Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chesapeake Utilities 2012 Financial Conference Call. [Operator Instructions] Beth Cooper, Senior Vice President and Chief Financial Officer, you may begin your conference.

Thank you, and good morning, everyone. Welcome to the Chesapeake Utilities Corporation Year-end 2012 Earnings Conference Call. Before we begin, I would like to mention that we have prepared a presentation to accompany our discussion today. You can access this presentation on our website under the Investors section. It is located under the Events & Webcasts subsection. Turning to Slide 2, I would like to reiterate that matters discussed in this conference call 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 2012 annual report on Form 10-K, which was filed with the Securities and Exchange Commission earlier today. The Form 10-K includes further information about the risks and uncertainties related to the company's forward-looking statements. Now I'll turn the call over to Mike McMasters, President and Chief Executive Officer.

Thanks, Beth. Good morning, everyone. Turning to Slide 3. This morning, we announced our 6th straight year of record earnings. This also reflects both the fundamental strength of our company and the hard work and commitment of our employees. The company's 2012 net income increased $1.2 million to $28.9 million. Earnings per share increased 4% to $2.99 per share. For the past 5 years, earnings have grown from $1.94 per share in 2007 to $2.99 per share in 2012, compound annual growth rate of 9%. This performance has been driven by our ability to transform opportunities into profitable growth in our Delmarva and Florida service territories. We've been executing our strategic plans to develop growth through system expansion and acquisitions. Florida Public Utilities acquisition stands out as a very successful acquisition. While we have been aggressively developing opportunities for growth that we have identified, we've also maintained our financial discipline, which has enabled us to provide investors with competitive return on their capital. A little later, I'll talk more about the opportunities that we see as we execute this strategy. Turning to Slide 4. Supported by the increases in earnings and cash flow, we are continuing to increase our dividend while retaining and reinvesting capital for future growth. This year, we increased our dividend by $0.08 or 5.8%. The dividend payout, based on 2012 reported earnings, is 48%. Our goal is to provide shareholders with dividend growth that's supported by current earnings and expected growth. We believe that increases in earnings and dividends make our company stand out among utility stocks as an investment opportunity. So while we have grown dividends every year since 2004 and provide the 4% compound annual increase even through the past 5 years, we have maintained our payout around 50%.

I will now provide a detailed discussion on the financial results after I highlight our prospects for future growth in each of our businesses. Turning to Slide 5. The Regulated Energy segment continues to generate additional gross margins from geographic expansion of our system. Our strategy in the Delmarva Gas Distribution business is to continue to identify and develop projects for large commercial and industrial customers and then supplement that growth by adding residential and smaller commercial customers. Residential customer growth in the Delmarva Natural Gas Distribution business continues to be about 2%, and we expect it to continue at about this pace for the foreseeable future. The map and legend on Slide 5 highlights the major expansion initiatives that we have recently completed and have planned for Delmarva. While the next 2 slides provide more detail on the contributions of these growth initiatives, I think it is helpful to look at them on the map to understand our strategic growth plans. At the end of 2011, as shown on Slide 6, we completed the expansion of our transmission and distribution systems to Lewes, Delaware. This expansion generates $1.3 million in annualized gross margin and has opened up the opportunity to add residential and commercial customers in this previously unserved part of our service area. During 2012, we completed an expansion further south in Eastern Sussex County, Delaware, which is expected to contribute about $600,000 in annualized distribution and transmission margin. In Maryland, an expansion of service to Worcester County was completed, which will generate annualized margin of $391,000. We also recently completed an expansion of service to Cecil County, Maryland. This expansion generated $147,000 of gross margin during 2012 and is expected to contribute annualized margin of $882,000 going forward. Again, it also positions the company to be able…

Thanks, Beth. In summary, Chesapeake remains fundamentally strong, and growth in our regulated and nonregulated earnings capacity continues. 2012 is a testament to our growth strategy, the efforts of our employees and it's execution, even though warm weather impacted results at the beginning of the year. Our financial discipline is unwavering and has positioned us well as we continue to seek out new opportunities for growth. We believe the outlook for our future remains bright given our current dividend, the prospects for future growth in the dividend, supported by earnings growth. Our success over the last 6 years has been achieved by making decisions that are forward-thinking, staying focused on future years' growth. As a team, you have our commitment that in 2013, we will continue to work hard to pursue new opportunities and provide for continued earnings growth for future years. Beth and I would like -- would be happy to answer your questions.

[Operator Instructions] Your first question comes from the line of Spencer Joyce with Hilliard Lyons.

Moving on to a couple of questions. On Slide 7, where we talked about a couple of the upcoming projects in the works, I just wanted to ask, the Delaware City refinery expansion, I know it's replacing an existing contract for about $1 million in margin. This year, sort of before that December 13 date, we're not going to have $1 million in margin loss up until that point, right? It will essentially be a $500,000 additional in December.

It will be -- it won't all be at one time. Basically, the previous contract expired, and that actually expired going back at the end of November of 2011. And since that time, there -- they have contracted with us for interruptible -- some interruptible capacity. So Spencer, it won't be that there's an entire void of that contract, but the full contract will not come back on until later in the year.

Okay, good, good. That's sort of what I had assumed. Also, with the NRG's Dover expansion, that November 13 date, that's a delay from May, isn't it? Has that date been pushed back?

We have -- actually have capacity that we can serve them, and we will be serving them beginning in May. The construction has been delayed of additional facilities, and we'll need those facilities for the winter, and we will not need them in the summer, when we have additional capacity due to the seasonal nature of some of our transportation services.

Okay, got you. One sort of kind of one-off item, I think it come across my desk, either a coal or nuclear power plant shutting down in Citrus County, Florida. Has that sort of been on your radar screen as a potential gas supply opportunity? Or are you all aware of that or do you have some operations close to the area there?

We do have facilities in Citrus County, and it has been, I guess, something we've been aware of that potential. But there was a little bit of a controversy in that [indiscernible] acquisition.

Okay. Yes, and I'm sure we're considerably far away from any impact there, but I just wanted to see if that had been on your radar screen. One other kind of minutia item, it looks like there was a pretty sharp drop in the D&A for this quarter. I know we have the FPU stuff affecting us for, really, the foreseeable future. But what was the driver in the Q4 drop as opposed to kind of the Qs 1 through 3 of this year?

I'll need -- Spencer, we'll need to go back and take a look at your specific question. Overall, depreciation and amortization are actually up for the year largely because of the capital investments, as we talked about earlier, and then also given the amortization of the premium, and that's being factored in. So...

Yes. Definitely for the full year, it's up. It just looks like Q1, 2 and 3 were all pretty even around 5.7, 5.8, and then we dropped all the way down to a 5.0 or 5.1 this quarter, and I'm just wondering if that is going to be kind of a normal thing to see it lower, maybe that's a true-up in Q4 or why we sort of saw that decline there sequentially.

Well -- and actually, Spencer, that the piece that you're seeing in Quarter 4 is the true-up for the amortization of the tax gain, that I -- when you look at the reconciliation that was provided on page -- let me go here in the actual slide itself, on Slide, I guess, 11 here -- on Slide 11, you'll see that there was the initiation of the amortization of the FPU premerger deferred tax gain, that was a true-up that was recorded in the fourth quarter. So what you are seeing is the offset of the increased depreciation and amortization year-over-year being net against that in this last quarter is a true-up accumulation of the amortization of that piece.

Okay, got you. So it's sort of a onetime item in the fourth quarter?

It was a true-up. It actually will be something that is continuing beyond this year for a little more than -- a little less than 2 years after this year. But because we had to catch up the entire piece for 2012, it all hit in the final quarter once it was approved by the...

Okay, got you. One other kind of short one here, don't want to keep you too long, but the unregulated side obviously had a pretty good Q4. And one of the things we've seen sort of in our regional energy coverage is declining NGL prices. So I'm assuming you all are seeing some lower input costs there on the propane and holding those retail margins sticky. Have you seen that spill over somewhat into the first quarter here?

You're correct, we are seeing lower propane prices. And typically, what would happen with warm weather, you'll see: one, propane prices fall; but also, propane margins, to some degree, are likely to expand a little bit when you have warmer weather on a per gallon basis. And it is just typically because of the -- a lot of the costs on the Propane business -- while some costs are fixed, some are variable, and a lot of the revenue is driven off the variable, you'll see upward pressure on -- or upward pressure on margins because of the lower volumes.

Your next question comes from the line of Dan Fidell with U.S. Capital Advisors.

Just a couple of questions on my side. I guess first is a housekeeping question. Just in terms of the fiscal year finish at $2.99, just trying to get kind of a normalized base level of earnings for fiscal '12. Is it -- am I going about this right, if we just kind of net out weather, for the FPU acquisition premium call it about $0.08 net, so the $2.99 base level is $3.07? Am I thinking about that right?

Well, when you look at the items that are included in that, what we call those adjustments for unusual items, you are correct, Dan, absolutely that the weather is one that we recognize we can't necessarily control. And the other would be that ongoing amortization of the FPU premium, so yes.

Okay. Great. Just a second question, just for clarity, I think you talked about ESG and finishing off that sort of midyear, and I guess a discussion on whether or not -- not discussion, but maybe your comments on whether or not it will be accretive to 2013 and sort of how much, so how should we be kind of thinking about the acquisition sort of near term?

Well, the acquisition we're making progress on is the Maryland PSC, and we hope to get that done here shortly, but it's still dragging. Yes, you would see that this is an asset purchase, so we're just using debt, and so it will be accretive.

Okay. Great. And then maybe you can give us just a little bit of color on Delaware. I know kind of mid this past year, filing kind of new gas tariffs for expansion and conversions. Any thoughts on the timing for decision from Delaware regulators on that side, and then just any kind of vision you see in the potential impact if they were to sign off on it?

Well, we're I will say cautiously optimistic that we'll be able to get a settlement on that case, possibly the first quarter but maybe more likely in the second quarter. And the impact of that will be it should stimulate growth, I guess, for the smaller commercial and residential markets in that part of the state. The difficulty is it's going to be a slow -- it's going to be a residential conversion and small commercial conversion, Dan, so it'll take us a while to ramp that up. So you'll see a little bit of growth in 2013, but you won't get a full year impact of anything. And so by the time we get here this time next year, we'll have a much better picture, but -- and it's just going to be -- it's going to take a little while for that to ramp up. So I don't think it's going to be material, again, in '13.

Great. And then just a quick question on CapEx, $112 million guide for '13. Did you -- just for clarity, 2 items, I guess. First, did you say that excludes the $16.5 million free ESG? And then I guess, secondly, any comments you can give us on kind of a normalized run rate beyond 2013? That's certainly been growing very substantially. It's great. You've had some great growth opportunities, but just any kind of thoughts in terms of, for our modeling, how we ought to be looking at this?

I've -- in regards to your first question, the $112 million, that -- it does include the -- it does not include the Eastern Shore Gas acquisition. Your second question, Dan, which relates on a go-forward basis, I would tell you, we announced some pretty large expansions as we made our way to Worcester County, as we've made our way into Cecil County, and we're finishing those up, some of that in 2013, some of the other items that we've listed here, the NRG, I mean. Those are -- those projects are significant projects. So we are continually trying to go out there and identify additional growth opportunities. But in terms of where we sit now and being able -- if we had those projects lined up beyond 2013, we would have disclosed those. And so absent that at this time, I think looking at a more traditional level of CapEx for those future years is, at this point, what we we're basically starting to do.

Your next question comes from the line of Michael Gaugler with Brean Capital.

I have one -- just one follow-up question, most of -- on CapEx. Most of my questions have been answered. When you look at financing the growth going forward, are you thinking more in terms of long-term debt or short-term debt?

Well, Michael, basically, when you look at our balance sheet at the end of 2012, we had about $60 million of short-term debt that we were coming in to the year with. And some of that has a seasonality aspect, and so as we come through the winter months, our short-term borrowing needs, absent CapEx, are going to decline. We expect our CapEx to pick up. So I think as we move through the year, you will see us utilize both types of debt, but ultimately, we're not going to carry large, large amounts of short-term debt at the levels of CapEx that we're talking about here.

Okay. Are you considering equity along with that? Or are you going to just stick strictly with debt?

I suppose with the current position in regards to equity, the total capital with us being at 60% and then on equity to permanent capital being at almost 72%, we'll be going to the debt markets.

Your next question comes from the line of Heike Doerr with Robert W. Baird. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: I wanted to start by talking about the dividend. I know you mentioned that you were looking to have the dividend growth stay on pace with the EPS growth. The payout ratio is below 50%. Do we have any target of increasing that to a more historical utility-like payout ratio?

What we've been looking at, Heike, given our growth and as we're looking at the growth that we have before us in terms of opportunities, we will look at our earnings growth, and then we'll look at our dividend growth. And what you saw the board do in 2012 was actually increase the dividend by just shy of 6%. So there was a step-up in that regard, where the dividend growth was significantly up. And so what you're going to see is to continue to grow the dividend to the extent that we have the earnings growth capacity, but we're not going to most likely be in a position to be getting at a point where our dividend growth is exceeding our earnings growth because we want to be able to retain the earnings in terms of being able to capture future growth. And so that's been our -- what we've been trying to do in the past, and I think that's what you'll continue to see as we move forward. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Okay, that's helpful. And then to switch gears, we've seen in other states a pickup in legislative items that could impact the way our utilities are regulated. And I'm just wondering if there's anything positive or negative that's on the horizon in any of your jurisdictions that we should be paying attention to?

No, I would say that there isn't anything that's significant that's come across our desks. It's a constant. I think the biggest constant challenge that we have right now, I think, are just allowed of returns and are they going to get squeezed with the lower interest rates, but that's -- I mean, the biggest single worry we have. But that's not a legislative issue, it's more of a regulatory issue. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Okay. In some states, we've seen the utilities pushing for legislative changes to help pave the way to get more trackers and balancing counts in place. Is there anything that you are actively working with some of your utility peers on to approve?

Well, our states are fairly limited. With the Delaware, there's only 2 gas utilities in Delaware; and then in Maryland, there's a few more; and in Florida, there's a few more, but we're not working at this stage with any of the -- any other utilities to have any legislation passed [indiscernible], et cetera.

Your next question comes from the line of John Hanson with Praesidis.

All questions have been answered.

Well, good.

There are no further questions in queue at this time. I'll turn the conference back over to our presenters.

Well, thanks, everyone for joining in, and have a nice day.

This concludes today's conference call. You may now disconnect.