Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Form 10-K 405 Ugi Corporation 50 193K
3: EX-10.13 Ugi Corp. 2000 Directors' Stock Option Plan 8 34K
4: EX-10.14 Ugi Corporation 2000 Stock Incentive Plan 14 57K
5: EX-10.28 Pledge Agreement Dated Sept 1999 Between Eastfield 8 26K
6: EX-10.29 Pledge Agreement Dated Sept 1999 Between Eurogas 7 24K
7: EX-10.30 Form of Guarantee Agreement Relating to Euro 74 M 6 25K
8: EX-10.31 Form of Guarantee Agreement Relating to Euro 16 M 6 25K
9: EX-10.32 Form of Guarantee Agreement Relating to Euro 15 M 6 24K
10: EX-10.33 Description of Change of Control Messrs. Greenberg 2± 10K
11: EX-10.34 Description of Change of Control, Mr. Chaney 1 9K
2: EX-10.5 Letter Dated July 8, 1998 Pursuant to Article 1 2 13K
12: EX-13.1 Pages 13 to 43 of the 1999 Annual Report 61± 270K
13: EX-21 Subsidiaries of the Registrant 2 12K
14: EX-23.1 Consent of Arthur Andersen LLP 1 8K
15: EX-27 Financial Data Schedule 1 11K
================================================================================
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, 1999
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:
[Download Table]
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, 1999 was $544,095,354.
At December 1, 1999 there were 27,330,251 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, 1999 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 29, 2000 are incorporated
by reference into Part III of this Form 10-K.
================================================================================
TABLE OF CONTENTS
[Enlarge/Download Table]
PART I BUSINESS PAGE
Items 1 and 2 Business and Properties.................................................. 1
AmeriGas Propane 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......................................................... 24
PART II SECURITIES AND FINANCIAL INFORMATION
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters.......................................... 24
Item 6 Selected Financial Data.................................................. 26
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations............................ 27
Item 7A Quantitative and Qualitative Disclosures About Market Risk............... 27
Item 8 Financial Statements and Supplementary Data.............................. 27
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure....................... 27
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........................... 28
PART IV ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K.................................................. 31
Signatures............................................................... 37
Index to Financial Statements and
Financial Statement Schedules............................................ F-2
(i)
PART I: BUSINESS
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
UGI Corporation is a holding company that operates propane distribution,
gas and electric utility, energy marketing and related businesses through
subsidiaries.
Our majority-owned subsidiary, AmeriGas Partners, L.P., a Delaware limited
partnership ("AmeriGas Partners" or the "Partnership"), conducts the nation's
largest retail propane distribution business through its 98.99% owned subsidiary
AmeriGas Propane, L.P. (the "Operating Partnership"). We have been in the retail
propane distribution business for over 40 years, operating through various
subsidiaries. The Partnership's sole general partner is our subsidiary, AmeriGas
Propane, Inc. ("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." We have a 58.4% combined
ownership interest in the Partnership and the Operating Partnership. The
remaining interest is publicly held.
Our subsidiary UGI Utilities, Inc. ("Utilities") owns and operates a
natural gas distribution utility and an electric distribution utility in eastern
Pennsylvania. Effective October 1, 1999, Utilities' electric generation assets
were transferred to its non-utility subsidiary, UGI Development Company
("UGID"). Utilities is the successor to a business founded in 1882. It serves
265,000 natural gas customers and 61,000 electric customers.
Our subsidiary UGI Enterprises, Inc. ("Enterprises") conducts domestic and
international businesses through subsidiaries. The domestic businesses include
retail gas and electric marketing, and a supercenter retailer of quality hearth,
spa and grill products, Hearth USA(TM). In September 1999, Enterprises acquired
FLAGA Beteiligungs Aktiengesellschaft, the largest retail propane distributor in
Austria. Enterprises also has two international energy-related joint ventures.
We expect Enterprises to continue to evaluate and develop new related and
complementary business opportunities for us.
UGI was incorporated in Pennsylvania in 1991. UGI is not subject to
regulation by the Pennsylvania Public Utility Commission ("PUC"). It is also
exempt from registration as a holding company and not otherwise subject to the
Public Utility Holding Company Act of 1935, except for Section 9(a)(2), which
regulates the acquisition of voting securities of an electric or gas utility
company. Our executive offices are located at 460 North Gulph Road, King of
Prussia, Pennsylvania 19406, and our telephone number is (610) 337-1000. In this
report, the terms "Company" and "UGI," as well as the terms "our," "we," and
"its," are sometimes used as abbreviated references to UGI Corporation or,
collectively, UGI Corporation and its consolidated subsidiaries. Similarly, the
terms "AmeriGas Partners" and the "Partnership" are sometimes used as
abbreviated references to AmeriGas Partners, L.P. or, collectively, AmeriGas
Partners, L.P. and its subsidiaries, including the Operating Partnership.
-1-
BUSINESS STRATEGY
In July 1999, following a comprehensive study, we announced our intention
to refocus our strategic direction on growing our existing natural gas, electric
and propane businesses while seeking additional related and complementary growth
opportunities. We plan to employ our core competencies from our existing
businesses, as well as use our national scope, extensive asset base and access
to customers, to accelerate growth in related and complementary businesses, both
domestic and international. We expect to achieve compound annual earnings per
share growth of 6% to 10% over the next five years and we have set a 20%
earnings contribution target for our new businesses over the same period.
During September 1999, we announced the acquisition of FLAGA Beteiligungs
Aktiengesellschaft ("FLAGA") by Enterprises. FLAGA is the largest retail propane
distributor in Austria and one of the largest distributors in the Czech
Republic. On September 10, 1999, Hearth USA(TM) held its grand opening in
Rockville, Maryland. Hearth USA(TM) is the first retail supercenter for quality
hearth, spa and grill products.
Our domestic propane distribution business is conducted through AmeriGas
Partners. The Partnership is the largest retail propane distributor in the
United States, based on fiscal year 1999 retail volume of 783 million gallons.
The Partnership operates from approximately 600 district locations in 46 states.
AmeriGas Propane manages the Partnership. Although our consolidated financial
statements include 100% of the Partnership's revenues, assets and liabilities,
our net income reflects only our 58.4% share in the income or loss of the
Partnership, due to the publicly-owned limited partner interest.
AMERIGAS PROPANE BUSINESS
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, motor fuel and industrial users to whom natural gas is not readily
available. 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 generation portion of 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, we are unable to predict the extent to which the price
of electricity may drop. Therefore,
-2-
we cannot predict the ultimate impact that electric utility deregulation may
have on propane's existing competitive price advantage over electricity.
PRODUCTS, SERVICES AND MARKETING
As of September 30, 1999, the Partnership distributed propane to
approximately 969,000 customers from approximately 600 district locations in 46
states. The Partnership's operations are located primarily in the Northeast,
Southeast, Great Lakes and West Coast regions of the United States. The
Partnership also sells, installs and services propane appliances, including
heating systems. In certain markets, the Partnership also installs and services
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. 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, motor fuel, agricultural and wholesale. Approximately 80%
of the Partnership's 1999 fiscal year sales (based on gallons sold) were to
retail accounts (33% to residential customers, 29% to industrial/commercial
customers, 11% to motor fuel customers and 7% to agricultural customers), and
approximately 20% were to wholesale customers. Sales to residential customers in
fiscal 1999 represented approximately 41% of retail gallons sold and 50% 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.
Our PPX Prefilled Propane Xchange(R) program ("PPX(R)") enables consumers to
exchange their empty 20-pound propane barbecue grill cylinders at various retail
locations such as home centers and convenience stores. Sales of PPX(R) cylinders
to retailers are included in the commercial/industrial market. 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. As a motor fuel, propane is burned in internal
combustion engines that power over-the-road vehicles, forklifts and stationary
engines. Agricultural uses include tobacco curing and crop drying.
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 3,000 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 with capacities of 5 to 30 gallons. Some of these deliveries are made
to the customer's location, where empty cylinders are either picked up for
replenishment or filled in place. The Partnership continues
-3-
to expand its PPX(R) program. PPX(R) is availabLe at approximately 6,000 retail
locations throughout the country. In its wholesale operations, the Partnership
principally sells propane to large industrial end-users and other propane
distributors.
PROPANE SUPPLY AND STORAGE
Supplies of propane from the Partnership's sources historically have been
readily available. During the year ended September 30, 1999, the Partnership
purchased over 65% of its propane from 10 suppliers, including the Shell Oil
companies (approximately 16%), Dynegy (approximately 15%), and the Amoco
companies (approximately 14%). Management believes that if supplies from these
sources were interrupted, the Partnership 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 Shell, Dynegy and Amoco, no single supplier provided more
than 10% of the Partnership's total propane supply in fiscal year 1999. 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 200 sources of supply, and it also makes purchases
on the spot market. The Partnership purchases its propane supplies from domestic
and international suppliers. Over 80% of propane purchases by the Partnership in
the 1999 fiscal year were on a contractual basis under one- or two-year
agreements subject to annual review. More than 70% 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, Utah 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 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 risk management techniques designed to control
product costs, and by passing product cost increases through to end users.
The Partnership expects to be able to secure adequate product supply for
its customers during fiscal year 2000. Periods of severe cold weather, supply
interruptions, or other unforeseen events, however, could result in rapid
increases in product cost. The General Partner has adopted supply acquisition
and product price risk management practices to reduce the effect of price
volatility on product costs. These practices currently include the use of summer
storage, prepaid contracts for future product delivery and derivative commodity
instruments such as options and
-4-
propane price swaps. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Market Risk Disclosures."
The following graph shows the average 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
(CENTS PER GALLON)
[Download Table]
Mont Belvieu Conway
Oct-94 $0.32.5952 $0.29.5298
Nov-94 $0.34.6063 $0.30.6938
Dec-94 $0.33.4345 $0.30.1607
Jan-95 $0.32.8338 $0.29.551
Feb-95 $0.31.8687 $0.28.9253
Mar-95 $0.32.8372 $0.30.0111
Apr-95 $0.32.3126 $0.30.0406
May-95 $0.32.7534 $0.31.2293
Jun-95 $0.31.842 $0.31.4955
Jul-95 $0.30.8108 $0.31.3834
Aug-95 $0.31.3433 $0.33.1724
Sep-95 $0.31.3608 $0.32.4765
Oct-95 $0.30.946 $0.32.7784
Nov-95 $0.30.9531 $0.32.7406
Dec-95 $0.35.3219 $0.38.1719
Jan-96 $0.36 $0.36.2415
Feb-96 $0.40.8563 $0.37.7688
Mar-96 $0.37.2292 $0.36.0119
Apr-96 $0.35.5744 $0.34.1071
May-96 $0.34.9233 $0.34.4773
Jun-96 $0.34.925 $0.36.3531
Jul-96 $0.35.6339 $0.37.2679
Aug-96 $0.38.4403 $0.37.9773
Sep-96 $0.47.0156 $0.44.7844
Oct-96 $0.51.5734 $0.51.5272
Nov-96 $0.58.0493 $0.63.4112
Dec-96 $0.61.0446 $0.84.2917
Jan-97 $0.47.4545 $0.63.392
Feb-97 $0.38.7105 $0.39.0197
Mar-97 $0.38.5 $0.37.2563
Apr-97 $0.34.875 $0.35.2614
May-97 $0.35.3095 $0.36.4762
Jun-97 $0.34.4286 $0.35.8631
Jul-97 $0.34.9063 $0.34.6278
Aug-97 $0.37.0268 $0.36.5268
Sep-97 $0.38.6786 $0.37.9524
Oct-97 $0.39.8261 $0.37.3207
Nov-97 $0.35.9479 $0.35.0035
Dec-97 $0.33.571 $0.31.3636
Jan-98 $0.30.0656 $0.28.2063
Feb-98 $0.29.7862 $0.28.3237
Mar-98 $0.27.3892 $0.27.8381
Apr-98 $0.29.0565 $0.29.4702
May-98 $0.27.4188 $0.27.8231
Jun-98 $0.24.4205 $0.24.8409
Jul-98 $0.24.5398 $0.24.5483
Aug-98 $0.24.1161 $0.23.8661
Sep-98 $0.24.8304 $0.24.0417
Oct-98 $0.25.7188 $0.24.5682
Nov-98 $0.24.7862 $0.23.2007
Dec-98 $0.20.8949 $0.18.7188
Jan-99 $0.21.7467 $0.19.6086
Feb-99 $0.22.4342 $0.20.5822
Mar-99 $0.24.1005 $0.23.4022
Apr-99 $0.28.2619 $0.27.5774
May-99 $0.28.3063 $0.26.8813
Jun-99 $0.30.9517 $0.28.679
Jul-99 $0.37.2619 $0.34.622
Aug-99 $0.40.5085 $0.37.5597
Sep-99 $0.43.1786 $0.42.4048
COMPETITION
Propane competes 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, service, 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, we are unable to predict the ultimate impact that the
deregulation of electric generation may have on propane's current competitive
price advantage. Since the 1970s, many new homes have been 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 during
interruptions in natural
-5-
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. In recent years, some rural electric cooperatives and fuel oil
distributors have expanded their businesses to include propane distribution and
the Partnership competes with them as well. Based on the most recent annual
survey by the American Petroleum Institute, the 1997 domestic retail market for
propane (annual sales for other than chemical uses) was approximately 10.3
billion gallons and, based on LP-GAS magazine rankings, 1998 sales volume of the
ten largest propane companies (including AmeriGas Partners) represented
approximately 40% of domestic retail sales. Management believes the
Partnership's 1999 retail volume represents approximately 8% of the domestic
retail market. The ability to compete effectively depends on supplying customer
service, maintaining competitive retail prices and controlling operating
expenses.
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 may experience greater than normal customer losses in
certain years when competitive conditions reflect any of these factors.
In the motor fuel market, propane competes with gasoline and diesel fuel.
When gasoline prices are high relative to propane, propane competes effectively.
Wholesale propane distribution is a highly competitive, low margin business.
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, 1999, the Partnership owned approximately 81% 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. In Rhode Island, the Partnership
leases storage with a 400,000 barrel capacity.
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. As of September 30, 1999, the
Partnership operated a fleet of approximately 150 transport trucks, 40% of which
are leased. It owned approximately 315 transport trailers and leased over 400
railroad tank cars. In addition, the Partnership fleet included over 2,400
bobtail and rack trucks, and approximately 1,800 other delivery and service
vehicles. Approximately 41% of these vehicles were owned. Other assets owned at
September 30, 1999 included more than one million stationary
-6-
storage tanks with typical capacities of 100 to 1,000 gallons and over 1.1
million portable propane cylinders with typical capacities of 5 to 100 gallons.
The Partnership also owned more than 2,400 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(R),"
"America's Propane Company(R)" and "PPX Prefilled Propane Xchange(R)" trade
names and related service marks. UGI owns, directly or indirectly, all the
right, title and interest in the "AmeriGas" and "Petrolane(R)" trade names and
related trade and service marks. ThE General Partner owns all right, title and
interest in the "America's Propane Company" and "PPX Prefilled Propane Xchange"
trade names and related service marks. The Partnership has an exclusive (except
for use by UGI, AmeriGas, Inc. and the General Partner), royalty-free license to
use these names and trade and service marks. UGI, Petrolane Incorporated and the
General Partner each has the option to terminate its respective license
agreement on 12 months prior notice (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, Petrolane and the General
Partner each has the option to terminate its license agreement upon payment of a
fee equal to the fair market value of the licensed trade names. UGI has a
similar termination option, however, UGI must provide 12 months prior notice in
addition to paying the fee.
The General Partner has discontinued widespread use of the "Petrolane"
trade name and conducts Partnership operations almost exclusively under the
"AmeriGas," "America's Propane Company" and "PPX Prefilled Propane Xchange"
trade names and related service marks.
SEASONALITY
Because many customers use propane for heating purposes, the Partnership's
retail sales volume is seasonal, with approximately 56% of the Partnership's
fiscal year 1999 retail sales volume and approximately 83% of its earnings
before interest expense, income taxes, depreciation and amortization occurring
during the five-month peak heating season from November through March. As a
result of this seasonality, sales are concentrated in the Partnership's first
and second fiscal quarters (October 1 through March 31). 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. For
historical information on national weather statistics, 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
-7-
propane. These laws include, among others, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or, the "Superfund Law"), 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 imposes
joint and several liability on certain classes of persons considered to have
contributed to the release or threatened release of a "hazardous substance" into
the environment without regard to fault or the legality of the original conduct.
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 Notes 1 and 13 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. 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 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"). During
1999, the Research and Special Programs Administration ("RSPA"), a division of
the DOT, issued new regulations applicable to cargo tanks used to transport
propane and procedures for loading propane on and off cargo tanks. Specific
provisions include, among other things, revised attendance requirements for
unloading propane and new requirements for emergency discharge control
equipment, such as remote control devices that enable the driver to stop the
unloading process at a distance from the vehicle and passive systems that will
shut down loading and unloading without human intervention. The Partnership is
in compliance with the new regulations and is evaluating the equipment that is
being developed to comply with the passive systems requirements that will become
effective in July 2001.
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 gas
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-
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, 1999, the General
Partner had 5,026 employees, including 277 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 and expenses.
-9-
UTILITY OPERATIONS
Our utility business is conducted by UGI Utilities, Inc. a wholly owned
subsidiary. Utilities operates its 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.
GAS UTILITY
SERVICE AREA; REVENUE ANALYSIS
Gas Utility distributes natural gas to approximately 265,000 customers in
portions of 14 eastern and southeastern Pennsylvania counties through its
distribution system of approximately 4,400 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 specialty metals, aluminum and
glass. For the fiscal years ended September 30, 1999, 1998 and 1997, revenues of
Gas Utility accounted for approximately 25%, 24%, and 24%, respectively, of our
total consolidated revenues.
System throughput (the total volume of gas sold to or transported for
customers within Gas Utility's distribution system) for the 1999 fiscal year was
approximately 76.1 billion cubic feet ("bcf"). System sales of gas accounted for
approximately 40% of system throughput, while gas transported for commercial and
industrial customers (who bought their gas from others) accounted for
approximately 60% of system throughput. Based on industry data for 1998,
residential customers account for approximately 35% of total system throughput
by local gas distribution companies in the United States. By contrast, for the
1999 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 and Transcontinental Gas Pipeline Corporation.
-10-
GAS SUPPLY CONTRACTS
During the 1999 fiscal year, Gas Utility purchased approximately 32.5 bcf
of natural gas for sale to customers. Approximately 30.2 bcf or 93% of the
volumes purchased were supplied under agreements with six major suppliers of
natural gas. The remaining 2.3 bcf or 7% of gas purchased was supplied by
producers and marketers under other arrangements, including multi-month
agreements at spot prices. In fiscal year 2000, Gas Utility expects to obtain
necessary gas supplies under contracts no longer than 12 months in duration. See
"Natural Gas Choice and Competition Act."
SEASONAL VARIATION
Because many of its customers use gas for heating purposes, Gas Utility's
sales are seasonal, with approximately 58% of fiscal year 1999 throughput and
approximately 74% of earnings before interest expense, income taxes,
depreciation and amortization occurring during the winter season from November
through March.
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
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 14 years, Gas Utility provides transportation services for
those sales. Pennsylvania has enacted legislation which requires a customer
choice option for retail purchasers of natural gas. See "Natural Gas Choice and
Competition Act."
Commercial and industrial customers representing approximately 42% of Gas
Utility's transportation system throughput (22% of transportation revenues) have
the ability to switch to an alternate fuel at any time and, therefore, are
served on an interruptible basis under rates which are competitively priced with
respect to their alternate fuel. Gas Utility's margins from these customers,
therefore, are affected by the difference, or "spread," between the customers'
delivered cost of gas and the customers' delivered alternate fuel cost. In
addition, other customers representing 31% of transportation system throughput
(19% of transportation revenues) have locations which afford them the option,
although none has exercised it, of seeking transportation service directly from
interstate pipelines, thereby bypassing Gas Utility. The majority of customers
in the latter group are served under transportation contracts having three- to
ten-year terms. Included in these two groups are Utilities' ten largest
customers in terms of annual volume. All of these customers have contracts with
Utilities, seven of which extend into fiscal year 2002. No single customer
represents, or is anticipated to represent, more than 1% of the total revenues
of Gas Utility.
-11-
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 through fiscal year 2000. Supply mix is diversified, market priced,
and delivered pursuant to a number of long- and short-term firm transportation
and storage arrangements, including transportation contracts held by some of
Utilities' larger customers. Gas Utility also operates propane air and liquefied
natural gas facilities to meet winter peak service requirements.
During the 1999 fiscal year, Gas Utility supplied transportation service to
three major cogeneration installations and two utility generation sites. 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
7,130 additional residential heating customers during the 1999 fiscal year, a
modest increase from the previous year. Of those new customers, new home
construction accounted for a record 5,692 heating customers, an increase of
approximately 16% from the prior year. 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, accounted for the balance
of the additions. The total number of new commercial and industrial customers
was 1,174.
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's objective in negotiations with interstate pipeline and
natural gas suppliers, and in litigation before regulatory agencies, is to
assure availability of supply, transportation and storage alternatives to serve
market requirements at the lowest cost possible, taking into account the need
for security of supply. Consistent with that objective, Gas Utility negotiates
the terms of firm transportation capacity on all pipelines serving Gas Utility,
arranges for appropriate storage and peak-shaving resources, negotiates with
producers for competitively priced gas purchases and aggressively participates
in regulatory proceedings related to transportation rights, costs of service and
gas costs.
NATURAL GAS CHOICE AND COMPETITION ACT
Since December 1982, Gas Utility has provided transportation service for
commercial and industrial customers who purchase their gas from others. As noted
earlier, this unbundled service accounted for approximately 60% of Gas Utility's
system throughput in fiscal year 1999.
-12-
In June 1999, Governor Ridge signed into law the Natural Gas Choice and
Competition Act ("Gas Competition Act") which requires local natural gas
distribution companies to extend the availability of gas transportation service
to residential and small commercial customers by July 1, 2000 pursuant to a
PUC-approved plan. Gas Utility submitted its plan to the PUC on October 1, 1999.
We expect the PUC to act on the plan in the spring of 2000. Gas Utility designed
its plan to ensure reliability of gas supply deliveries to Gas Utility on behalf
of residential and small commercial customers. The plan also provides for
recovery of costs associated with Gas Utility's existing pipeline capacity and
gas supply contracts. If the plan is approved substantially as filed, we do not
expect that the Gas Competition Act will have a material adverse impact on our
financial condition or results of operations. See Note 3 to the Consolidated
Financial Statements included in the Company's 1999 Annual Report and
incorporated by reference in this Report.
ELECTRIC UTILITY
ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT
On January 1, 1997, Pennsylvania's Electricity Generation Customer Choice
and Competition Act ("Electricity Customer Choice Act") became effective. The
Electricity Customer Choice Act permits all Pennsylvania retail electric
customers to choose their electric generation supplier. Pursuant to the Act, all
electric utilities were required to file restructuring plans with the PUC which,
among other things, included unbundled 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. 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
Electricity 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 prices for electric generation as long as stranded costs are being
recovered through the CTC. In accordance with the restructuring proceedings
discussed below, Utilities expects to collect a CTC from all distribution
customers until December 31, 2002. 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.
On June 19, 1998, the PUC entered its Opinion and Order (the "Restructuring
Order") in Electric Utility's restructuring proceeding under the Electricity
Customer Choice Act. The Restructuring Order authorized Electric Utility to
recover from its customers approximately $32.5 million in stranded costs (on a
full revenue requirements basis, which includes all income and gross receipts
taxes) over a four-year period commencing January 1, 1999 through a CTC,
together with carrying charges on unrecovered balances of 7.94%. Electric
Utility's recoverable stranded costs include approximately $8.7 million for the
termination of a 1993 power purchase agreement with Foster Wheeler Penn
Resources, Inc., an independent power producer. Since January 1, 1999, all of
Electric Utility's customers have been permitted to select an alternative
electric generation supplier. Customers choosing another supplier currently
receive an average generation "shopping credit" (developed from system-wide
generation rates) of 3.67 cents per kilowatt hour ("kwh"), which will
-13-
remain in effect through December 31, 2000. The shopping credit will increase to
4.3 cents per kwh in calendar years 2001 and 2002.
As noted above, Electric Utility's power generation rates are capped until
December 31, 2002. Because Electric Utility has discontinued regulatory
accounting, which permitted it to adjust customer charges to reflect changes in
Electric Utility's power costs, quarterly results have been, and future results
are likely to be, more volatile, due in large part to seasonal variations in
such costs. Results will also be affected by the number of customers who choose
to purchase their power from other suppliers during any given time period.
During fiscal 1999, Utilities received PUC approval to transfer its electric
generation assets to a non-utility subsidiary. These electric generation assets,
consisting principally of Utilities' Hunlock generating station and its 1.11%
interest in the Conemaugh generating station, were transferred effective October
1, 1999 to UGID, a wholly-owned subsidiary of Utilities. UGID has been granted
"Exempt Wholesale Generator" status by FERC.
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
1999 fiscal year, about 52% of sales volume came from residential customers, 35%
from commercial customers and 13% from industrial customers. Electricity
transported for customers who purchased their power from others pursuant to the
Electricity Customer Choice Act represented approximately 5% of this sales
volume. For the 1999, 1998 and 1997 fiscal years, revenues of Electric Utility
accounted for approximately 5%, 5%, and 4%, respectively, of our total
consolidated revenues.
SOURCES OF SUPPLY
Electric Utility distributes both electricity that it purchases from others
(including UGID) and, since November 1, 1997, electricity that customers
purchase from other suppliers. Through UGID, Utilities owns and operates the
Hunlock generating station located near Kingston, Pennsylvania ("Hunlock
Station"); it also 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 50%
of its energy requirements during the 1999 fiscal year.
Effective August 1, 1999, Utilities and PP&L terminated their 1992 power
supply agreement and entered into a new agreement. Through December 2000, PP&L
will supply approximately 30% of Electric Utility's energy requirements and,
through February 2001, PP&L will supply all of Electric Utility's capacity
requirements in excess of its capacity from other sources. Electric Utility
expects to enter into short-term contracts to meet the balance of its energy
needs.
-14-
UGID is evaluating the potential of the Hunlock Station site, and currently
expects to operate the Hunlock plant through the next few years. Decisions
regarding the operation of Hunlock Station will be highly dependent on market
prices for power.
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. Both the Conemaugh Station and the Hunlock
Station are in material compliance with these emission standards.
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. Future actions of the
Commission may cause the DER to modify its regulations for nitrous oxides and
thereby affect the compliance plans of Hunlock and Conemaugh Stations.
SEASONALITY
Sales and distribution of electricity for residential heating purposes
accounted for approximately 20% of the total sales of Electric Utility during
the 1999 fiscal year. Electricity competes with natural gas, oil, propane and
other heating fuels in this use. Approximately 53% of volume occurred during the
six coldest months of the 1999 fiscal year (November through April),
demonstrating modest seasonality favoring winter due to the use of electricity
for residential heating purposes.
-15-
UTILITY REGULATION AND RATES
PENNSYLVANIA PUBLIC UTILITY COMMISSION JURISDICTION
Utilities' gas and electric utility operations, which exclude electric
generation, 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. As noted
earlier, effective October 1, 1999 Utilities transferred its electric generation
assets to UGID. UGID has FERC authority to sell power at market-based rates.
Generally, UGID is not subject to regulation by the PUC.
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 Utilities 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 its transmission facilities are used by third parties.
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. PGC rates may also be adjusted
quarterly, or monthly, 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 separate rates. In addition, residential
customers maintaining a high load factor may qualify for the PGC (2) rate.
ENERGY COST RATES
In accordance with provisions of the Electricity Customer Choice Act, the
PUC approved Electric Utility's application to roll its energy cost rate ("ECR")
into its base rates 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 customer charges to reflect annual
changes in the cost of purchased power, fuel, interchange power and the cost of
transmitting power purchased from external sources. Electric Utility may no
longer adjust customer charges to reflect changes in such costs.
-16-
BASE RATES
Gas Utility's current base rates have been in effect since August 31, 1995.
Rates for total non-gas charges to retail customers are currently capped through
December 31, 2000 pursuant to the Gas Competition Act. Electric Utility's
current base rates have been in effect since July 19, 1996 and are capped
through June 2001 pursuant to the Electricity Customer Choice Act. See Note 3 to
the Consolidated Financial Statements included in the Company's 1999 Annual
Report and incorporated by reference in this Report.
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, however,
any increase in Electric Utility's state tax surcharge is generally subject to
the rate caps discussed above.
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, like UGID, and other matters, are also
subject to the jurisdiction of FERC.
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-Manufactured
Gas Plants." 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 - Electric
Utility Environmental Factors."
-17-
EMPLOYEES
At September 30, 1999, Utilities and its subsidiaries had 1,138 employees.
-18-
UGI ENTERPRISES, INC.
UGI Enterprises, Inc. is a wholly owned subsidiary of UGI that was formed
in 1994. Through its subsidiaries, Enterprises is developing the domestic and
international businesses described below.
INTERNATIONAL PROPANE DISTRIBUTION
In September 1999, subsidiaries of Enterprises acquired all of the stock of
Flaga, a privately-held company founded in 1947. Flaga is the largest retail
propane distributor in Austria and a leading distributor in the Czech Republic.
FLAGA operates from 7 distribution locations in Austria, 8 in the Czech Republic
and 2 in Slovakia. Flaga markets over 40 million gallons of propane annually and
has revenues of approximately $50 million. Its assets totaled $138 million at
September 30, 1999.
NATURAL GAS AND ELECTRICITY MARKETING
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 Enterprises. Energy Services conducts this business
under the trade name GASMARK(R). GASMARK(R) sells natural gas directly to more
than 1,100 commercial and industrial customers in the Mid-Atlantic region
through the transportation systems of 15 utility systems. Energy Services also
sells electricity to over 500 commercial and industrial customers in
Pennsylvania. Another Enterprises subsidiary, UGI Power Supply, Inc., has FERC
authority to engage in wholesale electric power sales.
RETAIL HEARTH PRODUCTS
In September 1999, Enterprises opened the first Hearth USA(TM) retail store
in Rockville, Maryland. HeartH USA(TM) is the nation's first large-scale
retailer to offer a wide selection of hearth, grill and spa products together
with installation services. Another store is scheduled to open in the
Mid-Atlantic region early in 2000. Enterprises expects to evaluate the Hearth
retail concept further prior to scheduling openings in other markets.
INTERNATIONAL ENERGY-RELATED JOINT VENTURES
During 1996, Enterprises formed a partnership 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 has extensive experience in the transportation of liquefied natural
gas, and North American World Trade, Ltd. is a consulting firm with Romanian
expertise. The joint venture is known as Black Sea LPG Romania, S.A. Enterprises
has funded the initial development of the joint venture through its subsidiary,
UGI Romania, Inc. The Romanian partners in this venture are Regia Autonoma a
Gazelor Naturale "Romgaz" Medias, the Romanian national gas utility; Regia
Autonoma de Electricitate "Renel", the Romanian national electric utility; and
Rompetrol, S.A., a privately-held energy services company. The economic climate
in Romania in recent years has slowed project development.
-19-
During 1998, Enterprises formed ChinaGas Partners, L.P. ("ChinaGas") with
affiliates of ETG to develop, build and operate LPG projects in the People's
Republic of China. On October 28, 1998, ChinaGas and its wholly owned subsidiary
together acquired 50% of the shares of an existing Chinese company known as the
Nantong Huayang LPG Port Co., Ltd. ("Port Company") which operates an integrated
LPG business, including an import terminal and distribution business, serving
the provinces along the lower and middle reaches of the Yangtze River. The other
shareholders in the Port Company are China National Chemical Supply & Sales
Corporation and two of its affiliates. Our effective ownership interest in the
Port Company is 25%.
BUSINESS SEGMENT INFORMATION
The table stating the amounts of revenues, operating income (loss) and
identifiable assets attributable to each of UGI's business segments for the
1999, 1998 and 1997 fiscal years appears in Note 17 to the Consolidated
Financial Statements contained in our 1999 Annual Report and is incorporated in
this Report by reference.
EMPLOYEES
At September 30, 1999, UGI and its subsidiaries had 6,720 employees.
-20-
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 legally liable for the obligations of its
subsidiaries. Under certain circumstances, however, a court could find a parent
company liable for environmental damage caused by a subsidiary company
-21-
when 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 subsidiary's separate corporate
form should be disregarded.
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 Notes 1 and 13 to the Company's Consolidated Financial Statements.
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 for 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. Investigations of the site conducted to date are insufficient to
establish the extent of environmental remediation necessary, if any. Hence,
Utilities is unable to estimate the total cost of cleanup associated with
manufactured gas plant wastes at this site.
2. 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
-22-
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.
RELATED MATTER
1. UGI Utilities, Inc. v. Insurance Co. of North America, et. al. On
February 11, 1999, UGI Utilities, Inc. filed suit in the Court of Common Pleas
of Montgomery County, Pennsylvania against more than fifty insurance companies,
including Insurance Services, Ltd. (AEGIS). The complaint alleges that the
defendants breached contracts of insurance by failing to indemnify Utilities for
certain environmental costs. The suit seeks to recover more than $11 million in
costs incurred by Utilities at various manufactured gas plant sites. The case is
in the preliminary discovery and pleadings stage.
-23-
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 1999 fiscal year.
EXECUTIVE OFFICERS
Information regarding our 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
Our 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 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:
[Download Table]
1999 FISCAL YEAR HIGH LOW
4th Quarter $24.688 $19.750
3rd Quarter 21.000 16.563
2nd Quarter 24.375 15.000
1st Quarter 25.750 21.625
[Download Table]
1998 FISCAL YEAR HIGH LOW
4th Quarter $25.813 $20.500
3rd Quarter 28.750 23.750
2nd Quarter 29.750 27.000
1st Quarter 30.125 25.125
-24-
DIVIDENDS
Quarterly dividends on our Common Stock were paid in the 1999 and 1998
fiscal years as follows:
[Download Table]
1999 FISCAL YEAR AMOUNT
4th Quarter $.365
3rd Quarter .365
2nd Quarter .365
1st Quarter .365
[Download Table]
1998 FISCAL YEAR AMOUNT
4th Quarter $.365
3rd Quarter .360
2nd Quarter .360
1st Quarter .360
HOLDERS
On December 1, 1999, UGI had 11,711 holders of record of Common Stock.
-25-
ITEM 6. SELECTED FINANCIAL DATA
[Enlarge/Download Table]
(Millions of dollars, except per share amounts)
Year Ended
September 30,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
(Millions of dollars, except per share amounts)
FOR THE PERIOD:
INCOME STATEMENT DATA:
Revenues $ 1,383.6 $ 1,439.7 $ 1,642.0 $ 1,557.6 $ 877.6
========= ========= ========= ========= =========
Income before extraordinary loss
and change in accounting $ 55.7 $ 40.3 $ 52.1 $ 39.5 $ 7.9
Extraordinary loss - debt restructuring -- -- -- -- (13.2)
Change in accounting for
postemployment benefits -- -- -- -- (3.1)
--------- --------- --------- --------- ---------
Net income (loss) $ 55.7 $ 40.3 $ 52.1 $ 39.5 $ (8.4)
========= ========= ========= ========= =========
DILUTED EARNINGS PER SHARE:(a)
Earnings before extraordinary loss
and change in accounting $ 1.74 $ 1.22 $ 1.57 $ 1.19 $ 0.24
Extraordinary loss - debt restructuring -- -- -- -- (0.40)
Change in accounting for
postemployment benefits -- -- -- -- (0.10)
--------- --------- --------- --------- ---------
Net earnings (loss) $ 1.74 $ 1.22 $ 1.57 $ 1.19 $ (0.26)
========= ========= ========= ========= =========
Cash dividends declared $ 1.47 $ 1.45 $ 1.43 $ 1.41 $ 1.39
========= ========= ========= ========= =========
AT PERIOD END:
BALANCE SHEET DATA:
Total assets $ 2,135.9 $ 2,074.6 $ 2,151.7 $ 2,133.0 $ 2,152.3
========= ========= ========= ========= =========
Capitalization:
Debt:
Bank loans - AmeriGas Propane $ 22.0 $ 10.0 $ 28.0 $ 15.0 $ --
Bank loans - UGI Utilities 87.4 68.4 67.0 50.5 42.0
Bank loans - other 11.6 -- -- -- --
Long-term debt
(including current maturities):
AmeriGas Propane 744.7 709.0 691.1 692.5 658.5
UGI Utilities 180.0 187.2 169.3 174.8 206.3
Other 91.6 8.2 8.6 9.0 9.3
--------- --------- --------- --------- ---------
Total debt 1,137.3 982.8 964.0 941.8 916.1
========= ========= ========= ========= =========
Minority interest in AmeriGas Partners 209.9 236.5 266.5 284.4 318.9
UGI Utilities preferred stock subject
to mandatory redemption 20.0 20.0 35.2 35.2 35.2
Common stockholders' equity 249.2 367.1 376.1 377.6 380.5
--------- --------- --------- --------- ---------
Total capitalization $ 1,616.4 $ 1,606.4 $ 1,641.8 $ 1,639.0 $ 1,650.7
========= ========= ========= ========= =========
RATIO OF CAPITALIZATION:
Total debt 70.4% 61.2% 58.7% 57.5% 55.5%
Minority interest 13.0% 14.7% 16.3% 17.4% 19.3%
UGI Utilities preferred stock 1.2% 1.2% 2.1% 2.1% 2.1%
Common stockholders' equity 15.4% 22.9% 22.9% 23.0% 23.1%
--------- --------- --------- --------- ---------
100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ========= =========
(a) Basic earnings per share was $1.58 in 1997. For all other periods
presented, basic earnings (loss) per share was the same as diluted
earnings (loss) per share.
-26-
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 13 through 21 of
UGI's 1999 Annual Report to Shareholders, is incorporated in this report by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
"Quantitative and Qualitative Disclosures About Market Risk" are contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Market Risk Disclosures" on pages 20 and 21 of the
UGI 1999 Annual Report to Shareholders and are 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 in this
Report by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-27-
PART III: UGI MANAGEMENT AND SECURITY HOLDERS
ITEMS 10 THROUGH 13.
In accordance with General Instruction G(3), and except as set forth below,
the information required by Items 10, 11, 12 and 13 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, 2000:
[Download Table]
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.
Item 13. Certain Relationships Compensation of Executive Officers -
and Related Transactions. Stock Ownership Policy and
Indebtedness of Management
The information concerning the Company's executive officers required by
Item 10 is set forth below.
EXECUTIVE OFFICERS
[Download Table]
NAME AGE POSITION
---- --- --------
Lon R. Greenberg 49 Chairman, Director, President
and Chief Executive Officer
Brendan P. Bovaird 51 Vice President and General Counsel
Bradley C. Hall 46 Vice President - New Business Development
Anthony J. Mendicino 51 Vice President - Finance
and Chief Financial Officer
Robert J. Chaney 57 President and Chief Executive
Officer, UGI Utilities, Inc.
-28-
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.
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.
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).
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 Gas Utility.
Anthony J. Mendicino
--------------------
Mr. Mendicino was elected Vice President - Finance and Chief Financial
Officer on September 8, 1998. He previously served as President and Chief
Operating Officer (July 1997 to June 1998) and as Senior Vice President (January
1997 to June 1997) of Eastwind Group, Inc., a holding company formed to acquire
and consolidate middle-market manufacturing businesses. Mr. Mendicino was Senior
Vice President and Chief Financial Officer and a director (1987 to 1996) of UTI
Energy Corp., a diversified oil field service company. From 1981 to 1987 Mr.
Mendicino held various positions with UGI, including Treasurer from 1984 to
1987.
-29-
Robert J. Chaney
----------------
Mr. Chaney is President and Chief Executive Officer of UGI Utilities, Inc.,
(since March 1999). He previously served as Executive Vice President (1998 to
1999), Vice President and General Manager - Gas Utility Division (1991 to 1998)
and Vice President - Rates and Energy Utilization - Gas Utility Division (1981
to 1991).
-30-
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-
INCORPORATION BY REFERENCE
[Enlarge/Download Table]
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
3.1 (Second) Amended and Restated Articles of UGI Amendment No. 1 3.(3)(a)
Incorporation of the Company on Form 8 to Form
8-B (4/10/92)
3.2 Bylaws of UGI as in effect since October UGI Form 10-K 3.2
27, 1998 (9/30/98)
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 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 Bank, (4/17/96)
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 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
4.5 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
4.6 Second Amendment dated as of September 15, AmeriGas Form 10-K 4.6
1998 to Note Agreement dated as of April Partners, L.P. (9/30/98)
12, 1995
-32-
INCORPORATION BY REFERENCE
[Enlarge/Download Table]
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
4.7 Third Amendment dated as of March 23, 1999 AmeriGas Form 10-Q 10.2
to Note Agreement dated as of April 12, 1995 Partners, L.P. (3/31/99)
4.8 Note Agreement dated as of March 15, 1999 AmeriGas Form 10-Q 10.3
among AmeriGas Propane, L.P., AmeriGas Partners, L.P. (3/31/99)
Propane, Inc. and certain institutional
investors
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 Section 61,060
(1993), order on rehearing, 64 FERC Section
61,365 (1993)
10.2 Service Agreement (Rate FTS) dated June 1, Utilities Form 10-K (10)o.
1987 between Utilities and Columbia, as (12/31/90)
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 Section 61,060 (1993), order
on rehearing, 64 FERC Section 61,365 (1993)
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 Section 61,060
(1993), order on rehearing, 64 FERC Section
61,365 (1993)
10.4 Amended and Restated Sublease Agreement UGI Form 10-K 10.35
dated April 1, 1988 between Southwest Salt (9/30/94)
Co. and AP Propane, Inc. (the "Southwest
Salt Co. Agreement")
*10.5 Letter dated July 8, 1998 pursuant to
Article 1, Section 1.2 of the Southwest
Salt Co. Agreement re: option to renew for
period of June 1, 2000 to May 31, 2005 and
related extension notice
-33-
INCORPORATION BY REFERENCE
[Enlarge/Download Table]
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
10.6** UGI Corporation Directors Deferred UGI Form 10-K 10.39
Compensation Plan dated August 26, 1993 (9/30/94)
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 Plan UGI Form 10-Q (10)ff
(6/30/92)
10.12** UGI Corporation Senior Executive Employee UGI Form 10-K 10.12
Severance Pay Plan effective January 1, 1997 (9/30/97)
*10.13** UGI Corporation 2000 Directors' Stock
Option Plan
*10.14** UGI Corporation 2000 Stock Incentive Plan
10.15** 1997 Stock Purchase Loan Plan UGI Form 10-K 10.16
(9/30/97)
10.16** UGI Corporation Supplemental Executive UGI Form 10-Q 10
Retirement Plan Amended and Restated (6/30/98)
effective October 1, 1996
10.17** Summary of Terms of UGI Corporation 1999 UGI Form 10-Q 10
Restricted Stock Awards (6/30/99)
10.18 Amended and Restated Credit Agreement dated AmeriGas Form 10-K 10.1
as of September 15, 1997 among AmeriGas Partners, L.P. (9/30/97)
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
10.19 First Amendment dated as of September 15, AmeriGas Form 10-K 10.2
1998 to Amended and Restated Credit Partners, L.P. (9/30/98)
Agreement
10.20 Second Amendment dated as of March 25, 1999 AmeriGas Form 10-Q 10.1
to Amended and Restated Credit Agreement Partners, L.P. (3/31/99)
-34-
INCORPORATION BY REFERENCE
[Enlarge/Download Table]
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
10.21 Intercreditor and Agency Agreement dated as AmeriGas Form 10-Q 10.2
of April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
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.
10.22 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.
10.23 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
10.24 Restricted Subsidiary Guarantee dated as of AmeriGas Form 10-Q 10.5
April 19, 1995 by AmeriGas Propane, L.P. Partners, L.P. (3/31/95)
for the benefit of Bank of America National
Trust and Savings Association, as
Collateral Agent
10.25 Trademark License Agreement dated April 19, AmeriGas Form 10-Q 10.6
1995 among UGI Corporation, AmeriGas, Inc., Partners, L.P. (3/31/95)
AmeriGas Propane, Inc., AmeriGas Partners,
L.P. and AmeriGas Propane, L.P.
10.26 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.
10.27 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.
*10.28 Pledge Agreement dated September 1999
between Eastfield International Holdings,
Inc. and Reiffeisen Zentralbank Osterreich
Aktiengesellschaft ("RZB")
*10.29 Pledge Agreement dated September 1999
between EuroGas Holdings, Inc. and RZB
*10.30 Form of Guarantee Agreement dated September
1999 between UGI Corporation and RZB relating
to loan amount of EURO 74 million
-35-
INCORPORATION BY REFERENCE
[Enlarge/Download Table]
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
*10.31 Form of Guarantee Agreement dated September
1999 between UGI Corporation and RZB relating
to loan amount of EURO 16 million
*10.32 Form of Guarantee Agreement dated September
1999 between UGI Corporation and RZB relating
to loan amount of EURO 15 million
*10.33** Description of Change of Control arrangements
for Messrs. Greenberg, Bovaird, Cuzzolina,
Hall and Mendicino
*10.34** Description of Change of Control arrangement
for Mr. Chaney
*13.1 Pages 13 through 43 of 1999 Annual Report to
Shareholders
*21 Subsidiaries of the Registrant
*23.1 Consent of Arthur Andersen LLP re:
Financial Statements of UGI Corporation
*27 Financial Data Schedule
* 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 1999 fiscal year, the Company filed the
following Current Reports on Form 8-K:
Date of Report Item Numbers Included
-------------- ---------------------
7/28/99 5 and 7 - News release regarding dividend
increase, stock repurchase and strategic
initiatives
8/2/99 5 and 7 - News release regarding
commencement of self-tender offer
9/7/99 5 and 7 - News release regarding final
results of self-tender offer
9/21/99 5 and 7 - News release regarding acquisition
of FLAGA Beteiligungs Aktiengesellschaft in
Austria
-36-
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 14, 1999 By: Anthony J. Mendicino
-----------------------------------
Anthony J. Mendicino
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 14, 1999, 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
Anthony J. Mendicino Vice President - Finance
--------------------- and Chief Financial Officer
Anthony J. Mendicino (Principal Financial Officer
and Principal Accounting Officer)
Stephen D. Ban Director
---------------------
Stephen D. Ban
Thomas F. Donovan Director
---------------------
Thomas F. Donovan
-37-
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below on December 14, 1999, by the following persons on
behalf of the Registrant in the capacities indicated.
SIGNATURE TITLE
--------- -----
Richard C. Gozon Director
---------------------
Richard C. Gozon
Director
---------------------
Anne Pol
Marvin O. Schlanger Director
---------------------
Marvin O. Schlanger
James W. Stratton Director
---------------------
James W. Stratton
David I. J. Wang Director
---------------------
David I. J. Wang
-38-
UGI CORPORATION AND SUBSIDIARIES
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 1999
F-1
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 report thereon of Arthur Andersen LLP dated
November 12, 1999, listed in the following index, are included in UGI's 1999
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 1999 Annual Report to
Shareholders is not to be deemed filed as part of this Report.
[Download Table]
Reference
---------------------------------
Annual
Report to
Form 10-K Shareholders
(page) (page)
------ ------
Reports of Independent Public Accountants:
On Consolidated Financial Statements 22
On Financial Statement Schedules F-4
Financial Statements:
Consolidated Balance Sheets, September 30,
1999 and 1998 24 to 25
For the years ended September 30, 1999,
1998 and 1997:
Consolidated Statements of Income 23
Consolidated Statements of Cash Flows 26
Consolidated Statements of Stockholders'
Equity 27
F-2
UGI CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
[Enlarge/Download Table]
Reference
---------------------------------
Annual
Report to
Form 10-K Shareholders
(page) (page)
------ ------
Notes to Consolidated Financial
Statements 28 to 43
Supplementary Data (unaudited):
Quarterly Data for the years ended
September 30, 1999 and 1998 42
Financial Statement Schedules:
For the years ended September 30, 1999,
1998 and 1997:
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).
We have omitted all other financial statement schedules because the required
information is either (1) not present; (2) not present in amounts sufficient to
require submission of the schedule; or (3) the information required is included
elsewhere in the financial statements or related notes.
F-3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of UGI Corporation:
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, 1999, incorporated by reference in
this Form 10-K, and have issued our report thereon dated November 12, 1999. Our
audits were 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. These
schedules have been subjected to the auditing procedures applied in the audits
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 12, 1999
F-4
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Millions of dollars)
[Enlarge/Download Table]
September 30,
ASSETS 1999 1998
------ --------------- --------------
Current assets:
Cash and cash equivalents $ 0.4 $ 15.2
Accounts receivable 0.1 0.5
Deferred income taxes 0.2 0.2
Prepaid expenses and other current assets 0.3 0.5
--------------- --------------
Total current assets 1.0 16.4
Investments in subsidiaries 271.3 375.1
Other assets 2.2 2.1
--------------- --------------
Total assets $ 274.5 $ 393.6
=============== ==============
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
-----------------------------------------------
Current liabilities:
Accounts and notes payable $ 11.1 $ 10.3
Accrued liabilities 10.7 13.1
--------------- --------------
Total current liabilities 21.8 23.4
Noncurrent liabilities 3.5 3.2
Common stockholders' equity:
Common Stock, without par value (authorized - 100,000,000 shares;
issued - 33,198,731 shares) 394.8 394.3
Accumulated deficit (8.2) (17.7)
Accumulated other comprehensive income 0.5 -
Unearned compensation - restricted stock (1.7) -
--------------- --------------
385.4 376.6
Less treasury stock, at cost (136.2) (9.6)
--------------- --------------
Total common stockholders' equity 249.2 367.0
--------------- --------------
Total liabilities and common stockholders' equity $ 274.5 $ 393.6
=============== ==============
S-1
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF INCOME
(Millions of dollars, except per share amounts)
[Enlarge/Download Table]
Year Ended
September 30,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
Revenues $ - $ - $ -
Costs and expenses:
Operating and administrative expenses 10.4 10.7 12.2
Other income, net (10.5) (10.4) (14.8)
---------- ---------- ----------
(0.1) 0.3 (2.6)
---------- ---------- ----------
Operating income (loss) 0.1 (0.3) 2.6
---------- ---------- ----------
Income (loss) before income taxes 0.1 (0.3) 2.6
Income tax expense (benefit) 0.3 (0.1) 1.1
---------- ---------- ----------
Income (loss) before equity in income
of unconsolidated subsidiaries (0.2) (0.2) 1.5
Equity in income
of unconsolidated subsidiaries 55.9 40.5 50.6
---------- ---------- ----------
Net income $ 55.7 $ 40.3 $ 52.1
========== ========== ==========
Earnings per common share:
Basic $ 1.74 $ 1.22 $ 1.58
========== ========== ==========
Diluted $ 1.74 $ 1.22 $ 1.57
========== ========== ==========
Average common shares outstanding (millions):
Basic 31.954 32.971 33.049
========== ========== ==========
Diluted 32.016 33.123 33.132
========== ========== ==========
S-2
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(Millions of dollars)
[Enlarge/Download Table]
Year Ended
September 30,
-------------------------------------------------
1999 1998 1997
------------- ------------- -------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (a) $ 178.0 $ 77.8 $ 77.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated subsidiaries (16.5) (34.8) (74.6)
Other - 2.5 20.6
------------- ------------- -------------
Net cash used by investing activities (16.5) (32.3) (54.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends on Common Stock (47.9) (47.6) (47.2)
Issuance of Common Stock 4.7 8.5 11.7
Repurchases of Common Stock (133.1) (11.3) (19.2)
------------- ------------- -------------
Net cash used by financing activities (176.3) (50.4) (54.7)
------------- ------------- -------------
Cash and cash equivalents decrease $ (14.8) $ (4.9) $ (31.2)
============= ============= =============
Cash and cash equivalents:
End of period $ 0.4 $ 15.2 $ 20.1
Beginning of period 15.2 20.1 51.3
------------- ------------- -------------
Decrease $ (14.8) $ (4.9) $ (31.2)
============= ============= =============
(a) Includes dividends received from unconsolidated subsidiaries of $176.7,
$77.6 and $75.8, respectively, for the years ended September 30, 1999, 1998
and 1997.
S-3
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Millions of dollars)
[Enlarge/Download Table]
Charged
Balance at (credited) Balance at
beginning to costs and end of
of year expenses Other year
----------- ---------- ----------- ------------
YEAR ENDED SEPTEMBER 30, 1999
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 7.9 $ 7.8 $ (7.9)(1) $ 8.0
=========== ============
0.2 (2)
Allowance for amortization of deferred
financing costs - AmeriGas Propane $ 5.4 $ 1.7 $ - $ 7.1
=========== ============
Allowance for amortization of
other deferred costs - AmeriGas Propane $ 4.6 $ 1.0 $ (3.5)(3) $ 2.1
=========== ============
Other reserves:
Self-insured property and casualty liability $ 48.5 $ 12.9 $ (22.9)(4) $ 38.7
=========== ============
0.2 (3)
Insured property and casualty liability $ 4.3 $ 0.8 $ 5.1
=========== ============
Environmental, litigation and other $ 13.9 $ (1.5)(4) $ 12.5
=========== ============
$ 0.1 (3)
YEAR ENDED SEPTEMBER 30, 1998
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 11.3 $ 8.4 $ (11.8)(1) $ 7.9
=========== ============
Allowance for amortization of deferred
financing costs - AmeriGas Propane $ 3.8 $ 1.6 $ - $ 5.4
=========== ============
Allowance for amortization of
other deferred costs - AmeriGas Propane $ 3.9 $ 0.7 $ - $ 4.6
=========== ============
Other reserves:
Self-insured property and casualty liability $ 48.5 $ 11.7 $ (11.7)(4) $ 48.5
=========== ============
Insured property and casualty liability $ 1.8 $ 2.9 $ (0.4)(4) $ 4.3
=========== ============
Environmental, litigation and other $ 22.6 $ (4.0) $ (4.7)(4) $ 13.9
=========== ============
S-4
UGI CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)
(Millions of dollars)
[Enlarge/Download Table]
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 - AmeriGas Propane $ 2.2 $ 1.6 $ - $ 3.8
=========== ============
Allowance for amortization of
other deferred costs - AmeriGas Propane $ 2.8 $ 1.1 $ - $ 3.9
=========== ============
Other reserves:
Self-insured property and casualty liability $ 47.7 $ 11.3 $ (10.5)(4) $ 48.5
=========== ============
Insured property and casualty liability $ 19.0 $ 3.3 $ (20.5)(4) $ 1.8
=========== ============
Environmental, litigation and other $ 16.1 $ 7.6 $ (1.1)(4) $ 22.6
=========== ============
(1) Uncollectible accounts written off, net of recoveries.
(2) Acquisitions of businesses.
(3) Other adjustments.
(4) Payments, net.
S-5
EXHIBIT INDEX
[Download Table]
EXHIBIT NO. DESCRIPTION
----------- -----------
10.5 Letter dated July 8, 1998 pursuant to Article 1,
Section 1.2 of the Southwest Salt Co. Agreement re:
option to renew for period of June 1, 2000 to May 31,
2005 and related extension notice
10.13 UGI Corporation 2000 Directors' Stock Option Plan
10.14 UGI Corporation 2000 Stock Incentive Plan
10.28 Pledge Agreement dated September 1999 between
Eastfield International Holdings, Inc. and Reiffeisen
Zentralbank Osterreich Aktiengesellschaft ("RZB")
10.29 Pledge Agreement dated September 1999 between EuroGas
Holdings, Inc. and RZB
10.30 Form of Guarantee Agreement dated September 1999
between UGI Corporation and RZB relating to loan
amount of EURO 74 million
10.31 Form of Guarantee Agreement dated September 1999
between UGI Corporation and RZB relating to loan
amount of EURO 16 million
10.32 Form of Guarantee Agreement dated September 1999
between UGI Corporation and RZB relating to loan
amount of EURO 15 million
10.33 Description of Change of Control arrangements for
Messrs. Greenberg, Bovaird, Cuzzolina, Hall and
Mendicino
10.34 Description of Change of Control arrangements for Mr.
Chaney
13.1 Pages 13 to 43 of the 1999 Annual Report
21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP re: Financial
Statements of UGI Corporation
27 Financial Data Schedule
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000893220-99-001395 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Tue., Apr. 30, 10:27:54.2am ET 
