<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-1398
UGI UTILITIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1174060
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
UGI UTILITIES, INC.
100 Kachel Boulevard, Suite 400
Green Hills Corporate Center, Reading, PA
(Address of principal executive offices)
19607
(Zip Code)
(610) 796-3400
(Registrant's telephone number, including area code)
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
---
At April 30, 1999, there were 26,781,785 shares of UGI Utilities, Inc.
Common Stock, par value $2.25 per share, outstanding, all of which were held,
beneficially and of record, by UGI Corporation.
<PAGE> 2
UGI UTILITIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999,
September 30, 1998 and March 31, 1998 1
Condensed Consolidated Statements of Income for the three, six
and twelve months ended March 31, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows for the
six and twelve months ended March 31, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 - 20
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 5. Other Information 20 - 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
</TABLE>
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<PAGE> 3
PART I FINANCIAL INFORMATION
UGI UTILITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1999 1998 1998
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,221 $ 4,720 $ 4,095
Accounts receivable (less allowances for doubtful accounts
of $2,034, $1,373 and $3,457, respectively) 59,660 20,258 59,178
Accrued utility revenues 14,386 6,745 13,838
Inventories 10,554 28,460 9,213
Deferred income taxes 9,281 4,070 12,022
Prepaid expenses and other current assets 10,642 6,556 9,685
-------- -------- --------
Total current assets 108,744 70,809 108,031
Property, plant and equipment, at cost (less accumulated depreciation
and amortization of $263,041, $253,608 and $246,470, respectively) 548,770 543,913 533,200
Regulatory assets 59,906 59,318 48,676
Other assets 16,958 16,277 17,125
-------- -------- --------
Total assets $734,378 $690,317 $707,032
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,143 $ 7,143 $ 7,143
Current portion of redeemable preferred stock -- -- 15,187
Bank loans 72,800 68,400 42,900
Accounts payable 32,004 38,847 25,491
Other current liabilities 61,872 29,720 63,346
-------- -------- --------
Total current liabilities 173,819 144,110 154,067
Long-term debt 180,037 180,027 187,161
Deferred income taxes 109,211 105,734 103,440
Other noncurrent liabilities 27,645 29,204 19,680
Commitments and contingencies
Redeemable preferred stock 20,000 20,000 20,000
Common stockholder's equity:
Common Stock, $2.25 par value (authorized - 40,000,000 shares;
issued and outstanding - 26,781,785 shares) 60,259 60,259 60,259
Additional paid-in capital 68,559 68,559 68,249
Retained earnings 94,848 82,424 94,176
-------- -------- --------
Total common stockholder's equity 223,666 211,242 222,684
-------- -------- --------
Total liabilities and stockholders' equity $734,378 $690,317 $707,032
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
UGI UTILITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
---------------------- ----------------------- ----------------------
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 167,692 $ 152,333 $ 280,462 $ 287,797 $ 414,948 $ 441,547
--------- --------- --------- --------- --------- ---------
Costs and expenses:
Gas, fuel and purchased power 87,449 80,661 142,785 153,158 204,258 228,513
Operating and administrative expenses 30,937 29,841 57,391 56,916 111,650 114,825
Operating and administrative expenses
- related parties 1,297 1,291 2,469 2,389 4,917 5,298
Depreciation and amortization 5,912 5,510 11,389 10,861 22,571 21,020
Other income, net (1,077) (1,120) (2,198) (2,006) (5,185) (3,370)
--------- --------- --------- --------- --------- ---------
124,518 116,183 211,836 221,318 338,211 366,286
--------- --------- --------- --------- --------- ---------
Operating income 43,174 36,150 68,626 66,479 76,737 75,261
Interest expense 4,324 4,385 8,762 8,706 17,639 17,022
--------- --------- --------- --------- --------- ---------
Income before income taxes 38,850 31,765 59,864 57,773 59,098 58,239
Income taxes 14,683 11,766 22,664 21,566 22,554 22,269
--------- --------- --------- --------- --------- ---------
Net income 24,167 19,999 37,200 36,207 36,544 35,970
Dividends on preferred stock 387 691 775 1,382 1,553 2,764
--------- --------- --------- --------- --------- ---------
Net income after dividends on preferred stock $ 23,780 $ 19,308 $ 36,425 $ 34,825 $ 34,991 $ 33,206
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
UGI UTILITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
March 31, March 31,
--------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 37,200 $ 36,207 $ 36,544 $ 35,970
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 11,389 10,861 22,571 21,020
Deferred income taxes, net (3,677) (2,782) 4,573 2,022
Other, net 1,061 2,377 4,357 5,152
-------- -------- -------- --------
45,973 46,663 68,045 64,164
Net change in:
Accounts receivable and accrued utility revenues (49,012) (42,889) (4,172) 5,466
Inventories 17,906 21,432 (1,341) (335)
Deferred fuel costs 12,250 11,727 (4,643) 2,456
Accounts payable (6,843) (19,876) 6,457 (1,678)
Other current assets and liabilities 15,815 3,122 1,722 (589)
-------- -------- -------- --------
Net cash provided by operating activities 36,089 20,179 66,068 69,484
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (16,042) (15,615) (37,646) (38,676)
Net proceeds (costs) of property, plant and equipment disposals (171) (165) 305 (849)
-------- -------- -------- --------
Net cash used by investing activities (16,213) (15,780) (37,341) (39,525)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (24,775) (14,017) (35,851) (15,398)
Issuance of long-term debt -- 35,000 -- 55,000
Repayment of long-term debt -- (10,000) (7,143) (18,980)
Bank loans increase (decrease) 4,400 (24,100) 29,900 (52,100)
Redemption of Series Preferred Stock -- -- (15,507) --
-------- -------- -------- --------
Net cash used by financing activities (20,375) (13,117) (28,601) (31,478)
-------- -------- -------- --------
Cash and cash equivalents increase (decrease) $ (499) $ (8,718) $ 126 $ (1,519)
======== ======== ======== ========
CASH AND CASH EQUIVALENTS:
End of period $ 4,221 $ 4,095 $ 4,221 $ 4,095
Beginning of period 4,720 12,813 4,095 5,614
-------- -------- -------- --------
Increase (decrease) $ (499) $ (8,718) $ 126 $ (1,519)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of UGI Utilities, Inc. (UGI Utilities) and its wholly
owned subsidiary UGI Development Company (collectively, "the Company"
or "we"). We eliminate all significant intercompany accounts and
transactions when we consolidate. UGI Utilities is a wholly owned
subsidiary of UGI Corporation (UGI) and operates a natural gas
distribution utility (Gas Utility) in parts of eastern and southeastern
Pennsylvania and an electric utility (Electric Utility) in northeastern
Pennsylvania.
The accompanying condensed consolidated financial statements are
unaudited and have been prepared in accordance with the rules and
regulations of the U.S. Securities and Exchange Commission. They
include all adjustments which we consider necessary for a fair
statement of the results for the interim periods presented. Such
adjustments consisted only of normal recurring items unless otherwise
disclosed. These financial statements should be read in conjunction
with the financial statements and the related notes included in our
Annual Report on Form 10-K for the year ended September 30, 1998. Due
to the seasonal nature of our businesses, the results of operations for
interim periods are not necessarily indicative of the results to be
expected for a full year.
Management makes estimates and assumptions when preparing financial
statements in conformity with generally accepted accounting principles.
These estimates and assumptions affect the reported amounts of assets
and liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities. Actual results could differ from
these estimates.
On October 1, 1998, we adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income" (SFAS 130).
SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in financial statements.
Comprehensive income includes net income and all other nonowner changes
in equity. SFAS 130 also requires reclassification of financial
statements of earlier periods provided for comparative purposes. UGI
Utilities' comprehensive income was the same as its net income for all
periods presented.
2. SEGMENT INFORMATION
On October 1, 1998, we adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131
establishes standards for
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<PAGE> 7
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(continued)
(unaudited)
(Thousands of dollars)
reporting information about operating segments as well as related
disclosures about products and services, geographic areas, and major
customers. In determining our reportable segments under the provisions
of SFAS 131, we examined the way we organize our businesses internally
for making operating decisions and assessing business performance.
Because our gas utility and electric utility operations are organized
and managed as strategic business units offering different products and
services, we have determined that UGI Utilities has two reportable
segments comprising Gas Utility and Electric Utility.
Although Electric Utility's June 1998 Restructuring Order provides for
the unbundling of prices for electric generation, transmission and
distribution services, we currently manage and evaluate our electric
generation, transmission and distribution operations together.
Accordingly, these operations are combined for segment reporting
purposes.
The accounting policies of the two segments are the same as those
described in the Significant Accounting Policies note contained in our
Annual Report on Form 10-K for the year ended September 30, 1998. We
evaluate each segment's performance principally based upon its earnings
before interest expense, income taxes, depreciation and amortization
(EBITDA). Although EBITDA is used internally to evaluate segment
performance, it should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative
to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition
under generally accepted accounting principles.
No single customer represents more than 5% of the total revenues of
either Gas Utility or Electric Utility. Financial information by
business segment follows:
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<PAGE> 8
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
2. SEGMENT INFORMATION (continued)
THREE MONTHS ENDED MARCH 31, 1999:
<TABLE>
<CAPTION>
Reportable Segments
Inter- ------------------------
segment Gas Electric All
Total Eliminations utility utility other
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment revenues $ 167,692 $ -- $ 147,623 $ 20,069 $ --
Segment profit (loss):
EBITDA $ 49,086 $ -- $ 44,045 $ 5,049 $ (8)
Depreciation and amortization (5,912) -- (4,777) (1,135) --
----------------------------------------------------------------
Operating income (loss) 43,174 -- 39,268 3,914 (8)
Interest expense (4,324) -- (3,730) (594) --
----------------------------------------------------------------
Income (loss) before income taxes $ 38,850 $ -- $ 35,538 $ 3,320 $ (8)
================================================================
Segment assets (at period end) $ 734,378 $ (101) $ 636,335 $ 97,881 $ 263
================================================================
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998:
<TABLE>
<CAPTION>
Reportable Segments
Inter- -------------------------
segment Gas Electric All
Total Eliminations utility utility other
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment revenues $ 152,333 $ -- $ 133,226 $ 19,107 $ --
Segment profit:
EBITDA $ 41,660 $ -- $ 37,166 $ 4,265 $ 229
Depreciation and amortization (5,510) -- (4,516) (994) --
----------------------------------------------------------------
Operating income 36,150 -- 32,650 3,271 229
Interest expense (4,385) -- (3,794) (591) --
----------------------------------------------------------------
Income before income taxes $ 31,765 $ -- $ 28,856 $ 2,680 $ 229
================================================================
Segment assets (at period end) $ 707,032 $ 192 $ 618,113 $ 87,811 $ 916
================================================================
</TABLE>
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<PAGE> 9
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
2. SEGMENT INFORMATION (continued)
SIX MONTHS ENDED MARCH 31, 1999:
<TABLE>
<CAPTION>
Reportable Segments
Inter- --------------------------
segment Gas Electric All
Total Eliminations utility utility other
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment revenues $ 280,462 $ -- $ 242,201 $ 38,261 $ --
Segment profit (loss):
EBITDA $ 80,015 $ -- $ 70,290 $ 9,742 $ (17)
Depreciation and amortization (11,389) -- (9,444) (1,945) --
-----------------------------------------------------------------
Operating income (loss) 68,626 -- 60,846 7,797 (17)
Interest expense (8,762) -- (7,574) (1,188) --
-----------------------------------------------------------------
Income (loss) before income taxes $ 59,864 $ -- $ 53,272 $ 6,609 $ (17)
=================================================================
Segment assets (at period end) $ 734,378 $ (101) $ 636,335 $ 97,881 $ 263
=================================================================
</TABLE>
SIX MONTHS ENDED MARCH 31, 1998:
<TABLE>
<CAPTION>
Reportable Segments
Inter- -------------------------
segment Gas Electric All
Total Eliminations utility utility other
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment revenues $ 287,797 $ -- $ 250,057 $ 37,740 $ --
Segment profit:
EBITDA $ 77,340 $ -- $ 69,007 $ 8,116 $ 217
Depreciation and amortization (10,861) -- (8,991) (1,870) --
----------------------------------------------------------------
Operating income 66,479 -- 60,016 6,246 217
Interest expense (8,706) -- (7,565) (1,141) --
----------------------------------------------------------------
Income before income taxes $ 57,773 $ -- $ 52,451 $ 5,105 $ 217
================================================================
Segment assets (at period end) $ 707,032 $ 192 $ 618,113 $ 87,811 $ 916
================================================================
</TABLE>
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<PAGE> 10
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
2. SEGMENT INFORMATION (continued)
TWELVE MONTHS ENDED MARCH 31, 1999:
<TABLE>
<CAPTION>
Reportable Segments
Inter- --------------------------
segment Gas Electric All
Total Eliminations utility utility other
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment revenues $ 414,948 $ -- $ 342,298 $ 72,650 $ --
Segment profit (loss):
EBITDA $ 99,308 $ -- $ 84,220 $ 15,186 $ (98)
Depreciation and amortization (22,571) -- (18,618) (3,953) --
-----------------------------------------------------------------
Operating income (loss) 76,737 -- 65,602 11,233 (98)
Interest expense (17,639) -- (15,279) (2,360) --
-----------------------------------------------------------------
Income (loss) before income taxes $ 59,098 $ -- $ 50,323 $ 8,873 $ (98)
=================================================================
Segment assets (at period end) $ 734,378 $ (101) $ 636,335 $ 97,881 $ 263
=================================================================
</TABLE>
TWELVE MONTHS ENDED MARCH 31, 1998:
<TABLE>
<CAPTION>
Reportable Segments
Inter- -------------------------
segment Gas Electric All
Total Eliminations utility utility other
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment revenues $ 441,547 $ -- $ 370,026 $ 71,521 $ --
Segment profit:
EBITDA $ 96,281 $ -- $ 81,813 $ 14,199 $ 269
Depreciation and amortization (21,020) -- (16,955) (4,065) --
----------------------------------------------------------------
Operating income 75,261 -- 64,858 10,134 269
Interest expense (17,022) -- (14,552) (2,435) (35)
----------------------------------------------------------------
Income before income taxes $ 58,239 $ -- $ 50,306 $ 7,699 $ 234
================================================================
Segment assets (at period end) $ 707,032 $ 192 $ 618,113 $ 87,811 $ 916
================================================================
</TABLE>
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<PAGE> 11
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
3. COMMITMENTS AND CONTINGENCIES
The gas distribution business has been one of UGI Utilities' main
businesses since it began in 1882. Prior to the construction of major
natural gas pipelines in the 1950s, gas used for lighting and heating
was produced at manufactured gas plants (MGPs) from processes involving
coal, coke or oil. Some constituents of coal tars produced from this
process are today considered hazardous substances under the Superfund
Law and may be located at these sites.
Several private parties have made claims against UGI Utilities to
recover costs of investigation or remediation of several MGP sites. In
addition, we have identified environmental contamination at several of
our properties and have undertaken investigation and, as appropriate,
remediation of these sites in cooperation with appropriate
environmental agencies or private parties. At sites where a former
subsidiary of UGI Utilities operated an MGP, we believe that UGI
Utilities should not have significant liability because UGI 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 at sites owned by a
subsidiary company when the parent company either (1) itself operated
the facility causing the environmental damage or (2) 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 MGPs that UGI Utilities owned or directly operated, or that
were owned or operated by former subsidiaries of UGI Utilities, if a
court were to conclude that the subsidiary's separate corporate form
should be disregarded. In many circumstances where UGI Utilities may be
liable, we may not be able to reasonably quantify expenditures because
of a number of factors. These factors include the various costs
associated with potential remedial alternatives, the unknown number of
other potentially responsible parties involved and their ability to
contribute to the costs of investigation and remediation, and changing
environmental laws and regulations.
UGI Utilities has filed suit against more than fifty insurance
companies alleging that the defendants breached contracts of insurance
by failing to indemnify UGI Utilities for certain environmental costs.
The suit seeks to recover more than $11 million in costs incurred by
UGI Utilities at various manufactured gas plant sites.
In addition to these environmental matters, there are other pending
claims and legal actions arising in the normal course of our
businesses. We cannot predict with certainty the final results of
environmental and other matters. However, it is reasonably possible
that some of them could be resolved unfavorably to us. Management
believes, after
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<PAGE> 12
UGI UTILITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
consultation with counsel, that damages or settlements, if any,
recovered by the plaintiffs in such claims or actions will not have a
material adverse effect on our financial position. However, such
damages or settlements could be material to our operating results or
cash flows in future periods depending on the nature and timing of
future developments with respect to these matters and the amounts of
future operating results and cash flows.
4. UGI PROPOSED MERGER WITH UNISOURCE WORLDWIDE, INC.
On March 1, 1999, UGI and Unisource Worldwide, Inc. (Unisource)
announced that their boards of directors had approved a definitive
merger agreement for a stock-for-stock transaction. Under the merger
agreement, Unisource would be merged with a wholly owned subsidiary of
UGI and UGI would exchange 0.566 common shares of UGI common stock for
each common share of Unisource. It is estimated that UGI would issue up
to approximately 40 million shares of UGI common stock in the merger.
The acquisition of Unisource is subject to the approval of Unisource's
shareholders. The issuance of UGI common stock to effect the merger is
subject to the approval of UGI shareholders. In addition, the merger is
subject to customary regulatory approvals. In connection with the
merger, UGI announced its intention to sell UGI Utilities.
On May 10, 1999, Unisource announced that it had received an
unsolicited written proposal from Georgia-Pacific Corporation
(Georgia-Pacific) to acquire Unisource at a price of $12.00 per share
in cash and that the Unisource board of directors had authorized
management to begin discussions with Georgia-Pacific concerning its
proposal. The UGI-Unisource merger transaction is pending.
-10-
<PAGE> 13
UGI UTILITIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare our results of operations for (1) the three
months ended March 31, 1999 (1999 three-month period) with the three months
ended March 31, 1998 (1998 three-month period); (2) the six months ended March
31, 1999 (1999 six-month period) with the six months ended March 31, 1998 (1998
six-month period); and (3) the twelve months ended March 31, 1999 (1999
twelve-month period) with the twelve months ended March 31, 1998 (1998
twelve-month period). Our results of operations should be read in conjunction
with the segment information included in Note 2 to the Condensed Consolidated
Financial Statements. Although the adoption of SFAS 131 did not change the
operating segments we disclose, Gas Utility and Electric Utility results for all
periods presented now include billed UGI corporate overhead costs.
1999 THREE-MONTH PERIOD COMPARED WITH 1998 THREE-MONTH PERIOD
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999 1998 (Increase)
- ------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
GAS UTILITY:
Natural gas system throughput - bcf 29.1 25.9 3.2 12.4%
Heating degree days - % warmer
than normal (8.4) (24.0) -- --
Revenues $147.6 $133.2 $ 14.4 10.8%
Total margin (a) $ 63.2 $ 56.2 $ 7.0 12.5%
Operating income $ 39.3 $ 32.7 $ 6.6 20.2%
EBITDA (b) $ 44.0 $ 37.2 $ 6.8 18.3%
ELECTRIC UTILITY:
Electric sales - gwh 255.2 237.2 18.0 7.6%
Revenues $ 20.1 $ 19.1 $ 1.0 5.2%
Total margin (a) $ 10.2 $ 9.3 $ .9 9.7%
Operating income $ 3.9 $ 3.3 $ .6 18.2%
EBITDA (b) $ 5.0 $ 4.3 $ .7 16.3%
- ------------------------------------------------------------------------------------------------
</TABLE>
bcf - billions of cubic feet. gwh - millions of kilowatt hours.
(a) Gas and Electric utilities' total margin represents total revenues less
cost of sales and revenue-related taxes.
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<PAGE> 14
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(b) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative
to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition
under generally accepted accounting principles.
GAS UTILITY. Weather in the Gas Utility service area in the 1999 three-month
period was 8.4% warmer than normal but 20.6% colder than in the comparable
prior-year period. Total system throughput increased 3.2 bcf (12.4%) including a
2.0 bcf (16.3%) increase in throughput to our firm- residential, commercial and
industrial (collectively, "core market") customers and a 1.3 bcf increase in
delivery service volumes. Part of the increase in firm delivery service
throughput resulted from some of our industrial core market customers switching
to firm delivery service. Under delivery service tariffs, we record revenues for
the transportation of gas through our distribution system but not for the gas
itself.
The increase in Gas Utility's total revenues in the 1999 three-month period is
due principally to a $13.5 million increase in core market revenues. These
increases were primarily a result of the higher volumes sold to our core market
residential and commercial customers. Cost of gas sold was $78.4 million in the
1999 three-month period, an increase of $6.7 million over the 1998 three-month
period, principally reflecting the increase in core market sales.
Gas Utility total margin for the 1999 three-month period increased $7.0 million
(12.5%) resulting from (1) a $5.7 million increase in margin from core market
customers and (2) a $2.0 million increase in margin from firm delivery service
customers. Total margin from our interruptible customers, who have the ability
to switch to alternate fuels, principally oil, decreased $.7 million. The lower
interruptible margins in the 1999 three-month period were a result of oil prices
declining relative to natural gas prices.
As a result of the higher core market and delivery service total margin, Gas
Utility operating income and EBITDA for the 1999 three-month period increased
$6.6 million and $6.8 million, respectively. Operating and administrative
expenses (excluding revenue-related taxes which are included in the analysis of
margin above) were comparable with the prior-year period.
ELECTRIC UTILITY. Total electric sales in the 1999 three-month period increased
18.0 gwh (7.6%) reflecting the impact of colder weather in the Electric Utility
service territory. Although the terms of our Electric Utility Restructuring
Order permit all of our customers to choose their electricity supplier effective
January 1, 1999, less than 5% of our sales during the 1999 three-month period
represents electricity we distributed for alternate suppliers.
In accordance with its June 19, 1998 Restructuring Order, in January 1999
Electric Utility began charging customers unbundled rates for generation,
transmission and distribution services, and a competitive transition charge
(CTC) for the recovery of stranded costs. The increase in Electric
-12-
<PAGE> 15
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Utility revenues reflects the higher 1999 three-month period total sales
partially offset by lower revenues from customers who purchased electricity from
other suppliers. Because these customers buy their electricity from others, we
record revenues for distributing the electricity over our wires but we do not
record revenues related to the electricity itself. Electric Utility cost of
sales was $9.0 million in the 1999 three-month period, virtually unchanged from
the prior-year period, as the impact of the higher sales was offset by lower per
unit purchased power costs.
Electric Utility's total margin increased $.9 million reflecting (1) the impact
of the higher sales and (2) lower per unit purchased power costs. Electric
Utility operating income and EBITDA increased during the 1999 three-month period
as a result of the higher total margin partially offset by slightly higher
operating expenses.
1999 SIX-MONTH PERIOD COMPARED WITH 1998 SIX-MONTH PERIOD
<TABLE>
<CAPTION>
Increase
Six Months Ended March 31, 1999 1998 (Decrease)
- --------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
GAS UTILITY:
Natural gas system throughput - bcf 49.4 48.5 .9 1.9%
Heating degree days - % warmer
than normal (12.0) (14.8) -- --
Revenues $242.2 $250.1 $ (7.9) (3.2)%
Total margin $106.4 $104.8 $ 1.6 1.5%
Operating income $ 60.8 $ 60.0 $ .8 1.3%
EBITDA $ 70.3 $ 69.0 $ 1.3 1.9%
ELECTRIC UTILITY:
Electric sales - gwh 478.4 464.9 13.5 2.9%
Revenues $ 38.3 $ 37.7 $ .6 1.6%
Total margin $ 20.0 $ 18.2 $ 1.8 9.9%
Operating income $ 7.8 $ 6.2 $ 1.6 25.8%
EBITDA $ 9.7 $ 8.1 $ 1.6 19.8%
- -------------------------------------------------------------------------------------------------
</TABLE>
GAS UTILITY. Weather in Gas Utility's service territory in the 1999 six-month
period was 12.0% warmer than normal compared with weather that was 14.8% warmer
than normal in the prior-year period. As a result of the slightly colder weather
and an increase in total customers, system throughput increased .9 bcf (1.9%).
The decrease in Gas Utility revenues in the 1999 six-month period is principally
due to decreases in revenues from off-system sales, core-market industrial
customers, and retail interruptible customers. These decreases were partially
offset by an increase in revenues from firm delivery
-13-
<PAGE> 16
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
service customers. Gas Utility's cost of gas was $126.1 million, a decrease of
$9.2 million from the prior-year period, reflecting the decline in off-system
sales and lower purchased gas cost rates.
The increase in the 1999 six-month period total margin principally resulted from
(1) a $2.3 million increase in margin from core market residential and
commercial customers and (2) a $2.2 million increase in margin from firm
delivery service customers. These margin increases were partially reduced by (1)
a $1.6 million decline in margin from core market industrial customers (due in
large part to customers switching to firm delivery service) and (2) a $1.2
million decrease in margin from interruptible customers. The decline in margin
from interruptible customers resulted from a decline in oil prices relative to
natural gas prices.
Gas Utility operating income and EBITDA were slightly higher in the 1999
six-month period reflecting the increase in total margin. Total operating and
administrative expenses, excluding revenue-related taxes, were essentially
unchanged from the prior-year period. Operating expenses in the 1999 six-month
period reflect lower accruals for uncollectible accounts and medical benefits
while operating expenses in the 1998 six-month period are net of $1.6 million of
income from an insurance recovery.
ELECTRIC UTILITY. Total electric sales were 13.5 gwh (2.9%) higher in the 1998
six-month period on weather that was 2.0% colder than last year. Notwithstanding
the colder weather, temperatures were 6.5% warmer than normal in the 1999
six-month period.
Electric Utility revenues increased $.6 million in the 1999 six-month period as
a result of the higher total sales. The increase in total revenues resulting
from the greater total sales was partially reduced by lower revenues from
Electric Utility customers who purchase the electric generation portion of their
electric service from other suppliers. Electric Utility cost of sales was $16.7
million, a decline of $1.2 million from the prior-year period, as the impact of
the higher sales was more than offset by lower per unit purchased power costs.
Electric Utility's total margin increased $1.8 million (9.9%) in the 1999
six-month period reflecting the impact of (1) the lower per unit purchased power
costs and (2) the higher sales. Operating income and EBITDA were also higher
principally due to the increase in total margin.
-14-
<PAGE> 17
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1999 TWELVE-MONTH PERIOD COMPARED WITH 1998 TWELVE-MONTH PERIOD
<TABLE>
<CAPTION>
Increase
Twelve Months Ended March 31, 1999 1998 (Decrease)
- ------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
GAS UTILITY:
Natural gas system throughput - bcf 75.8 76.3 (.5) (.7)%
Heating degree days - % warmer
than normal (13.8) (11.5) -- --
Revenues $342.3 $370.0 $(27.7) (7.5)%
Total margin $158.7 $160.7 $ (2.0) (1.2)%
Operating income $ 65.6 $ 64.9 $ .7 1.1%
EBITDA $ 84.2 $ 81.8 $ 2.4 2.9%
ELECTRIC UTILITY:
Electric sales - gwh 889.9 861.1 28.8 3.3%
Revenues $ 72.7 $ 71.5 $ 1.2 1.7%
Total margin $ 35.7 $ 35.2 $ .5 1.4%
Operating income $ 11.2 $ 10.1 $ 1.1 10.9%
EBITDA $ 15.2 $ 14.2 $ 1.0 7.0%
- ----------------------------------------------------------------------------------
</TABLE>
GAS UTILITY. Weather in Gas Utility's service territory was 13.8% warmer than
normal in the 1999 twelve-month period, slightly warmer than the 11.5% warmer
than normal temperatures experienced in the 1998 twelve-month period. As a
result, total system throughput declined a modest .5 bcf (.7%).
The decrease in Gas Utility's revenues principally reflects (1) a $17.3 million
decrease in revenues from core market customers, principally industrial
customers, (2) a $10.4 million decrease in revenues from off-system sales and
(3) a $3.0 million decrease in revenues from interruptible retail customers.
These decreases were partially offset by a $3.0 million increase in revenues
from firm delivery service customers. Cost of gas sold for the 1999 twelve-month
period was $170.5 million, a decrease of $24.8 million. The decline is a result
of the lower off-system sales and lower sales to core market customers.
The decrease in 1999 twelve-month period total margin reflects (1) a $2.8
million decline in margin from our core market industrial customers due in large
part to customers switching to delivery service and (2) a $2.1 million decline
in total margin from interruptible customers reflecting a less favorable spread
between natural gas and oil prices. These decreases were
-15-
<PAGE> 18
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
partially offset by (1) a $2.5 million increase in total margin from firm
delivery service customers and (2) slightly higher core market residential
margin.
Operating income and EBITDA in the 1999 twelve-month period were higher than in
the 1998 twelve-month period, notwithstanding the lower total margin, reflecting
(1) lower operating and administrative costs and (2) a $.6 million increase in
other income. Gas Utility's operating and administrative expenses, excluding
revenue-related taxes, were $3.7 million lower in the 1999 twelve-month period
reflecting (1) the absence of charges for environmental matters recorded in the
1998 twelve-month period, (2) lower distribution system maintenance expenses,
and (3) lower accruals for uncollectible accounts. Operating expenses in the
1998 twelve-month period are net of $1.6 million of income from an insurance
recovery.
ELECTRIC UTILITY. Total electric sales during the 1999 twelve-month period were
higher than the prior year reflecting the effects of (1) slightly colder
heating-season weather, (2) the warmer summer's effect on electricity used for
air conditioning, and (3) an increase in customers. Electric Utility revenues
increased $1.2 million as the effect of the higher sales was partially offset by
the impact of customers choosing alternate suppliers for the electric generation
component of their electric service.
Electric Utility cost of sales was $33.8 million in the 1999 twelve-month
period, an increase of $.6 million, reflecting the increase in total sales
partially offset by lower per unit purchased power costs. Electric Utility
operating income and EBITDA were also higher in the 1999 twelve-month period
reflecting the higher total margin and higher other income.
FINANCIAL CONDITION AND LIQUIDITY
CAPITAL STRUCTURE
The Company's debt outstanding at March 31, 1999 totaled $260.0 million compared
with $255.6 million at September 30, 1998. Included in these amounts are bank
loans of $72.8 million and $68.4 million, respectively. We may borrow up to $97
million under our revolving credit agreements.
CASH FLOWS
The Company's cash flows from operating activities are seasonal and are
generally greatest during the second and third fiscal quarters when customers
pay bills incurred during the heating season and are generally lowest during the
first and fourth fiscal quarters. Accordingly, cash flows from operations during
the six months ended March 31, 1999 are not necessarily indicative of cash flows
to be expected for a full year.
-16-
<PAGE> 19
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OPERATING ACTIVITIES. Cash provided by operating activities was $36.1 million
during the six months ended March 31, 1999. In the prior-year period, operating
activities provided $20.2 million of cash. Changes in operating working capital
during the six months ended March 31, 1999 required $9.9 million of operating
cash flow while changes in operating working capital during the six months ended
March 31, 1998 required $26.5 million of operating cash flow. Cash generated by
operating activities before changes in operating working capital totaled $46.0
million during the six months ended March 31, 1999, comparable to the $46.7
million generated in the prior-year period.
INVESTING ACTIVITIES. We spent $16.0 million for property, plant and equipment
in the six months ended March 31, 1999 compared with $15.6 million in the six
months ended March 31, 1998.
FINANCING ACTIVITIES. Cash flows from financing activities for the 1999
six-month period include dividends on preferred stock of $.8 million compared
with $1.4 million of such dividends in the 1998 six-month period. The lower
preferred stock dividends resulted from the redemption of $15 million face value
of Series Preferred Stock in April 1998. During the 1999 six-month period, we
paid $24.0 million of dividends to our parent company, UGI. In the prior-year
six-month period, we paid $12.6 million of dividends to UGI.
UGI Utilities' borrowed a net $4.4 million under its revolving credit agreements
in the 1999 six-month period compared with net repayments of $24.1 million in
the prior-year period. During the six months ended March 31, 1998, UGI Utilities
issued $35 million of notes under its Series B Medium-Term Note program.
PROPOSED NATURAL GAS CUSTOMER CHOICE LEGISLATION
In March of 1999, proposed legislation was introduced in both houses of the
Pennsylvania General Assembly which would extend to all Pennsylvania gas
customers the right to choose their natural gas supplier. Senate Bill No. 601
(introduced on March 15, 1999) and House Bill No. 937 (introduced on March 17,
1999) (collectively, the "Competition Bills") contain identical language crafted
by a legislative collaborative conducted under the auspices of the Governor of
Pennsylvania. The Company was an active participant in this collaborative
process and supports the legislation if it is passed in conjunction with
companion bills that would repeal Pennsylvania's gross receipts tax on natural
gas service. The Company believes that it is likely that natural gas customer
choice legislation will be enacted by the Pennsylvania General Assembly in the
summer of 1999.
The Competition Bills would give all Pennsylvania natural gas consumers the
right to choose their natural gas commodity supplier by November 1, 1999. The
Pennsylvania Public Utility Commission (PUC) would have the right to extend this
deadline for a period of up to eight months. Each Pennsylvania local
distribution company (LDC) would be required to file a restructuring plan with
the PUC which would be acted upon no later than nine months after the filing
date.
-17-
<PAGE> 20
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Competition Bills avoid the need for recovery of stranded costs associated
with interstate pipeline contracts. The Competition Bills would permit each LDC
to require energy marketers serving customers on its system to accept an
assignment of an appropriate amount of the LDC's interstate pipeline capacity.
After July 1, 2002, an energy marketer could petition the PUC to avoid such an
assignment, but the PUC could not grant the request unless the LDC is assured of
full recovery of interstate pipeline capacity costs. Energy marketers and
customers would be given the opportunity to replace expiring contracts or to
meet increased system requirements. Approximately 75% of the Company's existing
pipeline contract capacity commitments will expire by the end of 2003.
YEAR 2000 MATTERS
The Year 2000 ("Y2K") issue is a result of computer programs being written using
two digits (rather than four) to identify and process a year in a date field.
Computer programs, computer-controlled systems and equipment with embedded
software may recognize date fields using "00" as the year 1900 rather than the
year 2000. If uncorrected, miscalculations and possible computer-based system
failures could result which might disrupt business operations. We are
designating the following information as our "Year 2000 Readiness Disclosure."
Recognizing the potential business consequences of the Y2K issue, we conducted a
detailed assessment of our critical, date sensitive, computer-based systems to
identify those systems that were not Y2K compliant and developed a program to
modify those systems that were not otherwise scheduled for replacement prior to
the year 2000. Our Y2K compliance efforts focused on our ability to continue to
perform three critical operating functions: (1) obtain products to sell; (2)
provide service to our customers; and (3) bill customers and pay our vendors and
employees. In addition, the PUC ordered that all Pennsylvania utilities' mission
critical systems must be Y2K compliant by March 31, 1999.
Those systems that we assessed included (1) our information technology ("IT")
systems such as computer hardware and software we use in the operation of our
business and (2) our non-IT systems that contain embedded systems with
potentially date sensitive components such as micro-controllers contained in
various equipment and facilities. Among these systems are our customer
information systems, financial systems and distribution control systems. In
order to identify and modify those systems that we determined were not Y2K
compliant, we used internal resources as well as outside consultants and vendor
representatives. In addition to assessing, identifying and modifying our own
systems, we developed and implemented a program to attempt to determine the Y2K
compliance status of third parties, including our key suppliers and vendors, and
certain of our customers.
As of March 31, 1999, we have successfully completed the modification and
testing of all our critical IT and non-IT systems that were not Y2K compliant
except for Electric Utility's System
-18-
<PAGE> 21
UGI UTILITIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Control and Data Acquisition (SCADA) system. We anticipate replacing this system
with a Y2K compliant system by July 31, 1999.
As previously mentioned, in addition to assuring our IT and non-IT systems are
Y2K compliant, we developed and implemented a program to assess the readiness of
our key suppliers and third-party providers, including suppliers of interstate
transportation capacity, natural gas producers and electricity interchange
providers. Although none of our products or services are of themselves date
sensitive, as a utility company we are dependent upon other companies whose IT
and non-IT systems may not be Y2K compliant. We have completed our program to
contact and inquire of the readiness of these key suppliers and vendors. We have
evaluated the responses received from our critical vendors and suppliers and to
the extent we were not satisfied with the responses, or have determined that the
responses indicate a lack of Y2K readiness, we have developed contingency plans.
The major elements of these contingency plans are based upon the use of manual
back-up systems, additional staffing, and alternative supply sources. These
contingency plans attempt to mitigate the potential impact of Y2K noncompliance
by our key suppliers and vendors. However, these plans cannot assure that
business disruptions that may be caused by key suppliers or third-party
providers will not have a material adverse impact on our operations. Gas Utility
and Electric Utility have completed their contingency plans.
In addition, there are other Y2K risks which are beyond our control any of which
could have a material adverse impact on our operations. Such risks include, but
are not limited to, the failure of utility and telecommunications companies to
provide service and the failure of financial institutions to process
transactions.
Incremental costs associated with our Y2K efforts, which we expense as incurred,
have not had a material effect on our results of operations. Because our Y2K
compliance program is substantially complete, we do not expect future costs will
be significant.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposures are market prices for natural gas and electric
power and changes in interest rates.
Although Gas Utility is subject to changes in the price of natural gas, the
current regulatory framework allows Gas Utility to recover prudently incurred
gas costs from its customers. Consequently, there currently is limited commodity
price risk associated with Gas Utility due to the current rate-making structure.
-19-
<PAGE> 22
UGI UTILITIES, INC.
Because the sources and costs of our electric power vary from period to period
and because we no longer defer the difference between actual power costs and
amounts included in our rates, Electric Utility's quarterly results may be more
volatile in the future. In addition, future financial results will likely depend
upon a number of factors including the number of our customers who choose
alternative electricity suppliers and our success in producing or purchasing
electricity at competitive market prices. If our costs to produce or purchase
power exceed the amounts we are able to charge our customers, Electric Utility's
results would be adversely affected.
We have interest rate exposure associated with borrowings under our revolving
credit agreements. These agreements provide for interest rates on borrowings
which are indexed to short-term market interest rates. Based upon the level of
borrowings outstanding under these agreements at March 31, 1999, an increase in
short-term interest rates of 50 basis points (0.5%) would increase annual
interest expense by approximately $.4 million. Due to the seasonal nature of our
businesses, the level of borrowings outstanding at March 31, 1999 is not
necessarily indicative of the level of borrowings throughout the year.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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 Company of North America, The Home
Insurance Company, Lloyds of London, and Associated Electric and Gas Insurance
Services, Ltd. The complaint alleges that the defendants breached contracts of
insurance by failing to indemnify UGI Utilities for certain environmental costs.
The suit seeks to recover more than $11 million in costs incurred by UGI
Utilities at various manufactured gas plant sites.
ITEM 5. OTHER INFORMATION
SALE BY UGI CORPORATION
On March 1, 1999, UGI Corporation, the parent company of UGI Utilities,
announced that it had entered into a merger agreement with Unisource Worldwide,
Inc. for a stock-for-stock merger transaction. In connection with the merger,
UGI Corporation announced its intention to sell UGI Utilities.
On May 10, 1999, Unisource announced that it received an unsolicited
written proposal from Georgia-Pacific Corporation to acquire Unisource at a
price of $12.00 per share in cash and that the Unisource board of directors had
authorized management to begin discussions with Georgia-Pacific concerning its
proposal. The UGI-Unisource merger transaction is pending.
-20-
<PAGE> 23
UGI UTILITIES, INC.
MANAGEMENT CHANGES
Robert J. Chaney was elected a director of UGI Utilities on February 23, 1999.
He was also elected President and Chief Executive Officer of the Company,
effective March 1, 1999, succeeding Richard L. Bunn who retired as President and
Chief Executive Officer on the same date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
10.1 Amended Change of Control Agreement between UGI
Corporation and Robert J. Chaney is incorporated by
reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year ended September 30,
1998
10.2 Change of Control Agreement between UGI Corporation
and John C. Barney is incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form
10-K for the year ended September 30, 1998
12.1 Computation of ratio of earnings to fixed charges
12.2 Computation of ratio of earnings to combined fixed
charges and preferred stock dividends
27 Financial Data Schedule
(b) The Company did not file any Current Reports on Form 8-K
during the fiscal quarter ended March 31, 1999.
-21-
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UGI Utilities, Inc.
-------------------
(Registrant)
Date: May 14, 1999 By: J. C. Barney
- ------------------- ----------------------------------------
J. C. Barney, Senior Vice President -
Finance
(Principal Financial Officer)
-22-
<PAGE> 25
UGI UTILITIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
10.1 Amended Change of Control Agreement between UGI Corporation and Robert
J. Chaney is incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1998
10.2 Change of Control Agreement between UGI Corporation and John C. Barney
is incorporated by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1998
12.1 Computation of ratio of earnings to fixed charges
12.2 Computation of ratio of earnings to combined fixed charges and
preferred stock dividends
27 Financial Data Schedule
-23-
<PAGE> 1
UGI UTILITIES INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES - EXHIBIT 12.1
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended September 30,
March 31, --------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income taxes $59,864 $57,007 $63,275 $61,717 $39,759
Interest expense 8,656 17,383 16,696 15,921 16,632
Amortization of debt discount and expense 106 200 176 173 206
Interest component of rental expense 722 1,624 1,887 1,838 1,604
------- ------- ------- ------- -------
$69,348 $76,214 $82,034 $79,649 $58,201
======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense $ 8,656 $17,383 $16,696 $15,921 $16,632
Amortization of debt discount and expense 106 200 176 173 206
Allowance for funds used during
construction (capitalized interest) 18 39 114 107 65
Interest component of rental expense 722 1,624 1,887 1,838 1,604
------- ------- ------- ------- -------
$ 9,502 $19,246 $18,873 $18,039 $18,507
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 7.30 3.96 4.35 4.42 3.14
======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
UGI UTILITIES INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS - EXHIBIT 12.2
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended September 30,
March 31, ----------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income taxes $59,864 $57,007 $63,275 $61,717 $39,759
Interest expense 8,656 17,383 16,696 15,921 16,632
Amortization of debt discount and expense 106 200 176 173 206
Interest component of rental expense 722 1,624 1,887 1,838 1,604
------- ------- ------- ------- -------
$69,348 $76,214 $82,034 $79,649 $58,201
======= ======= ======= ======= =======
COMBINED FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS:
Interest expense $ 8,656 $17,383 $16,696 $15,921 $16,632
Amortization of debt discount and expense 106 200 176 173 206
Allowance for funds used during
construction (capitalized interest) 18 39 114 107 65
Interest component of rental expense 722 1,624 1,887 1,838 1,604
Preferred stock dividend requirements 775 2,160 2,764 2,765 2,778
Adjustment required to state preferred stock
dividend requirements on a pretax basis 472 1,304 1,754 1,685 1,164
------- ------- ------- ------- -------
$10,749 $22,710 $23,391 $22,489 $22,449
======= ======= ======= ======= =======
Ratio of earnings to combined fixed charges
and preferred stock dividends 6.45 3.36 3.51 3.54 2.59
======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A) the
condensed consolidated balance sheet and income statement of UGI Utilities, Inc.
as of and for the six months ended March 31, 1999 and is qualified in its
entirety by reference to such (B) financial statements included in UGI
Utilities' quarterly report on Form 10-Q for the quarter ended March 31, 1999.
</LEGEND>
<CIK> 0000100548
<NAME> UGI UTILITIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 4,221
<SECURITIES> 0
<RECEIVABLES> 76,080
<ALLOWANCES> 2,034
<INVENTORY> 10,554
<CURRENT-ASSETS> 108,744
<PP&E> 811,811
<DEPRECIATION> 263,041
<TOTAL-ASSETS> 734,378
<CURRENT-LIABILITIES> 173,819
<BONDS> 180,037
20,000
0
<COMMON> 60,259
<OTHER-SE> 163,407
<TOTAL-LIABILITY-AND-EQUITY> 734,378
<SALES> 280,462
<TOTAL-REVENUES> 280,462
<CGS> 142,785
<TOTAL-COSTS> 142,785
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,969
<INTEREST-EXPENSE> 8,762
<INCOME-PRETAX> 59,864
<INCOME-TAX> 22,664
<INCOME-CONTINUING> 37,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,200
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>There are no publicly held shares outstanding.
</FN>
</TABLE>
