8-K

United States

Securities and Exchange Commission

Washington, D.C. 20549

_______________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2007

Chesapeake Utilities Corporation

(Exact name of registrant as specified in its charter)

Delaware	001-11590	51-0064146
(State or other jurisdiction of	(Commission	(I.R.S. Employer
incorporation or organization)	File Number)	Identification No.)

909 Silver Lake Boulevard, Dover, Delaware 19904

(Address of principal executive offices, including Zip Code)

(302) 734-6799

(Registrant's Telephone Number, including Area Code)

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 7, 2007, the Company issued a press release announcing its financial results for the quarter and six months ended June 30, 2007. A copy of the press release is attached as Exhibit 99.1 hereto and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibit 99.1 — Press Release of Chesapeake Utilities Corporation, dated August 7, 2007.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

Chesapeake Utilities Corporation

/s/ Michael P. McMasters

—————————————

Michael P. McMasters

Senior Vice President and Chief Financial Officer

Date: August 7, 2007

EX-99.1

Exhibit 99.1

[Chesapeake Utilities

Corporation Logo]

FOR IMMEDIATE RELEASE

August 07, 2007

NYSE Symbol: CPK

CHESAPEAKE UTILITIES CORPORATION REPORTS 31 PERCENT INCREASE IN NET INCOME FOR THE SECOND QUARTER OF 2007

Dover, Delaware— Chesapeake Utilities Corporation (NYSE: CPK) today announced a $349,000, or 31 percent, increase in net income for the quarter ended June 30, 2007 compared to the same period in 2006. Net income for the second quarter was $1.5 million, or $0.22 per share (diluted), compared to a net income of $1.1 million, or $0.19 per share (diluted), for the second quarter in 2006. Net income increased $2.2 million, or 31 percent, for the first six months in 2007 when compared to the same period in 2006. Net income for the first six months in 2007 was $9.5 million, or $1.39 per share (diluted), compared to a net income of $7.2 million, or $1.20 per share (diluted), for the same period in 2006. The increase in the quarterly and year to date earnings reflects higher operating income for the Company’s natural gas and propane segments from continued growth and colder temperatures on the Delmarva Peninsula, which increased volumes sold to customers. The Company estimates that the growth and colder weather contributed $3.4 million and $1.7 million, respectively, to gross margin during the first six months of 2007.

Highlights during the quarter included:

·   Customer growth in the natural gas and propane businesses remained strong, with the Delmarva and Florida natural gas distribution operations showing 8 and 7 percent increases in residential customers, respectively over the second quarter of 2006; and the Delmarva propane Community Gas Systems generating a 27 percent increase in customers over the second quarter of 2006.

·   Gross margin for the Company’s natural gas transmission operation increased by approximately $918,000 over the second quarter 2006 due to the implementation of additional firm transportation services in November of 2006.

·   Continued capital investment to support customer growth resulted in an increase of $4.9 million to net property, plant and equipment during the quarter.

·  On May 2, 2007, the Board of Directors of Chesapeake Utilities Corporation raised the annualized dividend two cents per share from $1.16 to $1.18 per share. The quarterly dividend of $0.295 per share was paid July 5, 2007 to all shareholders of record at the close of business on June 13, 2007.

“Strong customer growth continues to create opportunities for the Company, and our employees continue to take advantage of these opportunities to produce higher levels of earnings,” stated John R. Schimkaitis, President and Chief Executive Officer of Chesapeake Utilities Corporation. “We are pleased with the operational performance at each of our business segments and are excited about the potential for additional growth and what that can mean for our shareholders.”

The discussions of the results for the periods ended June 30, 2007 and 2006 use the terms “gross margin.” “Gross margin” is a non-GAAP financial measure that management uses to evaluate the performance of its business segments. For an explanation of the calculation of “gross margin,” see the footnote to the Supplemental Income Statement Data chart.

Comparative results for the quarter ended June 30, 2007 and 2006

Operating income was $3.7 million for the second quarter of 2007, compared to $3.2 million for the same period in 2006, representing an increase of $483,000, or 15 percent. Gross margin increased $2.5 million, or 16 percent, compared to 2006, primarily due to continued customer growth and the positive impact of colder weather in the second quarter of 2007.

Natural Gas Operations

Natural gas operating income for the quarter increased $492,000, or 14 percent, on gross margin growth of $1.8 million, compared to the second quarter of 2006. Items contributing to the period-over-period increase in gross margin include:

Gross margin for the three months ended June 30, 2006	$ 11,445,000
Growth		1,330,000
Rate increase		295,000
Weather		224,000
Other		(59,000)
Gross margin for the three months ended June 30, 2007	$	13,235,000

§   The natural gas segment continues to experience strong customer growth as the Delmarva and Florida natural gas distribution operations experienced increases of 8 and 7 percent, respectively, in residential customers. The natural gas transmission operation also added $918,000 to gross margin during this period from new transportation capacity contracts implemented in November of 2006.

§   Rate increases for the Company’s Maryland natural gas distribution and its natural gas transmission operations contributed $295,000 additionally to gross margin in the second quarter of 2007 as compared to the second quarter of 2006. In October of 2006, the Maryland Public Service Commission granted the Company an increase in its base rates, which resulted in an $183,000 period-over-period increase to gross margin in the second quarter of 2007. The natural gas transmission operation implemented temporary rates, subject to refund, in May of 2007 which represented $112,000 of additional gross margin.

§   Weather contributed to the increase in gross margin in the second quarter 2007 compared to the same period in 2006, as temperatures on the Delmarva Peninsula were 36 percent colder in 2007. The Company estimates that the colder temperatures led to an increase in gross margin during the quarter of approximately $224,000 when compared to 2006.

Other operating expenses for the natural gas segment increased $1.3 million, or 16 percent, for the second quarter of 2007 compared to the second quarter of 2006, due primarily to costs of supporting the continued customer growth, including higher payroll and incentive compensation, benefits, depreciation, and property taxes, as well as, the Company’s receipt of approval from the Federal Energy Regulatory Commission in the second quarter of 2006 to defer $310,000 of pre-service costs related its Energylink Expansion Project. The deferral of these costs resulted in lower expenses in the second quarter of 2006. The Energylink Expansion Project proposes the construction of approximately 63 miles of new pipeline facilities to transport natural gas from Calvert County, Maryland, crossing under the Chesapeake Bay into Dorchester and Caroline Counties, Maryland, to points on the Delmarva Peninsula where such facilities would interconnect with the Company’s existing facilities in Sussex County, Delaware.

Propane Operations

The propane segment incurred an operating loss of $546,000, representing an increased loss of $104,000, or 24 percent, for the second quarter of 2007 compared to the same period in 2006. The gross margin growth of $408,000 was offset by an increase in other operating expenses of $512,000. Items contributing to the period-over-period increase in gross margin include:

Gross margin for the three months ended June 30, 2006	$ 3,156,000
Weather		201,000
Growth from Community Gas Systems		116,000
Propane wholesale & marketing		153,000
Decrease in margin per retail gallon		(159,000)
Other		97,000
Gross margin for the three months ended June 30, 2007	$	3,564,000

§   Temperatures on the Delmarva Peninsula were 36 percent colder in the second quarter of 2007 compared the same period in 2006, which contributed to an increase of 365,000 gallons, or 13 percent, sold during this period in 2007 when compared to the same period in 2006. The Company estimates that the colder weather increased gross margin by approximately $201,000 for the Delmarva propane distribution operation compared to the second quarter of 2006.

§   Continued customer growth for the Delmarva Community Gas Systems (“CGS”) accounted for an $116,000 increase in gross margin for the first quarter 2007, compared to the same period in 2006. The average number of customers increased by approximately 1,020 to a total count of approximately 4,800, or a 27 percent increase, compared to the second quarter of 2006.

§   Increased market opportunities that arose in the second quarter of 2007 due to price volatility in the propane wholesale market resulted in $153,000 in additional gross margin from the wholesale marketing operation.

§   Gross margin decreased by $159,000 in the second quarter of 2007 compared to the same period in 2006 because of reductions in the average gross margin per retail gallon. Gross margin per retail gallon decreased as a result of market prices for propane, during the current quarter, being reduced to levels closer to the Company’s inventory price per gallon.

Other operating expenses of the propane unit increased for the quarter by $512,000, or 14 percent, compared to the second quarter of 2006, primarily from an increase in health care costs, propane tank maintenance and recertifications, depreciation expense, as well as, the recovery of $87,000 in fixed costs in 2006 from one of our propane suppliers in response to a propane contamination incident in March 2006. The recovery of these costs resulted in lower expenses in 2006.

Advanced Information Services

The advanced information services segment experienced gross margin growth of approximately $376,000, or 30 percent, and contributed operating income of $179,000 for the second quarter of 2007. Increases in revenue and gross margin were almost completely offset by increases in other operating expenses, consequently operating income increased by only $7,000 compared to the same period in 2006. The improved gross margin reflects an increase in consulting revenues, as the number of billable hours increased 20 percent, and additional income from Managed Database Administration (“MDBA”) services. The advanced information services segment began the MDBA service in 2006 to provide third parties with professional database monitoring and support solutions.

Interest Expense

Total interest expense for the second quarter of 2007 increased approximately $93,000, or six percent, compared to the same period in 2006. The higher interest expense was primarily due to:

§   An increase in the average long-term debt balance in 2007 compared to 2006, partially offset by a lower average interest rate on long-term debt; and

§   Higher average short-term interest rates, partially offset by a decrease in the average short-term debt balance.

Comparative results for the six months ended June 30, 2007 and 2006

Operating income was $18.3 million for the first six months of 2007, compared to $14.6 million for the same period in 2006, representing an increase of $3.6 million, or 25 percent. Gross margin increased $7.0 million, or 17 percent, compared to 2006, primarily due to continued customer growth and the positive impact of colder weather experienced in the first six months of 2007.

Natural Gas Operations

Natural gas operating income for the first six months of 2007 increased $2.1 million, or 18 percent, on gross margin growth of $4.1 million, compared to the same period in 2006. Items contributing to the period-over-period increase in gross margin include:

Gross margin for the six months ended June 30, 2006	$ 27,858,000
Growth		2,899,000
Weather		756,000
Rate increase		607,000
Other		(144,000)
Gross margin for the six months ended June 30, 2007	$	31,976,000

§   The natural gas segment continues to experience strong customer growth as the Delmarva and Florida natural gas distribution operations experienced increases of 8 and 7 percent, respectively, in residential customers. The natural gas transmission operation also added $1.8 million to gross margin from the new transportation capacity contracts implemented in November of 2006.

§   Weather contributed to the increase in gross margin in the first six months of 2007 compared to the same period in 2006, as temperatures on the Delmarva Peninsula were 21 percent colder in 2007. The Company estimates that the colder temperatures contributed approximately $756,000 to gross margin when compared to the same period in 2006.

§   Rate increases for the Company’s Maryland natural gas distribution and its natural gas transmission operations contributed $607,000 in additional gross margin in the first six months of 2007. In October 2006, the Maryland Public Service Commission granted the Company an increase in its base rates, which resulted in a $495,000 period-over-period increase to gross margin. The natural gas transmission operation implemented temporary rates, subject to refund, in May 2007, which contributed $112,000 of additional gross margin.

Other operating expenses for the natural gas segment increased $2.0 million, or 12 percent, for the first six months of 2007 compared to the second quarter of 2006, due primarily to costs to support the customer growth, including higher payroll and incentive compensation, benefits, depreciation, property taxes, and regulatory expenses, as well as, a deferral of pre-service costs related to the Energylink Expansion Project, which was approved in the second quarter of 2006, and resulted in a $310,000 decrease in expenses for the second quarter and first six months of 2006.

Propane Operations

Propane operating income for the first six months increased $1.3 million, or 45 percent, on gross margin growth of $2.5 million, compared to the same period in 2006. Items contributing to the period-over-period increase in gross margin include:

Gross margin for the six months ended June 30, 2006	$ 10,611,000
Weather		931,000
Increase in margin per retail gallon		622,000
Growth from Community Gas Systems		529,000
Propane wholesale & marketing		367,000
Other		94,000
Gross margin for the six months ended June 30, 2007	$	13,154,000

§   Temperatures on the Delmarva Peninsula were 21 percent colder in the first six months of 2007 compared the same period in 2006, which contributed to the increase of 1.9 million gallons, or 13 percent, sold during this period in 2007 when compared to the same period in 2006. The Company estimates that the colder weather increased gross margin by approximately $931,000 for the Delmarva propane distribution operation compared to the first six months of 2006.

§   Gross margin increased by $622,000 in the first six months of 2007 compared to the same period in 2006 because of improvements in the average gross margin per retail gallon. Gross margin per retail gallon increased as a result of market prices for propane rising to levels greater than the Company’s inventory price per gallon.

§   Continued customer growth for the Delmarva CGS contributed to the increase of $529,000 in gross margin for the first six months of 2007, compared to the same period in 2006. The average number of customers increased by approximately 1,000 to a total count of approximately 4,680, or a 27 percent increase, compared to the same period in 2006.

§   Gross margin for the Company’s propane wholesale marketing operation increased by $367,000 for the first six months of 2007 compared to the same period in 2006. The higher gross margin reflects the increased market opportunities that arose in 2007 due to price volatility in the propane wholesale market.

Other operating expenses of the propane unit increased for the first six months of 2007 by $1.2 million, or 16 percent, compared to the first six months of 2006, primarily due to an increase in costs to support customer growth and improved operating results, including higher payroll and incentive compensation, benefits, depreciation, and tank maintenance and recertifications, as well as, the recovery of $387,000 in fixed costs in 2006 from one of our propane suppliers in response to a propane contamination incident in March 2006. The recovery of these costs resulted in lower expenses in 2006.

Advanced Information Services

The advanced information services segment reported operating income of $228,000 for the first six months of 2007, representing an increase of $39,000 compared to the same period in 2006. The improved results are attributable primarily to an increase in consulting revenues, as the number of billable hours increased 17 percent, and additional income from Managed Database Administration (“MDBA”) services. The increased revenues were partially offset by higher other operating expenses as the Company incurred costs to support growth and improved earnings.

Interest Expense

Total interest expense for the first six months of 2007 increased approximately $199,000, or seven percent, compared to the same period in 2006. The higher interest expense was primarily due to:

§   An increase in the average long-term debt balance in 2007 compared to 2006, partially offset by lower average interest rate on long-term debt; and

§   Higher average short-term interest rates, partially offset by a decrease in the average short-term debt balance.

Condensed Consolidated Statements of Income
For the Periods Ended June 30, 2007 and 2006
Dollars in Thousands Except Per Share Amounts
(Unaudited)
	Second Quarter				Year to Date
	2007		2006		2007		2006
Operating Revenues	$	52,502	$	44,304	$	146,029	$	135,254
Operating Expenses
Cost of sales, excluding costs below		34,233		28,506		98,169		94,430
Operations		10,316		8,852		20,876		18,453
Maintenance		565		584		1,145		1,028
Depreciation and amortization		2,368		2,037		4,683		4,014
Other taxes		1,332		1,120		2,886		2,686
Total operating expenses		48,814		41,099		127,759		120,611
Operating Income		3,688		3,205		18,270		14,643
Other income, net of other expenses		235		64		288		142
Interest charges		1,595		1,501		3,194		2,995
Income Before Income Taxes		2,328		1,768		15,364		11,790
Income taxes		846		635		5,891		4,561
Net Income	$	1,482	$	1,133	$	9,473	$	7,229
Earnings Per Share of Common Stock:
Basic	$	0.22	$	0.19	$	1.41	$	1.22
Diluted	$	0.22	$	0.19	$	1.39	$	1.20
Basic weighted average shares outstanding		6,737		5,952		6,722		5,931
Diluted weighted average shares outstanding		6,850		5,964		6,835		6,070

Supplemental Income Statement Data
For the Periods Ended June 30, 2007 and 2006
Dollars in Thousands
(Unaudited)
	Second Quarter						Year to Date
	2007			2006			2007			2006
Gross Margin (1)
Natural Gas	$	13,235		$	11,445		$	31,976		$	27,858
Propane		3,564			3,156			13,154			10,611
Advanced Information Services		1,649			1,273			3,120			2,495
Other		(179	)		(76	)		(390	)		(140)
Total Gross Margin	$	18,269		$	15,798		$	47,860		$	40,824
Operating Income
Natural Gas	$	3,992		$	3,501		$	13,608		$	11,496
Propane		(546	)		(442	)		4,328			2,992
Advanced Information Services		179			172			228			188
Other		63			(26	)		106			(33)
Total Operating Income	$	3,688		$	3,205		$	18,270		$	14,643
Heating Degree-Days — Delmarva Peninsula
Actual		527			388			2,966			2,457
10-year average (normal)		496			512			2,737			2,793

⁽¹⁾“Gross margin” is determined by deducting the cost of sales from operating revenue. Cost of sales includes the purchased gas cost for natural gas and propane and the cost of labor spent on direct revenue-producing activities. Gross margin should not be considered an alternative to operating income or net income, which is determined in accordance with Generally Accepted Accounting Principles (“GAAP”). Chesapeake believes that gross margin, although a non-GAAP measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates the profitability achieved by the Company under its allowed rates for regulated operations and under its competitive pricing structure for non-regulated segments. Chesapeake’s management uses gross margin in measuring its business units’ performance and has historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner.

Condensed Consolidated Balance Sheets
Dollars and Share Amounts in Thousands
(Unaudited)
Assets	June 30, 2007			December 31, 2006
Property, Plant and Equipment
Natural gas	$	277,240		$	269,013
Propane		46,362			44,792
Advanced information services		1,098			1,054
Other plant		9,140			9,147
Total property, plant and equipment		333,840			324,006
Less: Accumulated depreciation and amortization		(89,485	)		(85,010)
Plus: Construction work in progress		6,740			1,829
Net property, plant and equipment		251,095			240,825
Investments		2,132			2,016
Current Assets
Cash and cash equivalents		909			4,488
Accounts receivable (less allowance for uncollectible
accounts of $720 and $662, respectively)		40,939			44,969
Accrued revenue		1,394			4,325
Propane inventory, at average cost		6,875			7,187
Other inventory, at average cost		1,369			1,565
Regulatory assets		650			1,276
Storage gas prepayments		5,120			7,393
Income taxes receivable		1,218			1,079
Deferred income taxes		412			1,365
Prepaid expenses		2,996			2,281
Other current assets		3,642			1,555
Total current assets		65,524			77,483
Deferred Charges and Other Assets
Goodwill		674			674
Other intangible assets, net		185			192
Pension		630			591
Long-term receivables		773			824
Other regulatory assets		1,758			1,765
Other deferred charges		2,593			1,215
Total deferred charges and other assets		6,613			5,261
Total Assets	$	325,364		$	325,585

Condensed Consolidated Balance Sheets
Dollars and Share Amounts in Thousands
(Unaudited)
Capitalization and Liabilities	June 30, 2007			December 31, 2006
Capitalization
Stockholders' equity
Common Stock, par value $0.4867 per share
(authorized 12,000 shares)	$	3,282		$	3,255
Additional paid-in capital		64,129			61,960
Retained earnings		51,807			46,271
Accumulated other comprehensive income		(335	)		(335)
Deferred compensation obligation		1,371			1,119
Treasury stock		(1,371	)		(1,118)
Total stockholders' equity		118,883			111,152
Long-term debt, net of current maturities		69,965			71,050
Total capitalization		188,848			182,202
Current Liabilities
Current portion of long-term debt		7,656			7,656
Short-term borrowing		23,569			27,554
Accounts payable		26,645			33,871
Customer deposits and refunds		7,863			7,502
Accrued interest		811			832
Dividends payable		1,989			1,939
Accrued compensation		1,881			2,901
Regulatory liabilities		6,118			4,199
Other accrued liabilities		5,740			4,007
Total current liabilities		82,272			90,461
Deferred Credits and Other Liabilities
Deferred income taxes		27,155			26,517
Deferred investment tax credits		301			328
Other regulatory liabilities		1,053			1,236
Environmental liabilities		103			212
Accrued pension costs		2,242			2,199
Accrued asset removal cost		19,355			18,411
Other liabilities		4,035			4,019
Total deferred credits and other liabilities		54,244			52,922
Total Capitalization and Liabilities	$	325,364		$	325,585

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 Cautionary Statement in the Company’s report on Form 10-K for further information on the risks and uncertainties related to the Company’s forward-looking statements.

Chesapeake Utilities Corporation is a diversified utility company engaged in natural gas distribution, transmission and marketing, propane gas distribution and wholesale marketing, advanced information services and other related services. Information about Chesapeake's businesses is available on the World Wide Web at www.chpk.com.

For more information, contact:

Michael P. McMasters

Senior Vice President & Chief Financial Officer

302.734.6799