Chesapeake Utilities Corporation Reports Sixth Consecutive Year of Record Earnings

Thu Mar 7, 2013 8:40pm EST

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- Net income of $28.9 million, or $2.99 per share
DOVER, Del.,  March 7, 2013  /PRNewswire/ -- Chesapeake Utilities Corporation
(NYSE: CPK) today announced financial results for both the year and the fourth
quarter ended  December 31, 2012.  The Company's net income for 2012 was  $28.9
million, or  $2.99  per share.  This represents an increase of  $1.2 million, or
 $0.12  per share, compared to 2011.    

For the fourth quarter of 2012, the Company reported net income of  $9.9
million, or  $1.02  per share.  This represents an increase of  $1.9 million, or
 $0.19  per share, compared to the same quarter in 2011.   

"We are very pleased to announce another year of strong financial results, our
sixth consecutive year of record earnings," stated  Michael P. McMasters,
President and Chief Executive Officer of Chesapeake Utilities Corporation.  "Our
employees' continuous efforts to deliver value to our customers through great
service and innovative solutions with a personal touch are driving our financial
results year after year.  In addition to overcoming a sluggish economy and
warmer weather during 2012, we delivered growth that more than offset the
amortization of the Florida Public Utilities acquisition premium and costs to
generate record earnings for the sixth consecutive year.  Our employees'
tireless efforts in pursuit of operational excellence, combined with our focus
on identifying and transforming business opportunities into reality and our
financial stability, continue to position us well to generate value for our
customers and shareholders."

Operating Results for the Year Ended  December 31, 2012

The Company's operating income for 2012 was  $56.6 million, an increase of  $2.9
million, compared to 2011.  Gross margin increased by  $8.0 million, or five
percent, in 2012, compared to 2011.  The Company increased gross margin in 2012
even with significantly warmer temperatures, which reduced gross margin by  $3.6
million.  Other operating expenses increased by  $5.1 million, or four percent,
in 2012, compared to 2011.   

Regulated Energy

Operating income for the regulated energy segment for 2012 was  $47.0 million,
an increase of  $3.1 million, or seven percent, compared to 2011.  An increase
in gross margin of  $6.7 million  was partially offset by an increase in other
operating expenses of  $3.6 million.  The significant components of the gross
margin variance included:

* An increase of  $6.3 million  due to natural gas growth resulting from: (a)
major expansion initiatives in  Sussex County, Delaware;  Worcester  and  Cecil 
Counties,  Maryland; and  Nassau County, Florida; (b) additional residential,
commercial and industrial customer growth on the Delmarva Peninsula and in 
Florida; and (c) additional transmission services provided to an existing
industrial customer on the Delmarva Peninsula;  
* A decrease of  $750,000  from the reversal in 2011 of a  Florida  natural gas
regulatory reserve;  
* An increase of  $737,000  as a result of new rates for Eastern Shore Natural
Gas Company ("Eastern Shore"), the Company's interstate natural gas transmission
subsidiary, that became effective  July 2011; and  
* A decrease of  $926,000  as a result of lower consumption by natural gas and
electric customers, due to warmer temperatures primarily during the first
quarter, which was partially offset by  $696,000  in increased
non-weather-related natural gas consumption primarily in  Florida.

The increase in other operating expenses is due primarily to: (a)  $2.4 million 
in amortization expense associated with the recovery of the Florida Public
Utilities Company ("FPU") acquisition adjustment and merger-related costs,
partially offset by an amortization credit of  $684,000  associated with FPU's
pre-merger deferred income tax gain; and (b)  $1.3 million  in higher
depreciation expense, asset removal and facilities costs associated with capital
investments to support growth and system integrity.

Unregulated Energy

Operating income for the unregulated energy segment for 2012 was  $8.4 million,
a decrease of  $1.3 million, or 13 percent, compared to 2011, due primarily to a
decrease in gross margin of  $1.3 million.  Other operating expenses for 2012
remained unchanged from 2011.  The significant components of the gross margin
variance included:

* Decreases of  $2.7 million  as a result of lower consumption by propane
customers due to warmer weather primarily during the first quarter and  $515,000
 in lower propane sales due to the timing of deliveries to bulk-delivery
customers, energy conservation and other factors;  
* An increase of  $2.7 million  due to higher propane retail margins per gallon
as a result of sustained retail pricing in response to local market conditions
and lower average propane inventory costs; and  
* A decrease of  $575,000  as a result of a non-recurring gain recorded in 2011
related to the Company's share of proceeds received from an antitrust litigation
settlement with a major supplier.

Other

Operating income for the other segment for 2012 was  $1.3 million, an increase
of  $1.1 million, compared to 2011.  The increase in operating income was
attributable to improved results from BravePoint®, Inc. ("BravePoint"), the
Company's advanced information services subsidiary.  BravePoint, which reported
operating income of  $828,000  in 2012, compared to an operating loss of 
$270,000  in 2011, generated increased gross margin of  $2.6 million,  $852,000 
of which represents increased gross margin from ProfitZoom and Application
Evolution sales and related services.  The remaining increase in gross margin
was generated from higher consulting revenues and other product sales.  This
increase in gross margin was partially offset by an increase of  $1.5 million 
in other operating expenses as a result of resources added to support these
sales and services.

Operating Results for the Fourth Quarter Ended  December 31, 2012

The Company's operating income for the fourth quarter of 2012 was  $18.5
million, an increase of  $3.0 million, compared to the same quarter in 2011. 
Gross margin increased by  $4.6 million, or 10 percent, in the fourth quarter of
2012, compared to the same quarter in 2011.  Other operating expenses for the
fourth quarter of 2012 increased by  $1.6 million, or five percent, in 2012,
compared to the same quarter in 2011.   



Regulated Energy

Operating income for the regulated energy segment for the fourth quarter of 2012
was  $13.8 million, an increase of  $901,000, or seven percent, compared to the
same quarter in 2011.  An increase in gross margin of  $1.8 million  was
partially offset by an increase in operating expenses of  $982,000.  The
significant components of the gross margin variance included:

* An increase of  $1.5 million  due to natural gas growth resulting from: (a)
major expansion initiatives in  Sussex County, Delaware;  Worcester  and  Cecil 
Counties,  Maryland; and  Nassau County, Florida; and (b) additional
residential, commercial and industrial customer growth on the Delmarva Peninsula
and in  Florida;  
* A decrease of  $750,000  as a result of the reversal in the fourth quarter of
2011 of a  Florida  natural gas regulatory reserve; and  
* An increase of  $572,000  as a result of higher consumption by natural gas and
electric customers, due primarily to colder temperatures in the fourth quarter
of 2012, compared to the same quarter in 2011.

The increase in other operating expenses is due primarily to: (a)  $589,000  in
increased amortization expense associated with the recovery of the FPU
acquisition adjustment and merger-related costs, offset by an amortization
credit of  $684,000  associated with FPU's pre-merger deferred tax gain; (b) 
$254,000  in an increased accrual for general liability claims; and (c) 
$315,000  in higher depreciation expense, asset removal and facilities costs
associated with capital investments to support growth and system integrity.   

Unregulated Energy

Operating income for the unregulated energy segment for the fourth quarter of
2012 was  $4.3 million, representing an increase of  $2.0 million, or 84
percent, compared to the same quarter in 2011, due primarily to an increase in
gross margin of  $2.0 million.  Operating expenses for the fourth quarter of
2012 remained unchanged from the same quarter in 2011.  The significant
components of the gross margin variance included:

* An increase of  $1.4 million  due to higher retail margins per gallon in the
Delmarva and  Florida  propane distribution operations as a result of sustained
retail pricing in response to local market conditions and lower average propane
inventory cost; and  
* An increase of  $509,000  in propane sales due primarily to colder
temperatures on the Delmarva Peninsula, which increased consumption by propane
customers and deliveries to bulk customers.

Other

Operating income for the other segment for the fourth quarter of 2012 was 
$384,000, an increase of  $179,000  from the same quarter in 2011.  The increase
in operating income was attributable to improved results from BravePoint. 
BravePoint, which reported operating income of  $270,000  in the fourth quarter
of 2012, compared to  $87,000  in the same quarter in 2011, generated increased
gross margin of  $752,000,  $388,000  of which represents increased gross margin
from ProfitZoom and Application Evolution sales and related services.  The
remaining increase was generated from higher consulting revenues and other
product sales.  This increase in gross margin was partially offset by an
increase of  $568,000  in operating expenses as a result of resources added to
support these sales and services.   

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 for
further information on the risks and uncertainties related to the Company's
forward-looking statements.

The discussions of the results 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
Financial Summary.  



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





Conference Call

Chesapeake Utilities Corporation will host a conference call on  March 8, 2013,
at  10:00 a.m. Eastern Time  to discuss the Company's financial results for the
year ended  December 31, 2012.  To participate in this call, dial 866.821.5457
and reference Chesapeake Utilities Corporation's 2012 Annual and Fourth Quarter
Financial Results Conference Call.  To access the replay recording of this call,
please visit the Company's website at  http://investor.chpk.com/results.cfm.

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

                                                                                         
 Financial Summary                                                                             
 
                                                                                             
 
(in thousands, except per-share and degree-day data)                                         
                                                                                            
                                               Year to Date           Fourth Quarter       
                                                                                         
 Chesapeake and Subsidiaries                    2012      2011        2012      2011      
 Gross Margin  (1)                                                                        
 Regulated Energy                               $134,806  $128,115    $35,968   $34,085   
 Unregulated Energy                             35,912    37,171      11,235    9,234     
 Other                                         8,425     5,843       2,216     1,471     
 Total Gross Margin                             $179,143  $171,129    $49,419   $44,790   
                                                                                         
 Operating Income                                                                         
 Regulated Energy                               $46,999   $43,911     $13,848   $12,947   
 Unregulated Energy                             8,355     9,619       4,311     2,343     
 Other                                         1,281     175         384       205       
 Total Operating Income                         56,635    53,705      18,543    15,495    
                                                                                         
 Other Income, net of other expenses            271       906         59        205       
 Interest Charges                               8,747     9,000       2,090     2,345     
 Pre-tax Income                                48,159    45,611      16,512    13,355    
                                                                                         
 Income Taxes                                   19,296    17,989      6,655     5,398     
 Net Income                                     $28,863   $27,622     $9,857    $7,957    
                                                                                         
 Earnings Per Share of Common Stock                                                       
 Basic                                         $3.01     $2.89       $1.03     $0.83     
 Diluted                                       $2.99     $2.87       $1.02     $0.83     
                                                                                         
 Heating Degree-Days - Delmarva Peninsula                                                 
 Actual                                        3,936     4,221       1,561     1,345     
 10-year average (normal)                       4,491     4,499       1,594     1,594     
                                                                                         
 Heating Degree-Days - Florida                                                            
 Actual                                        633       753         286       219       
 10-year average (normal)                       915       920         327       325       
                                                                                         
 Cooling Degree-Days - Florida                                                            
 Actual                                        2,871     2,858       249       182       
 10-year average (normal)                       2,756     2,718       270       275       
                                                                                         
  (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 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. 


 Financial Summary Highlights                                                                                                
 
                                                                                                                           
 
Key variances for the year ended December 31, 2012 included:                                                               
 (in thousands, except per share amounts)                                     Pre-tax       Net          Earnings      
                                                                              Income        Income       Per Share     
                                                                                                                       
 2011 Reported Results                                                        $   45,611    $  27,622    $     2.87    
                                                                                                                       
 Adjusting for unusual items:                                                                                          
 Weather impact                                                               (3,627)       (2,197)      (0.23)        
 Amortization of FPU acquisition premium and costs                            (2,354)       (1,426)      (0.15)        
 Severance and pension settlement charge in 2011                              1,299         787          0.08          
 Florida regulatory reserve and sales tax reserve reversal in 2011            (1,049)       (636)        (0.07)        
 Amortization of FPU pre-merger deferred tax gain                             684           414          0.04          
 Litigation settlement with a major propane supplier in 2011                  (575)         (348)        (0.04)        
 Gain from the sale of Internet Protocol asset in 2011                        (553)         (335)        (0.03)        
                                                                              (6,175)       (3,741)      (0.40)        
 Increased Margins:                                                                                                    
 Natural gas growth                                                           6,263         3,793        0.40          
 Higher propane retail margins per gallon                                     2,724         1,650        0.17          
 BravePoint                                                                   2,602         1,576        0.16          
                                                                              11,589        7,019        0.73          
 Increased Other Operating Expenses:                                                                                   
 BravePoint, primarily due to employee-related costs                          (1,523)       (923)        (0.10)        
 Higher depreciation, asset removal and facilities costs                      (1,326)       (803)        (0.08)        
 Acquisition-related costs and increased capacity for future growth           (758)         (459)        (0.05)        
                                                                              (3,607)       (2,185)      (0.23)        
                                                                                                                       
 Net other changes                                                            741           148          0.02          
                                                                                                                       
 2012 Reported Results                                                        $   48,159    $  28,863    $     2.99    
                                                                                                                       


The Company's results for 2012 reflected additional gross margin generated by:
(a) the natural gas transmission and distribution operations as a result of
major expansion initiatives in  Sussex County, Delaware;  Worcester  and  Cecil 
Counties,  Maryland; and  Nassau County, Florida; (b) additional customer
growth; and (c) additional transmission services provided to an existing
industrial customer.  Higher retail propane margins per gallon, as a result of
sustained retail prices and favorable supply costs, and increased product sales
and consulting revenues from BravePoint also generated additional gross margin. 
These increases in gross margin more than offset a reduction of  $3.6 million 
in gross margin due to significantly warmer temperatures in 2012, particularly
during the first three months of the year.  Also included in the 2012 results is
amortization expense of  $2.4 million  related to the recovery of the FPU
acquisition adjustment and merger-related costs, partially offset by an
amortization credit of  $684,000  associated with FPU's pre-merger deferred
income tax gain.  Higher expenses associated with growth initiatives and capital
investments to support growth and system integrity also offset the gross margin
increases.  

Key variances for the three months ended  December 31, 2012  included:

 (in thousands, except per share amounts)                                  Pre-tax     Net          Earnings     
                                                                           Income      Income       Per Share    
                                                                                                                 
 Fourth quarter of 2011 Reported Results                                   $ 13,355    $   7,957    $    0.83    
                                                                                                                 
 Adjusting for Unusual Items:                                                                                    
 Weather impact                                                            1,223       729          0.08         
 Florida regulatory reserve and sales tax reserve reversal in 2011         (750)       (447)        (0.05)       
 Amortization of FPU pre-merger deferred tax gain                          684         408          0.04         
 Amortization of FPU acquisition premium and costs                         (589)       (351)        (0.04)       
                                                                           568         339          0.03         
 Increased Margins:                                                                                              
 Natural gas growth                                                        1,482       883          0.09         
 Higher propane retail margins per gallon                                  1,364       813          0.08         
 BravePoint                                                                752         448          0.05         
                                                                           3,598       2,144        0.22         
 Increased Other Operating Expenses:                                                                             
 BravePoint, primarily due to employee-related costs                       (565)       (337)        (0.03)       
 Higher natural gas transmission facilities costs                          (223)       (133)        (0.01)       
                                                                           (788)       (470)        (0.04)       
                                                                                                                 
 Net other changes                                                         (221)       (113)        (0.02)       
                                                                                                                 
 Fourth quarter of 2012 Reported Results                                   $ 16,512    $   9,857    $    1.02    
                                                                                                                 


The Company's results for the fourth quarter of 2012 reflected additional gross
margin generated by: (a) major expansion initiatives on the Delmarva Peninsula
and in  Florida; (b) additional customer growth; and (c) additional transmission
services provided to an existing industrial customer.  Higher retail propane
margins per gallon, as a result of sustained retail prices and favorable supply
costs, also generated additional gross margin.  Colder temperatures in the
fourth quarter of 2012, compared to the same quarter in 2011, generated
additional gross margin, which more than offset the negative
quarter-over-quarter impact in gross margin from the reversal in 2011 of a
$750,000 regulatory reserve recorded in the prior year.  Increased product sales
and consulting revenues by BravePoint more than offset increased expenses to
support its growth.   

The following information highlights certain key factors contributing to the
Company's results for the year and quarter ended  December 31, 2012:

Growth

New natural gas transmission services and growth in natural gas distribution
customers generated  $3.6 million  and  $2.7 million, respectively, in
additional gross margin for 2012, compared to 2011, and  $822,000  and 
$660,000, respectively, in additional gross margin for the fourth quarter of
2012, compared to the same quarter in 2011.  These increases in gross margin
were related primarily to the continued execution of the Company's strategic
plan, including expansion of natural gas service to new areas and conversion of
several large commercial and industrial customers to natural gas. In addition,
new services are being initiated by the Company's natural gas transmission
subsidiaries in response to increased demand for natural gas service on the
Delmarva Peninsula and in  Florida, both from the Company's natural gas
distribution operations and other unaffiliated customers directly connected to
the transmission systems.   

Major Expansion Initiatives and Customer Growth Reflected in Results   
In late 2011 and during 2012, the Company expanded natural gas transmission and
distribution services to  Sussex County, Delaware  and  Nassau County, Florida 
and also initiated natural gas transmission service  in  Worcester and  Cecil 
Counties,  Maryland.   These major  expansion initiatives increased the
Company's natural gas footprint, delivering natural gas service to areas where
it was not previously available.  These initiatives generated  $2.9 million  of
additional gross margin for the natural gas transmission operations in 2012. 
Natural gas distribution service to two large industrial customers in  Lewes,
Delaware  and two industrial facilities of an existing customer in southeastern 
Sussex County, Delaware  generated  $588,000  of additional gross margin for
2012.  For the fourth quarter of 2012, these natural gas transmission and
distribution initiatives generated  $869,000  and  $192,000, respectively, of
additional gross margin, compared to the same quarter in 2011.

In addition to the recent expansion initiatives, the Delmarva natural gas
distribution operation has added 12 new large industrial and commercial
customers since the beginning of 2011, which generated  $574,000  in additional
gross margin in 2012, compared to 2011, and  $108,000  in the fourth quarter of
2012, compared to the same quarter in 2011.  Growth in residential and other
commercial customers on the Delmarva Peninsula generated  $513,000  and  $22,000
 in additional gross margin in 2012 and in the fourth quarter of 2012,
respectively.  Customer growth in  Florida, primarily from commercial and
industrial customers, generated  $986,000  and  $338,000  in additional gross
margin in 2012 and in the fourth quarter of 2012, respectively.   

Future Major Expansion Initiatives and Opportunities   
Although not affecting results in 2012, Eastern Shore entered into precedent
agreements with NRG Energy Center Dover LLC ("NRG") and PBF Energy Inc.
("Delaware City Refinery") to further expand its transmission system in order to
provide additional services to these customers.  Eastern Shore expects to enter
into firm transportation service agreements with NRG and Delaware City Refinery
upon satisfaction of certain conditions pursuant to the respective precedent
agreements.  These additional services are expected to be initiated in late
2013. A delay in obtaining the regulatory approval from the Federal Energy
Regulatory Commission for construction of these new facilities could delay the
service initiation.

In  Florida, Peninsula Pipeline Company, Inc. ("Peninsula Pipeline"), the
Company's intrastate natural gas transmission subsidiary, entered into a firm
transportation agreement with an unaffiliated utility, which will generate an
estimated annual gross margin of approximately  $840,000.  This service is
expected to be initiated in the second quarter of 2013 upon completion of
construction of the new facility.

As the Company expands its natural gas service to new areas, first through
transmission and distribution service to large industrial customers, its natural
gas distribution operations continue to pursue additional opportunities to
provide service to residential and other commercial and industrial customers in
those areas.  In an effort to increase the availability of natural gas within
the Company's  Delaware  service areas, the Company's  Delaware  natural gas
distribution division filed an application with the Delaware Public Service
Commission ("PSC") in  June 2012  to add several natural gas expansion service
offerings.  These offerings include a monthly fixed charge in lieu of upfront
contributions from customers to extend the distribution system and optional
service offerings to assist customers in the process of converting to natural
gas.  The goal of these new offerings is to meet the energy needs of residents,
communities and businesses throughout the Company's service territory,
specifically in areas of southeastern  Sussex County, where natural gas will now
be available.  The Delaware PSC is currently reviewing this application.   

Additional information highlighting the major expansion initiatives is provided
in the "Major Expansion Initiative Highlights (Unaudited)" table later in this
release.

Acquisition   
In  June 2012, the Company entered into an agreement with Eastern Shore Gas
Company and its affiliates (collectively "ESG," which is unrelated to the
Company's interstate natural gas transmission subsidiary) to purchase their
operating assets for approximately  $16.5 million.  These assets are currently
used to provide propane distribution service to approximately 11,000 residential
and commercial customers in  Worcester County, Maryland, primarily through
underground propane gas distribution systems.  The Company is evaluating the
potential conversion of some of these underground propane distribution systems
to natural gas where it is economical and feasible.  The Company filed an
application with the Maryland PSC for approval of the transaction in August
2012.  The transaction, which is also subject to obtaining consents from certain
local jurisdictions to the assignment of certain franchise agreements and the
satisfaction of other closing conditions, is expected to be completed in 2013. 
The Company expects to finance the acquisition using unsecured short-term debt. 
The acquisition is expected to be accretive to earnings per share in 2013 and
thereafter.

Investing in Growth   
To continue its growth, the Company is expanding its resources and capabilities.
 The Company is in the early stages of several natural gas distribution
expansions on the Delmarva Peninsula including expansions into  Sussex County,
Delaware, and  Worcester  and  Cecil  Counties in Maryland.  These expansions
will require not only the construction or conversion of distribution facilities,
but also the conversion of customers' appliances or equipment inside their
homes.  The Company has begun the process of reorganizing its Delmarva natural
gas distribution operation and expects to increase its staffing to support these
expansions.  Secondly, as a result of BravePoint's growth over the last several
quarters, BravePoint is continuing to add new team members.  During 2012 and the
fourth quarter of 2012, BravePoint's other operating expenses increased by  $1.5
million  and  $568,000, respectively, compared to the same periods in 2011, due
primarily to increased staffing.  Finally, to increase the Company's capacity to
appropriately manage future growth, resources have been, and continue to be,
added in several key functional areas, including, but not limited to, Human
Resources, Communications and Strategic Business Development. During 2012, the
Company incurred  $312,000  in additional acquisition-related costs, compared to
2011 and  $446,000  in new costs associated with increased capacity for future
growth.  The Company expects to incur additional costs to successfully position
the Company for future growth.

Weather and Consumption

Significantly warmer temperatures in 2012, particularly during the first three
months of the year when the demand for natural gas and propane are at their
highest, had a large negative impact on the Company's earnings. Lower customer
energy consumption directly attributable to warmer temperatures in 2012 reduced
gross margin by  $3.6 million, compared to 2011.  Temperatures in 2012 on the
Delmarva Peninsula and in  Florida  were seven percent (285 heating degree-days
("HDD")) and 16 percent (120 HDD), respectively, warmer than 2011.  Compared to
normal temperatures, which are based on the 10-year historic average of HDD,
temperatures in 2012 on the Delmarva Peninsula and in  Florida  were 12 percent
(555 HDD) and 31 percent (282 HDD), respectively, warmer and reduced gross
margin for 2012 by approximately  $5.1 million, compared to gross margin that
the Company would have generated under normal temperatures.

Temperatures in the fourth quarter of 2012 were colder when compared to the same
quarter in 2011; however, it was still warmer than normal.   Temperatures in the
fourth quarter of 2012 on the Delmarva Peninsula and in  Florida  were 16
percent (216 HDD) and 31 percent (67 HDD), respectively, colder than the same
quarter in 2011 and increased gross margin by  $1.4 million  in the fourth
quarter of 2012, compared to the same quarter in 2011.  However, temperatures in
the fourth quarter of 2012 on the Delmarva Peninsula and in  Florida  were two
percent (33 HDD) and 13 percent (41 HDD), respectively, warmer than normal and
reduced gross margin by approximately  $475,000, compared to gross margin that
the Company would have generated under normal temperatures.







Propane Retail Margins per Gallon

During 2012, the Company's propane distribution operations generated additional
gross margin of  $2.7 million  due to higher retail margins per gallon, compared
to 2011. Sustained retail pricing in response to local market conditions,
combined with lower propane inventory costs as a result of declining wholesale
prices, contributed to this increase.  The propane retail price per gallon is
subject to various market conditions, including competition with other propane
suppliers and the availability and price of alternative energy sources, and may
fluctuate based on changes in demand, supply and other energy commodity prices.

Recovery of Acquisition Premium and Merger-related Costs

In  January 2012, the Florida PSC issued an order approving the recovery of 
$34.2 million  as an acquisition adjustment and  $2.2 million  in merger-related
costs in connection with the Company's acquisition of FPU in 2009. Inclusion of
the acquisition adjustment and merger-related costs in the Company's rate base
and the recovery of these assets through amortization expense will increase the
Company's earnings and cash flows above what it would have achieved absent the
regulatory approval.  The acquisition adjustment and merger-related costs are to
be amortized over 30 years and five years, respectively, beginning in November
2009.  Based upon the effective date and outcome of the order, the Company
recorded the amortization as an expense beginning in 2012, which resulted in an
increase in amortization expense of  $2.4 million  and  $589,000  in 2012 and
the fourth quarter of 2012, respectively.  The Company expects to record  $2.4
million  ($1.4 million, net of tax) in amortization expense in 2013,  $2.3
million  ($1.4 million, net of tax) in 2014, and  $1.8 million  ($1.1 million,
net of tax) annually thereafter until 2039.     

In  November 2012, the Florida PSC issued an order approving the recognition of
a  $1.9 million  regulatory liability for FPU for a one-time tax contingency
gain, including income tax gross-up, to be amortized over a period from  January
2012  to October 2014.  This tax contingency gain is related to an income tax
liability recorded by FPU prior to the merger with Chesapeake.  As the liability
no longer exists, upon receiving the Florida PSC order, the Company recorded an
amortization credit of  $684,000  in 2012, which was recorded in the fourth
quarter.

 Chesapeake Utilities Corporation and Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                           
 Major Expansion Initiative Highlights (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Major Expansion Initiatives That Have Already Commenced (dollars in thousands):                                                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Project                                                                                                             Date of New                                                                     Q4 2012                                                                         YTD                                                                                                                     Estimated                                                             
                                                                                                                     
Service                                                                        
Margin                                                                         
December                                                                                                               
Annualized                                                           
                                                                                                                                                                                                                                                                                     
2012 Margin                                                                                                            
Margin                                                               
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Sussex County, DE expansion                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                     Transmission (for Lewes, DE) - 3,250 Dts/d  (1)                                                 Nov-11                                                                          $         234                                                                   $         935                                                                                                           $         935                                                         
                     Distribution - Two large industrial customers                                                                                                                                                                                                                                                                                                                                                                                                                
                     in Lewes, DE  (2)                                                                               Dec-11                                                                          143                                                                             500                                                                                                                     391                                                                   
                     Transmission (for southeastern part) 1,550 Dts/d                                                Mar-12 to May-12                                                                111                                                                             334                                                                                                                     446                                                                   
                     Distribution - Two facilities of an existing customer                                                                                                                                                                                                                                                                                                                                                                                                        
                     in the southeastern part of Sussex County                                                       Mar-12 to Aug-12                                                                50                                                                              89                                                                                                                      154                                                                   
                                                                                                                                                                                                    $         538                                                                   $      1,858                                                                                                            $      1,926                                                          
 Cecil County, MD expansion                                                                                                                                                                                                                                                                                                                                                                                                                                                        
                     Transmission - 4,070 Dts/d                                                                     Nov-12                                                                          $         147                                                                   $         147                                                                                                           $         882                                                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Worcester County, MD expansion                                                                                                                                                                                                                                                                                                                                                                                                                                                     
                     Transmission - 1,450 Dts/d                                                                      Jun-12 to Jan-13                                                                $           51                                                                  $           90                                                                                                          $         391                                                         
 Nassau County, FL expansion                                                                                                                                                                                                                                                                                                                                                                                                                                                       
                     Transmission - A new fixed annual rate service  (4)                                            Apr-12                                                                          $         482                                                                   $      1,537                                                                                                            $      2,100                                                          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                    $      1,218                                                                    $      3,632                                                                                                            $      5,299                                                          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Total by Geographic Location of the Project:                                                                                                                                                                                                                                                                                                                                                                                                                                       
                     Delmarva Natural Gas Distribution                                                                                                                                               $         193                                                                   $         589                                                                                                           $         545                                                         
                     Delmarva Natural Gas Transmission                                                                                                                                               543                                                                             1,506                                                                                                                   2,654                                                                 
                     Florida Natural Gas Transmission                                                                                                                                                482                                                                             1,537                                                                                                                   2,100                                                                 
                                                                                                                                                                                                    $      1,218                                                                    $      3,632                                                                                                            $      5,299                                                          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Upcoming Major Expansion Initiatives with Executed Contracts (dollars in thousands):                                                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Project                                                                                                             Date of New                                                                                                                                                     Estimated                                                                                                                                                                                        
                                                                                                                     
Service                                                                                                                                                        Annualized Margin                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
 Service to an unaffiliated Florida utility  (5)                                                                      Apr-13                                                                                                                                                          $840                                                                                                                                                                                             
 Service to NRG's Dover, DE electric generation plant                                                                                                                                                                                                                                                                                                                                                                                                                                  
                     Transmission - 13,440 Dts/d  (3)                                                                Nov-13                                                                                                                                                          $2,400 to $2,800                                                                                                                                                                                 
 Delaware City refinery expansion                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                     Transmission - 15,000 Dts/d  (3) (6)                                                            Dec-13                                                                                                                                                          $1,600                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                    $4,840 to $5,240                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                     (1)These services generated $156,000 in gross margin in 2011 (all in the fourth quarter).                                                                                                                                                                                                                                                                                                                                                                             
                     (2)These services generated $1,000 in gross margin in 2011 (all in the fourth quarter).                                                                                                                                                                                                                                                                                                                                                                               
                     (3)A precedent agreement has been entered into by the parties for these services.  The figures provided represent the estimated gross margin pursuant to the respective precedent agreement.  A firm transportation service agreement will be entered into by the parties upon satisfying certain conditions.                                                                                                                                                         
                     (4)Peninsula Pipeline commenced its service in April 2012, using compressed natural gas while a new pipeline was being constructed.  The new pipeline was completed and placed in service in December 2012. Peninsula Pipeline is expected to incur approximately $800,000 in annual transportation costs upon the completion of the new pipeline, which will reduce this gross margin.                                                                               
                     (5)Estimated annual margin is based on a fixed monthly reservation charge agreed to by the customer.                                                                                                                                                                                                                                                                                                                                                                   
                     (6)This contract is expected to replace the 10,000 Dts/d contract with annualized gross margin of $1.1 million, which expired  in November 2012.                                                                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  


 Chesapeake Utilities Corporation and Subsidiaries                                                                           
 Condensed Consolidated Statements of Income (Unaudited)                                                                     
 For the Periods Ended December 31, 2012 and 2011                                                                            
 (in thousands, except shares and per share data)                                                                            
                                                                                                                      
                                                               Year to Date                    Fourth Quarter           
                                                                                                                      
                                                               2012       2011                2012       2011         
 Operating Revenues                                                                                                   
 Regulated Energy                                              $246,208   $256,226            $66,163    $63,513      
 Unregulated Energy                                            133,049    149,586             39,726     37,423       
 Other                                                         13,245     12,215              3,627      3,052        
 Total Operating Revenues                                      392,502    418,027             109,516    103,988      
                                                                                                                      
 Operating Expenses                                                                                                   
 Regulated energy cost of sales                                111,402    128,111             30,195     29,428       
 Unregulated energy and other cost of sales                    101,957    118,787             29,902     29,770       
 Operations                                                    82,387     79,810              21,555     20,013       
 Maintenance                                                   7,423      7,449               1,788      1,825        
 Depreciation and amortization                                 22,510     20,153              5,098      5,218        
 Other taxes                                                   10,188     10,012              2,435      2,239        
 Total operating expenses                                      335,867    364,322             90,973     88,493       
 Operating Income                                              56,635     53,705              18,543     15,495       
 Other income, net of other expenses                           271        906                 59         205          
 Interest charges                                              8,747      9,000               2,090      2,345        
 Income Before Income Taxes                                    48,159     45,611              16,512     13,355       
 Income taxes                                                  19,296     17,989              6,655      5,398        
 Net Income                                                    $28,863    $27,622             $9,857     $7,957       
                                                                                                                      
 Weighted Average Shares Outstanding:                                                                                 
 Basic                                                         9,586,144  9,555,799           9,594,567  9,565,674    
 Diluted                                                       9,671,507  9,651,058           9,678,771  9,661,176    
                                                                                                                      
 Earnings Per Share of Common Stock:                                                                                  
 Basic                                                         $3.01      $2.89               $1.03      $0.83        
 Diluted                                                       $2.99      $2.87               $1.02      $0.83        
                                                                                                                      


 Chesapeake Utilities Corporation and Subsidiaries                                        
                                                                                        
 Condensed Consolidated Balance Sheets  (Unaudited)                                       
                                                                                          
 Assets                                                 December 31,    December 31,    
                                                        2012            
2011           
 (in thousands, except shares and per share data)                                         
                                                                                        
 Property, Plant and Equipment                                                          
 Regulated energy                                       $585,429        $528,790        
 Unregulated energy                                     70,218          67,327          
 Other                                                  20,067          19,988          
 Total property, plant and equipment                    675,714         616,105         
 Less:  Accumulated depreciation and amortization       (155,378)       (137,784)       
 Plus:  Construction work in progress                   21,445          9,383           
 Net property, plant and equipment                      541,781         487,704         
                                                                                        
                                                                                        
 Current Assets                                                                         
 Cash and cash equivalents                              3,361           2,637           
 Accounts receivable (less allowance for uncollectible                                  
 accounts of $826 and $1,090, respectively)             53,787          76,605          
 Accrued revenue                                        11,688          10,403          
 Propane inventory, at average cost                     7,612           9,726           
 Other inventory, at average cost                       5,841           4,785           
 Regulatory assets                                      2,736           1,846           
 Storage gas prepayments                                3,716           5,003           
 Income taxes receivable                                4,703           6,998           
 Deferred income taxes                                  791             2,712           
 Prepaid expenses                                       6,020           5,072           
 Mark-to-market energy assets                           210             1,754           
 Other current assets                                   132             219             
 Total current assets                                   100,597         127,760         
                                                                                        
 Deferred Charges and Other Assets                                                      
 Goodwill                                               4,090           4,090           
 Other intangible assets, net                           2,798           3,127           
 Investments, at fair value                             4,168           3,918           
 Regulatory assets                                      77,408          79,256          
 Receivables and other deferred charges                 2,904           3,211           
 Total deferred charges and other assets                91,368          93,602          
                                                                                        
 Total Assets                                           $733,746        $709,066        
                                                                                        
                                                                                        
                                                                                        


                                                                                    
 Chesapeake Utilities Corporation and Subsidiaries                                    
                                                                                    
 Condensed Consolidated Balance Sheets  (Unaudited)                                   
                                                                                    
 Capitalization and Liabilities                     December 31,    December 31,    
                                                    2012            
2011           
 (in thousands, except shares and per share data)                                     
                                                                                    
 Capitalization                                                                     
 Stockholders' equity                                                               
 Common stock, par value $0.4867 per share                                          
 (authorized 25,000,000 shares)                     $4,671          $4,656          
 Additional paid-in capital                         150,750         149,403         
 Retained earnings                                  106,239         91,248          
 Accumulated other comprehensive loss               (5,062)         (4,527)         
 Deferred compensation obligation                   982             817             
 Treasury stock                                     (982)           (817)           
 Total stockholders' equity                         256,598         240,780         
                                                                                    
 Long-term debt, net of current maturities          101,907         110,285         
 Total capitalization                               358,505         351,065         
                                                                                    
 Current Liabilities                                                                
 Current portion of long-term debt                  8,196           8,196           
 Short-term borrowing                               61,199          34,707          
 Accounts payable                                   41,992          55,581          
 Customer deposits and refunds                      29,271          30,918          
 Accrued interest                                   1,437           1,637           
 Dividends payable                                  3,502           3,300           
 Accrued compensation                               7,435           6,932           
 Regulatory liabilities                             1,577           6,653           
 Mark-to-market energy liabilities                  331             1,496           
 Other accrued liabilities                          7,226           8,079           
 Total current liabilities                          162,166         157,499         
                                                                                    
 Deferred Credits and Other Liabilities                                             
 Deferred income taxes                              125,205         115,624         
 Deferred investment tax credits                    113             171             
 Regulatory liabilities                             5,454           3,564           
 Environmental liabilities                          9,114           9,492           
 Other pension and benefit costs                    33,535          33,798          
 Accrued asset removal cost - Regulatory liability  38,096          36,584          
 Other liabilities                                  1,558           1,269           
 Total deferred credits and other liabilities       213,075         200,502         
                                                                                    
 Total Capitalization and Liabilities               $733,746        $709,066        
                                                                                    
                                                                                    


 Chesapeake Utilities Corporation and Subsidiaries                                                                                                                 
 Distribution Utility Statistical Data (Unaudited)                                                                                                                 
                                                                                                                                                                  
                           For the Year Ended December 31, 2012                                For the Year Ended December 31, 2011                             
                           Delmarva NG     Chesapeake     FPU NG         FPU Electric       Delmarva NG     Chesapeake     FPU NG         FPU Electric    
                           
Distribution   
Florida NG    
Distribution  
Distribution      
Distribution   
Florida NG    
Distribution  
Distribution   
                                           
Division                                                        
Division                                     
 Operating Revenues                                                                                                                                       
 (in thousands)                                                                                                                                           
 Residential               $42,452         $4,453         $20,125        $40,814            $46,688         $4,471         $18,040        $45,945         
 Commercial                19,250          3,955          27,376         38,079             24,317          3,797          31,641         41,525          
 Industrial                5,648           4,834          11,063         7,513              5,044           4,794          9,258          7,414           
 Other  (1)                886             2,446          1,115          (3,845)            (1,732)         2,325          2,036          (5,813)         
 Total Operating Revenues  $68,236         $15,688        $59,679        $82,561            $74,317         $15,387        $60,975        $89,071         
                                                                                                                                                          
 Volume  (in Dts/MWHs)                                                                                                                                    
 Residential               2,511,444       313,695        1,218,539      292,981            2,895,956       313,591        1,189,544      318,065         
 Commercial                2,717,673       1,334,229      2,806,208      310,004            3,070,983       1,233,298      3,006,030      326,704         
 Industrial                3,876,693       14,123,510     3,487,931      58,640             3,124,765       14,127,513     2,945,544      52,440          
 Other                     124,063         -              181,566        9,373              104,137         -              (170,316)      (2,556)         
 Total                     9,229,873       15,771,434     7,694,244      670,998            9,195,841       15,674,402     6,970,802      694,653         
                                                                                                                                                          
 Average Customers                                                                                                                                        
 Residential               49,639          13,783         48,603         23,670             48,680          13,584         47,941         23,598          
 Commercial                5,212           1,253          4,528          7,394              5,171           1,185          4,531          7,386           
 Industrial                103             56             833            2                  93              59             686            2               
 Other                     5               -              -              -                  4               -              -              -               
 Total                     54,959          15,092         53,964         31,066             53,948          14,828         53,158         30,986          
                                                                                                                                                          
 (1)Operating revenues from "Other" sources include accrued 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. 


 Chesapeake Utilities Corporation and Subsidiaries                                                                                                                
 Distribution Utility Statistical Data (Unaudited)                                                                                                                
                                                                                                                                                                  
                           For the Three Months Ended December 31, 2012                       For the Three Months Ended December 31, 2011                     
                           Delmarva NG     Chesapeake     FPU NG         FPU Electric      Delmarva NG     Chesapeake     FPU NG         FPU Electric    
                           
Distribution   
Florida NG    
Distribution  
Distribution     
Distribution   
Florida NG    
Distribution  
Distribution   
                                           
Division                                                       
Division                                     
 Operating Revenues                                                                                                                                      
 (in thousands)                                                                                                                                          
 Residential               $11,455         $1,137         $5,335         $9,682            $9,914          $1,100         $2,734         $9,151          
 Commercial                5,180           1,050          7,031          9,689             4,818           1,012          8,427          9,601           
 Industrial                1,613           1,184          3,182          909               1,452           1,209          2,478          1,796           
 Other  (1)                2,936           602            1,712          (1,676)           2,770           617            3,529          (1,817)         
 Total Operating Revenues  $21,184         $3,973         $17,260        $18,604           $18,954         $3,938         $17,168        $18,731         
                                                                                                                                                         
 Volume  (in Dts/MWHs)                                                                                                                                   
 Residential               706,773         83,800         323,942        69,390            550,431         71,610         274,590        63,950          
 Commercial                811,306         362,627        738,894        80,379            706,355         337,270        771,236        80,715          
 Industrial                1,106,856       3,434,638      1,023,992      7,930             862,175         3,333,467      900,648        11,220          
 Other                     32,696          -              120,331        (10,855)          24,736          -              56,549         (10,505)        
 Total                     2,657,631       3,881,065      2,207,159      146,844           2,143,697       3,742,347      2,003,023      145,380         
                                                                                                                                                         
 Average Customers                                                                                                                                       
 Residential               50,009          13,813         48,782         23,690            48,936          13,569         48,066         23,625          
 Commercial                5,230           1,265          4,510          7,391             5,144           1,220          4,553          7,388           
 Industrial                102             60             898            2                 97              59             705            2               
 Other                     4               -              -              -                 4               -              -              -               
 Total                     55,345          15,138         54,190         31,083            54,181          14,848         53,324         31,015          
                                                                                                                                                         
 (1)Operating revenues from "Other" sources include accrued 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 . 


SOURCE  Chesapeake Utilities Corporation

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