (Unaudited)
             For the Periods Ended September 30, 2010 and 2009
              (in thousands, except shares and per share data)

                                 Third Quarter         Year to Date
                                 -------------         ------------

                                  2010       2009       2010       2009
                                  ----       ----       ----       ----
    Operating Revenues
    Regulated Energy           $53,412    $15,372   $197,779    $86,422
    Unregulated Energy          20,134     14,011    104,018     83,236
    Other                        2,920      2,375      7,990      7,413
    Total Operating
     Revenues                   76,466     31,758    309,787    177,071
    ---------------             ------     ------    -------    -------

    Operating Expenses
      Regulated energy cost
       of sales                 27,148      2,345    105,322     39,143
      Unregulated energy and
       other cost of sales      17,238     12,071     82,713     66,962
       Operations               17,993     11,001     54,848     34,820
       Transaction-related
        costs                       68       (675)       179        530
       Maintenance               1,899        600      5,388      1,932
       Depreciation and
        amortization             5,058      2,437     15,719      7,235
       Other taxes               2,479      1,722      7,876      5,371
     Total operating
      expenses                  71,883     29,501    272,045    155,993
     ---------------            ------     ------    -------    -------
    Operating Income             4,583      2,257     37,742     21,078
    Other income, net of
     other expenses                102        (26)       206         19
    Interest charges             2,256      1,540      6,924      4,755
    Income Before Income
     Taxes                       2,429        691     31,024     16,342
    Income tax expenses            801        383     12,082      6,636
    -------------------            ---        ---     ------      -----
    Net Income                  $1,628       $308    $18,942     $9,706
    ==========                  ======       ====    =======     ======

    Weighted Average Shares
     Outstanding:
      Basic                  9,493,425  6,883,070  9,460,462  6,859,516
      Diluted                9,497,696  6,888,024  9,570,921  6,981,010

    Earnings Per Share of
     Common Stock:
      Basic                      $0.17      $0.04      $2.00      $1.41
      Diluted                    $0.17      $0.04      $1.98      $1.40
      -------                    -----      -----      -----      -----

            Chesapeake Utilities Corporation and Subsidiaries
              Supplemental Income Statement Data (Unaudited)
            For the Periods Ended September 30, 2010 and 2009
                  (in thousands, except degree-day data)

                                     Third Quarter       Year to Date
                                     -------------       ------------

    Chesapeake and Subsidiaries      2010     2009     2010     2009
    ---------------------------      ----     ----     ----     ----
    Gross Margin (1)
      Regulated Energy            $26,264  $13,027  $92,457  $47,279
      Unregulated Energy            4,420    3,300   25,278   20,293
      Other                         1,396    1,015    4,017    3,394
     Total Gross Margin           $32,080  $17,342 $121,752  $70,966
     ==================           =======  ======= ========  =======

    Operating Income (Loss)
       Regulated Energy            $6,536   $2,971  $32,360  $16,554
       Unregulated Energy         (2,237)  (1,361)    4,732    5,233
       Other                          284      647      650     (709)
     Total Operating Income        $4,583   $2,257  $37,742  $21,078
     ======================        ======   ======  =======  =======

    Heating Degree-Days -
     Delmarva Peninsula
      Actual                           50       80    3,021    3,003
      10-year average (normal)         60       58    2,923    2,889
      ------------------------        ---      ---    -----    -----

    Heating Degree-Days - Florida
      Actual                            -        -      942      614
      10-year average (normal)          -        -      587      547
      ------------------------        ---      ---      ---      ---

    Cooling Degree-Days - Florida
      Actual                        1,654    1,425    2,693    2,434
      10-year average (normal)      1,405    1,466    2,365    2,418
      ------------------------      -----    -----    -----    -----
    (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
                Supplemental Income Statement Data (Unaudited)

    The following presents FPU's results of operations for the three and
    nine months ended September 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.

                                                  Third         Year to
    (in thousands)                               Quarter          Date
    --------------                                -------        -------
    FPU Stand-alone                                  2010           2010
    ---------------                                  ----           ----
    Gross Margin (1)
    Regulated Energy
      Natural Gas                                  $7,081        $27,256
      Electric                                      4,934         14,025
    Unregulated Energy
      Propane and other                             1,695          7,392
     Total Gross Margin                           $13,710        $48,673
     ==================                           =======        =======

    Operating Income
    Regulated Energy
      Natural Gas                                  $1,355         $9,026
      Electric                                      1,669          3,917
    Unregulated Energy
      Propane and other                              (605)         1,205
     Total Operating Income                        $2,419        $14,148
     ======================                        ======        =======
    (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
                              September 30, 2010
                          --------------------------
                                   Delmarva
                                      NG               Chesapeake
                                                        Florida
                                 Distribution              NG
                                 ------------           Division
                                                        --------
    Operating Revenues
    (in thousands)
    --------------
      Residential                             $4,041         $928
      Commercial                               3,156          815
      Industrial                                 811        1,134
      Other (1)                                  420          434
      ---------                                  ---          ---
    Total Operating
     Revenues                                 $8,428       $3,311

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential                            140,570       41,779
      Commercial                             335,080      250,502
      Industrial                             467,142    2,881,509
      Other                                   58,763            -
      -----                                   ------          ---
    Total                                  1,001,555    3,173,790

    Average customers
    -----------------
      Residential                             46,908       13,388
      Commercial                               4,933        1,133
      Industrial                                 176           59
      Other                                        6            -
      -----                                      ---          ---
    Total                                     52,023       14,580
    -----                                     ------       ------


                          For the Three Months Ended
                              September 30, 2010
                          --------------------------
                                              FPU
                            FPU NG         Electric
                          Distribution   Distribution
                          ------------   ------------
    Operating Revenues
    (in thousands)
    --------------
      Residential               $3,596        $15,951
      Commercial                 6,649         13,463
      Industrial                 1,813          1,441
      Other (1)                   (601)        (4,524)
      ---------                   ----         ------
    Total Operating
     Revenues                  $11,457        $26,331

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential              170,649        108,779
      Commercial               607,154        100,588
      Industrial               362,951         13,230
      Other                     58,531        (10,756)
      -----                     ------        -------
    Total                    1,199,285        211,841

    Average customers
    -----------------
      Residential               46,731         23,594
      Commercial                 4,472          7,363
      Industrial                 1,316              3
      Other                          3              -
      -----                        ---            ---
    Total                       52,522         30,960
    -----                       ------         ------


                          For the Three Months Ended
                              September 30, 2009
                          --------------------------
                                   Delmarva
                                      NG               Chesapeake
                                                        Florida
                                 Distribution              NG
                                 ------------          Division
                                                       --------
    Operating Revenues
    (in thousands)
    --------------
      Residential                             $4,345         $775
      Commercial                               3,564          689
      Industrial                                 666          962
      Other (1)                                  637          275
      ---------                                  ---          ---
    Total Operating
     Revenues                                 $9,212       $2,701

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential                            145,570       42,952
      Commercial                             319,110      247,848
      Industrial                             418,752    2,630,101
      Other                                   82,130            -
      -----                                   ------          ---
    Total                                    965,562    2,920,901

    Average customers
    -----------------
      Residential                             45,871       13,059
      Commercial                               4,921        1,116
      Industrial                                 146           60
      Other                                        7            -
      -----                                      ---          ---
    Total                                     50,945       14,235
    -----                                     ------       ------


                          For the Three Months Ended
                              September 30, 2009
                          --------------------------
                                                            FPU
                                    FPU NG               Electric
                                 Distribution          Distribution
                                 ------------          ------------
    Operating Revenues
    (in thousands)
    --------------
      Residential                             $3,238        $13,559
      Commercial                               5,029         11,198
      Industrial                               1,805          2,361
      Other (1)                                  758         (2,472)
      ---------                                  ---         ------
    Total Operating
     Revenues                                $10,830        $24,646

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential                            168,962         98,218
      Commercial                             578,361         91,309
      Industrial                             405,242         15,180
      Other                                  (25,214)        (3,803)
      -----                                  -------         ------
    Total                                  1,127,351        200,904

    Average customers
    -----------------
      Residential                             46,519         23,703
      Commercial                               4,440          7,404
      Industrial                                 547              2
      Other                                        -              -
      -----                                      ---            ---
    Total                                     51,506         31,109
    -----                                     ------         ------
    (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 Nine Months Ended
                              September 30, 2010
                          -------------------------
                                                      Chesapeake
                                   Delmarva             Florida
                                      NG                   NG
                                 Distribution           Division
                                -------------         -----------
    Operating Revenues
    (in thousands)
    ------------------
      Residential                           $34,471        $3,561
      Commercial                             20,243         2,755
      Industrial                              2,621         3,528
      Other (1)                              (2,497)        1,283
      ---------                              ------         -----
    Total Operating
     Revenues                               $54,838       $11,127

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential                         2,196,744       295,338
      Commercial                          2,086,444       972,474
      Industrial                          1,520,357    10,284,366
      Other                                 200,713             -
      -----                                 -------           ---
    Total                                 6,004,258    11,552,178

    Average customers
    -----------------
      Residential                            47,508        13,423
      Commercial                              5,053         1,125
      Industrial                                168            59
      Other                                       5             -
      -----                                     ---           ---
    Total                                    52,734        14,607
    -----                                    ------        ------


                            For the Nine Months Ended
                               September 30, 2010
                            -------------------------
                                                FPU
                              FPU NG         Electric
                          Distribution    Distribution
                          -------------   -------------
    Operating Revenues
    (in thousands)
    --------------
      Residential               $17,930         $40,508
      Commercial                 27,397          34,176
      Industrial                  6,223           5,996
      Other (1)                  (3,464)         (8,188)
      ---------                  ------          ------
    Total Operating
     Revenues                   $48,086         $72,492

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential             1,016,537         273,678
      Commercial              2,364,820         250,810
      Industrial              1,479,214          52,810
      Other                     (92,845)            889
      -----                     -------             ---
    Total                     4,767,726         578,187

    Average customers
    -----------------
      Residential                46,970          23,570
      Commercial                  4,484           7,375
      Industrial                  1,306               3
      Other                           1               -
      -----                         ---             ---
    Total                        52,761          30,948
    -----                        ------          ------


                          For the Nine Months Ended September
                                        30, 2009
                          -----------------------------------
                                                                Chesapeake
                                        Delmarva                  Florida
                                           NG                        NG
                                      Distribution                Division
                                     -------------              -----------
    Operating Revenues
    (in thousands)
    ------------------
      Residential                                     $40,911        $2,794
      Commercial                                       25,032         2,251
      Industrial                                        2,556         3,244
      Other (1)                                        (1,914)          956
      ---------                                        ------           ---
    Total Operating
     Revenues                                         $66,585        $9,245

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential                                   2,160,292       252,342
      Commercial                                    1,988,612       857,481
      Industrial                                    1,214,228    10,352,569
      Other                                           267,720             -
      -----                                           -------           ---
    Total                                           5,630,852    11,462,392

    Average customers
    -----------------
      Residential                                      46,669        13,291
      Commercial                                        5,027         1,113
      Industrial                                          142            62
      Other                                                 9             -
      -----                                               ---           ---
    Total                                              51,847        14,466
    -----                                              ------        ------


                          For the Nine Months Ended September
                                        30, 2009
                          -----------------------------------
                                                                     FPU
                                        FPU NG                     Electric
                                      Distribution              Distribution
                                           (2)                        (2)
                                     -------------              -------------
    Operating Revenues
    (in thousands)
    ------------------
      Residential                                     $16,076         $33,840
      Commercial                                       23,725          29,266
      Industrial                                        4,702           6,183
      Other (1)                                        (3,513)         (5,682)
      ---------                                        ------          ------
    Total Operating
     Revenues                                         $40,990         $63,607

    Volume (in Mcfs/
     MWHs)
    ----------------
      Residential                                     919,574         245,347
      Commercial                                    2,271,664         237,144
      Industrial                                    1,343,684          51,820
      Other                                          (144,082)          9,881
      -----                                          --------           -----
    Total                                           4,390,840         544,192

    Average customers
    -----------------
      Residential                                      46,888          23,705
      Commercial                                        4,474           7,398
      Industrial                                          530               2
      Other                                                 -               -
      -----                                               ---             ---
    Total                                              51,892          31,105
    -----                                              ------          ------
    (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)

                                            September    December
     Assets                                     30,      31, 2009
     ------                                       2010    --------
                                                  ----
     (in thousands, except shares and per share data)

     Property, Plant and Equipment
       Regulated energy                       $478,048    $463,856
       Unregulated energy                       60,614      61,360
       Other                                    16,582      16,054
     Total property, plant and equipment       555,244     541,270
     Less:  Accumulated depreciation and
      amortization                            (118,393)   (107,318)
     Plus:  Construction work in progress       11,029       2,476
     Net property, plant and equipment         447,880     436,428
     ---------------------------------         -------     -------

     Investments                                 3,006       1,959
     -----------                                 -----       -----

     Current Assets
       Cash and cash equivalents                 2,753       2,828
       Accounts receivable (less allowance for
        uncollectible
          accounts of $1,030 and $1,609,
           respectively)                        52,166      70,029
       Accrued revenue                           7,410      12,838
       Propane inventory, at average cost        7,804       7,901
       Other inventory, at average cost          3,586       3,149
       Regulatory assets                            53       1,205
       Storage gas prepayments                   6,215       6,144
       Income taxes receivable                   9,071       2,614
       Deferred income taxes                       523       1,498
       Prepaid expenses                          5,301       5,843
       Mark-to-market energy assets              2,290       2,379
       Other current assets                        147         147
     Total current assets                       97,319     116,575
     --------------------                       ------     -------

     Deferred Charges and Other Assets
       Goodwill                                 35,609      34,095
       Other intangible assets, net              3,547       3,951
       Long-term receivables                       235         343
       Regulatory assets                        20,835      19,860
       Other deferred charges                    3,844       3,891
     Total deferred charges and other
      assets                                    64,070      62,140
     --------------------------------           ------      ------

     Total Assets                             $612,275    $617,102
     ============                             ========    ========

              Chesapeake Utilities Corporation and Subsidiaries

              Condensed Consolidated Balance Sheets (Unaudited)

                                                     September
     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)                        $4,623        $4,572
         Additional paid-in capital                     147,022       144,502
         Retained earnings                               72,858        63,231
         Accumulated other comprehensive loss            (2,404)       (2,524)
         Deferred compensation obligation                   767           739
         Treasury stock                                    (767)         (739)
     Total stockholders' equity                         222,099       209,781

     Long-term debt, net of current maturities           97,491        98,814
     Total capitalization                               319,590       308,595
     --------------------                               -------       -------

     Current Liabilities
       Current portion of long-term debt                  7,216        35,299
       Short-term borrowing                              43,073        30,023
       Accounts payable                                  34,363        51,948
       Customer deposits and refunds                     26,591        24,960
       Accrued interest                                   3,267         1,887
       Dividends payable                                  3,135         2,959
       Accrued compensation                               4,261         3,445
       Regulatory liabilities                             9,573         8,882
       Mark-to-market energy liabilities                  1,982         2,514
       Other accrued liabilities                         13,353         8,683
     Total current liabilities                          146,814       170,600
     -------------------------                          -------       -------

     Deferred Credits and Other Liabilities
       Deferred income taxes                             75,396        66,923
       Deferred investment tax credits                      125           193
       Regulatory liabilities                             3,475         4,154
       Environmental liabilities                         10,946        11,104
       Other pension and benefit costs                   16,257        17,505
       Accrued asset removal cost -Regulatory
        liability                                        34,683        33,214
       Other liabilities                                  4,989         4,814
     Total deferred credits and other liabilities       145,871       137,907
     --------------------------------------------       -------       -------

     Total Capitalization and Liabilities              $612,275      $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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