Dover, Delaware — Chesapeake Utilities Corporation (NYSE: CPK) today announced the financial results for the year and quarter ended December 31, 2008.

Earnings per share increased by $0.04 per share (diluted) for the year ended December 31, 2008 as net income from continuing operations increased by $389,000, or three percent, to $13.6 million, or $1.98 per share (diluted), compared to net income from continuing operations of $13.2 million, or $1.94 per share (diluted) for 2007. Excluding the one-time charge against earnings for the unconsummated acquisition, net income increased to $14.3 million, or $2.08 per share (diluted). Increased earnings from the natural gas segment more than offset declines experienced by the propane and advanced information services segments.

For the three months ended December 31, 2008, net income from continuing operations increased by $334,000, or eight percent, to $4.4 million, or $0.64 per share (diluted), compared with net income of $4.1 million, or $0.60 per share (diluted), for the same period last year. Increased earnings from the natural gas segment and the impact of colder weather on the Delmarva Peninsula offset the decreased earnings experienced by the propane and advanced information services segments.

“Our team delivered record net income and earnings per share, despite incurring several non-recurring charges related to an unconsummated acquisition and the significant impact that declining commodity prices had on our propane distribution business,” stated John R. Schimkaitis, President and Chief Executive Officer of Chesapeake Utilities Corporation. “Consistent with our growth strategy, our natural gas operations provided a stable base of earnings, generating increased operating income of $3.4 million, which offset these costs. Additionally, our propane wholesale marketing operation was able to take advantage of the market conditions that led to the charges in the propane distribution business and generated $901,000 in additional margin to partially offset the impact of declining prices on the propane distribution business.”

Highlights for the fourth quarter of 2008 included:

  • Enhancements in sales contract terms, customer growth and margins from spot sales for the Company’s natural gas marketing subsidiary provided for a period-over-period increase of 104 percent in its gross margin.
  • On November 1, 2008, Eastern Shore completed construction and placed into service approximately nine miles of new pipeline included in the third phase of its multi-year system expansion. These additional facilities provide for 5,650 dekatherms of additional firm service capacity per day and $988,000 of gross margin on an annualized basis.
  • The Company’s natural gas distribution operations posted a three-percent increase in residential customers served, despite the continued slowdown in new residential housing construction.
  • The Company’s propane wholesale and marketing subsidiary recognized a 98-percent increase in gross margin as a result of increased opportunities generated from the volatility in wholesale propane prices.• The rapid decline of propane prices resulted in non-recurring charges of $1.2 million for the Delmarva propane distribution operation as it marked-to-market its propane swap agreement and valued its propane inventory at current market prices.
  • The Company continues to find attractive and profitable opportunities to invest capital to support current and future customer growth. The Company’s investment resulted in an increase of $4.9 million in net property, plant and equipment during the quarter.
  • The Company was able to increase its total committed short-term borrowing capacity from $15.0 million to $55.0 million during the fourth quarter of 2008, despite many banks reducing their lending capacity.
  • In addition, on October 31, 2008, the Company executed a $30.0 million long-term debt placement of 5.93 percent Unsecured Senior Notes due October 31, 2023.

The discussions of the results for the periods ended December 31, 2008 and 2007 use the terms “gross margin,” which is a non-GAAP financial measure that management uses to evaluate the performance of the Company’s business segments. For an explanation of the calculation of “gross margin,” see the footnote to the Supplemental Income Statement Data chart below.

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

 

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