Back to GetFilings.com
1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
Commission file number 1-11071
UGI CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Pennsylvania 23-2668356
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
460 North Gulph Road, King of Prussia, PA 19406
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(610) 337-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF CLASS ON WHICH REGISTERED
Common Stock, without par value New York Stock Exchange, Inc.
Philadelphia Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO .
-------- --------
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. [X]
The aggregate market value of UGI Corporation Common Stock held by
nonaffiliates of the registrant on December 1, 1997 was $913,031,053.
At December 1, 1997 there were 32,909,914 shares of UGI Corporation Common Stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Annual Report to
Shareholders for the year ended September 30, 1997 are incorporated by
reference into Parts I and II of this Form 10-K. Portions of the Proxy
Statement for the Annual Meeting of Shareholders to be held on February 24,
1998 are incorporated by reference into Part III of this Form 10-K.
================================================================================
2
TABLE OF CONTENTS
PART I BUSINESS PAGE
Items 1 and 2 Business and Properties........................................1
General........................................................1
Propane Partnership Business...................................2
Utility Operations............................................10
UGI Enterprises, Inc..........................................19
Item 3 Legal Proceedings.............................................21
Item 4 Submission of Matters to a Vote of
Security Holders..............................................25
PART II SECURITIES AND FINANCIAL INFORMATION
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters...............................25
Item 6 Selected Financial Data.......................................27
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations.................28
Item 8 Financial Statements and Supplementary Data...................28
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure............28
PART III UGI MANAGEMENT AND SECURITY HOLDERS
Item 10 Directors and Executive Officers of the Registrant............28
Item 11 Executive Compensation........................................28
Item 12 Security Ownership of Certain Beneficial
Owners and Management.........................................28
Item 13 Certain Relationships and Related Transactions................31
PART IV ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K.......................................31
Signatures....................................................39
Index to Financial Statements and
Financial Statement Schedules................................F-2
(i)
3
PART I: BUSINESS
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
UGI Corporation ("UGI" or the "Company") is a holding company with two
principal lines of business: propane distribution and utilities. The Company's
AmeriGas, Inc. subsidiary ("AmeriGas") conducts the nation's largest retail
propane distribution business through AmeriGas Partners, L.P., a Delaware
limited partnership ("AmeriGas Partners" or the "Partnership") and its 98.99%
owned subsidiary AmeriGas Propane, L.P. (the "Operating Partnership").
AmeriGas Propane, Inc., a Pennsylvania corporation and a wholly owned
subsidiary of AmeriGas, is the Partnership's sole general partner ("AmeriGas
Propane" or the "General Partner"). The common units of AmeriGas Partners,
which represent limited partner interests, are traded on the New York Stock
Exchange under the symbol "APU." Through its subsidiaries, AmeriGas has a 58.5
combined ownership interest in the Partnership and the Operating Partnership,
and the remaining interest is publicly held. The Company has been in the
propane distribution business since 1959. The Company's utility business is
conducted through its subsidiary, UGI Utilities, Inc. ("Utilities"), which owns
and operates natural gas distribution and electric utilities in Pennsylvania.
The Company has been in the utility business for over 100 years and supplies
gas and electric utility services to approximately 252,000 and 61,000
customers, respectively.
UGI Enterprises, Inc. ("UGI Enterprises"), a wholly owned UGI
subsidiary formed in 1994, conducts retail gas and electric marketing
businesses and evaluates and develops new business opportunities. Black Sea
LPG, L.P. is Enterprises' first joint venture. The project will create an
energy import and distribution business in Romania. Other joint ventures in
international energy markets are being developed.
UGI was incorporated in Pennsylvania in 1991 as part of the
restructuring of Utilities (formerly, UGI Corporation) into a holding company
system effective April 10, 1992. UGI is not subject to regulation by the
Pennsylvania Public Utility Commission ("PUC"). UGI is also exempt from
registration as a holding company and not otherwise subject to regulation under
the Public Utility Holding Company Act of 1935, except for Section 9(a)(2)
thereof, which relates to the acquisition of voting securities of an electric
or gas utility company. UGI's executive offices are located at 460 North Gulph
Road, King of Prussia, Pennsylvania 19406, and its telephone number is (610)
337-1000. References to "UGI" or the "Company" include its consolidated
subsidiaries unless the context indicates otherwise. Similarly, references to
"AmeriGas Partners" and the "Partnership" include the Operating Partnership, its
predecessors and its subsidiaries.
-1-
4
PROPANE PARTNERSHIP BUSINESS
The Company's propane distribution business is conducted through
AmeriGas Partners. The Partnership is the largest retail propane distributor in
the United States, with over 600 district locations in 45 states at September
30, 1997. AmeriGas Propane, Inc., the sole general partner, operates and manages
the Partnership.
BACKGROUND
On July 15, 1993, AmeriGas acquired a significant equity interest in,
and other UGI subsidiaries assumed management of, Petrolane Incorporated
("Petrolane"). The Petrolane acquisition expanded substantially the size of the
propane distribution network under the Company's management. From July 15, 1993
to April 19, 1995, the Company's investment in Petrolane was accounted for by
the equity method, under which the investment was recorded at cost and adjusted
by the Company's share (originally, approximately 30%) of Petrolane's
undistributed income or loss. On April 19, 1995, Petrolane became a wholly owned
subsidiary of the General Partner, and through a series of related transactions,
all of the propane businesses of AmeriGas, including Petrolane, were transferred
to the Operating Partnership (the "Partnership Formation"). Although the
Company's consolidated financial statements now include 100% of the
Partnership's revenues and assets, the Company's net income reflects only its
58.5% share in the income or loss of the Partnership, due to the public's
limited partner interest.
GENERAL INDUSTRY INFORMATION
Propane is separated from crude oil during the refining process and
also extracted from natural gas or oil wellhead gas at processing plants.
Propane is normally transported and stored in a liquid state under moderate
pressure or refrigeration for economy and ease of handling in shipping and
distribution. When the pressure is released or the temperature is increased, it
is usable as a flammable gas. Propane is colorless and odorless; an odorant is
added to allow its detection. Propane is clean burning, producing negligible
amounts of pollutants when properly consumed.
The primary customers for propane are residential, commercial,
agricultural, engine fuel and industrial users to whom natural gas is not
readily available. Customers use propane primarily for home heating, water
heating, cooking, engine fuel and process applications. Propane is typically
more expensive than natural gas, competitive with fuel oil when operating
efficiencies are taken into account and, in most areas, cheaper than electricity
on an equivalent energy basis. Several states have adopted or are considering
proposals that would substantially deregulate the electric utility industry and
thereby permit retail electric customers to choose their electric supplier.
While proponents of electric utility deregulation believe that competition will
ultimately reduce the cost of electricity, the Company is unable to predict the
extent to which the price of electricity may drop. Therefore, the Company cannot
predict the ultimate impact that electric utility deregulation may have on
propane's competitive price advantage over electricity.
-2-
5
PRODUCTS, SERVICES AND MARKETING
As of September 30, 1997, the Partnership distributed propane to
approximately 956,000 customers from over 600 district locations in 45 states.
The Partnership's operations are located primarily in the Northeast, Southeast,
Great Lakes and West Coast regions of the United States. From many of its
district locations, the Partnership also sells, installs and services equipment
related to its propane distribution business, including heating and cooking
appliances and, at some locations, propane fuel systems for motor vehicles.
Typically, district locations are found in suburban and rural areas where
natural gas is not available. Districts generally consist of an office,
appliance showroom, warehouse and service facilities, with one or more 18,000 to
30,000 gallon storage tanks on the premises. The Partnership also engages in the
business of delivering liquefied petroleum gases by truck as a common carrier.
As part of its overall transportation and distribution infrastructure, the
Partnership operates as an interstate carrier in 48 states throughout the United
States. It is also licensed as a carrier in Canada.
The Partnership sells propane primarily to five markets: residential,
commercial/industrial, engine fuel, agricultural and wholesale. Approximately
79% of the Partnership's 1997 fiscal year sales (based on gallons sold) were to
retail accounts (32% to residential customers, 29% to industrial/commercial
customers, 11% to motor fuel customers and 7% to agricultural customers), and
approximately 21% were to wholesale customers. Sales to residential customers in
fiscal 1997 represented approximately 41% of retail gallons sold and 53% of the
Partnership's total propane margin. No single customer accounts for 1% or more
of the Partnership's consolidated revenues.
In the residential market, which includes both conventional and mobile
homes, propane is used primarily for home heating, water heating and cooking
purposes. Commercial users, which include motels, hotels, restaurants and retail
stores, generally use propane for the same purposes as residential customers. As
an engine fuel, propane is burned in internal combustion engines that power
over-the-road vehicles, forklifts and stationary engines. Industrial customers
use propane to fire furnaces, as a cutting gas and in other process
applications. Other industrial customers are large-scale heating accounts and
local gas utility customers who use propane as a supplemental fuel to meet peak
load deliverability requirements. Agricultural uses include tobacco curing, crop
drying and poultry brooding.
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,400 to 2,600 gallons of propane, into a stationary storage
tank on the customer's premises. The Partnership owns most of these storage
tanks and leases them to its customers. The capacity of these tanks ranges
from approximately 100 gallons to approximately 1,200 gallons. The Partnership
also delivers propane to retail customers in portable cylinders, which
typically have a capacity of 5 to 30 gallons. When these cylinders are
delivered to customers, empty cylinders are picked up for replenishment at
district locations or are filled in place. In its wholesale operations, the
Partnership principally sells propane to large industrial end-users and other
propane distributors.
-3-
6
PROPANE SUPPLY AND STORAGE
Supplies of propane from the Partnership's sources historically have
been readily available. In the year ended September 30, 1997, the Partnership
purchased over half of its propane from 10 suppliers, including the Amoco
companies (Amoco Canada and Amoco Oil Company, approximately 15%) and Warren
Gas Liquids (formerly, Warren Petroleum Company), approximately 11%.
Management believes that if supplies from either source were interrupted, it
would be able to secure adequate propane supplies from other sources without a
material disruption of its operations; however, the cost of procuring
replacement supplies might be materially higher, and at least on a short-term
basis, margins could be affected. Aside from Amoco and Warren, no single
supplier provided more than 10% of the Partnership's total domestic propane
supply in the fiscal year ended September 30, 1997. In certain market areas,
however, some suppliers provide 70% to 80% of the Partnership's requirements.
Disruptions in supply in these areas could also have an adverse impact on the
Partnership's margins.
The Partnership has over 300 sources of supply, and it also makes
purchases on the spot market. The Partnership purchases its propane supplies
from domestic and international suppliers. Approximately 70% of propane
purchases by the Partnership in the 1997 fiscal year were on a contractual
basis under one-year agreements subject to annual renewal. More than half of
the supply contracts provide for pricing based upon posted prices at the time
of delivery or the current prices established at major storage points such as
Mont Belvieu, Texas, or Conway, Kansas. In addition, some agreements provide
maximum and minimum seasonal purchase volume guidelines. The percentage of
contract purchases, and the amount of supply contracted for at fixed prices
will vary from year to year as determined by the General Partner. The
Partnership uses a number of interstate pipelines, as well as railroad tank
cars, delivery trucks and barges to transport propane from suppliers to storage
and distribution facilities. The Partnership stores propane at facilities in
Arizona, Rhode Island and several other locations.
Because the Partnership's profitability is sensitive to changes in
wholesale propane costs, the Partnership generally seeks to pass on increases
in the cost of propane to customers. There is no assurance, however, that the
Partnership will always be able to pass on product cost increases fully,
particularly when product costs rise rapidly. In fiscal year 1997, when the
average Mont Belvieu price per gallon of propane more than doubled between
April 1, 1996 ($.34625) and December 16, 1996 ($.75), the Partnership was able
to maintain its profitability through the use of hedging techniques designed to
control product costs, as well as by passing on product cost increases.
Product cost declined in 1997 and is now at more normal historic levels.
The Partnership expects to be able to secure adequate supplies for its
customers during fiscal year 1998, however, periods of severe cold weather,
supply interruptions, or other unforeseen events, could result in rapid
increases in product cost. The General Partner is gradually expanding its
product price risk management activities to reduce the effect of price
volatility on its product costs. Current strategies include the use of summer
storage, prepaid contracts for future product delivery and, to some extent,
derivative commodity instruments such as options and propane price swaps.
-4-
7
The following graph shows the average quarterly prices of propane on
the propane spot market during the last five fiscal years at Mont Belvieu,
Texas and Conway, Kansas, two major storage areas.
AVERAGE PROPANE SPOT MARKET PRICES
Mont Belvieu Conway
(Cents per Gallon)
Oct-92 35.5455 30.8693
Nov-92 32.6842 33.2171
Dec-92 31.0536 35.8452
Jan-93 33.8875 44.175
Feb-93 33.0921 34.7763
Mar-93 34.4565 34.9185
Apr-93 34.6488 32.9762
May-93 32.7813 32.3635
Jun-93 32.7216 33.9659
Jul-93 31.494 32.6845
Aug-93 30.7727 33.4943
Sep-93 30.1667 34.5179
Oct-93 29.5655 33.8214
Nov-93 27.7625 32.1375
Dec-93 24.7262 25.994
Jan-94 26.6131 25.7083
Feb-94 29.3487 27.7237
Mar-94 28.4674 26.875
Apr-94 28.8188 28.7875
May-94 29.619 28.7321
Jun-94 28.7898 27.9432
Jul-94 29.2438 27.9813
Aug-94 30.0598 29.462
Sep-94 30.1131 29.8333
Oct-94 32.5952 29.5298
Nov-94 34.6063 30.6938
Dec-94 33.4345 30.1607
Jan-95 32.8338 29.551
Feb-95 31.8687 28.9253
Mar-95 32.8372 30.0111
Apr-95 32.3126 30.0405
May-95 32.7534 31.2293
Jun-95 31.842 31.4955
Jul-95 30.8108 31.3834
Aug-95 31.3433 33.1724
Sep-95 31.3608 32.4765
Oct-95 30.946 32.7784
Nov-95 30.9531 32.7406
Dec-95 35.3219 38.1719
Jan-96 36 36.2415
Feb-96 40.8563 37.7688
Mar-96 37.2292 36.0119
Apr-96 35.5744 34.1071
May-96 34.9233 34.4773
Jun-96 34.925 36.3531
Jul-96 35.6339 37.2679
Aug-96 38.4403 37.9773
Sep-96 47.0156 44.7844
Oct-96 51.5734 51.5272
Nov-96 58.0493 63.4112
Dec-96 61.0446 84.2917
Jan-97 47.4545 63.392
Feb-97 38.7105 39.0197
Mar-97 38.5 37.2563
Apr-97 34.875 35.2614
May-97 35.3095 36.4762
Jun-97 34.4286 35.8631
Jul-97 34.9063 34.6278
Aug-97 37.0268 36.5268
Sep-97 38.6786 37.9524
COMPETITION
Propane is sold in competition with other sources of energy, some of
which are less costly for equivalent energy value. Propane distributors
compete for customers against suppliers of electricity, fuel oil and natural
gas, principally on the basis of price, availability and portability.
Electricity is a major competitor of propane, but propane generally enjoys a
competitive price advantage over electricity for space heating, water heating
and cooking. As previously stated, the Company is unable to predict the
ultimate impact that electric utility deregulation may have on propane's
current competitive price advantage. In the last two decades, many new homes
were built to use electrical heating systems and appliances. Fuel oil is also
a major competitor of propane and is generally less expensive than propane.
Operating efficiencies and other factors such as air quality and environmental
advantages, however, generally make propane competitive with fuel oil as a
heating source. Furnaces and appliances that burn propane will not operate on
fuel oil, and vice versa, and, therefore, a conversion from one fuel to the
other requires the installation of new equipment. Propane serves as an
alternative to natural gas in rural and suburban areas where natural gas is
unavailable or portability of product is required. Natural gas is generally a
less expensive source of energy than propane, although in areas where natural
gas is available, propane is used for certain industrial and commercial
applications and as a standby fuel
-5-
8
during interruptions in natural gas service. The gradual expansion of the
nation's natural gas distribution systems has resulted in the availability of
natural gas in some areas that previously depended upon propane. However,
natural gas pipelines are not present in many regions of the country where
propane is sold for heating and cooking purposes.
The domestic propane retail distribution business is highly
competitive. The Partnership competes in this business with other large propane
marketers, including other full-service marketers, and thousands of small
independent operators. Based on the most recent information supplied by the
American Petroleum Institute, the 1995 domestic retail market for propane
(annual sales for other than chemical uses) was approximately 9.3 billion
gallons and, based on LP-GAS magazine rankings, the ten largest propane
companies (including AmeriGas Partners) comprise approximately 35% of domestic
sales. The Partnership's retail volume of approximately 807 million gallons in
fiscal year 1997 represented approximately 9% of 1995 total domestic retail
sales. The ability to compete effectively depends on reliability of service,
responsiveness to customers and maintaining competitive retail prices.
Competition can intensify in response to a variety of factors,
including significantly warmer-than-normal weather, higher prices resulting
from extraordinary increases in the cost of propane, and recessionary economic
factors. The Partnership has experienced greater than normal customer losses
in certain years when competitive conditions reflected these factors.
In the engine fuel market, propane competes with gasoline and diesel
fuel. When gasoline prices are high relative to propane, propane competes
effectively. The wholesale propane business is highly competitive. Propane
sales to other retail distributors and large-volume, direct-shipment industrial
end users are price sensitive and frequently involve a competitive bidding
process.
PROPERTIES
As of September 30, 1997, the Partnership owned approximately 60% of
its district locations. In addition, the Partnership subleases three
one-million barrel underground storage caverns in Arizona to store propane and
butane for itself and third parties. The Partnership also leases a 600,000
barrel refrigerated, above-ground storage facility in California, which could
be used in connection with waterborne imports or exports of propane or butane.
The California facility, which the Partnership operates, is currently subleased
to several refiners for the storage of butane. The Partnership leases a
400,000 barrel storage facility in Rhode Island, which is owned by a third
party. The Rhode Island facility is used to import propane.
The transportation of propane requires specialized equipment. The
trucks and railroad tank cars utilized for this purpose carry specialized steel
tanks that maintain the propane in a liquefied state. The Partnership has a
fleet of approximately 385 transport trucks and 680 railroad tank cars, most of
which are leased. In addition, the Partnership utilizes over 2,300 bobtail and
rack trucks, and over 1,900 other delivery and service vehicles. More than 50%
of these vehicles are owned. As of September 30, 1997, the Partnership owned
more than 800,000 stationary
-6-
9
storage tanks with typical capacities of 100 to 1,000 gallons and approximately
900,000 portable propane cylinders with typical capacities of 5 to 100 gallons.
In addition, the Partnership owns over 2,000 large volume tanks which are used
for its own storage requirements. Most of the Partnership's debt is secured by
liens and mortgages on the Partnership's real and personal property.
TRADE NAMES; TRADE AND SERVICE MARKS
The Partnership markets propane principally under the "AmeriGas" and
"America's Propane Company" trade name and related service marks. UGI owns,
directly or indirectly, all the right, title and interest in the "AmeriGas" and
"Petrolane" trade names and related trade and service marks. The Partnership
has an exclusive (except for use by AmeriGas and the General Partner),
royalty-free license to use these names and trade and service marks. UGI,
Petrolane and the General Partner each have the option to terminate their
respective license agreements on 12 months' prior notice, or immediately in the
case of the General Partner, without penalty if the General Partner is removed
as general partner of the Partnership other than for cause. If the General
Partner ceases to serve as the general partner of the Partnership for cause,
UGI, Petrolane and the General Partner will each have the option to terminate
the license agreements immediately upon payment of a fee equal to the fair
market value of the licensed trade names.
The General Partner has discontinued widespread use of the "Petrolane"
trade name and conducts Partnership operations almost exclusively under the
"AmeriGas" and "America's Propane Company" trade names. The General Partner
has filed applications with the United States Patent and Trademark Office to
register the mark "PPX-Prefilled Propane Xchange" for use in connection with
the Partnership's cylinder exchange business.
SEASONALITY
The Partnership's retail sales volume is seasonal, with approximately
56% of the Partnership's fiscal year 1997 retail sales volume and approximately
83% of its earnings before interest, taxes, depreciation and amortization
occurring during the five-month peak heating season from November through
March, because many customers use propane for heating purposes. As a result of
this seasonality, sales are concentrated in the Partnership's first and second
fiscal quarters (October 1 through March 31), and cash receipts are greatest
during the second and third fiscal quarters when customers pay for propane
purchased during the winter heating season.
Sales volume for the Partnership traditionally fluctuates from year to
year in response to variations in weather, prices, competition, customer mix and
other factors, such as conservation efforts and general economic conditions.
Long-term, historic weather data from the National Weather Service Climate
Analysis Center indicate that average annual temperatures have remained
relatively constant over the last 30 years with fluctuations occurring on a
year-to-year basis only. Actual weather conditions in the Partnership's various
service territories, however, can vary substantially from historical averages.
For information concerning average annual variations
-7-
10
in weather across the Partnership's service territories, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
GOVERNMENT REGULATION
The Partnership is subject to various federal, state and local
environmental, safety and transportation laws and regulations governing the
storage, distribution and transportation of propane. These laws include, among
others, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the Clean
Air Act, the Occupational Safety and Health Act, the Emergency Planning and
Community Right to Know Act, the Clean Water Act and comparable state statutes.
CERCLA, also known as the "Superfund" law, imposes joint and several liability
without regard to fault or the legality of the original conduct on certain
classes of persons considered to have contributed to the release or threatened
release of a "hazardous substance" into the environment. Propane is not a
hazardous substance within the meaning of federal and state environmental laws.
However, the Partnership owns and operates real property where such hazardous
substances may exist. See Note 11 to the Company's Consolidated Financial
Statements.
All states in which the Partnership operates have adopted fire safety
codes that regulate the storage and distribution of propane. In some states
these laws are administered by state agencies, and in others they are
administered on a municipal level. The Partnership conducts training programs
to help ensure that its operations are in compliance with applicable
governmental regulations. The Partnership maintains various permits under
environmental laws that are necessary to operate certain of its facilities,
some of which may be material to the operations of the Partnership. Management
believes that the procedures currently in effect at all of its facilities for
the handling, storage and distribution of propane are consistent with industry
standards and are in compliance in all material respects with applicable
environmental, health and safety laws.
With respect to the transportation of propane by truck, the
Partnership is subject to regulations promulgated under the Federal Motor
Carrier Safety Act. These regulations cover the transportation of hazardous
materials and are administered by the United States Department of
Transportation ("DOT"). With respect to general operations, National Fire
Protection Association Pamphlets No. 54 and No. 58, which establish a set of
rules and procedures governing the safe handling of propane, or comparable
regulations, have been adopted as the industry standard in a majority of the
states in which the Partnership operates.
The Natural Gas Safety Act of 1968 required the DOT to develop and
enforce minimum safety regulations for the transportation of gases by pipeline.
The DOT's pipeline safety code applies to, among other things, a propane gas
system which supplies 10 or more customers from a single source, and a propane
system, any portion of which is located in a public place. The code requires
operators of all gas systems to provide training and written instructions for
employees, establish written procedures to minimize the hazards resulting from
gas pipeline emergencies, and keep records of inspections and testing.
-8-
11
On December 13, 1996, the Research and Special Programs Administration
("RSPA"), a division of the DOT, issued an advisory notice that alerted persons
involved in the design, manufacture, assembly, maintenance or transportation of
hazardous materials in certain cargo tank motor vehicles, including the type of
vehicles used by the Partnership, of a problem with emergency discharge
systems. On February 19, 1997, RSPA issued an emergency interim final rule
indicating that the emergency discharge control systems on the affected
vehicles may not function as required by federal regulations under all
operating conditions. The interim final rule specified the conditions under
which the affected vehicles could continue to be operated. On August 18, 1997,
after conducting a series of public hearings and workshops, RSPA issued a final
rule which sets forth the requirements that must be satisfied to continue
operating such vehicles. The final rule requires, among other things, that in
the event of an unintentional release of product, the person attending the
unloading operation must be able to promptly activate the internal self-closing
stop valve on the motor vehicle and shut down all motive and auxiliary power
equipment. The final rule provides alternative ways to comply with this
requirement and permits the use of radio-controlled systems that are capable of
stopping the transfer of propane by use of a transmitter carried by a qualified
person who also satisfies the attendance requirements contained in the
regulations. The Partnership is in the process of testing a radio-controlled
system and plans to equip its bobtail vehicles with such a system unless the
regulation is modified as a result of the pending administrative and legal
proceedings. The Partnership filed an administrative appeal requesting
reconsideration and a partial stay of the final rule which was denied on
December 5, 1997. See "Legal Proceedings."
EMPLOYEES
The Partnership does not directly employ any persons responsible for
managing or operating the Partnership. The General Partner provides these
services and is reimbursed for its direct and indirect costs and expenses,
including all compensation and benefit costs. At September 30, 1997, the General
Partner had 5,131 employees, including 303 temporary and part-time employees.
UGI also performs certain financial and administrative services for the General
Partner on behalf of the Partnership and is reimbursed by the Partnership for
its direct and indirect costs.
Approximately one percent of the General Partner's employees are
represented by nine local labor unions which are affiliated with the
International Brotherhood of Teamsters (8), and the Warehouse, Processing and
Distribution Workers Union of the International Longshoremen's and
Warehousemen's Union, AFL-CIO (1).
-9-
12
UTILITY OPERATIONS
The Company's utility business is conducted by Utilities, a wholly
owned subsidiary of the Company. Utilities operates its utility business
through two divisions, the gas division ("Gas Utility") and the electric
division ("Electric Utility"). The business conducted by each of these
divisions is described below.
DISTRIBUTION OF NATURAL GAS
Service Area; Revenue Analysis. Gas Utility distributes natural gas
to approximately 252,000 customers in portions of 14 eastern and southeastern
Pennsylvania counties through its distribution system of approximately 4,200
miles of gas mains. The service area consists of approximately 3,000 square
miles and includes the cities of Allentown, Bethlehem, Easton, Harrisburg,
Hazleton, Lancaster, Lebanon and Reading, Pennsylvania. Located in Gas
Utility's service area are major production centers for basic industries such
as steel fabrication. For the fiscal years ended September 30, 1997, 1996 and
1995, revenues of Gas Utility accounted for approximately 24%, 25% and 33%,
respectively, of UGI's total consolidated revenues.
System throughput (the total volume of gas sold to or transported for
customers within Gas Utility's distribution system) for the 1997 fiscal year
was approximately 80.2 billion cubic feet ("bcf"). System sales of gas
accounted for approximately 46% of system throughput, while gas transported for
commercial and industrial customers (who buy their gas from others) accounted
for approximately 54% of system throughput. Based on industry data for 1996,
residential customers account for approximately 38% of total system throughput
by local gas distribution companies in the United States. By contrast, for the
1997 fiscal year, Gas Utility's residential customers represented 23% of its
total system throughput.
Sources of Supply and Pipeline Capacity. Gas Utility meets its
service requirements by utilizing a diverse mix of natural gas purchase
contracts with producers and marketers, storage and transportation services
from pipeline companies, and its own propane-air and liquefied natural gas
peak-shaving facilities. Purchases of natural gas in the spot market are also
made to reduce costs and manage storage inventory levels. These arrangements
enable Gas Utility to purchase gas from Gulf Coast, mid-continent, Appalachian
and Canadian sources. For the transportation and storage function, Utilities
has agreements with a number of pipeline companies, including Texas Eastern
Transmission Corporation, Columbia Gas Transmission Corporation ("Columbia"),
ANR Pipeline Company, Columbia Gulf Transmission Company, CNG Transmission
Corporation, National Fuel Gas Supply Corporation, Transcontinental Gas
Pipeline Corporation, Trunkline Gas Company, Texas Gas Transmission Corporation
and Panhandle Eastern Pipe Line Company.
Gas Supply Contracts. During the 1997 fiscal year, Gas Utility
purchased approximately 37.5 bcf of natural gas and sold approximately 36.8 bcf
to customers. Gas not sold to customers was used by Gas Utility principally
for storage for later sale to customers. Approximately 31 bcf or 83% of the
volumes purchased were supplied under agreements with six major suppliers of
natural gas. The remaining 6.5 bcf or 17% of gas purchased was supplied by
producers and
-10-
13
marketers under other arrangements, including multi-month agreements at spot
prices. Certain gas supply contracts require minimum gas purchases. Each of
these agreements, however, either terminates in fiscal year 1998, or includes
provisions which entitle Utilities to terminate in the event the agreement is
not market responsive.
Storage and Peak Shaving. Gas Utility contracts for 10.8 bcf of
seasonal storage with several interstate pipelines. Gas is injected in storage
during the summer and delivered during the winter at combined peak day
capacities of approximately .14 bcf. In Harrisburg, Reading and Bethlehem,
Pennsylvania, Gas Utility operates peak-shaving facilities capable of producing
.06 bcf of gas per day from propane-air and liquefied natural gas facilities.
These facilities are used to meet winter peak service requirements.
Seasonal Variation. Approximately 58% of Gas Utility's system
throughput for the 1997 fiscal year occurred during the winter season from
November 1, 1996 through March 31, 1997, because many of its customers use gas
for heating purposes.
Competition. Natural gas is a fuel that competes with electricity and
oil and to a lesser extent with propane and coal. Competition among these
fuels is primarily a function of their comparative price and the relative cost
and efficiency of fuel utilization equipment. Electric utilities in Gas
Utility's service area are aggressively seeking new load, primarily in the new
construction market. Competition with fuel oil dealers is focused on
industrial customers. Gas Utility responds to this competition with marketing
efforts designed to retain and grow its customer base.
In substantially all of its service territory, Gas Utility is the only
regulated gas distribution utility having the right, granted by the PUC or by
law, to provide transportation services. While unregulated gas marketers have
been selling gas to commercial and industrial customers in Gas Utility's
service territory for over 12 years, Gas Utility provides transportation
services for those sales.
Customers representing approximately 25% of the Company's
non-residential system throughput (11% of non-residential revenues) have the
ability to switch to an alternate fuel at any time, and therefore, are served
under flexible, interruptible rates which are competitively priced with respect
to their alternate fuel. Gas Utility's margins from these customers, therefore,
are affected by the spread between the customers' delivered cost of gas and the
customers' delivered alternate fuel cost. In addition, other customers
representing 30% of non-residential system throughput (8% of non-residential
revenues) have locations which afford them the option of seeking transportation
service directly from interstate pipelines, thereby bypassing Gas Utility,
although none have done so. The majority of these customers are served under
transportation contracts having three- to ten-year terms. Included in these two
groups are the ten Utilities' customers with the highest volume of system
throughput. Three of the top five customers have executed ten-year agreements
with Utilities. No single customer represents, or is anticipated to represent,
more than 5% of the total revenues of Gas Utility.
-11-
14
Outlook for Gas Service and Supply. Gas Utility anticipates having
adequate pipeline capacity and sources of supply available to it to meet the
full requirements of all firm customers on its system at least through fiscal
year 1998. Supply mix is diversified, market priced, and delivered pursuant to
a number of long and short-term firm transportation and storage arrangements.
During the 1997 fiscal year, Gas Utility supplied transportation
service to three major cogeneration installations. Gas Utility continues to
pursue opportunities to supply natural gas to electric generation projects
located in its service territory. Gas Utility also continues to seek new
residential, commercial and industrial customers for both firm and
interruptible service. In the residential market sector, Gas Utility connected
6,882 additional residential heating customers during the 1997 fiscal year, an
increase of 8% from the previous year. Approximately 63% of the additions
represent gas customers from the new construction market. The remaining 37%
represent customers converting from other energy sources, primarily oil, and
existing non-heating gas customers who have added gas heating systems to
replace other energy sources. The total number of new commercial and
industrial customers was 1,068, down slightly from 1,122 in fiscal year 1996.
Utilities continues to monitor and participate extensively in
third-party proceedings before the Federal Energy Regulatory Commission
("FERC") affecting the rates and the terms and conditions under which Gas
Utility transports and stores natural gas. Among these proceedings are those
arising out of certain FERC orders and/or pipeline filings which relate to (i)
the relative pricing of pipeline services in a competitive energy marketplace;
(ii) the flexibility of the terms and conditions of pipeline service contracts;
and (iii) pipelines' requests to increase their base rates, or change the terms
and conditions of their storage and transportation services.
Gas Utility continues to take the measures it believes necessary, in
negotiations with interstate pipeline and natural gas suppliers and in cases
before regulatory agencies, to assure availability of supply, transportation and
storage alternatives to serve market requirements at the lowest cost consistent
with security of supply considerations. Those measures include negotiating the
terms of firm transportation capacity from production areas on all pipelines
serving Gas Utility, arranging for appropriate storage and peak-shaving
resources, negotiating with producers for competitively priced secure gas
purchases and aggressively participating in regulatory proceedings related to
transportation rights, costs of service and gas costs.
GENERATION AND DISTRIBUTION OF ELECTRICITY
ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT
On January 1, 1997, Pennsylvania's Electricity Generation Customer
Choice and Competition Act (Customer Choice Act) became effective. The
Customer Choice Act permits all Pennsylvania retail electric customers to
choose their electric generation supplier over a three-year phase-in period
commencing January 1, 1999. The Customer Choice Act requires all electric
utilities to file restructuring plans with the PUC which, among other things,
include unbundled
-12-
15
prices for electric generation, transmission and distribution and a competitive
transition charge (CTC) for the recovery of "stranded costs" which would be paid
by all customers receiving distribution service and certain customers that
increase their own generation of electricity. "Stranded costs" generally are
electric generation-related costs that traditionally would be recoverable in a
regulated environment but may not be recoverable in a competitive electric
generation market. Under the Customer Choice Act, Electric Utility's rates for
transmission and distribution services provided through June 30, 2001 are capped
at levels in effect on January 1, 1997. In addition, Electric Utility generally
may not increase the generation component of prices as long as stranded costs
are being recovered through the CTC. Electric Utility will continue to be the
only regulated electric utility having the right, granted by the PUC or by law,
to distribute electric energy in its service territory.
Electric Utility has filed its restructuring plan with the PUC
("Restructuring Plan"). The Restructuring Plan includes a claim for the
recovery of $34.4 million for stranded costs during the period January 1, 1999
through December 31, 2002. The major components of this claim are: (1) plant
investments in excess of competitive market value and electric generation
facility retirement costs; (2) potential costs associated with existing power
purchase agreements; and (3) regulatory assets (principally income taxes)
recoverable from ratepayers under current regulatory practice. It also seeks
to establish a recovery mechanism that would permit the recovery of up to an
additional $28 million of costs associated with the buyout or implementation of
a December 1993 agreement with Foster Wheeler Penn Resources, Inc. to purchase
power from a wood-fired generator to be constructed by Foster Wheeler. The PUC
is expected to take action on Electric Utility's filing in May 1998.
The Customer Choice Act also authorized the PUC to implement pilot
customer choice programs for up to five percent of the noncoincident peak load
of industrial, commercial and residential customers. In accordance with PUC
directives, Electric Utility implemented such a pilot program effective
November 1, 1997. It is anticipated that a full five percent of the
noncoincident peak load of Electric Utility's industrial, commercial and
residential customers will participate in the pilot.
Given the changing regulatory environment in the electric utility
industry, the Company continues to evaluate its ability to apply the provisions
of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS 71), as it relates to its electric generation operation. SFAS 71 permits
the recording of costs (regulatory assets) that have been, or are expected to
be, allowed in the ratesetting process in a period different from the period in
which such costs would be charged to expense by an unregulated enterprise. The
Company believes its electric generation assets and related regulatory assets
continue to satisfy the criteria of SFAS 71. If such electric generation assets
no longer meet the criteria of SFAS 71, then any related regulatory assets
would be written-off unless some form of transition cost recovery is
established by the PUC which would meet the requirements under generally
accepted accounting principles for continued accounting as regulatory assets
during such recovery period. Any generation-related, long-lived fixed and
intangible assets would be evaluated for impairment under the provisions of
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of."
-13-
16
Based upon an evaluation of the various factors and conditions
affecting future cost recovery, the Company does not expect the Customer Choice
Act to have a material adverse effect on its financial condition or results of
operations.
Service Area; Revenue Analysis. Electric Utility supplies electric
service to approximately 61,000 customers in portions of Luzerne and Wyoming
Counties in northeastern Pennsylvania through a system consisting of
approximately 2,100 miles of transmission and distribution lines and 14
transmission substations. For the 1997 fiscal year, about 53% of sales volume
came from residential customers, 34% from commercial customers and 13% from
industrial customers and others. For the 1997, 1996 and 1995 fiscal years,
revenues of Electric Utility accounted for approximately 4%, 4% and 8%,
respectively, of UGI's total consolidated revenues.
Sources of Supply. Electric Utility distributes electricity which it
generates or purchases from others. As the provisions of the Customer Choice Act
are implemented, it will also distribute electric power acquired and transmitted
by others. Utilities owns and operates Hunlock generating station located near
Kingston, Pennsylvania ("Hunlock Station"), and has a 1.11% ownership interest
in the Conemaugh generating station located near Johnstown, Pennsylvania
("Conemaugh Station"), which is operated by another utility. These two
coal-fired stations can generate up to 69 megawatts of electric power for
Electric Utility and provided approximately 47% of its energy requirements
during the 1997 fiscal year.
Utilities has a long-term power supply agreement with Pennsylvania
Power & Light Company ("PP&L"). Under this agreement, PP&L supplies all the
electric power required by Electric Utility above that provided from certain
other sources, including Hunlock Station. The cost of electricity supplied by
PP&L is based on PP&L's actual system costs. Utilities estimates that the cost
of electricity supplied by Hunlock is higher than projected market rates, but
lower than the cost of electricity purchased under the PP&L contract. As a
result of the availability and projected cost of alternative supplies,
Utilities has provided PP&L with notice of its intent to stop purchasing power
under the power supply agreement as of March 2001. In addition, if certain
conditions occur (i.e., Electric Utilities' demand falls to zero in any
particular billing month), the power supply agreement may terminate at an
earlier date. There currently is a dispute between Utilities and PP&L over the
effect of customer choice on Utilities' obligations under the PP&L power supply
agreement. Utilities has filed an action in the Court of Common Pleas of
Luzerne County, Pennsylvania seeking a declaration of the rights and
responsibilities of the parties to the agreement.
In a regulated utility environment, Hunlock Station could be expected
to operate until the end of its useful life in 2004. As a result of electric
deregulation, however, Hunlock may cease operations as early as January 1,
1999, depending on a number of factors, including customer load, contract
purchase obligations and the availability and cost of replacement power. Until
restructuring proceedings under the Customer Choice Act are completed,
Utilities will be unable to predict how long Hunlock Station will operate.
-14-
17
Environmental Factors. The operation of Hunlock Station complies with
the air quality standards of the Pennsylvania Department of Environmental
Resources ("DER") with respect to stack emissions. Under the Federal Water
Pollution Control Act, Utilities has a permit from the DER to discharge water
from Hunlock Station into the North Branch of the Susquehanna River.
The Federal Clean Air Act Amendments of 1990 (the "Clean Air Act
Amendments") impose emissions limitations for certain compounds, including
sulfur dioxide and nitrous oxides. The Conemaugh Station is in compliance with
these standards, and the Hunlock Station is required to meet these emission
standards by 1999.
In compliance with the Clean Air Act Amendments, the DER issued final
Reasonably Available Control Technology ("RACT") regulations for nitrous oxides
in January 1994. These regulations are applicable to Hunlock and Conemaugh
Stations. Utilities' compliance plans for Hunlock Station and Conemaugh Station
have been approved by the DER. Capital expenditures associated with the RACT
regulations are not expected to be material.
More stringent regulation of nitrous oxide emissions at both Hunlock
and Conemaugh Stations may be required due to the actions of the Northeast
Ozone Transport Commission. The Commission was created by the Clean Air Act
Amendments to provide a plan to reduce ground level ozone in the Northeast to a
level acceptable to the U.S. Environmental Protection Agency (the "EPA").
Future actions of the Commission may cause the DER to modify its nitrous oxide
RACT plans and thereby affect the compliance plans of Hunlock and Conemaugh
Stations.
Seasonality. Sales of electricity for residential heating purposes
accounted for approximately 23% of the total sales of Electric Utility during
the 1997 fiscal year. Electricity competes with natural gas, oil, propane and
other heating fuels in this use. Approximately 54% of sales occurred in the
six coldest months of the 1997 fiscal year, demonstrating modest seasonality
favoring winter due to the use of electricity for residential heating purposes.
PROPERTIES
Utilities' Mortgage and Deed of Trust constitutes a first lien on
substantially all real and personal property of Utilities.
UTILITY REGULATION AND RATES
Recent Regulatory Environment. Since December 1982, Utilities has
provided transportation service for commercial and industrial customers who
purchase their gas from others. As previously reported, this unbundled service
accounted for approximately 54% of Utilities' system throughput in fiscal year
1997. Certain states, including Pennsylvania, are considering whether
transportation service options should be extended to residential and small
commercial customers. On March 27, 1997, proposed customer choice legislation
was introduced in the Pennsylvania General Assembly that would, among other
things, extend the availability of gas transportation service to residential and
small
-15-
18
commercial customers of local gas distribution companies. It would permit all
customers of natural gas distribution utilities to transport their natural gas
supplies through the distribution systems of Pennsylvania gas utilities by April
1, 1999 and would also require Pennsylvania gas utilities to stop selling
natural gas. Legislative committees have conducted public hearings on the
proposed legislation and Utilities has provided testimony on such issues as the
need for standards to assure reliability of future gas supplies and the recovery
of costs associated with existing gas supply assets. Utilities is considering a
number of options for addressing the provision of unbundled transportation
services to residential and small commercial customers, including the
termination of bundled retail sales services. The Company will continue to
monitor the proposed legislation.
FERC Orders 888 and 889. In April 1996, FERC issued Orders No. 888
and 889 which established rules for the use of electric transmission facilities
for wholesale transactions. FERC has also asserted jurisdiction over the
transmission component of electric retail choice transactions. In compliance
with these orders, the PJM Interconnection, LLC ("PJM"), of which UGI is a
member, has filed an open access transmission tariff with the FERC establishing
transmission rates and procedures for transmission within the PJM control area.
Under the PJM tariff and associated agreements, Electric Utility is entitled to
receive certain revenues when Utilities' transmission facilities are used by
third parties.
Pennsylvania Public Utility Commission Jurisdiction. Utilities' gas
and electric utility operations are subject to regulation by the PUC as to
rates, terms and conditions of service, accounting matters, issuance of
securities, contracts and other arrangements with affiliated entities, and
various other matters.
Purchased Gas Cost Rates. Gas Utility's gas service tariff contains
Purchased Gas Cost ("PGC") rates which provide for annual increases or
decreases in the rate per thousand cubic feet ("mcf") which Gas Utility charges
for natural gas sold by it, to reflect Utilities' projected cost of purchased
gas. In accordance with regulations adopted by the PUC on June 14, 1995, PGC
rates may also be adjusted quarterly to reflect purchased gas costs. Each
proposed PGC rate is required to be filed with the PUC six months prior to its
effective date. During this period the PUC holds hearings to determine whether
the proposed rate reflects a least-cost fuel procurement policy consistent with
the obligation to provide safe, adequate and reliable service. After
completion of these hearings, the PUC issues an order permitting the collection
of gas costs at levels which meet that standard. The PGC mechanism also
provides for an annual reconciliation. Utilities has two PGC rates. PGC (1)
is applicable to small, firm, core market customers consisting of the
residential and small commercial and industrial classes; PGC (2) is applicable
to firm, contractual, high-load factor customers served on three specific rates
(Rates BD, BD-L and N/CIAC). In addition, residential customers maintaining a
high load may qualify for the PGC(2) rate. In accordance with the schedule
established by law and PUC regulations, Gas Utility will file a new PGC tariff
on June 1, 1998, to be effective December 1, 1998. When filed, the proposed
tariff will reflect estimated PGC over-collections and under-collections
through November 30, 1998.
Energy Cost Rates. In accordance with provisions of the Customer
Choice Act, the PUC approved Electric Utility's application to roll its energy
costs rate ("ECR") into its base rates
-16-
19
effective as of May 2, 1997, at a combined level not to exceed the rate cap
established as of January 1, 1997. Before January 1, 1997, the ECR permitted
Electric Utility to adjust customers' monthly charges to reflect annual changes
in the cost of purchased power, fuel, interchange power and the cost of
transmitting power purchased from external sources. Although Electric Utility
may no longer adjust customer charges to reflect changes in the cost of
purchased power, it will continue to account for such changes in order to
reconcile costs as part of its Restructuring Plan.
Gas Rate Case. On January 27, 1995, Gas Utility filed with the PUC
for a $41.3 million increase in base rates. The PUC approved a $19.5 million
settlement of this proceeding, effective August 31, 1995.
Electric Rate Case. On January 26, 1996 Electric Utility filed with
the PUC for a $6.2 million increase in its base rates, to be effective March
26, 1996. On July 18, 1996, the PUC approved a settlement of this proceeding
authorizing a $3.1 million increase in annual revenues. This increase in base
rates became effective on July 19, 1996.
Deferred Fuel Adjustments. Gas Utility defers and until January 1,
1997 Electric Utility deferred the difference between the amount of revenue
recognized, and the applicable purchased gas costs and purchased power costs
incurred, until subsequently billed or refunded to customers.
State Tax Surcharge Clauses. Utilities' gas and electric service
tariffs contain state tax surcharge clauses. The surcharges are recomputed
whenever any of the tax rates included in their calculation are changed. These
clauses protect Utilities from the effect of increases in most of the
Pennsylvania taxes to which it is subject.
UTILITY FRANCHISES
Utilities holds certificates of public convenience issued by the PUC
and certain "grandfather rights" predating the adoption of the Pennsylvania
Public Utility Code and its predecessor statutes which it believes are adequate
to authorize it to carry on its business in substantially all the territory to
which it now renders gas and electric service. Under applicable Pennsylvania
law, Utilities also has certain rights of eminent domain as well as the right
to maintain its facilities in streets and highways in its territories.
OTHER GOVERNMENT REGULATION
In addition to regulation by the PUC, the gas and electric utility
operations of Utilities are subject to various federal, state and local laws
governing environmental matters, occupational health and safety, pipeline safety
and other matters. Certain of Utilities' activities involving the interstate
movement of natural gas, the transmission of electricity, transactions with
non-utility generators of electricity and other matters, are also subject to the
jurisdiction of FERC.
-17-
20
Utilities is subject to the requirements of the federal Resource
Conservation and Recovery Act, CERCLA and comparable state statutes with
respect to the release of hazardous substances on property owned or operated by
Utilities. See ITEM 3. "LEGAL PROCEEDINGS-Environmental Matters." The
electric generation activities of Utilities are also subject to the Clean Air
Act Amendments, the Federal Water Pollution Control Act and comparable state
statutes and regulations. See "UTILITY OPERATIONS - Generation and
Distribution of Electricity-Environmental Factors."
-18-
21
UGI ENTERPRISES, INC.
UGI Enterprises, Inc. is a wholly owned subsidiary of UGI, formed in
1994. Through subsidiaries, UGI Enterprises is developing the domestic and
international energy businesses described below.
In 1995, the gas marketing business previously conducted by a
subsidiary of Utilities was transferred to UGI Energy Services, Inc. ("Energy
Services"), a wholly owned subsidiary of UGI Enterprises. Energy Services
conducts this business under the trade name GASMARK. GASMARK sells natural gas
directly to more than 875 commercial and industrial customers in the
Mid-Atlantic region, Massachusetts, New York and Ohio, through the
transportation systems of 15 utility systems. Another Enterprises subsidiary
has been formed to market electricity under the trade name POWERMARK.
During 1996, UGI Enterprises formed a joint venture with affiliates of
Energy Transportation Group, Inc. ("ETG") and North American World Trade, Ltd.
to develop, build and operate a liquefied petroleum gas ("LPG") import project
in Romania. ETG operates a major fleet of liquefied natural gas ("LNG")
vessels, and North American World Trade, Ltd. is a consulting firm with
Romanian expertise. The joint venture is known as Black Sea LPG, L.P. The
project will include construction of a 26 million gallon refrigerated marine
LPG import terminal and an LPG pipeline with propane-air mixing plants to
deliver propane to Bucharest, Romania's capital. UGI has funded the initial
development of the joint venture through UGI Black Sea Enterprises, Inc., a
wholly owned subsidiary of UGI Enterprises. Black Sea LPG, L.P. will develop
the project and UGI Black Sea Enterprises, Inc. will operate the terminal and
the propane-air plants. On December 11, 1997, affiliates of UGI Enterprises
and ETG entered into an agreement creating a Romanian joint venture known as
Black Sea LPG Romania S.A. for the purpose of financing and constructing the
project. The Romanian partners in this venture are Regia Autonoma a Gazelor
Naturale "Romgaz" Medias, the national gas utility; Regia Autonoma de
Electricitate "Renel", the national electric utility; and Rompetrol, S.A., a
privately held energy services company.
In addition, UGI International Enterprises, Inc., another UGI
Enterprises subsidiary, and ETG have a cooperation agreement with China
National Chemical Supply & Sales Corporation to develop an integrated propane
company, including a propane import and distribution business, to serve Chinese
provinces along the Yangtze River.
-19-
22
BUSINESS SEGMENT INFORMATION
The table stating the amounts of revenues, operating income (loss) and
identifiable assets attributable to each of UGI's industry segments for the
1997, 1996 and 1995 fiscal years appears on page 20 of UGI's 1997 Annual Report
to Shareholders and is incorporated in this Report by reference.
EMPLOYEES
At September 30, 1997, UGI and its subsidiaries had 6,437 employees.
-20-
23
ITEM 3. LEGAL PROCEEDINGS
With the exception of the matters set forth below, no material legal
proceedings are pending involving UGI, any of its subsidiaries or any of their
properties, and no such proceedings are known to be contemplated by
governmental authorities.
ENVIRONMENTAL MATTERS - MANUFACTURED GAS PLANTS
Prior to the general availability of natural gas, in the 1800s through
the mid-1900s, manufactured gas was a chief source of gas for lighting and
heating nationwide. The process involved heating certain combustibles such as
coal, oil and coke in a low-oxygen atmosphere. Methods of production included
coal carbonization, carbureted water gas and catalytic cracking. These methods
were employed at many different sites throughout the country. The residue from
gas manufacturing, including coal tar, was typically stored on site, burned in
the gas plant, or sold for commercial use. Some constituents of coal tars
produced from the manufactured gas process are today considered hazardous
substances under the Superfund Law.
The gas distribution business has been one of Utilities' principal
lines of business since its inception in 1882. One of the ways Utilities
initially expanded its business in its early years was by entering into
agreements with other gas companies to operate their businesses. After 1888,
the principal means by which Utilities expanded its gas business was to acquire
all or a portion of the stock of companies engaged in this business. Utilities
also provided management and administrative services to some of these
companies. Utilities grew rapidly by means of stock acquisitions and became
one of the largest public utility holding companies in the country. Pursuant
to the requirements of the Public Utility Holding Company Act of 1935,
Utilities divested all of its utility operations other than those which now
constitute the Gas Utility and the Electric Utility.
The manufactured gas process was once used by Utilities in connection
with providing gas service to its customers. In addition, virtually all of the
gas companies that Utilities operated or to which it provided services, or in
which Utilities held stock, utilized a manufactured gas process. Utilities has
been notified of several sites outside Pennsylvania on which (i) gas plants were
formerly operated by it or owned or operated by its former subsidiaries and (ii)
either environmental agencies or private parties are investigating the extent of
environmental contamination and the necessity of environmental remediation.
Utilities is currently litigating a claim against it relating to an out-of-state
site. If Utilities were found liable as a "responsible party" as defined in the
Superfund Law (or comparable state statutes) with respect to this site, it would
have joint and several liability with other responsible parties for the full
amount of the cleanup costs. A "responsible party" under that statute includes
(i) the current owner of the affected property and (ii) each owner or operator
of a facility during the time when hazardous substances were released on the
property.
Management believes that Utilities should not have significant
liability in those instances in which a former subsidiary operated a
manufactured gas plant because Utilities generally is not
-21-
24
legally liable for the obligations of its subsidiaries. Under certain
circumstances, however, courts have found parent companies liable for
environmental damage caused by subsidiary companies when the parent company
exercised such substantial control over the subsidiary that the court concluded
that the parent company either (i) itself operated the facility causing the
environmental damage or (ii) otherwise so controlled the subsidiary that the
subsidiary's separate corporate form should be disregarded. There could be,
therefore, significant future costs of an uncertain amount associated with
environmental damage caused by manufactured gas plants that Utilities owned or
directly operated, or that were owned or operated by former subsidiaries of
Utilities, if a court were to conclude that the level of control exercised by
Utilities over the subsidiary satisfies the standard described above.
Utilities believes that there are approximately 40 manufactured gas
plant sites in Pennsylvania where either (i) Utilities formerly operated the
plant or (ii) Utilities owns or at one time owned the site. Most of the sites
are no longer owned by Utilities and the gas plants formerly operated at these
40 sites have all been out of operation since at least the early 1950s.
Utilities or other parties are currently conducting investigative or remedial
activities at nine of the 40 sites. Based on the 1995 settlement agreement
with the PUC relating to Gas Utilities' 1995 base rate increase filing, rate
relief will be permitted for certain remediation expenditures on
environmentally contaminated sites located in Pennsylvania. Because of this,
Utilities does not expect its costs for Pennsylvania sites to be material to
its results of operations.
The following is a short description of the status of certain matters
involving Utilities related to manufactured gas plants located in other states.
See also Note 11 to the Company's Consolidated Financial Statements which
appears on pages 35 and 36 of its 1997 Annual Report to Shareholders.
OUT OF STATE GAS PLANT SITES
1. Halladay Street, Jersey City, New Jersey. By letter dated April 12,
1993, Public Service Electric and Gas Company ("PSE&G") informed Utilities that
PSE&G had been named as a defendant in a civil action pending in the United
States District Court of the District of New Jersey, seeking damages as a result
of contamination relating to the former manufactured gas plant operations at
Halladay Street in Jersey City, New Jersey. The Halladay Street gas plant
operated from approximately 1884 until 1950. PSE&G asserted that Utilities is
liable for that portion of the costs associated with operations of the plant
between 1886 and 1899. PPG Industries, Inc. has also been named as a defendant
in the action for costs associated with chemical contamination at the site
unrelated to gas plant operations. In July 1993, PSE&G served Utilities with a
complaint naming Utilities as a third-party defendant in this civil action.
PSE&G subsequently amended the complaint to allege additional theories of
liability for the period from 1899 to 1940. To date, that action has focused on
the chemical contamination allegedly associated with PPG Industries' activities
and there have been no developments concerning liability for gas plant related
contamination. Management is currently investigating Utilities' involvement in
operations of the site and evaluating its defenses. Investigations of the site
conducted to date are insufficient to establish the extent of environmental
remediation necessary,
-22-
25
if any. Hence, Utilities is unable to estimate the total cost of cleanup
associated with manufactured gas plant wastes at this site.
2. Burlington, Vermont. By letter dated November 24, 1992, the EPA
notified Utilities of potential liability with respect to contamination at the
Pine Street Canal Superfund Site, Burlington, Vermont. The EPA has also
identified eighteen other "potentially responsible parties." Utilities has
responded to the EPA letter and denied liability for any contamination caused
by the former operator of the gas plant. Management believes that Utilities
has substantial defenses to any claim that may be made for investigative or
remedial costs because, among other things, the plant was operated by a
subsidiary of a predecessor company.
The site is the location of a former manufactured gas plant owned and
operated by Burlington Gas Light Company ("BGLC") and Burlington Light and
Power Company ("BLPC"). The EPA contends that Utilities is potentially liable
because it assumed the liabilities of American Gas Company of New Jersey, a
one-time parent of BGLC and BLPC. In 1985, the EPA removed approximately
15,000 tons of coal tar contaminated material from a portion of the site. From
1986 through 1992, the EPA conducted investigations and developed potential
remedial actions at the site. The results of EPA's investigations show that
coal gasification wastes, particularly polynuclear aromatic hydrocarbons and
coal tar, are present in surface and subsurface soils as well as groundwater.
The contamination also extends to wetlands adjacent to the site.
In November 1992, the EPA proposed a cleanup of the site that, among
other actions, would consist of on-site containment, dredging and excavation,
dewatering and consolidation of contaminated soils, treatment of groundwater and
restoration of wetlands. The estimated cost of the proposed plan would have been
approximately $50 million. In May 1993, after reviewing extensive public comment
concerning the proposed plan of remediation, the EPA withdrew the proposed plan
and announced that it would work with a coordinating council consisting of
community groups, potentially responsible parties ("PRPs") and others to develop
an alternative plan.
In September 1997, the coordinating council proposed a remedial plan
calling for capping of the site at an estimated cost of $6 million to $10
million. In addition, the coordinating council and EPA may have spent an
additional $10 million in studying the site. In December 1997, Green Mountain
Power Company, the lead PRP, agreed in principle to indemnify and release
Utilities from any further liability at the site on terms and conditions which
are not material to the results of operations of Utilities.
3. Savannah, Georgia. On March 2, 1992, Atlanta Gas Light Company
("AGL") informed Utilities that it was investigating contamination that appears
to be related to manufactured gas plant operations at a site owned by AGL in
Savannah, Georgia. AGL believes that Utilities may be liable for investigative
and remedial costs as a result of having operated the gas plant through a
subsidiary company in the early 1900s. AGL has stated its intention to bring
suit against Utilities. AGL estimates that total costs to remediate the site
may exceed $5 million. Management believes that Utilities has substantial
defenses to any action that may arise out of the activities of its former
subsidiary at this site.
-23-
26
4. Concord, New Hampshire. By letter dated October 18, 1993,
EnergyNorth Natural Gas, Inc. ("EnergyNorth") informed Utilities that the New
Hampshire Department of Environmental Services ("NHDES") has alleged that there
is environmental contamination on property in Concord, N.H., where a
manufactured gas plant was once located. EnergyNorth requested that
Utilities, as a former operator of the plant, participate in investigation of
the site. Because this gas plant appears to have been operated almost
exclusively by former subsidiary companies of Utilities, Utilities declined to
participate. On September 17, 1995 EnergyNorth filed suit against Utilities
alone in federal District Court in New Hampshire, seeking Utilities' allocable
share of response costs associated with remediating gas plant related
contamination at that site. The complaint alleges that EnergyNorth has spent
$3.5 million to remove contaminants from a gas holder at the site and will be
required to spend an unknown amount in the future. As a result of
investigations of gas plant related contamination in a nearby pond completed in
1996, EnergyNorth recommended to NHDES a remedial plan that would cost
approximately $4 million. In November 1997, Utilities settled this litigation
on terms which are not material to the results of operations of Utilities.
OTHER MATTERS
1. Foster Wheeler Penn Resources, Inc. v. UGI Utilities, Inc. Civil
Action No. 97CV4592. On July 14, 1997, Foster Wheeler Penn Resources, Inc. filed
suit against UGI Utilities, Inc. in United States District Court for the Eastern
District of Pennsylvania alleging, among other things, that UGI Utilities
breached an Agreement for the Sale and Purchase of Net Electrical Energy under
which UGI Utilities had agreed to purchase electricity from a generating
facility yet to be built by Foster Wheeler. In its suit Foster Wheeler seeks,
among other things, a declaration that the Sale and Purchase Agreement remains
in effect or in the alternative that Foster Wheeler be awarded damages in excess
of $20 million. Management believes that it has defenses to Foster Wheeler's
claims.
2. U.S. Department of Transportation Administrative Proceeding. On
or about September 17, 1997, the Operating Partnership and five other major
interstate propane marketers jointly filed a Petition for Reconsideration and a
Request for Partial Stay of Final Rule HM-225 (more commonly known as 49 C.F.R.
Section 171.5, the "Final Rule") published by the Research and Special Programs
Administration, a division of the U.S. Department of Transportation (the "DOT")
on August 18, 1997. While the other marketers subsequently withdrew their
petition and filed suit in federal court against the DOT, the Operating
Partnership continued its administrative appeal. The appeal relates to the
provisions of the Final Rule requiring passive emergency discharge control
systems on cargo tank motor vehicles (also known as bobtails) or alternatively,
the installation of radio-controlled systems on bobtails or the use of multiple
attendants on such vehicles. On December 5, 1997, the appeal was denied.
Management of the Operating Partnership is considering an appeal of the DOT
decision.
The Operating Partnership is also monitoring the pending litigation on
the Final Rule brought by other major marketers and parallel litigation by the
propane industry's national trade
-24-
27
association, the National Propane Gas Association. See "BUSINESS AND PROPERTIES
- - PROPANE PARTNERSHIP BUSINESS - Government Regulation."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the last
fiscal quarter of the 1997 fiscal year.
UGI'S EXECUTIVE OFFICERS
Information regarding UGI's executive officers is included in Part III
of this Report and is incorporated in Part I by reference.
PART II: SECURITIES AND FINANCIAL INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the New York and Philadelphia
Stock Exchanges under the symbol "UGI". The following table sets forth the
high and low sales prices for the Company's Common Stock on the New York Stock
Exchange Composite Transactions tape as reported in The Wall Street Journal for
each full quarterly period within the two most recent fiscal years:
1997 FISCAL YEAR HIGH LOW
4th Quarter $28.000 $22.125
3rd Quarter 24.375 21.625
2nd Quarter 25.375 21.750
1st Quarter 24.125 20.875
1996 FISCAL YEAR HIGH LOW
4th Quarter $24.875 $21.875
3rd Quarter 24.875 20.000
2nd Quarter 22.750 20.125
1st Quarter 21.875 19.750
-25-
28
DIVIDENDS
Quarterly dividends on UGI Common Stock were paid in the 1997 and 1996
fiscal years as follows:
1997 FISCAL YEAR AMOUNT
4th Quarter $.36
3rd Quarter .35 1/2
2nd Quarter .35 1/2
1st Quarter .35 1/2
1996 FISCAL YEAR AMOUNT
4th Quarter $.35 1/2
3rd Quarter .35
2nd Quarter .35
1st Quarter .35
HOLDERS
On December 1, 1997, UGI had 13,732 holders of record of Common Stock.
The information concerning restrictions on dividends required by Item
5 is incorporated in this Report by reference to Note 4 to the Company's
Consolidated Financial Statements which appears on pages 29 through 30 of its
1997 Annual Report to Shareholders.
-26-
29
ITEM 6. SELECTED FINANCIAL DATA
Year Ended Nine Months Ended
September 30, September 30,
--------------------------------------------- --------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- --------
(Unaudited)
(Millions of dollars, except per share amounts)
FOR THE PERIOD:
Income statement data:
Revenues $1,642.0 $1,557.6 $ 877.6 $ 762.2 $ 509.5 $ 486.8
======== ======== ======== ======== ======== ========
Income (loss) from:
Continuing operations $ 52.1 $ 39.5 $ 7.9 $ 37.4 $ 12.6 $ 15.3
Discontinued operations -- -- -- 7.6 -- 1.7
-------- -------- -------- -------- -------- --------
Income before extraordinary loss
and change in accounting 52.1 39.5 7.9 45.0 12.6 17.0
Extraordinary loss - debt restructuring -- -- (13.2) -- -- --
Change in accounting for
postemployment benefits -- -- (3.1) -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) $ 52.1 $ 39.5 $ (8.4) $ 45.0 $ 12.6 $ 17.0
======== ======== ======== ======== ======== ========
Earnings from continuing operations $ 1.57 $ 1.19 $ 0.24 $ 1.16 $ 0.41 $ 0.57
Earnings from discontinued operations -- -- -- 0.23 -- 0.06
-------- -------- -------- -------- -------- --------
Earnings before extraordinary loss
and change in accounting 1.57 1.19 0.24 1.39 0.41 0.63
Extraordinary loss - debt restructuring -- -- (0.40) -- -- --
Change in accounting for
postemployment benefits -- -- (0.10) -- -- --
-------- -------- -------- -------- -------- --------
Net earnings (loss) $ 1.57 $ 1.19 $ (0.26) $ 1.39 $ 0.41 $ 0.63
======== ======== ======== ======== ======== ========
Cash dividends declared $ 1.43 $ 1.41 $ 1.39 $ 1.36 $ 0.99 $ 0.96
======== ======== ======== ======== ======== ========
Total assets $2,151.7 $2,133.0 $2,152.3 $1,182.2 $1,211.4 $1,076.3
======== ======== ======== ======== ======== ========
Capitalization:
Debt:
Bank loans - Propane $ 28.0 $ 15.0 $ -- $ -- $ -- $ --
Bank loans - Utilities 67.0 50.5 42.0 17.0 -- --
Long-term debt
(including current maturities):
Propane 691.1 692.5 658.5 210.3 210.2 211.0
Utilities 169.3 174.8 206.3 175.6 200.4 196.2
Other 8.6 9.0 9.3 9.6 9.9 --
-------- -------- -------- -------- -------- --------
Total Debt 964.0 941.8 916.1 412.5 420.5 407.2
======== ======== ======== ======== ======== ========
Minority interest in AmeriGas Partners 266.5 284.4 318.9 -- -- --
UGI Utilities preferred stock subject
to mandatory redemption 35.2 35.2 35.2 35.2 33.2 35.2
Common stockholders' equity 376.1 377.6 380.5 424.3 414.5 375.5
-------- -------- -------- -------- -------- --------
Total capitalization $1,641.8 $1,639.0 $1,650.7 $ 872.0 $ 868.2 $ 817.9
======== ======== ======== ======== ======== ========
Ratio of capitalization:
Total debt 58.7% 57.5% 55.5% 47.3% 48.4% 49.8%
Minority interest 16.3% 17.4% 19.3% -- -- --
UGI Utilities preferred stock 2.1% 2.1% 2.1% 4.0% 3.8% 4.3%
Common stockholders' equity 22.9% 23.0% 23.1% 48.7% 47.8% 45.9%
-------- -------- -------- -------- -------- --------
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======== ======== ======== ======== ======== ========
-27-
30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations, entitled "Financial Review" and contained on pages 10
through 18 of UGI's 1997 Annual Report to Shareholders, is incorporated in this
Report by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedules referred to
in the Index contained on pages F-2 and F-3 of this Report are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During fiscal year 1997, UGI engaged a new independent auditor, Arthur
Andersen LLP. The information required by Item 9 is incorporated in this
Report by reference to UGI's Amendment No. 1 on Form 8-K/A to its Current
Report on Form 8-K dated July 11, 1997.
PART III: UGI MANAGEMENT AND SECURITY HOLDERS
ITEMS 10 THROUGH 12.
In accordance with General Instruction G(3), and except as set forth
below, the information required by Items 10, 11 and 12 is incorporated in this
Report by reference to the following portions of UGI's Proxy Statement, which
will be filed with the Securities and Exchange Commission by January 28, 1998:
CAPTIONS OF PROXY STATEMENT
INFORMATION INCORPORATED BY REFERENCE
----------- ------------------------------
Item 10. Directors and Executive Election of Directors - Nominees
Officers of Registrant.
Item 11. Executive Compensation. Compensation of Executive Officers
Compensation of Directors
Item 12. Security Ownership of Securities Ownership of Management
Certain Beneficial
Owners and Management.
Securities Ownership of Certain
Beneficial Owners
-28-
31
The information concerning the Company's executive officers
required by Item 10 is set forth below.
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Lon R. Greenberg 47 Chairman, Director, President
and Chief Executive Officer
Charles L. Ladner 59 Senior Vice President - Finance
and Chief Financial Officer
Brendan P. Bovaird 49 Vice President and General Counsel
Michael J. Cuzzolina 52 Vice President - Accounting
and Financial Control
Bradley C. Hall 44 Vice President - New Business Development
Richard L. Bunn 61 President and Chief Executive
Officer, UGI Utilities, Inc.
All officers are elected for a one-year term at the organizational
meetings of the respective Boards of Directors held each year.
There are no family relationships between any of the officers or
between any of the officers and any of the directors.
The following is a summary of the business experience of the executive
officers listed above during at least the last five years. For purposes of the
summary of business experience set forth below, references to "the Company,"
"UGI" and "the Board" prior to February 19, 1992 refer to Utilities (formerly,
UGI Corporation) or the Board of Directors of Utilities, respectively.
Lon R. Greenberg
Mr. Greenberg was elected Chairman of UGI effective August 1, 1996,
having been elected Chief Executive Officer effective August 1, 1995. He was
elected Director and President of UGI and a Director of UGI Utilities in July
1994. Mr. Greenberg was Senior Vice President - Legal and Corporate
Development (1989 to 1994), and also served as Vice President - Legal and
Corporate Development (1987 to 1989). Previously, he was Vice President -
Legal (1984 to 1987), General Counsel (1983 to 1994) and Secretary (1982 to
1988). He joined the Company in 1980 as Corporate Development Counsel. Mr.
Greenberg is also a director on the Mellon PSFS Advisory Board.
-29-
32
Charles L. Ladner
Mr. Ladner is Senior Vice President - Finance (since 1978). Since
April 1997, Mr. Ladner has also served as Vice President - Finance and
Accounting of AmeriGas Propane, Inc. He joined the Company in August 1973 as
Vice President - Finance.
Brendan P. Bovaird
Mr. Bovaird is Vice President and General Counsel of UGI (since April
1995). He is also Vice President and General Counsel of UGI Utilities, Inc.,
and AmeriGas Propane, Inc. (since April 1995). Mr. Bovaird previously served as
Division Counsel and Member of the Executive and Operations Committees of
Wyeth-Ayerst International Inc. (1992 to 1995) and Senior Vice President,
General Counsel and Secretary of Orion Pictures Corporation (1990 to 1991).
Michael J. Cuzzolina
Mr. Cuzzolina is Vice President - Accounting and Financial Control of
the Company (since 1984) and Treasurer of AmeriGas Propane, Inc. (since 1995).
He joined the Company in 1974 and has previously served as Treasurer and
Assistant Controller of the Company and as Vice President - Finance of
AmeriGas.
Bradley C. Hall
Mr. Hall was elected Vice President - New Business Development on
October 25, 1994, having been Vice President - Marketing and Rates, UGI
Utilities, Inc. Gas Division. He also serves as President of UGI Enterprises,
Inc. (since 1994). He joined the Company in 1982 and held various positions in
the Gas Division.
Richard L. Bunn
Mr. Bunn is President and Chief Executive Officer of UGI Utilities,
Inc., (since May 1992). Mr. Bunn began his career with UGI as an engineer in
the Electric Utility Division (1958).
-30-
33
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV: ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
(1), (2) The financial statements and financial statement
schedules incorporated by reference or included in this Report
are listed in the accompanying Index to Financial Statements
and Financial Statement Schedules set forth on pages F-2
through F-3 of this Report, which is incorporated herein by
reference.
(3) LIST OF EXHIBITS:
The exhibits filed as part of this Report are as follows
(exhibits incorporated by reference are set forth with the
name of the registrant, the type of report and registration
number or last date of the period for which it was filed, and
the exhibit number in such filing):
-31-
34
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
3.1 (Second) Amended and Restated Articles of UGI Amendment No. 1 on 3.(3)(a)
Incorporation of the Company Form 8 to Form 8-B
(4/10/92)
3.2 Bylaws of UGI as in effect since October UGI Form 10-K (9/30/95) 3.2
31, 1995.
- ------------------------------------------------------------------------------------------------------------------
4 Instruments defining the rights of
security holders, including indentures.
(The Company agrees to furnish to the
Commission upon request a copy of any
instrument defining the rights of holders
of its long-term debt not required to be
filed pursuant to Item 601(b)(4) of
Regulation S-K)
4.1 Rights Agreement, as amended as of April UGI Form 8-K 4.1
17, 1996, between the Company and Mellon (4/17/96)
Bank, N.A., successor to Mellon Bank
(East) N.A., as Rights Agent, and
Assumption Agreement dated April 7, 1992
4.2 The description of the Company's Common UGI Form 8-B/A 3.(4)
Stock contained in the Company's (4/17/96)
registration statement filed under the
Securities Exchange Act of 1934, as
amended
4.3 UGI's (Second) Amended and Restated
Articles of Incorporation and Bylaws
referred to in 3.1 and 3.2 above.
4.4 Utilities' Articles of Incorporation Utilities Form 8-K 4(a)
(9/22/94)
- ------------------------------------------------------------------------------------------------------------------
-32-
35
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
4.5 Note Agreement dated as of April 12, 1995 AmeriGas Form 10-Q 10.8
among The Prudential Insurance Company of Partners, L.P. (3/31/95)
America, Metropolitan Life Insurance
Company, and certain other institutional
investors and AmeriGas Propane, L.P., New
AmeriGas Propane, Inc. and Petrolane
Incorporated
4.6 First Amendment dated as of September 12, AmeriGas Form 10-K 4.5
1997 to Note Agreement dated as of April Partners, L.P. (9/30/97)
12, 1995
- ------------------------------------------------------------------------------------------------------------------
10.1 Service Agreement (Rate FSS) dated as of UGI Form 10-K 10.5
November 1, 1989 between Utilities and (9/30/95)
Columbia, as modified pursuant to the
orders of the Federal Energy Regulatory
Commission at Docket No. RS92-5-000
reported at Columbia Gas Transmission
Corp., 64 FERC Paragraph 61,060 (1993), order
on rehearing, 64 FERC Paragraph 61,365 (1993)
10.2 Service Agreement (Rate FTS) dated June Utilities Form 10-K (10)o.
1, 1987 between Utilities and Columbia, (12/31/90)
as modified by Supplement No. 1 dated
October 1, 1988; Supplement No. 2 dated
November 1, 1989; Supplement No. 3 dated
November 1, 1990; Supplement No. 4 dated
November 1, 1990; and Supplement No. 5
dated January 1, 1991, as further
modified pursuant to the orders of the
Federal Energy Regulatory Commission at
Docket No. RS92-5-000 reported at
Columbia Gas Transmission Corp., 64 FERC
Paragraph 61,060 (1993), order on rehearing, 64
FERC Paragraph 61,365 (1993)
- ------------------------------------------------------------------------------------------------------------------
-33-
36
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
10.3 Transportation Service Agreement (Rate Utilities Form 10-K (10)p.
FTS-1) dated November 1, 1989 between (12/31/90)
Utilities and Columbia Gulf Transmission
Company, as modified pursuant to the
orders of the Federal Energy Regulatory
Commission in Docket No. RP93-6-000
reported at Columbia Gulf Transmission
Co., 64 FERC Paragraph 61,060 (1993), order
on rehearing, 64 FERC Paragraph 61,365 (1993)
10.4 Amended and Restated Sublease Agreement UGI Form 10-K 10.35
dated April 1, 1988 between Southwest (9/30/94)
Salt Co. and AP Propane, Inc. (the
"Southwest Salt Co. Agreement")
10.5 Letter dated September 26, 1994 pursuant UGI Form 10-K 10.36
to Article 1, Section 1.2 of the (9/30/94)
Southwest Salt Co. Agreement re: option
to renew for period of June 1, 1995 to
May 31, 2000
10.6** UGI Corporation Directors Deferred UGI Form 10-K 10.39
Compensation Plan dated August 26, 1993 (9/30/94)
- ------------------------------------------------------------------------------------------------------------------
-34-
37
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
10.7** UGI Corporation 1992 Stock Option and UGI Form 10-Q (10)ee
Dividend Equivalent Plan, as amended May (6/30/92)
19, 1992
10.8** UGI Corporation Annual Bonus Plan dated UGI Form 10-Q 10.4
March 8, 1996 (6/30/96)
10.9** UGI Corporation Directors' Equity UGI Form 10-Q 10.1
Compensation Plan (3/31/97)
10.10** UGI Corporation 1997 Stock Option and UGI Form 10-Q 10.2
Dividend Equivalent Plan (3/31/97)
10.11** UGI Corporation 1992 Directors' Stock UGI Form 10-Q (10)ff
Plan (6/30/92)
*10.12** UGI Corporation Senior Executive Employee
Severance Pay Plan effective January 1, 1997
*10.13** Change of Control Agreement between UGI
Corporation and Lon R. Greenberg
*10.14** Form of Change of Control Agreement
between UGI Corporation and each of
Messrs. Bunn and Ladner
*10.15** Form of Change of Control Agreement
between UGI Corporation and each of
Messrs. Bovaird, Cuzzolina and Hall
*10.16** 1997 Stock Purchase Loan Plan
- ------------------------------------------------------------------------------------------------------------------
-35-
38
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
10.17 Amended and Restated Credit Agreement AmeriGas Form 10-K 10.1
dated as of September 15, 1997 among Partners, L.P. (9/30/97)
AmeriGas Propane, L.P., AmeriGas Propane,
Inc., Petrolane Incorporated, Bank of
America National Trust and Savings
Association, as Agent, First Union
National Bank, as Syndication Agent
and certain banks
10.18 Intercreditor and Agency Agreement dated AmeriGas Form 10-Q 10.2
as of April 19, 1995 among AmeriGas Partners, L.P. (3/31/95)
Propane, Inc., Petrolane Incorporated,
AmeriGas Propane, L.P., Bank of America
National Trust and Savings Association
("Bank of America") as Agent, Mellon
Bank, N.A. as Cash Collateral Sub-Agent,
Bank of America as Collateral Agent and
certain creditors of AmeriGas Propane,
L.P.
10.19 General Security Agreement dated as of AmeriGas Form 10-Q 10.3
April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
L.P., Bank of America National Trust and
Savings Association and Mellon Bank, N.A.
10.20 Subsidiary Security Agreement dated as of AmeriGas Form 10-Q 10.4
April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
L.P., Bank of America National Trust and
Savings Association as Collateral Agent
and Mellon Bank, N.A. as Cash Collateral
Agent
- ------------------------------------------------------------------------------------------------------------------
-36-
39
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
10.21 Restricted Subsidiary Guarantee dated as AmeriGas Form 10-Q 10.5
of April 19, 1995 by AmeriGas Propane, Partners, L.P. (3/31/95)
L.P. for the benefit of Bank of America
National Trust and Savings Association,
as Collateral Agent
10.22 Trademark License Agreement dated April AmeriGas Form 10-Q 10.6
19, 1995 among UGI Corporation, AmeriGas, Partners, L.P. (3/31/95)
Inc., AmeriGas Propane, Inc., AmeriGas
Partners, L.P. and AmeriGas Propane, L.P.
10.23 Trademark License Agreement, dated April AmeriGas Form 10-Q 10.7
19, 1995 among AmeriGas Propane, Inc., Partners, L.P. (3/31/95)
AmeriGas Partners, L.P. and AmeriGas
Propane, L.P.
10.24 Agreement dated as of May 1, 1996 between AmeriGas Form 10-K 10.2
TE Products Pipeline Company, L.P. and Partners, L.P. (9/30/97)
AmeriGas Propane, L.P.
- ------------------------------------------------------------------------------------------------------------------
*11 Statement re: Computation of Per Share
Earnings
- ------------------------------------------------------------------------------------------------------------------
*13.1 Pages 10 through 39 of 1997 Annual Report
to Shareholders
*13.2 Amendment No. 1 on Form 8-K/A to Form 8-K
dated July 11, 1997
- ------------------------------------------------------------------------------------------------------------------
*21 Subsidiaries of the Registrant
- ------------------------------------------------------------------------------------------------------------------
*23.1 Consent of Arthur Andersen LLP
re: Financial Statements of UGI
Corporation
*23.2 Consent of Arthur Andersen LLP
re: Financial Statements of AmeriGas
Propane, Inc.
*23.3 Consent of Coopers & Lybrand L.L.P.
- ------------------------------------------------------------------------------------------------------------------
-37-
40
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- ------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
- ------------------------------------------------------------------------------------------------------------------
*27 Financial Data Schedule
- ------------------------------------------------------------------------------------------------------------------
*99 Cautionary Statements Affecting
Forward-looking Information
- ------------------------------------------------------------------------------------------------------------------
* Filed herewith.
** As required by Item 14(a)(3), this exhibit is identified as a
compensatory plan or arrangement.
(b) Reports on Form 8-K:
During the last quarter of the 1997 fiscal year, the Company
filed a Current Report on Form 8-K dated July 11, 1997,
consisting of Items 4 and 7; and Amendment No. 1 on Form 8-K/A
to the Current Report on Form 8-K dated July 11, 1997,
consisting of Items 4 and 7.
-38-
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UGI CORPORATION
Date: December 16, 1997 By: Charles L. Ladner
-------------------------------
Charles L. Ladner
Senior Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 16, 1997, by the following persons
on behalf of the Registrant in the capacities indicated.
SIGNATURE TITLE
--------- -----
Lon R. Greenberg Chairman, President
- -------------------------- and Chief Executive Officer
Lon R. Greenberg (Principal Executive Officer)
and Director
Charles L. Ladner Senior Vice President -
- --------------------------- Finance and Chief Financial
Charles L. Ladner Officer (Principal
Financial Officer)
Michael J. Cuzzolina Vice President -
- -------------------------- Accounting and
Michael J. Cuzzolina Financial Control
(Principal Accounting
Officer)
Stephen D. Ban Director
- ----------------------------
Stephen D. Ban
Robert C. Forney Director
- ---------------------------
Robert C. Forney
-39-
42
SIGNATURE TITLE
--------- -----
Richard C. Gozon Director
- --------------------------
Richard C. Gozon
Director
- -----------------------------------
Anne Pol
Quentin I. Smith, Jr. Director
- ----------------------------
Quentin I. Smith, Jr.
James W. Stratton Director
- ---------------------------
James W. Stratton
David I. J. Wang Director
- ----------------------------
David I. J. Wang
-40-
43
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.12 UGI Corporation Senior Executive Employee Severance Pay Plan
10.13 Change of Control Agreement between UGI Corporation and Lon R.
Greenberg
10.14 Form of Change of Control Agreement between UGI Corporation and each of
Messrs. Bunn and Ladner
10.15 Form of Change of Control Agreement between UGI Corporation and each of
Messrs. Bovaird, Cuzzolina and Hall
10.16 1997 Stock Purchase Loan Plan
11 Statement re: Computation of Per Share Earnings
13.1 Pages 10 to 39 of 1997 Annual Report to Shareholders
13.2 Amendment No. 1 on Form 8-K/A to Form 8-K dated July 11, 1997
21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP re: Financial Statements of UGI
Corporation
23.2 Consent of Arthur Andersen LLP re: Financial Statements of AmeriGas
Propane, Inc.
23.3 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
99 Cautionary Statements Affecting Forward-looking Information
-41-
44
UGI CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 1997
F-1
45
UGI CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statements and supplementary data of UGI Corporation
and subsidiaries, together with the reports thereon of Arthur Andersen LLP dated
November 14, 1997 and Coopers & Lybrand L.L.P. dated November 22, 1996, listed
in the following index, are included in UGI's 1997 Annual Report to Shareholders
and are incorporated in this Form 10-K Annual Report by reference. With the
exception of the pages listed in this index and information incorporated in
Items 1, 2, 5, 7 and 8, the 1997 Annual Report to Shareholders is not to be
deemed filed as part of this Report.
Reference
-------------------------------------------
Annual
Report to
Form 10-K Shareholders
(page) (page)
------ ------
Reports of Independent Public Accountants:
On Consolidated Financial Statements 39
On Financial Statement Schedules F-4 to F-5
Report of Independent Public Accountants on the Consolidated Financial
Statements of AmeriGas Propane, Inc. and subsidiaries for the
fiscal year ended September 30, 1996 and the period April 19, 1995
to September 30, 1995 F-6
Financial Statements:
Consolidated Balance Sheets, September 30,
1997 and 1996 22 to 23
For the years ended September 30, 1997, 1996 and 1995:
Consolidated Statements of Income 21
Consolidated Statements of Cash Flows 24
Consolidated Statements of Stockholders'
Equity 25
F-2
46
UGI CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
Reference
-------------------------------------------
Annual
Report to
Form 10-K Shareholders
(page) (page)
------ ------
Notes to Consolidated Financial
Statements 26 to 38
Supplementary Data (unaudited):
Quarterly Data for the years ended
September 30, 1997 and 1996 38
Financial Statement Schedules:
For the years ended September 30, 1997, 1996 and 1995:
I - Condensed Financial
Information of Registrant
(Parent Company) S-1 to S-3
II - Valuation and Qualifying
Accounts S-4 to S-5
Annual Reports on Form 10-K/A
Annual Reports on Form 10-K/A for the UGI Utilities, Inc. and AmeriGas
Propane, Inc. savings plans will be filed by amendment within the time
period specified by Rule 15d-21(b).
All other financial statement schedules are omitted because the required
information is not present or not present in amounts sufficient to require
submission of the schedule or because the information required is included
elsewhere in the respective financial statements or notes thereto contained or
incorporated by reference herein.
F-3
47
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in UGI Corporation's annual report to
shareholders for the year ended September 30, 1997, incorporated by reference in
this Form 10-K, and have issued our report thereon dated November 14, 1997. Our
audit was made for the purpose of forming an opinion on those consolidated
financial statements taken as a whole. The schedules listed in the Index on
pages F-2 and F-3 are the responsibility of UGI Corporation's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. The
information for the year ended September 30, 1997 included on these schedules
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 14, 1997
F-4
48
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors
and Stockholders
UGI Corporation
Our report on the consolidated financial statements of UGI Corporation and
subsidiaries, which includes an explanatory paragraph regarding the Company's
change in its method of accounting for postemployment benefits in 1995, has been
incorporated by reference in this Form 10-K from page 39 of the 1997 Annual
Report to Shareholders of UGI Corporation and subsidiaries. In connection with
our audits of such financial statements, we have also audited the financial
statement schedules for the years ended September 30, 1996 and 1995 listed in
the index on pages F-2 and F-3 inclusive, of this Form 10-K.
In our opinion, the financial statement schedules (pages S-1 to S-5, inclusive)
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 22, 1996
F-5
49
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of AmeriGas Propane, Inc.:
We have audited the consolidated balance sheets of AmeriGas Propane, Inc. (a
Pennsylvania corporation and a wholly owned subsidiary of AmeriGas, Inc.) and
subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholder's equity and cash flows for the year ended
September 30, 1996 and the period April 19, 1995 to September 30, 1995 (not
presented herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
AmeriGas Propane, Inc. and subsidiaries as of September 30, 1996 and 1995 and
the results of their operations and their cash flows for the year ended
September 30, 1996 and the period April 19, 1995 to September 30, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 22, 1996
F-6
50
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Millions of dollars)
September 30,
1997 1996
------ ------
ASSETS
Current assets:
Cash and cash equivalents $ 20.1 $ 51.4
Short-term investments -- 23.1
Accounts receivable 0.5 0.4
Deferred income taxes 0.2 0.2
Prepaid expenses and other current assets 0.1 0.2
------ ------
Total current assets 20.9 75.3
Investments in subsidiaries 376.2 326.5
Other assets 4.0 1.0
------ ------
Total assets $401.1 $402.8
====== ======
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable $ 10.3 $ 12.2
Accrued liabilities 13.2 11.7
------ ------
Total current liabilities 23.5 23.9
Noncurrent liabilities 1.5 1.3
Common stockholders' equity:
Common Stock, without par value (authorized - 100,000,000 shares;
issued - 33,198,731 shares) 393.7 392.0
Accumulated deficit (9.2) (12.9)
------ ------
384.5 379.1
Less treasury stock, at cost 8.4 1.5
------ ------
Total common stockholders' equity 376.1 377.6
------ ------
Total liabilities and common stockholders' equity $401.1 $402.8
====== ======
S-1
51
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF INCOME
(Millions of dollars, except per share amounts)
Year Ended
September 30,
------------------------------
1997 1996 1995
------ ------ ------
Revenues $ -- $ -- $ --
Costs and expenses:
Operating and administrative expenses 12.2 10.1 16.4
Petrolane management fee income -- -- (6.8)
Miscellaneous income, net (14.8) (13.4) (16.7)
------ ------ ------
(2.6) (3.3) (7.1)
------ ------ ------
Operating income 2.6 3.3 7.1
Interest income -- 0.1 0.2
------ ------ ------
Income before income taxes 2.6 3.4 7.3
Income taxes 1.1 1.4 3.2
------ ------ ------
Income before equity in income
of unconsolidated subsidiaries
and equity investees 1.5 2.0 4.1
Equity in continuing operations
of unconsolidated subsidiaries 50.6 37.5 3.7
Equity in Petrolane -- -- 0.1
------ ------ ------
Income before extraordinary loss and change
in accounting for postemployment benefits 52.1 39.5 7.9
Extraordinary loss - debt restructuring - subsidiaries -- -- (13.2)
Change in accounting for postemployment benefits - subsidiaries -- -- (3.1)
------ ------ ------
Net income (loss) $ 52.1 $ 39.5 $ (8.4)
====== ====== ======
Earnings per common share:
Earnings before extraordinary loss and change
in accounting for postemployment benefits $ 1.57 $ 1.19 $ 0.24
Extraordinary loss - debt restructuring - subsidiaries -- -- (0.40)
Change in accounting for postemployment benefits - subsidiaries -- -- (0.10)
------ ------ ------
Net earnings (loss) $ 1.57 $ 1.19 $(0.26)
====== ====== ======
S-2
52
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(Millions of dollars)
Year Ended
September 30,
----------------------------
1997 1996 1995
------ ------ ------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (a) $ 77.5 $ 96.6 $ 25.0
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment -- -- (0.2)
Net repayments from unconsolidated subsidiaries -- -- 0.5
Investments in unconsolidated subsidiaries (74.6) (1.1) (0.6)
Other 20.6 (21.1) (2.0)
------ ------ ------
Net cash used by investing activities (54.0) (22.2) (2.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Common Stock (47.2) (46.4) (45.2)
Issuance of Common Stock 11.7 11.3 10.1
Purchase of Common Stock (19.2) (7.1) --
------ ------ ------
Net cash used by financing activities (54.7) (42.2) (35.1)
------ ------ ------
Cash and cash equivalents increase (decrease) $(31.2) $ 32.2 $(12.4)
====== ====== ======
Cash and cash equivalents:
End of period $ 20.1 $ 51.3 $ 19.1
Beginning of period 51.3 19.1 31.5
------ ------ ------
Increase (decrease) $(31.2) $ 32.2 $(12.4)
====== ====== ======
(a) Includes dividends received from unconsolidated subsidiaries of $75.8,
$95.2 and $22.1, respectively, for the years ended September 30, 1997, 1996
and 1995.
Supplemental disclosure of non-cash investing activities:
During the year ended September 30, 1995, UGI Corporation contributed a $10
noninterest bearing demand note to its wholly owned subsidiary, AmeriGas,
Inc. During the year ended September 30, 1996, the note was contributed to
AmeriGas Propane, Inc., a subsidiary of AmeriGas, Inc.
S-3
53
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Millions of dollars)
Charged
Balance at (credited) Balance at
beginning to costs and end of
of year expenses Other year
--------- ------------ ----------- ----------
YEAR ENDED SEPTEMBER 30, 1997
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $10.6 $11.3 $(10.6)(1) $11.3
===== =====
Allowance for amortization of deferred
financing costs - Propane $ 2.2 $ 1.6 $ -- $ 3.8
===== =====
Allowance for amortization of
other deferred costs - Propane $ 2.8 $ 1.1 $ -- $ 3.9
===== =====
Other reserves:
Self-insured property and casualty liability $47.7 $11.3 $(10.5)(2) $48.5
===== =====
Insured property and casualty liability $19.0 $ 3.3 $(20.5)(2) $ 1.8
===== =====
Environmental, litigation and other $16.1 $ 7.6 $ (1.1)(2) $22.6
===== =====
YEAR ENDED SEPTEMBER 30, 1996
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 7.3 $10.5 $ (7.2)(1) $10.6
===== =====
Allowance for amortization of deferred
financing costs - Propane $ 0.7 $ 1.5 $ -- $ 2.2
===== =====
Allowance for amortization of
other deferred costs - Propane $ 1.8 $ 1.0 $ -- $ 2.8
===== =====
Other reserves:
Self-insured property and casualty liability $48.5 $14.0 $(14.8)(2) $47.7
===== =====
Insured property and casualty liability $11.7 $ 6.8 $ 0.5 (4) $19.0
===== =====
Environmental, litigation and other $26.1 $(7.1) $ (2.9)(2) $16.1
===== =====
S-4
54
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)
(Millions of dollars)
Charged
Balance at (credited) Balance at
beginning to costs and end of
of year expenses Other year
--------- ------------ ----------- ----------
YEAR ENDED SEPTEMBER 30, 1995
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 4.7 $ 5.4 $(7.3)(1) $ 7.3
===== =====
4.5 (3)
Allowance for amortization of deferred
financing costs - Propane $ -- $ 0.7 $ -- $ 0.7
===== =====
Allowance for amortization of
other deferred costs - Propane $ 6.3 $ 1.6 $ 0.4 (3) $ 1.8
===== =====
(6.5)(4)
Other reserves:
Self-insured property and casualty liability $13.6 $11.3 $(9.6)(2) $48.5
===== =====
33.0 (3)
0.2 (4)
Insured property and casualty liability $ -- $14.9 $(2.1)(2) $11.7
===== =====
(1.1)(4)
Environmental, litigation and other $ 0.5 $ 0.2 $32.3 (3) $26.1
===== =====
(6.3)(4)
(0.6)(2)
(1) Uncollectible accounts written off, net of recoveries.
(2) Payments.
(3) Represents amounts for Petrolane Incorporated (Petrolane) as a result
of the purchase on April 19, 1995 of the 65% of the common stock of
Petrolane not already owned by UGI or its subsidiary AmeriGas, Inc.
(4) Other adjustments.
S-5