Form 8-K

Exhibit 99.1

FOR IMMEDIATE RELEASE
November 4, 2010
NYSE Symbol: CPK

CHESAPEAKE UTILITIES CORPORATION ANNOUNCES INCREASED
FINANCIAL RESULTS FOR THE THIRD CONSECUTIVE QUARTER

Dover, Delaware — Chesapeake Utilities Corporation (NYSE: CPK) today announced increased financial results for both the quarter ended and the nine months ended September 30, 2010. The Company’s results for both periods reflect strong growth in the Company’s legacy businesses, as well as the results of Florida Public Utilities Company (“FPU”), which Chesapeake acquired in October of 2009.

The Company’s net income for the quarter ended September 30, 2010 was $1.6 million, or $0.17 per share (diluted), an increase of $1.3 million, or $0.13 per share (diluted), compared to $308,000, or $0.04 per share (diluted), for the quarter ended September 30, 2009. Chesapeake’s legacy businesses continued to experience strong earnings growth, generating $0.04 per share (diluted) of the increase, a 100 percent increase over the prior year’s earnings per share (diluted) of $0.04. Historically, the third quarter’s results have the greatest seasonal decline. Chesapeake’s legacy business results reflect the impact of the rate increase for the Company’s Central Florida Gas division, strong customer growth on the Delmarva Peninsula (both in the form of residential growth and growth from service to new large commercial/industrial customers), additional margin from continued expansion of natural gas transportation services and improved performance from the advanced information services business. These increases were partially offset by a decline in earnings from the unregulated energy businesses. FPU’s results added $0.09 per share (diluted) to the Company’s overall consolidated results in the current quarter, which is calculated based on the additional shares issued in the merger. With the addition of FPU and its electric business, Chesapeake is now less sensitive to a seasonal decline in the third quarter.

The Company’s net income for the nine months ended September 30, 2010 was $18.9 million, or $1.98 per share (diluted), an increase of $9.2 million, or $0.58 per share (diluted), compared to $9.7 million, or $1.40 per share (diluted), for the same period in 2009. Chesapeake’s legacy businesses generated $1.9 million of additional net income for the nine months ended September 30, 2010, representing increased growth of 20 percent. Earnings per share for the nine months ended September 30, 2010 increased by 0.24 per share (diluted) based upon the performance the legacy businesses, or approximately 17 percent. Similar to the quarterly results, the strong performance of Chesapeake’s legacy businesses was a direct result of the increased earnings generated by the regulated energy businesses and improved results from the advanced information services business, partially offset by a decline in earnings from the unregulated energy businesses. The results for the nine months ended September 30, 2010 included $7.3 million of net income generated by FPU, or $0.34 per share (diluted) calculated based on the additional shares issued in the merger.

“Our third quarter results reflect strong performance by the regulated energy businesses, both on the Delmarva Peninsula and in Florida. Continued growth and expansion by our Delmarva natural gas distribution and transmission businesses and successful integration of the Florida operations have provided us with an excellent opportunity to achieve and exceed our goal of earnings accretion in the first year after the merger,” stated John R. Schimkaitis, Vice Chairman and Chief Executive Officer of Chesapeake Utilities Corporation. “We are very pleased to report the third consecutive quarter of strong performance. We continue to focus on the integration of our Florida operations to generate benefits from the merger for our customers and shareholders and are excited about the opportunities for growth across our lines of business.”

The discussions of the results for the periods ended September 30, 2010 and 2009, 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 Supplemental Income Statement Data chart. In addition, certain information is presented, which, for comparison purposes, includes only FPU’s results of operations for the periods ended September 30, 2010 and, in some cases, FPU’s results for the same periods in 2009, which were prior to the merger. Certain other information is presented, which, for comparison purposes, excludes results of operations of FPU from the consolidated results of operations and all merger-related costs incurred in connection with the FPU merger for the periods presented. Although non-GAAP measures are not intended to replace the GAAP measures for evaluation of Chesapeake’s performance, Chesapeake believes that the portions of the presentation which include only the FPU results, or which exclude the FPU results for the post-merger period and merger-related costs, provide helpful comparisons for an investor’s evaluation purposes.

Highlights for the third quarter of 2010 included:

•

The rate increase for Chesapeake’s Florida division, effective in January 2010, contributed approximately $554,000 to gross margin for the quarter ended September 30, 2010.

•

Eastern Shore Natural Gas Company (“ESNG”), the Company’s natural gas transmission subsidiary, generated additional gross margin of $390,000 from new transportation services commencing in late 2009 and during 2010.

•

ESNG received approval from the Federal Energy Regulatory Commission to begin construction of an eight-mile mainline extension to interconnect ESNG’s system with Texas Eastern Transmission LP’s mainline facilities in Lancaster County, Pennsylvania. Currently, ESNG has executed Precedent Agreements with two divisions of the Company that will result in 17 years of transportation services associated with this project. The Precedent Agreements allow a three-year phase-in of service, from 20,000 dekatherms per day in the first year of service to 40,000 dekatherms per day by the third year of service, at ESNG’s current tariff rate for service in that area. Estimated annual margin from this project is $2.2 million based on 20,000 dekatherms per day and $4.3 million based on 40,000 dekatherms per day. ESNG’s service under this project is expected to begin no later than January 2011.

•

Two-percent growth in residential customers and an increase in the number of commercial and industrial customers for the Delmarva natural gas distribution operations contributed to a period-over-period increase in gross margin of $138,000. This increase includes $24,000 in additional gross margin generated from service to a new industrial customer in southern Delaware, which began in the third quarter of 2010. In addition, service to another industrial customer is expected to commence in late 2010 or early 2011. Services to these new industrial customers in southern Delaware are expected to add annual margin equivalent to 1,575 average residential heating customers. In further extending the Delmarva natural gas distribution and transmission infrastructure, the Company is bringing cost-effective and environmentally friendly natural gas to new areas on the Delmarva Peninsula and creating additional opportunities for growth.

•

The Company’s advanced information services subsidiary, BravePoint, generated operating income of $258,000 in the third quarter of 2010, compared to an operating loss of $103,000 in the same period in 2009, due to increased billable consulting hours and lower operating costs. In September 2010, BravePoint also announced the launch of a new fully-integrated profit management system designed specifically for companies specializing in the fire suppression business.

•

FPU reported $2.4 million of operating income and $1.1 million of net income in the third quarter of 2010, which represent 53 percent and 66 percent, respectively, of the Company’s overall consolidated results for the current quarter. With the addition of FPU, whose entire operations are located in Florida, the Company’s earnings became less sensitive to a seasonal decline in the third quarter. FPU’s earnings for the quarter include $49,000 in gross margin generated from approximately two months of operations of Indiantown Gas Company, whose operating assets were purchased by FPU on August 9, 2010 and which added approximately 700 customers including two large industrial customers.

•

Xeron, the Company’s propane wholesale marketing subsidiary, experienced a decline in gross margin as the absence of significant fluctuations in propane prices and lower wholesale trading volumes reduced the opportunities for Xeron and decreased its trading volume by 13 percent.

As a result of the merger with FPU, the Company changed its operating segments in the fourth quarter of 2009 to better reflect how the chief operating decision maker (the Company’s Chief Executive Officer) reviews the various operations of the Company. The discussions of operating results below reflect the Company’s revised segments. The regulated energy segment is composed of the Company’s natural gas distribution, electric distribution and natural gas transmission operations. The unregulated energy segment is composed of the Company’s natural gas marketing, propane distribution and propane wholesale marketing operations. The “Other” segment is composed of the Company’s advanced information services business, other subsidiaries that own property which is leased to other affiliates, unallocated corporate costs and eliminations.

Comparative results for the quarters ended September 30, 2010 and 2009

Operating income increased by $2.3 million, or 103 percent, from $2.3 million to $4.6 million for the current quarter. Operating income for the Company included $2.4 million in operating income from FPU for the current quarter. FPU’s results are not included in the third quarter of 2009.

Regulated Energy

Operating income for the regulated energy segment for the third quarter of 2010 was $6.5 million, an increase of $3.6 million, or 120 percent, compared to the same period in 2009. An increase in gross margin of $13.2 million was partially offset by an increase in other operating expenses of $9.6 million. Items contributing to the period-over-period increase in gross margin are listed in the following table:


(in thousands)
Gross margin for the three months ended September 30, 2009	$	13,027


Factors contributing to the gross margin increase for the three months ended September 30, 2010:

Margin from FPU operations		12,015
Change in rates		710
New transportation services		293
Net customer growth		164
Other		55

Gross margin for the three months ended September 30, 2010	$	26,264

•

FPU’s natural gas and electric distribution operations generated $7.1 million and $4.9 million, respectively, in gross margin for the period. Gross margin from FPU’s natural gas distribution operation in the current quarter included $49,000 generated from Indiantown Gas Company, which added approximately 700 customers including two large industrial customers.

FPU’s natural gas gross margin for the current quarter reflects an accrual of $500,000 to reserve for regulatory risk. The Company recorded this reserve based on its assessment of the regulatory risk related to FPU’s current earnings and how they may have been affected by various factors, including the benefits, synergies, cost savings and cost increases resulting from the FPU merger. The Company is required to submit by April 29, 2011, data that details such known benefits, synergies, cost savings and cost increases.

•

An annual rate increase of approximately $2.5 million, approved by the Florida PSC in 2009 (effective in January 2010), increased gross margin for Chesapeake’s Florida natural gas distribution division by $554,000 for the current quarter. A net increase from changes in customers’ rates and rate classifications, primarily for certain Delmarva natural gas distribution commercial and industrial customers with negotiated rates, also generated additional gross margin of $156,000 for the current quarter.

•

New transportation services implemented by ESNG in November 2009 as a result of the completion of its latest expansion program generated additional gross margin of $254,000 for the quarter. A new expansion project completed in May 2010 also generated additional gross margin of $60,000 for the current quarter and is expected to generate annualized gross margin of $343,000. New firm transportation service for an industrial customer for the period from November 2009 to October 2012 generated additional gross margin of $76,000 for the current quarter.

Offsetting these margin increases were decreased margins of $97,000 in the quarter resulting from expired transportation service contracts in November 2009 and April 2010.

•

The Delmarva natural gas distribution operation experienced a two-percent growth in residential customers, which contributed $94,000 to gross margin. Also contributing to the gross margin increase were $44,000 from new commercial and industrial customers on the Delmarva Peninsula and $26,000 from a net increase in the number of customers served by Chesapeake’s Florida division.

Other operating expenses for the regulated energy segment increased by $9.6 million in the third quarter of 2010, largely due to the inclusion of $9.0 million in other operating expenses from FPU’s regulated energy operations for the period.

Unregulated Energy

The unregulated energy segment reported an operating loss for the third quarter of 2010 of $2.2 million, compared to an operating loss of $1.4 million for the same period in 2009. An increase in gross margin of $1.1 million was offset by a $2.0 million increase in other operating expenses. Items contributing to the period-over-period increase in gross margin are listed in the following table:


(in thousands)
Gross margin for the three months ended September 30, 2009	$	3,300


Factors contributing to the gross margin increase for the three months ended September 30, 2010:

Margin from FPU operations		1,415
Natural gas marketing		109
Other		62
Decreases in margin per retail gallon		(138	)
Propane wholesale marketing		(328	)


Gross margin for the three months ended September 30, 2010	$	4,420

•

FPU’s unregulated energy operation, which is primarily its propane distribution operation, generated $1.7 million in gross margin in the third quarter of 2010, which includes approximately $197,000 of gross margin generated from customers previously served by Chesapeake’s Florida propane distribution operation, which were transferred to FPU after the merger. Chesapeake’s Florida propane distribution operation generated $280,000 in gross margin in the third quarter of 2009.

•

The Company’s natural gas marketing subsidiary, Peninsula Energy Services Company, Inc. (“PESCO”), generated an increase in gross margin of $109,000, due primarily to an increase in spot sales and growth in commercial customers in Florida. Spot sales are not predictable and, therefore, are not included in our long-term financial plans or forecasts.

•

The increase in other gross margin for the current quarter is due primarily to the addition of 455 community gas system customers since the third quarter of 2009 and 1,000 additional customers acquired in February 2010 as part of the purchase of the operating assets of a propane distributor serving Northampton and Accomack counties in Virginia, which contributed $15,000 and $30,000 to gross margin, respectively.

•

Lower retail margins from the Delmarva propane distribution operation decreased gross margin by $138,000 in the current quarter. This decrease was due primarily to a non-recurring propane physical inventory adjustment of $118,000 in the third quarter of 2009, which reduced the cost of propane inventory and increased gross margin for that quarter.

•

Xeron experienced a $328,000 decrease in gross margin for the third quarter of 2010 as a result of a 13-percent decrease in trading volume. Lower trading volumes in the wholesale propane market have contributed to less trading activity for Xeron.

Other operating expenses for the unregulated energy segment increased by $2.0 million in the third quarter of 2010 due primarily to the increase of $1.9 million associated with the inclusion of FPU’s unregulated energy business. Other operating expenses for FPU’s unregulated business in the third quarter of 2010 included a non-recurring charge of $278,000 for the settlement of a class action complaint.

Other

Operating income for the “Other” segment for the third quarter of 2010 was $284,000, compared to an operating income of $647,000 for the same period in 2009. During the third quarter of 2010, gross margin increased by $381,000, primarily from BravePoint, and other operating expenses increased by $744,000, due primarily to deferral of certain previously expensed merger-related costs in the third quarter of 2009.

BravePoint reported operating income of $258,000 in the third quarter of 2010, compared to an operating loss of $103,000 in the third quarter of 2009. Gross margin from BravePoint increased by $374,000 due to an eight-percent increase in billable consulting hours and higher revenue from its professional database monitoring, support solution services and product sales. Other operating expenses from BravePoint increased slightly by $13,000, reflecting the continuing effectiveness of previously implemented cost control efforts.

In the third quarter of 2009, certain previously expensed merger-related costs were deferred as a regulatory asset, as the Company will seek to recover those costs through future rates, and this deferral resulted in reporting a net credit of $675,000 in merger-related costs for that period.

Interest Expense

Interest expense for the third quarter of 2010 increased by approximately $716,000, or 47 percent, compared to the same period in 2009. The primary drivers of the increased interest expense are related to FPU, including:

•

An increase in long-term interest expense of $456,000 is related to interest on FPU’s first mortgage bonds.

•

Interest expense from a new term loan facility was $140,000 for the third quarter of 2010. Two series of FPU bonds, the 4.9 percent and 6.85 percent series, were redeemed at the end of January 2010, using this new term loan facility.

•

Additional interest expense of $184,000 is related to interest on deposits from FPU’s customers.

Offsetting the increased interest expense from FPU was lower non-FPU-related interest expense from Chesapeake’s unsecured senior notes, as the principal balances decreased as a result of scheduled repayments, and lower additional short-term interest expense due to the timing of our capital expenditures and the increased cash flow generated from ordinary operating activities.

Comparative results for the nine months ended September 30, 2010 and 2009

Operating income increased by $16.7 million, or 79 percent, to $37.7 million for the first nine months of 2010, compared to the same period in 2009. Operating income for the Company included $14.1 million in operating income from FPU for the period.

Regulated Energy

Operating income for the regulated energy segment for the first nine months of 2010 was $32.4 million, an increase of $15.8 million, or 95 percent, compared to the same period in 2009. An increase in gross margin of $45.2 million was offset by an increase in other operating expenses of $29.4 million. Items contributing to the period-over-period increase in gross margin are listed in the following table:


(in thousands)
Gross margin for the nine months ended September 30, 2009	$	47,279


Factors contributing to the gross margin increase for the three months ended September 30, 2010:

Margin from FPU operations		41,281
Change in rates		2,004
New transportation services		880
Net customer growth		783
Favorable weather		464
Other		97
Decreased customer consumption		(331	)

Gross margin for the nine months ended September 30, 2010	$	92,457

•

FPU’s natural gas and electric distribution operations generated gross margin of $27.3 million and $14.0 million, respectively, for the period. Gross margin from FPU’s natural gas distribution operation for the nine months ended September 30, 2010 was positively affected by a rate increase of approximately $8.0 million, approved by the Florida PSC in 2009, and colder weather during the first quarter of 2010.

•

Gross margin for Chesapeake’s Florida division also experienced an increase of $1.7 million from an annual rate increase of approximately $2.5 million approved by the Florida PSC in 2009. A net increase from changes in customers’ rates and rate classifications, primarily for natural gas distribution commercial and industrial customers with negotiated rates, and a change in certain customer rates by the natural gas transmission operation also contributed $152,000 and $123,000, respectively, to the gross margin increase.

•

New transportation services implemented by ESNG in November 2009 as a result of the completion of its latest expansion program generated additional gross margin of $762,000 for the first nine months of 2010. A new expansion project completed in May 2010 also contributed additional gross margin of $101,000 for the period and is expected to generate annualized gross margin of $343,000. New transportation service for an industrial customer for the period from November 2009 to October 2012 generated additional gross margin of $304,000 for the nine months ended September 30, 2010.

Offsetting these margin increases were primarily the decreased margins of $284,000 for the first nine months of 2010, resulting from the expiration of transportation service contracts in November 2009 and April 2010.

•

The Delmarva natural gas distribution operation experienced growth in residential, commercial and industrial customers, which contributed $798,000 to the gross margin increase. Residential, commercial and industrial growth by the Delaware division contributed $418,000, $145,000 and $137,000, respectively, to the gross margin increase, and $98,000 of the gross margin increase was generated from overall customer growth in the Maryland division. The Delmarva natural gas distribution operation experienced a two-percent increase in average residential customers as compared to the first nine months of 2009. Offsetting this increase was a slight decrease in gross margin from a net change in the number of customers served by Chesapeake’s Florida division.

•

Colder weather on the Delmarva Peninsula generated an additional $219,000 of gross margin as heating degree-days increased by one percent for the first nine months of 2010 compared to the same period in 2009. Colder weather during the first quarter of 2010 contributed to an increase in gross margin of $245,000 by Chesapeake’s Florida division.

•

A decline in non-weather-related consumption for the Delmarva natural gas distribution operation and Chesapeake’s Florida division decreased gross margin by $310,000 and $21,000, respectively.

Other operating expenses for the regulated energy segment increased by $29.4 million in the nine months ended September 30, 2010, almost entirely due to the inclusion of $28.3 million in other operating expenses of FPU’s regulated energy operations for the period.

Unregulated Energy

Operating income for the unregulated energy segment for the first nine months of 2010 was $4.7 million, a decrease of $501,000, or 10 percent, compared to the same period in 2009. An increase in gross margin of $5.0 million was offset by a $5.5 million increase in other operating expenses. Items contributing to the period-over-period increase in gross margin are listed in the following table:


(in thousands)
Gross margin for the nine months ended September 30, 2009	$	20,293


Factors contributing to the gross margin increase for the nine months ended September 30, 2010:

Margin from FPU operations		6,353
Volume increase — weather and other		198
Miscellaneous fees and other		165
Propane wholesale marketing		(149	)
Natural gas marketing		(579	)
Decreases in margin per retail gallon		(1,003	)


Gross margin for the nine months ended September 30, 2010	$	25,278

•

FPU’s unregulated energy operation, which is primarily its propane distribution operation, generated $7.6 million in gross margin for the period, which included approximately $850,000 of gross margin generated from customers previously served by Chesapeake’s Florida propane distribution operation, which were transferred to FPU after the merger. Chesapeake’s Florida propane distribution operation generated $1.2 million in gross margin in the first nine months of 2009.

•

Increased gross margin from volume increases resulted primarily from the addition of 433 community gas system customers, which generated $141,000 of additional gross margin and approximately 1,000 customers added by Sharp Energy from the acquisition of the operating assets of a propane distributor in Virginia in February 2010, which generated $114,000 in gross margin during the first nine months of 2010.

•

Other fees increased by $165,000 in the first nine months of 2010, due primarily to continued growth and increased customer participation in various customer loyalty programs by the Delmarva propane distribution operation.

•

Xeron experienced a $149,000 decrease in gross margin during the first nine months of 2010 compared to the same period in 2009. Xeron’s trading volumes decreased by 14 percent in the nine months ended September 30, 2010 compared to the same period in 2009, as lower trading volumes in the wholesale propane market led to greater uncertainty, reducing Xeron’s trading activity, especially in the second and third quarters.

•

PESCO’s gross margin decreased by $579,000 for the nine months ended September 30, 2010, compared to the same period in 2009, due primarily to a decrease in spot sales related to one industrial customer on the Delmarva Peninsula. Spot sales are not predictable and, therefore, are not included in our long-term financial plans or forecasts.

•

Lower propane retail margin per gallon during the first nine months of 2010, compared to the same period in 2009, contributed to a decrease in gross margin of $1.0 million. Retail margins for the first nine months of 2009 benefited from the $939,000 loss recorded in late 2008 on a swap agreement for the 2008/2009 winter Pro-Cap (Propane Price Cap) program. This loss lowered the propane inventory costs and, therefore, increased retail margins during the first half of 2009. Retail margins for the first nine months of 2010 returned to more normal levels.

Other operating expenses for the unregulated energy segment increased by $5.5 million for the first nine months of 2010, due primarily to the increase of $5.3 million associated with the inclusion of FPU’s unregulated energy operations. Other operating expenses for FPU’s unregulated energy operations for the first nine months of 2010 included a non-recurring charge of $278,000 for the settlement of a class action complaint.

Other

Operating income for the “Other” segment for the first nine months of 2010 was $650,000, compared to an operating loss of $709,000 for the same period in 2009. During the nine months ended September 30, 2010, gross margin increased by $623,000, primarily from BravePoint, and operating expenses decreased by $736,000, due to lower operating expenses by BravePoint and lower merger-related costs in 2010.

BravePoint reported operating income of $523,000 in the first nine months of 2010, compared to an operating loss of $448,000 in the same period in 2009. Gross margin from BravePoint increased by $641,000 due to a nine-percent increase in billable consulting hours and higher revenue from its professional database monitoring and support solution services. Operating expenses for BravePoint decreased by $330,000 due to the success of cost containment actions implemented throughout 2009.

Merger-related costs, net of the deferral, decreased by $351,000 as higher costs were incurred during the nine months ended September 30, 2009 to consummate the merger.

Interest Expense

Interest expense for the first nine months of 2010 increased by approximately $2.2 million, or 46 percent, compared to the same period in 2009. The primary drivers of the increased interest expense are related to FPU, including:

•

An increase in long-term interest expense of $1.5 million is related to interest on FPU’s first mortgage bonds.

•

Interest expense from a new term loan facility was $356,000 for the first nine months of 2010. Two series of FPU bonds, the 4.9 percent and 6.85 percent series, were redeemed at the end of January 2010, using this new term loan facility.

•

Additional interest expense of $553,000 is related to interest on deposits from FPU’s customers.

Chesapeake Utilities Corporation and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
For the Periods Ended September 30, 2010 and 2009
(in thousands, except shares and per share data)


	Third Quarter					Year to Date
	2010		2009			2010		2009

Operating Revenues
Regulated energy	$	53,412	$	15,372		$	197,779	$	86,422
Unregulated energy		20,134		14,011			104,018		83,236
Other		2,920		2,375			7,990		7,413


Total Operating Revenues		76,466		31,758			309,787		177,071


Operating Expenses
Regulated energy cost of sales		27,148		2,345			105,322		39,143
Unregulated energy and other cost of sales		17,238		12,071			82,713		66,962
Operations		17,993		11,001			54,848		34,820
Transaction-related costs		68		(675	)		179		530
Maintenance		1,899		600			5,388		1,932
Depreciation and amortization		5,058		2,437			15,719		7,235
Other taxes		2,479		1,722			7,876		5,371

Total operating expenses		71,883		29,501			272,045		155,993


Operating Income		4,583		2,257			37,742		21,078

Other income (loss), net of other expenses		102		(26	)		206		19

Interest charges		2,256		1,540			6,924		4,755


Income Before Income Taxes		2,429		691			31,024		16,342

Income tax expenses		801		383			12,082		6,636


Net Income	$	1,628	$	308		$	18,942	$	9,706


Weighted Average Common Shares Outstanding:
Basic		9,493,425		6,883,070			9,460,462		6,859,516
Diluted		9,497,696		6,888,024			9,570,921		6,981,010

Earnings Per Share of Common Stock:
Basic	$	0.17	$	0.04		$	2.00	$	1.41
Diluted	$	0.17	$	0.04		$	1.98	$	1.40

Chesapeake Utilities Corporation and Subsidiaries
Supplemental Income Statement Data (Unaudited)
For the Periods Ended September 30, 2010 and 2009


(in thousands, except degree-day data)	Third Quarter						Year to Date
Chesapeake and Subsidiaries	2010			2009			2010		2009

Gross Margin ⁽¹⁾
Regulated Energy	$	26,264		$	13,027		$	92,457	$	47,279
Unregulated Energy		4,420			3,300			25,278		20,293
Other		1,396			1,015			4,017		3,394

Total Gross Margin	$	32,080		$	17,342		$	121,752	$	70,966


Operating Income (Loss)
Regulated Energy	$	6,536		$	2,971		$	32,360	$	16,554
Unregulated Energy		(2,237	)		(1,361	)		4,732		5,233
Other		284			647			650		(709	)

Total Operating Income	$	4,583		$	2,257		$	37,742	$	21,078


Heating Degree-Days — Delmarva Peninsula
Actual		50			80			3,021		3,003
10-year average (normal)		60			58			2,923		2,889

Heating Degree-Days — Florida

Actual		—			—			942		614
10-year average (normal)		—			—			587		547

Cooling Degree-Days — Florida

Actual		1,654			1,425			2,693		2,434
10-year average (normal)		1,405			1,466			2,365		2,418


⁽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 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.

Chesapeake Utilities Corporation and Subsidiaries
Supplemental Income Statement Data (Unaudited)

The following presents FPU’s results of operations for the three and nine months ended September 30, 2010, included in Chesapeake’s consolidated results. The information presented below is for comparison purposes and is not intended to replace the GAAP measures for evaluation of Chesapeake’s performance.


(in thousands)	Third Quarter			Year to Date
FPU Stand-alone	2010			2010
Gross Margin ⁽¹⁾
Regulated Energy
Natural Gas	$	7,081		$	27,256
Electric		4,934			14,025
Unregulated Energy
Propane and other		1,695			7,392

Total Gross Margin	$	13,710		$	48,673


Operating Income
Regulated Energy
Natural Gas	$	1,355		$	9,026
Electric		1,669			3,917
Unregulated Energy
Propane and other		(605	)		1,205

Total Operating Income	$	2,419		$	14,148


⁽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 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.

Chesapeake Utilities Corporation and Subsidiaries
Distribution Utility Statistical Data (Unaudited)


	For the Three Months Ended September 30, 2010										For the Three Months Ended September 30, 2009
			Chesapeake										Chesapeake
	Delmarva NG		Florida NG		FPU NG			FPU Electric			Delmarva NG		Florida NG		FPU NG			FPU Electric
	Distribution		Division		Distribution			Distribution			Distribution		Division		Distribution ⁽²⁾			Distribution ⁽²⁾
Operating Revenues (in thousands)
Residential	$	4,041	$	928	$	3,596		$	15,951		$	4,345	$	775	$	3,238		$	13,559
Commercial		3,156		815		6,649			13,463			3,564		689		5,029			11,198
Industrial		811		1,134		1,813			1,441			666		962		1,805			2,361
Other ⁽¹⁾		420		434		(601	)		(4,524	)		637		275		758			(2,472	)

Total Operating Revenues	$	8,428	$	3,311	$	11,457		$	26,331		$	9,212	$	2,701	$	10,830		$	24,646

Volume (in Mcfs/MWHs)
Residential		140,570		41,779		170,649			108,779			145,570		42,952		168,962			98,218
Commercial		335,080		250,502		607,154			100,588			319,110		247,848		578,361			91,309
Industrial		467,142		2,881,509		362,951			13,230			418,752		2,630,101		405,242			15,180
Other		58,763		—		58,531			(10,756	)		82,130		—		(25,214	)		(3,803	)

Total		1,001,555		3,173,790		1,199,285			211,841			965,562		2,920,901		1,127,351			200,904

Average customers
Residential		46,908		13,388		46,731			23,594			45,871		13,059		46,519			23,703
Commercial		4,933		1,133		4,472			7,363			4,921		1,116		4,440			7,404
Industrial		176		59		1,316			3			146		60		547			2
Other		6		—		3			—			7		—		—			—

Total		52,023		14,580		52,522			30,960			50,945		14,235		51,506			31,109


⁽¹⁾		Operating revenues from “Other” sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for biling services provided to third parties and adjustments for pass-through taxes.

⁽²⁾		Operating revenue, volume and average customer information for FPU-Natural Gas Distribution and FPU-Electric Distribution are presented for comparative purposes only. They represent the FPU results from the period prior to the merger with Chesapeake and therefore, they are not included in Chesapeake’s consolidated results.

Chesapeake Utilities Corporation and Subsidiaries
Distribution Utility Statistical Data (Unaudited)


	For the Nine Months Ended September 30, 2010											For the Nine Months Ended September 30, 2009
				Chesapeake											Chesapeake
	Delmarva NG			Florida NG		FPU NG			FPU Electric			Delmarva NG			Florida NG		FPU NG			FPU Electric
	Distribution			Division		Distribution			Distribution			Distribution			Division		Distribution ⁽²⁾			Distribution ⁽²⁾
Operating Revenues (in thousands)
Residential	$	34,471		$	3,561	$	17,930		$	40,508		$	40,911		$	2,794	$	16,076		$	33,840
Commercial		20,243			2,755		27,397			34,176			25,032			2,251		23,725			29,266
Industrial		2,621			3,528		6,223			5,996			2,556			3,244		4,702			6,183
Other ⁽¹⁾		(2,497	)		1,283		(3,464	)		(8,188	)		(1,914	)		956		(3,513	)		(5,682	)

Total Operating Revenues	$	54,838		$	11,127	$	48,086		$	72,492		$	66,585		$	9,245	$	40,990		$	63,607

Volume (in Mcfs/MWHs)
Residential		2,196,744			295,338		1,016,537			273,678			2,160,292			252,342		919,574			245,347
Commercial		2,086,444			972,474		2,364,820			250,810			1,988,612			857,481		2,271,664			237,144
Industrial		1,520,357			10,284,366		1,479,214			52,810			1,214,228			10,352,569		1,343,684			51,820
Other		200,713			—		(92,845	)		889			267,720			—		(144,082	)		9,881

Total		6,004,258			11,552,178		4,767,726			578,187			5,630,852			11,462,392		4,390,840			544,192

Average customers
Residential		47,508			13,423		46,970			23,570			46,669			13,291		46,888			23,705
Commercial		5,053			1,125		4,484			7,375			5,027			1,113		4,474			7,398
Industrial		168			59		1,306			3			142			62		530			2
Other		5			—		1			—			9			—		—			—

Total		52,734			14,607		52,761			30,948			51,847			14,466		51,892			31,105


⁽¹⁾		Operating revenues from “Other” sources include unbilled revenue, under (over) recoveries of fuel cost, conservation revenue, other miscellaneous charges, fees for biling services provided to third parties and adjustments for pass-through taxes.

⁽²⁾		Operating revenue, volume and average customer information for FPU-Natural Gas Distribution and FPU-Electric Distribution are presented for comparative purposes only. They represent the FPU results from the period prior to the merger with Chesapeake and therefore, they are not included in Chesapeake’s consolidated results.

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


	September 30,			December 31,
Assets	2010			2009
(in thousands, except shares and per share data)

Property, Plant and Equipment
Regulated energy	$	478,048		$	463,856
Unregulated energy		60,614			61,360
Other		16,582			16,054

Total property, plant and equipment		555,244			541,270
Less: Accumulated depreciation and amortization		(118,393	)		(107,318	)
Plus: Construction work in progress		11,029			2,476

Net property, plant and equipment		447,880			436,428


Investments		3,006			1,959


Current Assets
Cash and cash equivalents		2,753			2,828
Accounts receivable (less allowance for uncollectible accounts of $1,030 and $1,609, respectively)		52,166			70,029
Accrued revenue		7,410			12,838
Propane inventory, at average cost		7,804			7,901
Other inventory, at average cost		3,586			3,149
Regulatory assets		53			1,205
Storage gas prepayments		6,215			6,144
Income taxes receivable		9,071			2,614
Deferred income taxes		523			1,498
Prepaid expenses		5,301			5,843
Mark-to-market energy assets		2,290			2,379
Other current assets		147			147

Total current assets		97,319			116,575


Deferred Charges and Other Assets
Goodwill		35,609			34,095
Other intangible assets, net		3,547			3,951
Long-term receivables		235			343
Regulatory assets		20,835			19,860
Other deferred charges		3,844			3,891

Total deferred charges and other assets		64,070			62,140


Total Assets	$	612,275		$	617,102

Chesapeake Utilities Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


	September 30,			December 31,
Capitalization and Liabilities	2010			2009
(in thousands, except shares and per share data)

Capitalization
Stockholders’ equity
Common stock, par value $0.4867 per share (authorized 25,000,000 and 12,000,000 shares, respectively)	$	4,623		$	4,572
Additional paid-in capital		147,022			144,502
Retained earnings		72,858			63,231
Accumulated other comprehensive loss		(2,404	)		(2,524	)
Deferred compensation obligation		767			739
Treasury stock		(767	)		(739	)

Total stockholders’ equity		222,099			209,781

Long-term debt, net of current maturities		97,491			98,814

Total capitalization		319,590			308,595


Current Liabilities
Current portion of long-term debt		7,216			35,299
Short-term borrowing		43,073			30,023
Accounts payable		34,363			51,948
Customer deposits and refunds		26,591			24,960
Accrued interest		3,267			1,887
Dividends payable		3,135			2,959
Accrued compensation		4,261			3,445
Regulatory liabilities		9,573			8,882
Mark-to-market energy liabilities		1,982			2,514
Other accrued liabilities		13,353			8,683

Total current liabilities		146,814			170,600


Deferred Credits and Other Liabilities
Deferred income taxes		75,396			66,923
Deferred investment tax credits		125			193
Regulatory liabilities		3,475			4,154
Environmental liabilities		10,946			11,104
Other pension and benefit costs		16,257			17,505
Accrued asset removal cost — Regulatory liability		34,683			33,214
Other liabilities		4,989			4,814

Total deferred credits and other liabilities		145,871			137,907


Total Capitalization and Liabilities	$	612,275		$	617,102


Delaware	001-11590	51-0064146
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)


909 Silver Lake Boulevard, Dover, Delaware		19904
(Address of Principal Executive Offices)		(Zip Code)