Chesapeake Utilities Corporation Reports a 43-percent increase in second quarter earnings per share

• Net income of $5.1 million, or $0.52 per share for the second quarter of 2012, an increase of $1.5 million, or $0.15 per share, compared to the same quarter in 2011
• Additional margins generated from natural gas expansions on the Delmarva Peninsula and in Florida added $1.0 million to net income, or $0.10 per share

Dover, Delaware — Chesapeake Utilities Corporation (NYSE: CPK) today announced financial results for the second quarter of 2012. The Company’s net income for the quarter ended June 30, 2012 was $5.1 million, or $0.52 per share. This represents an increase of $1.5 million, or $0.15 per share, compared to the same quarter in 2011, and quarter-over-quarter increases of 44 percent and 43 percent for net income and earnings per share, respectively.

On a year-to-date basis, the Company reported net income of $15.8 million, or $1.63 per share, for the six months ended June 30, 2012. This represents a decrease of $1.5 million in net income, or $0.16 per share, compared to the same period in 2011. Warmer temperatures during the first half of 2012 resulted in lower net income of $2.4 million, or $0.25 per share, compared to the same period in 2011.

“Our financial results for the second quarter of 2012 represent the strongest second quarter results in the Company’s history,” stated Michael P. McMasters, President and Chief Executive Officer of Chesapeake Utilities Corporation. “The tireless efforts by our employees to expand our energy footprint both on the Delmarva Peninsula and in Florida continue to generate growth and shareholder value. By aggressively promoting environmentally-friendly and cost effective natural gas, we have created value for customers and shareholders and are continuing to generate increased financial results. To further natural gas expansion, we recently filed an application with the Delaware Public Service Commission (“PSC”) to increase our natural gas service offerings in the southern part of the state. At the end of June, we also entered into an agreement to purchase the operating assets of The Eastern Shore Gas Company and its affiliates (collectively, “ESG”). Currently, ESG provides propane distribution service to approximately 11,000 customers through underground propane gas distribution systems and 500 customers through bulk propane delivery service. In conjunction with the purchase of these assets, we are evaluating potential opportunities to economically convert some of the underground propane distribution service to natural gas. We are in the process of developing programs to assist customers in the conversion process. Our unregulated businesses continue to develop growth opportunities through new services, products and programs. All these opportunities position us for another year of strong performance despite the challenge of warmer temperatures experienced so far this year.”

The Company’s operating income for the second quarter of 2012 was $10.5 million, an increase of $2.7 million, compared to the same quarter in 2011. Gross margin increased by $3.1 million, or eight percent, in the second quarter of 2012, compared to the same quarter in 2011. The regulated energy segment generated $2.8 million of this increase, due primarily to growth in the Company’s natural gas transmission and distribution operations. This included $1.1 million in additional gross margin, which was generated by transmission system expansions and new transmission services, and $632,000 in additional gross margin, which was generated by growth in residential, commercial and industrial customers served by the natural gas distribution operations. BravePoint®, Inc. (“BravePoint”), the Company’s advanced information services subsidiary, generated $819,000 in additional gross margin, $139,000 of which represents increased margin from ProfitZoom™ and Application Evolution™ sales and related services. The remaining increase from BravePoint was generated from higher consulting revenues and other product sales. These increases in gross margin were offset partially by lower gross margin of $554,000 for the unregulated energy segment, due primarily to lower retail propane sales and margins per gallon on the Delmarva Peninsula.

Other operating expenses for the second quarter of 2012 were $30.1 million, an increase of $395,000, compared to the same quarter in 2011. Amortization expense related to the recovery of the acquisition adjustment and merger-related costs associated with the acquisition of Florida Public Utilities Company (“FPU”) increased expenses by $588,000 during the quarter. BravePoint’s other operating expenses increased by $394,000, due primarily to higher payroll and benefits costs to support increased services. These increases were largely offset by a non-recurring severance charge of $549,000 recorded in the second quarter of 2011.

The Company’s operating income for the six months ended June 30, 2012 was $30.5 million, a decrease of $2.1 million, compared to the same period in 2011. Gross margin decreased by $593,000, or less than one percent, for the six months ended June 30, 2012, compared to the same period in 2011. Lower customer energy consumption directly attributable to a decrease in heating degree-days of 19 percent and 35 percent on the Delmarva Peninsula and in Florida, respectively, reduced gross margin by $3.9 million. Most of this decrease occurred in the first three months of the year. Absent from 2012’s results was a one-time gain of $575,000 recorded in the first quarter of 2011 related to the proceeds received in an antitrust litigation settlement with a major propane supplier. These decreases were largely offset by growth in the Company’s natural gas transmission and distribution operations, which included $1.7 million in additional gross margin generated by transmission system expansions and new transmission services and $1.3 million in additional gross margin generated by growth in residential, commercial and industrial customers served by the Delmarva and Florida natural gas distribution operations. BravePoint also generated $1.3 million in additional gross margin, $276,000 of which represents increased margin from ProfitZoom™ and Application Evolution™ sales and related services. The remaining increase from BravePoint was generated from higher consulting revenues and other product sales.

Other operating expenses for the six months ended June 30, 2012 were $60.7 million, an increase of $1.5 million, compared to the same period in 2011. $1.2 million of the increase represented amortization expense related to the recovery of the FPU acquisition adjustment and merger-related costs. BravePoint’s other operating expenses increased by $728,000, due primarily to higher payroll and benefits costs to support increased services. Largely offsetting these increases was the absence of $787,000 in severance and pension settlement charges recorded in 2011.

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-K, as amended, and 10-Q for further information on the risks and uncertainties related to the Company’s forward-looking statements.

Unless otherwise noted, earnings per share information is presented on a diluted basis.

Conference Call
Chesapeake Utilities Corporation will host a conference call on August 9, 2012, at 10:30 a.m. Eastern Time to discuss the Company’s financial results for the second quarter ended June 30, 2012. To participate in this call, dial 866.821.5457 and reference Chesapeake Utilities Corporation’s 2012 Second Quarter Financial Results Conference Call. To access the replay recording of this call, please visit the Company’s website at https://chpk.com/investors/events-presentations/.
About Chesapeake Utilities Corporation

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

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