• The Company reports a 13-percent increase in net income for the quarter
  • Strong cash flow leads to $23.2 million reduction in short-term debt

Dover, Delaware — Chesapeake Utilities Corporation (NYSE: CPK) today announced a 13-percent increase in net income for the quarter ended March 31, 2009, compared to the same period in 2008. Net income for the quarter ended March 31, 2009, was $8.6 million, or $1.24 per share (diluted), an increase of $1.0 million, or $0.14 per share (diluted), compared to $7.6 million, or $1.10 per share (diluted), for the same period in 2008. The increased earnings reflect the improved financial performance of the propane distribution and natural gas marketing subsidiaries, customer growth, and the impact of colder weather on the Delmarva Peninsula.

The discussions of the results for the periods ended March 31, 2009 and 2008, use the term “gross margin,” which is a non-Generally Accepted Accounting Principle 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.

“Our first quarter results reflect the continued strong performance of our core business segments, as the operating and financial performance of our propane and natural gas operations remained strong and provided cash flow to allow us to pay down $23.2 million in short-term debt,” stated John R. Schimkaitis, President and Chief Executive Officer of Chesapeake Utilities Corporation. “As the year proceeds, we look forward to completing our merger with Florida Public Utilities Company and using this combination to supplement the solid fundamentals of our existing core gas distribution and propane operations.”

Highlights for the first quarter and year-to-date 2009 included:

  • On April 20, 2009, the Company announced a definitive merger agreement with Florida Public Utilities Company. The merger, which is subject to various regulatory and shareholder approvals, is expected to close before the end of 2009, and is projected to be neutral to slightly accretive to earnings in 2010 and meaningfully accretive in 2011.
  • The Company’s propane distribution operations increased gross margin by $1.4 million over the same period last year, benefiting from a lower inventory price per gallon, which was attributable to the decline in propane prices coupled with propane inventory write-downs of $800,000 in the second-half of 2008.
  • Colder weather on the Delmarva Peninsula contributed approximately $1.0 million in additional gross margin during the current quarter compared to the same period in 2008.
  • Increased margins from spot sales on the Delmarva Peninsula and enhancements in sales contract terms for the Company’s natural gas marketing subsidiary provided for a period-over-period increase of $913,000 in its gross margin.
  • In February 2009, the Company’s natural gas transmission subsidiary, Eastern Shore Natural Gas Company (“ESNG”), entered into two separate firm transportation service agreements with an industrial customer that will provide such service through October 31, 2012. The Company estimates that it will recognize an additional gross margin of $754,000 in 2009, of which $118,000 was recognized during the first quarter, and annualized gross margin of approximately $1.1 million through the term of these agreements.
  • On March 13, 2009, the Federal Energy Regulatory Commission authorized ESNG to construct the remaining facilities of its multi-year system expansion project. These facilities, which are expected to be placed into service on November 1, 2009, will provide 7,200 dekatherms (“Dts”) of additional, fully-subscribed, long-term, firm service capacity and will permit ESNG to earn additional annualized gross margin of approximately $1.0 million.
  • Strong operating cash flow during the quarter enabled the Company to reduce short-term debt by $23.2 million to $9.8 million, while also investing $4.1 million in property, plant and equipment to support current and future customer growth.

Comparative results for the quarters ended March 31, 2009 and 2008
Operating income increased by $1.9 million, or 14 percent, to $16.0 million for the first quarter of 2009, compared to $14.1 million for the same period in 2008, as gross margin increased by $4.0 million, or 14 percent, compared to the first quarter of 2008. The increases in operating income and gross margin were driven primarily by improved results for the natural gas and propane segments, partially offset by lower operating results for the advanced information services segment.

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For more information
Contact:

Beth W. Cooper
Senior Vice President & Chief Financial Officer
302.734.6799

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