<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 June 30, 1996
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 1-11071
UGI CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Pennsylvania 23-2668356
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
UGI CORPORATION
460 North Gulph Road, King of Prussia, PA
(Address of principal executive offices)
19406
(Zip Code)
(610) 337-1000
(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 July 31, 1996, there were 33,096,105 shares of UGI Corporation
Common Stock, without par value, outstanding.
<PAGE> 2
UGI CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1996,
September 30, 1995 and June 30, 1995 1
Condensed Consolidated Statements of Income for the
three, nine and twelve months ended June 30, 1996 and 1995 2
Condensed Consolidated Statements of Cash Flows for the
nine and twelve months ended June 30, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4 - 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14 - 28
PART II OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 30
</TABLE>
-i-
<PAGE> 3
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1996 1995 1995
-------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40.7 $ 121.7 $ 110.5
Short-term investments, at cost which approximates market value 45.2 11.0 31.0
Accounts receivable (less allowances for doubtful accounts of
$12.2, $7.3 and $10.1, respectively) 126.4 85.9 83.7
Accrued utility revenues 7.3 7.9 5.1
Inventories 83.2 102.2 75.0
Deferred income taxes 23.1 22.1 32.5
Prepayments and other current assets 10.1 16.5 14.3
-------- -------- --------
Total current assets 336.0 367.3 352.1
Investments 6.4 6.1 6.0
Property, plant and equipment, at cost (less accumulated depreciation
and amortization of $356.1, $320.0 and $308.0, respectively) 959.9 954.7 949.2
Intangible assets (less accumulated amortization of $92.8, $74.3 and
$68.0, respectively) 688.5 740.7 758.2
Deferred recoverable utility costs 43.1 41.3 31.2
Other assets 57.1 53.9 51.7
-------- -------- --------
Total assets $2,091.0 $2,164.0 $2,148.4
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt - Propane $ 5.5 $ 5.4 $ 6.6
Current maturities of long-term debt - Utilities 25.5 53.2 7.3
Current maturities of long-term debt - other 0.3 0.3 0.3
Bank loans - Utilities 10.0 42.0 35.5
Accounts payable 65.7 69.1 50.2
Other current liabilities 155.1 159.3 189.3
-------- -------- --------
Total current liabilities 262.1 329.3 289.2
Long-term debt - Propane 664.1 653.1 652.8
Long-term debt - Utilities 156.4 153.1 158.1
Long-term debt - other 8.7 9.0 9.0
Deferred income taxes 140.6 169.5 173.7
Other noncurrent liabilities 113.7 115.4 92.7
Minority interest in AmeriGas Partners 309.3 318.9 337.9
UGI Utilities redeemable preferred stock 35.2 35.2 35.2
Common stockholders' equity:
Common Stock, without par value (authorized - 100,000,000 shares;
issued - 33,081,447, 32,921,830 and 32,785,486 shares, respectively) 391.7 386.1 383.3
Retained earnings (accumulated deficit) 11.7 (5.5) 16.6
-------- -------- --------
403.4 380.6 399.9
Less treasury stock, at cost 2.5 0.1 0.1
-------- -------- --------
Total common stockholders' equity 400.9 380.5 399.8
-------- -------- --------
Total liabilities and stockholders' equity $2,091.0 $2,164.0 $2,148.4
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE> 4
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
--------------- ------------------ ------------------
1996 1995 1996 1995 1996 1995
------ ------ -------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Propane $175.5 $139.4 $ 836.1 $355.8 $ 992.0 $418.7
Utilities 81.4 66.2 372.7 303.5 426.6 357.0
Energy marketing 19.5 - 64.8 - 73.3 -
------ ------ -------- ------ -------- ------
276.4 205.6 1,273.6 659.3 1,491.9 775.7
------ ------ -------- ------ -------- ------
Costs and expenses:
Propane cost of sales 96.2 71.0 468.2 178.1 551.1 209.4
Utilities - gas, fuel and purchased power 38.1 29.2 186.2 148.5 207.4 172.0
Energy marketing cost of sales 18.4 - 59.0 - 67.0 -
Operating and administrative expenses 102.5 92.3 327.8 231.8 427.6 292.8
Depreciation and amortization 21.4 18.2 64.4 40.1 85.2 50.7
Petrolane fee income - (2.8) - (20.5) - (28.8)
Miscellaneous (income), net (4.0) (3.4) (10.2) (8.3) (13.3) (10.2)
------ ------ -------- ------ -------- ------
272.6 204.5 1,095.4 569.7 1,325.0 685.9
------ ------ -------- ------ -------- ------
Operating income 3.8 1.1 178.2 89.6 166.9 89.8
Interest charges (19.8) (17.8) (59.6) (39.5) (79.4) (49.6)
Minority interest in AmeriGas Partners 9.3 8.6 (19.4) 8.6 (8.3) 8.6
------ ------ -------- ------ -------- ------
Income (loss) before income taxes, subsidiary
preferred stock dividends and
equity in Petrolane (6.7) (8.1) 99.2 58.7 79.2 48.8
Income tax (expense) benefit 3.7 (4.1) (45.0) (32.8) (34.9) (28.6)
Dividends on UGI Utilities Series
Preferred Stock (0.7) (0.7) (2.1) (2.1) (2.8) (2.3)
Equity in Petrolane - (6.6) - (5.3) - (2.7)
------ ------ -------- ------ -------- ------
Income (loss) before extraordinary loss and
accounting change (3.7) (19.5) 52.1 18.5 41.5 15.2
Extraordinary loss - propane debt
restructuring - (13.2) - (13.2) - (13.2)
Change in accounting for
postemployment benefits - - - (3.1) - (3.1)
------ ------ -------- ------ -------- ------
Net income (loss) $ (3.7) $(32.7) $ 52.1 $ 2.2 $ 41.5 $ (1.1)
====== ====== ======== ====== ======== ======
Earnings (loss) per common and common
equivalent share:
Earnings (loss) before extraordinary loss
and accounting change $(.11) $(.60) $ 1.57 $ .57 $ 1.26 $ .46
Extraordinary loss - propane debt
restructuring - (.40) - (.41) - (.41)
Change in accounting for
postemployment benefits - - - (.09) - (.09)
---- ---- --------- ------- ---------- --------
Net earnings (loss) $(.11) $(1.00) $ 1.57 $ .07 $ 1.26 $ (.04)
===== ==== ========= ======= ========== ========
Dividends declared per share $ .355 $ .35 $ 1.055 $ 1.04 $ 1.405 $ 1.385
====== ===== ========== ======= ========== ========
Average common and common
equivalent shares outstanding 33.1 32.8 33.1 32.6 33.1 32.6
==== ==== ==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE> 5
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Nine Months Ended Twelve Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 (1) 1996 1995 (1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 52.1 $ 2.2 $ 41.5 $ (1.1)
Reconcile to net cash provided by
continuing operations:
Depreciation and amortization 64.4 40.1 85.2 50.7
Deferred income taxes, net 3.4 7.4 1.1 12.7
Equity in loss of Petrolane - 5.3 - 2.7
Extraordinary loss - 13.2 - 13.2
Minority interest in AmeriGas Partners 19.4 (8.6) 8.3 (8.6)
Change in accounting for postemployment benefits - 3.1 - 3.1
Other, net 4.2 5.6 6.0 11.5
------- ------- ------- -------
143.5 68.3 142.1 84.2
Net change in:
Accounts receivable and accrued utility revenues (47.4) 14.0 (54.3) 17.2
Inventories 19.5 12.9 (7.7) (1.0)
Deferred fuel adjustments 0.5 10.1 (9.7) 0.6
Pipeline transition costs, net 1.1 2.4 0.6 (1.5)
Producer settlements, net 0.1 (8.1) (1.3) (10.0)
Accounts payable (3.8) (17.2) 16.0 (16.9)
Other current assets and liabilities (0.1) 4.5 17.6 0.3
------- ------- ------- -------
Net cash provided by continuing operations 113.4 86.9 103.3 72.9
Net cash used by discontinued operations - - - (0.5)
------- ------- ------- -------
Net cash provided by operating activities 113.4 86.9 103.3 72.4
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (43.5) (43.7) (68.6) (61.0)
Net proceeds from disposals of property,
plant and equipment 3.2 0.5 4.1 1.4
Acquisitions of businesses, net of cash acquired (9.2) (2.5) (10.8) (2.8)
Short-term investments increase (34.2) (31.0) (14.2) (31.0)
Other, net (0.3) 1.2 (0.3) 0.7
------- ------- ------- -------
Net cash used by investing activities (84.0) (75.5) (89.8) (92.7)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on Common Stock (34.6) (33.6) (46.2) (44.7)
Distributions on Partnership Common Units (29.1) - (37.0) -
Issuance of long-term debt 34.1 - 82.1 -
Repayment of long-term debt (52.0) (11.8) (60.2) (19.9)
UGI Utilities bank loans increase (decrease) (32.0) 18.5 (25.5) 28.5
Issuance of UGI Utilities Series Preferred Stock - - - 19.8
Issuance of Common Stock 8.2 7.3 11.0 9.8
Repurchases of Common Stock (5.0) - (5.0) -
------- ------- ------- -------
Net cash used by financing activities (110.4) (19.6) (80.8) (6.5)
------- ------- ------- -------
AMERIGAS PARTNERS FORMATION TRANSACTIONS:
Acquisition of Petrolane Class B shares - (90.9) - (90.9)
Issuance of AmeriGas Partners Common Units - 349.7 - 349.7
Issuance of long-term debt - 208.5 - 208.5
Repayment of long-term debt and related interest - (408.9) - (408.9)
Other fees and expenses - (17.1) (2.5) (17.1)
------- ------- ------- -------
Net cash provided (used) by AmeriGas Partners
formation transactions - 41.3 (2.5) 41.3
------- ------- ------- -------
Cash and cash equivalents increase (decrease) $ (81.0) $ 33.1 $ (69.8) $ 14.5
======= ======= ======= =======
CASH AND CASH EQUIVALENTS:
End of period $ 40.7 $ 110.5 $ 40.7 $ 110.5
Beginning of period 121.7 77.4 110.5 96.0
------- ------- ------- -------
Increase (decrease) $ (81.0) $ 33.1 $ (69.8) $ 14.5
======= ======= ======= =======
</TABLE>
(1) Certain amounts have been reclassified.
During the twelve months ended June 30, 1996 and 1995, UGI Utilities, Inc. paid
cash dividends to UGI of $11.6 and $18.5, respectively. During the twelve
months ended June 30, 1996 and 1995, AmeriGas, Inc. paid cash dividends to UGI
of $56.9 and $4.4, respectively. During those same periods, UGI paid cash
dividends to holders of Common Stock of $46.2 and $44.7, respectively. The
ability of UGI Corporation to declare and pay cash dividends on its Common
Stock is dependent upon the receipt of cash dividends and distributions from
its wholly owned subsidiaries, principally UGI Utilities, Inc. and AmeriGas,
Inc.
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 6
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Millions of dollars, except per share amounts)
1. BASIS OF PRESENTATION
UGI Corporation (UGI) is a holding company with two principal lines of
business. UGI's utility business is conducted through a wholly owned
subsidiary, UGI Utilities, Inc. (UGI Utilities), which owns and
operates a natural gas distribution utility (Gas Utility) and an
electric utility (Electric Utility) in Pennsylvania (together referred
to herein as "Utilities"). Commencing with the April 19, 1995
Partnership Formation described below, UGI conducts a national propane
distribution business through AmeriGas Partners, L.P. (AmeriGas
Partners) and its operating subsidiary, AmeriGas Propane, L.P. (the
"Operating Partnership"), both of which are Delaware limited
partnerships. At June 30, 1996, UGI, through wholly owned
subsidiaries, holds an effective 2% general partner interest and a
56.7% limited partnership interest in the Operating Partnership. This
limited partner interest is evidenced by common units (Common Units)
and subordinated units (Subordinated Units) representing limited
partner interests in AmeriGas Partners. The remaining 41.3% effective
interest in the Operating Partnership is publicly held. AmeriGas
Partners and the Operating Partnership are collectively referred to
herein as the Partnership. UGI also conducts an energy marketing
business through its wholly owned subsidiary, UGI Enterprises, Inc.
(UGI Enterprises).
Prior to the Partnership Formation, UGI's AmeriGas, Inc. subsidiary
(AmeriGas) conducted a national propane distribution business
principally through its wholly owned subsidiaries AmeriGas Propane,
Inc. (AmeriGas Propane) and AmeriGas Propane-2, Inc. (AGP-2) and
equity investee Petrolane Incorporated (Petrolane). On April 19,
1995, a wholly owned subsidiary of AmeriGas acquired by merger (the
"Petrolane Merger") the approximately 65% of Petrolane common shares
outstanding not already owned by UGI or AmeriGas and combined the
propane distribution businesses of Petrolane, AmeriGas Propane and
AGP-2 (the "Partnership Formation") into the Operating Partnership,
which was formed to acquire these propane businesses and assets. A
wholly owned subsidiary of AmeriGas (the "General Partner") serves as
the general partner of AmeriGas Partners and the Operating
Partnership.
The consolidated financial statements include the accounts of UGI and
its majority-owned subsidiaries (collectively, the Company). All
significant intercompany accounts and transactions have been
eliminated in consolidation. The public unitholders' interest in
AmeriGas Partners' results of operations and net assets is reflected
as minority interest in the condensed consolidated statements of
income and balance sheets. The Company's investment in Petrolane
through April 19, 1995 was accounted for by the equity method under
which the investment was recorded at cost and adjusted by the
Company's share of Petrolane's undistributed income or loss.
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 (SEC).
They include all adjustments which the Company considers 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
- 4 -
<PAGE> 7
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
in conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1995. Due to the seasonal nature of the Company's
businesses, the results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.
2. AMERIGAS PARTNERS
QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
AmeriGas Partners makes distributions of its Available Cash
approximately 45 days after the end of each fiscal quarter. Available
Cash generally means, with respect to any fiscal quarter of the
Partnership, all cash on hand at the end of such quarter plus all
additional cash on hand as of the date of determination resulting from
borrowings subsequent to the end of such quarter less the amount of
reserves established by the General Partner in its reasonable
discretion for future cash requirements. These reserves may be
retained for the proper conduct of the Partnership's business and for
distributions during the next four quarters. In addition, reserves
for the payment of debt principal and interest are required under
provisions of certain of the Partnership's debt instruments. A
distribution of 55 cents per Common and Subordinated unit (the
"Minimum Quarterly Distribution") for each of the quarters ended March
31, 1996, December 31, 1995 and September 30, 1995 was made
approximately 45 days after each quarter. A pro rata distribution of
44.6 cents per Common and Subordinated unit was also made for the
period commencing with the Partnership Formation through June 30,
1995. The Minimum Quarterly Distribution for the quarter ended June
30, 1996 will be made on August 16, 1996 to holders of record on
August 9, 1996 of all Common and Subordinated units.
UNUSUAL ITEMS
In March 1996 the Partnership completed the arrangements for a refund
of general liability insurance premium deposits totaling $4.4 million
which were previously paid by Petrolane prior to the Partnership
Formation. The anticipated refund has been reflected as a reduction
to operating and administrative expenses in the accompanying Condensed
Consolidated Statements of Income. In addition, in March 1996 the
Partnership completed a reassessment of its potential liability for
environmental matters principally relating to the clean up of
underground storage tanks (USTs). The reassessment indicated a
reduction in estimated future costs and the resulting adjustment of
$3.3 million has also been reflected as a reduction to operating
expenses. The after-tax total of these adjustments increased net
income for the nine and twelve months ended June 30, 1996 by $2.7
million or $.08 per share.
In February 1996 the General Partner completed AmeriGas Partners' and
the Operating Partnership's federal income tax returns for the
Partnership's initial period of operation. As a part of this process,
a final determination was made as to how to allocate the tax basis of
certain of the assets contributed to the Partnership by the General
Partner and Petrolane pursuant to the Partnership Formation. The
completion of the allocation process resulted in reductions in the
deferred income tax liabilities of the General Partner and Petrolane
existing at the date of the Partnership Formation, which had been
recorded in connection with the Petrolane Merger and the Partnership
Formation. As a result, during the three months ended March 31, 1996,
the
- 5 -
<PAGE> 8
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company recorded a $37.0 million reduction in deferred income tax
liabilities and a corresponding reduction in goodwill which
adjustments are reflected in the accompanying condensed consolidated
balance sheet at June 30, 1996.
PRO FORMA INCOME STATEMENT DATA
The following unaudited pro forma condensed consolidated financial
information of the Company for the three and nine months ended June
30, 1995 was derived from the historical financial information of the
Company and Petrolane and was prepared to reflect the effects of the
Petrolane Merger and the Partnership Formation as if these
transactions had been completed as of the beginning of the periods
presented. The following unaudited pro forma condensed consolidated
financial information does not purport to present the results of
operations of the Company had the transactions described above
actually been completed as of the beginning of these periods. In
addition, the unaudited pro forma condensed consolidated financial
information is not necessarily indicative of results to be expected in
the future.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Three Months Nine Months
Ended Ended
June 30, June 30,
1995 1995
------------ ------------
<S> <C> <C>
Revenues $ 242.3 $1,026.2
Cost of sales (119.8) (524.6)
Depreciation and amortization (21.7) (63.6)
Other costs and expenses, net (98.1) (303.3)
------- --------
Operating income 2.7 134.7
Interest expense (21.1) (60.4)
Minority interest in AmeriGas Partners 9.1 (11.4)
Income taxes 2.3 (29.5)
Dividends on UGI Utilities Series Preferred Stock (.7) (2.1)
------- --------
Income (loss) before extraordinary loss and
accounting change $ (7.7) $ 31.3
======= ========
Earnings (loss) per share before extraordinary loss
and accounting change $ (.23) $ .96
======= ========
</TABLE>
- 6 -
<PAGE> 9
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ADJUSTMENTS RELATED TO THE PARTNERSHIP FORMATION
As a result of the Partnership Formation, in April 1995 the Company
recorded an extraordinary loss of $21.8 million pre-tax ($13.2 million
after-tax) from the restructuring of certain senior indebtedness of
Petrolane and AmeriGas Propane assumed by the Operating Partnership.
In addition, the Company wrote off $5.9 million of net deferred tax
benefits of AmeriGas Propane, and $5.8 million of net deferred tax
benefits of Petrolane (which amount is reflected in "Equity in
Petrolane" in the condensed consolidated statements of income for the
three, nine and twelve months ended June 30, 1995) representing the
Company's share of such tax benefits no longer realizable as a result
of the sale of Common Units to the public.
4. INVESTMENT IN PETROLANE
The following table includes summarized consolidated results of
operations for Petrolane for periods through April 19, 1995:
<TABLE>
<CAPTION>
March 24, September 24, June 24,
1995 to 1994 to 1994 to
April 19, April 19, April 19,
1995 1995 1995
--------- ------------- ---------
<S> <C> <C> <C>
Revenues $ 37.5 $372.1 $473.9
Cost of sales (20.4) (203.2) (261.0)
Depreciation and amortization (4.0) (27.4) (38.9)
Other costs and expenses (11.9) (100.0) (133.3)
------ ------ ------
Operating income 1.2 41.5 40.7
Interest expense (3.9) (30.0) (41.6)
Income tax (expense) benefit .3 (10.1) 9.8
------ ------ ------
Income (loss) before change in accounting (2.4) 1.4 8.9
Change in accounting for postemployment
benefits - (.9) (.9)
------ ------ ------
Net income (loss) $ (2.4) $ .5 $ 8.0
====== ====== ======
</TABLE>
Prior to the Partnership Formation, AmeriGas Propane and Petrolane
were parties to a customer services agreement (Customer Services
Agreement) pursuant to which AmeriGas Propane served customers of
closed Petrolane districts and Petrolane served customers of closed
AmeriGas Propane districts. These districts were closed in order to
achieve cost reductions and operational efficiencies in overlapping
geographical markets served by AmeriGas Propane and Petrolane. The
Customer Services Agreement terminated on April 19, 1995. Fees billed
by Petrolane to AmeriGas Propane under the Customer Services Agreement
totaled $.8 million, $6.9 million and, $9.2 million in the three, nine
and twelve months ended June 30, 1995, respectively, and are included
in operating and administrative expenses. Fees billed to Petrolane
totaled $.7 million,
- 7 -
<PAGE> 10
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$5.3 million and $7.2 million during the three, nine and twelve months
ended June 30, 1995, respectively, and are included in Petrolane fee
income.
Prior to the Partnership Formation, UGI provided Petrolane with
certain financial, accounting, human resources, risk management,
insurance, legal, corporate communications, investor relations,
treasury and corporate development services. For such services, UGI
received a quarterly fee from Petrolane. During the three, nine and
twelve months ended June 30, 1995, UGI recorded management fee income
of $.9 million, $6.8 million and $9.8 million, respectively, under
this agreement which amounts are included in Petrolane fee income.
Prior to the Partnership Formation, AmeriGas Management Company (AMC)
and AmeriGas Transportation Management Company (ATMC), first-tier
subsidiaries of UGI, provided general management, supervisory,
administrative and transportation services to Petrolane, AmeriGas
Propane and AGP-2. For such services, AMC and ATMC each received a
monthly fee from Petrolane in an amount which, together with fees
received from AmeriGas Propane and AGP-2, effectively reimbursed AMC
and ATMC for costs incurred to provide such services. During the
three, nine and twelve months ended June 30, 1995, the Company
recorded fee income under these agreements of $1.2 million, $8.3
million and $11.8 million, respectively, which amounts are included in
Petrolane fee income.
- 8 -
<PAGE> 11
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5.Segment Information
Information on revenues, operating income (loss), depreciation and
amortization, identifiable assets and certain operating statistics by
business segment for the periods presented follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1996 1995 1996 1995 1996 1995
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Propane $ 175.5 $ 139.4 $ 836.1 $ 355.8 $ 992.0 $ 418.7
Gas utility 65.2 51.2 320.2 254.1 357.4 292.0
Electric utility 16.2 15.0 52.5 49.4 69.2 65.0
Energy marketing 19.5 - 64.8 - 73.3 -
------- ------- ------- ------- ------- --------
Total consolidated operations $ 276.4 $ 205.6 $1,273.6 $ 659.3 $1,491.9 $ 775.7
======= ======= ======= ======= ======= ========
Petrolane (a) $ 37.5 $ 372.1 $ 473.9
======= ======= ========
OPERATING INCOME (LOSS)
Propane $ (4.9) $ (4.6) $ 100.4 (b) $ 31.3 $ 90.9 (b,c) $ 32.3
Gas utility 9.1 5.8 75.3 52.8 74.4 50.7
Electric utility 1.5 1.8 6.4 7.2 8.3 8.8
Energy marketing 0.5 0.3 4.4 1.2 5.0 1.4
Petrolane management fee - 0.9 - 6.8 - 9.8
Corporate general and other (2.4) (3.1) (8.3) (9.7) (11.7) (13.2)
------- ------- ------- ------- ------- --------
Total consolidated operations $ 3.8 $ 1.1 $ 178.2 $ 89.6 $ 166.9 $ 89.8
======= ======= ======= ======= ======= ========
Petrolane (a) $ 1.2 $ 41.5 $ 40.7
======= ======= ========
DEPRECIATION AND AMORTIZATION
Propane - depreciation $ 9.5 $ 7.9 $ 28.6 $ 14.5 $ 37.9 $ 18.4
Propane - amortization 6.4 5.3 19.4 10.5 25.9 12.8
Gas utility 4.5 4.1 13.2 12.1 17.2 15.7
Electric utility 1.0 0.9 3.0 2.8 3.9 3.6
Corporate general - - 0.2 0.2 0.3 0.2
------- ------- ------- ------- ------- --------
Total consolidated operations $ 21.4 $ 18.2 $ 64.4 $ 40.1 $ 85.2 $ 50.7
======= ======= ======= ======= ======= ========
Petrolane - depreciation (a) $ 1.9 $ 13.1 $ 18.6
======= ======= ========
Petrolane - amortization (a) $ 2.1 $ 14.3 $ 20.3
======= ======= ========
IDENTIFIABLE ASSETS
(at period end)
Propane $1,363.6 $1,493.0 $1,363.6 $1,493.0 $1,363.6 $1,493.0
Gas utility 559.6 508.9 559.6 508.9 559.6 508.9
Electric utility 83.9 82.8 83.9 82.8 83.9 82.8
Energy marketing 13.0 1.1 13.0 1.1 13.0 1.1
Corporate general and other 70.9 62.6 70.9 62.6 70.9 62.6
------- ------- ------- ------- ------- --------
Total consolidated operations $2,091.0 $2,148.4 $2,091.0 $2,148.4 $2,091.0 $2,148.4
======= ======= ======= ======= ======= =======
OPERATING STATISTICS
Propane sales - millions of gallons:
AmeriGas (through April 19, 1995) -
Retail 24.7 225.0 280.5
Wholesale 3.0 32.5 50.1
Petrolane (through April 19, 1995) -
Retail (a) 33.5 319.4 407.2
Wholesale (a) 10.0 99.9 129.4
AmeriGas Partners (after April 19, 1995) -
Retail 146.5 100.8 706.1 100.8 848.9 100.8
Wholesale 45.7 26.7 260.9 26.7 299.8 26.7
Natural gas throughput -
billions of cubic feet 16.9 15.9 72.3 68.2 86.5 82.2
Electric sales - millions of kilowatt hours 198.2 190.2 683.8 651.7 892.9 851.2
</TABLE>
- 9 -
<PAGE> 12
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTES TO SEGMENT INFORMATION:
(a) Includes 100% of amounts for Petrolane through April 19, 1995.
(b) Includes reductions in operating expenses of $4.4 million from
the anticipated refund of insurance premium deposits and $3.3
million from a reduction in accrued environmental costs.
(c) Includes accrual for Partnership management organizational
changes of $4.3 million.
6. UTILITY REGULATORY MATTERS
On June 22, 1993, the Pennsylvania Public Utility Commission (PUC)
entered an order permitting Gas Utility to record a regulatory asset
for the difference between the costs incurred under Statement of
Financial Accounting Standards (SFAS) No. 106, "Employers Accounting
for Postretirement Benefits Other Than Pensions" (SFAS 106) and costs
incurred on a pay-as-you-go basis. Under the terms of the order, the
regulatory asset resulting from the deferral of SFAS 106 costs was
allowable for ratemaking purposes subject to prior review in a base
rate proceeding. As part of Gas Utility's August 31, 1995 base rate
settlement (Gas Utility Base Rate Settlement) with the PUC, Gas
Utility was permitted the recovery over 17.25 years of the
approximately $4.0 million in deferred excess SFAS 106 costs,
comprising principally deferred transition obligation amortization,
for the period January 1, 1993 (the date Gas Utility adopted SFAS 106)
through August 31, 1995. The Gas Utility Base Rate Settlement,
however, reserved the right of any party to challenge the prospective
recovery of these deferred excess SFAS 106 costs in future rate
proceedings. Under the terms of Electric Utility's July 18, 1996 base
rate order, Electric Utility was permitted the recovery of its
deferred SFAS 106 transition obligation amortization.
In a proceeding involving an unaffiliated Pennsylvania utility,
Pennsylvania Power & Light Company (PP&L), the Commonwealth Court of
Pennsylvania (Commonwealth Court) reversed a PUC declaratory order
outside a full base rate proceeding permitting PP&L to defer excess
SFAS 106 costs pending its next base rate order. PP&L and the PUC
appealed the Commonwealth Court decision to the Pennsylvania Supreme
Court which, on March 12, 1996, declined to review the matter. The
Company will continue to monitor administrative and judicial
proceedings involving deferred excess SFAS 106 costs and recognizes
that, based on applicable law, it is possible that in future base rate
proceedings Utilities could prospectively be denied recovery of some
or all of its deferred excess SFAS 106 costs.
Also as part of the Gas Utility Base Rate Settlement, Gas Utility was
permitted to recover in its rates approximately $2.4 million in
ongoing annual costs incurred under the provisions of SFAS 106. Gas
Utility is required to defer the difference between the amount of SFAS
106 costs included in rates and the actuarially determined annual SFAS
106 costs for recovery or refund to ratepayers in future rate
proceedings. The ultimate recovery of SFAS 106 costs in excess of
pay-as-you-go costs was subject to the outcome of a legal challenge
brought by the Pennsylvania Office of Consumer Advocate (OCA) against
an unaffiliated Pennsylvania utility, Pennsylvania-American Water
Company (PAWC). In Irwin Popowsky v. PA P.U.C. (1994), the
Commonwealth Court rejected the claim of the OCA that principles of
ratemaking prohibit the PUC from permitting PAWC to recover excess
SFAS 106 costs. The OCA filed a petition for
- 10 -
<PAGE> 13
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
allowance of appeal with the Pennsylvania Supreme Court with respect
to this decision and the Pennsylvania Supreme Court, on March 12,
1996, denied this petition.
7. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to the lease guarantee obligations of
Petrolane relating to Petrolane's divestiture of nonpropane operations
prior to its 1989 acquisition by QFB Partners which are currently
estimated to aggregate approximately $100 million (subject to
reduction in certain circumstances). The leases expire through 2007
and some of them are currently in default. Under certain
circumstances such lease obligations may be reduced by the earnings of
such divested operations. The Partnership has succeeded to the
indemnity agreement of Petrolane by which Texas Eastern Corporation
(Texas Eastern), a prior owner of Petrolane, agreed to indemnify
Petrolane against any liabilities arising out of the conduct of
businesses that do not relate to, and are not a part of, the propane
business, including lease guarantees. To date, Texas Eastern has
directly satisfied its obligations without the Partnership's having to
honor its guarantee.
In addition, the Partnership has succeeded to Petrolane's agreement to
indemnify Shell Petroleum N.V. (Shell) for various scheduled claims
that were pending against Tropigas de Puerto Rico (Tropigas). This
indemnification agreement had been entered into by Petrolane in
conjunction with Petrolane's sale of the international operations of
Tropigas to Shell in 1989. The Partnership also succeeded to
Petrolane's right to seek indemnity on these claims first from
International Controls Corp., which sold Tropigas to Petrolane, and
then from Texas Eastern. To date, neither the Partnership nor
Petrolane has paid any sums under this indemnity, but several claims
by Shell, including claims related to certain antitrust actions
aggregating at least $68 million, remain pending.
The Company, along with other companies, has been named as a
potentially responsible party in several administrative proceedings
for the cleanup of various waste sites, including some Superfund
sites. Also, certain private parties have filed, or threatened to
file, suit against the Company to recover costs of investigation and,
as appropriate, remediation of several waste sites. In addition, the
Company has identified environmental contamination at several of its
properties and has voluntarily undertaken investigation and, as
appropriate, remediation of these sites in cooperation with
appropriate environmental agencies or private parties.
At a manufactured gas plant site in Burlington, Vermont, the United
States Environmental Protection Agency (EPA) has named nineteen
parties, including UGI Utilities, as potentially responsible parties
for gas plant contamination that resulted from the operations of a
former subsidiary of UGI Utilities. In May 1993, after receiving and
reviewing extensive public comment, EPA withdrew a proposed plan of
remediation that would have cost an estimated $50 million. EPA is now
working with community groups and potentially responsible parties to
develop a revised remediation plan. These groups continue to study
the site and evaluate the effect of the contamination on the
environment. UGI Utilities cannot estimate the cost associated with
any revised plan, but it does not believe such cost will exceed the
estimated cost of the originally proposed plan.
- 11 -
<PAGE> 14
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
With respect to a manufactured gas plant site in Concord, New
Hampshire, EnergyNorth Natural Gas, Inc. (EnergyNorth) has filed suit
against UGI Utilities alone seeking UGI Utilities' purportedly
allocable share of response costs associated with remediating gas
plant related contaminants at that site. EnergyNorth alleges that to
date it has spent $3.5 million to remediate part of the site and that
it will be required to spend an unknown amount in the future to
complete remediation.
At Burlington, Concord and other sites, management believes that UGI
Utilities should not have significant liability in those instances in
which a former subsidiary operated a manufactured gas plant because
UGI Utilities generally is not legally liable for the obligations of
its subsidiaries. Under certain circumstances, however, courts have
found parent companies liable for environmental damage caused by
subsidiary companies when the parent company exercised such
substantial control over the subsidiary that the court concluded that
the parent company either (i) itself operated the facility causing the
environmental damage or (ii) otherwise so controlled the subsidiary
that the subsidiary's separate corporate form should be disregarded.
There could be, therefore, significant future costs of an uncertain
amount associated with environmental damage caused by manufactured gas
plants that 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 level of control exercised by UGI Utilities
over the subsidiary satisfies the standard described above. In many
circumstances where UGI Utilities may be liable, expenditures may not
be reasonably quantifiable because of a number of factors, including
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.
The Company's policy is to accrue environmental investigation and
cleanup costs when it is probable that a liability exists and the
amount or range of amounts is reasonably estimable. The Company
intends to pursue recovery of any incurred costs through all
appropriate means, including regulatory relief, although such recovery
cannot be assured. Under the terms of the Gas Utility Base Rate
Settlement, Gas Utility is permitted to amortize as removal costs
site-specific environmental investigation and remediation costs, net
of related third-party payments, associated with Pennsylvania sites.
Gas Utility will be permitted to include in rates, through future base
rate proceedings, a five-year average of such prudently incurred
removal costs.
In addition to these environmental matters, there are various other
pending claims and legal actions arising out of the normal conduct of
the Company's businesses. The final results of environmental and
other matters cannot be predicted with certainty. However, it is
reasonably possible that some of them could be resolved unfavorably to
the Company. Management believes, after 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 the
Company's financial position but could be material to 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.
- 12 -
<PAGE> 15
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS 121) effective for fiscal
years beginning after December 15, 1995. In the case of the Company,
SFAS 121 must be adopted no later than fiscal 1997. SFAS 121
establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company's policy is
to evaluate the impairment of long-lived assets, including associated
intangibles, whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. The test
for impairment is performed by comparing estimated net future cash
flows expected to result from the use and eventual disposition of such
assets to their carrying amount aggregated on a business enterprise or
acquisition-level basis. On this basis, no impairment has been
recognized because the estimated future net cash flows of each such
asset group has exceeded the associated carrying amount. Under the
provisions of SFAS 121, the aggregation of cash flows and the related
test for impairment would be performed at a lower level within the
Company. As a result, long-lived assets and associated intangibles,
which are not deemed to be impaired under the Partnership's current
impairment policy, could be deemed to be impaired under the provisions
of SFAS 121 resulting in a noncash charge to operating income from
recording such impaired assets at fair value.
The Company has determined that the adoption of SFAS 121 will not have
a material effect on its nonpropane operations. However, the Company
is in the process of completing its evaluation of the impact of SFAS
121 on its propane operations. The Company expects to complete its
evaluation in the fourth quarter of fiscal 1996.
- 13 -
<PAGE> 16
UGI CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses of the Company's results of operations should be read in
conjunction with the segment information included in Note 5 to Condensed
Consolidated Financial Statements. Due to the seasonality of the Company's
businesses, the results of operations for interim periods are not necessarily
indicative of results to be expected for a full year. The comparisons of the
results of operations from consolidated propane operations for the three, nine
and twelve months ended June 30, 1996 and 1995 have been complicated by the
impact of the Petrolane Merger and the Partnership Formation. In order to
permit more meaningful analysis, the following analyses of the results of
propane operations also includes pro forma results for the three and nine
months ended June 30, 1995 as if the effects of the Petrolane Merger and the
transactions related to the Partnership Formation had occurred as of the
beginning of these periods.
- 14 -
<PAGE> 17
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS:
THREE MONTHS ENDED JUNE 30, 1996 (1996 THREE-MONTH PERIOD) COMPARED WITH THREE
MONTHS ENDED JUNE 30, 1995 (1995 THREE-MONTH PERIOD)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Increase
Three Months Ended June 30, 1996 1995 (Decrease)
- ------------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
REVENUES
Consolidated propane (a) $175.5 $139.4 N.M. N.M.
Gas utility 65.2 51.2 $ 14.0 27.3%
Electric utility 16.2 15.0 1.2 8.0
Energy marketing 19.5 - N.M. N.M.
Petrolane (b) 37.5 N.M. N.M.
Pro forma propane 175.5 176.1 (.6) (.3)
TOTAL MARGIN (c)
Consolidated propane (a) $ 79.3 $ 68.4 N.M. N.M.
Gas utility 32.3 27.0 $ 5.3 19.6%
Electric utility 7.7 7.5 .2 2.7
Energy marketing 1.1 - N.M. N.M.
Petrolane (b) 17.2 N.M. N.M.
Pro forma propane 79.3 85.5 (6.2) (7.3)
OPERATING INCOME (LOSS)
Consolidated propane (a) $ (4.9) $ (4.6) N.M. N.M.
Gas utility 9.1 5.8 $ 3.3 56.9%
Electric utility 1.5 1.8 (.3) (16.7)
Energy marketing .5 .3 .2 66.7
Petrolane management fee .9 N.M. N.M.
Corporate general and other (2.4) (3.1) (.7) (22.6)
Petrolane (b) 1.2 N.M. N.M.
Pro forma propane (4.9) (2.1) 2.8 133.3
OPERATING DATA
Propane-retail sales (million of gallons)-
Consolidated propane (a) 146.5 125.5 N.M. N.M.
Petrolane (b) 33.5 N.M. N.M.
Pro forma propane 146.5 159.0 (12.5) (7.9)%
Natural gas throughput-bcf 16.9 15.9 1.0 6.3
Electric sales-gwh 198.2 190.2 8.0 4.2
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- 15 -
<PAGE> 18
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
bcf - billions of cubic feet. gwh - millions of kilowatt hours.
(a) Consolidated propane includes the results of the operations of
AmeriGas Partners (successor to AmeriGas Propane and Petrolane) in the
1996 three-month period and AmeriGas Propane prior to, and AmeriGas
Partners subsequent to, the Partnership Formation in the 1995
three-month period. As a result, comparisons of consolidated propane
amounts are not meaningful (N.M.).
(b) Reflects 100% of Petrolane's results in the 1995 three-month period.
Accordingly, comparisons of Petrolane amounts are not meaningful
(N.M.). The results of operations of Petrolane in the 1995
three-month period are reflected in the Condensed Consolidated
Financial Statements of the Company on the equity method of
accounting.
(c) Consolidated propane and Petrolane total margin represents total
revenues less cost of sales. Gas and Electric utilities' total margin
represents total revenues less cost of sales and revenue-related
taxes. Energy marketing total margin, which represents margin from
the Company's gas marketing activities for periods subsequent to July
31, 1995, represents total revenues less cost of sales. For periods
prior to August 1, 1995, total margin from energy marketing activities
was reflected in miscellaneous income on the Condensed Consolidated
Statements of Income. Accordingly, comparisons of energy marketing
revenues and total margin are not meaningful (N.M.).
PROPANE OPERATIONS
CONSOLIDATED PROPANE. As previously mentioned, the Petrolane Merger, which
resulted in the consolidation of the operations of Petrolane effective April
19, 1995, and the effects of the Partnership Formation significantly affect the
comparison of historical consolidated propane results. During the 1995
three-month period, the results of Petrolane's operations were accounted for by
the equity method through April 19, 1995. As a result of the full-period
consolidation of Petrolane's operations in the 1996 three-month period, retail
volumes of propane sold, total consolidated propane revenues and total propane
margin were greater in the 1996 three-month period. Consolidated propane
operating loss was greater in the 1996 three-month period, despite higher
consolidated propane margin, reflecting higher consolidated propane operating
expenses resulting primarily from the full-period consolidation of the
operations of Petrolane.
PRO FORMA CONSOLIDATED PROPANE. The comparison of propane revenues, total
margin, operating loss and propane retail sales included in the table above are
affected by an additional week of operations (March 24, 1995 to March 31, 1995)
in the pro forma 1995 three-month period resulting from a difference in the
fiscal month end of the Partnership and the predecessor operating companies.
In order to provide a more meaningful comparison, the following analysis
reflects adjustments to the prior-year period's results to eliminate the
estimated impact of the additional week.
Retail volumes of propane sold increased approximately 4.7 million gallons
reflecting the benefit of colder late heating-season weather and the effects of
acquisitions. Wholesale volumes of propane sold were also higher in the 1996
three-month period as a result of increased sales of low margin storage
inventories. Revenues from the sale of propane in the 1996 three-month period
increased approximately $17.2 million
- 16 -
<PAGE> 19
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
reflecting principally higher average retail propane selling prices and higher
retail and wholesale volumes sold. Other revenues from the sale of appliances,
parts, and other products and services were slightly lower in the 1996
three-month period due in large part to lower revenues from hauling activities.
Propane cost of sales increased $15.1 million in the 1996 three-month period as
a result of higher average propane product costs and higher propane volumes.
Total propane margin increased an estimated $2.8 million in the 1996
three-month period compared with the adjusted pro forma 1995 three-month period
reflecting principally the impact of the higher retail volumes sold. Average
retail unit margin on propane sales in the 1996 three-month period was
essentially equal to average retail unit margin in the adjusted pro forma 1995
three-month period.
Total propane operating loss in the 1996 three-month period was $1.9 million
higher than the adjusted pro forma 1995 three-month period. A $2.8 million
increase in total margin was more than offset by higher operating and
administrative expenses and slightly higher charges for depreciation and
amortization. The increased operating expenses include higher payroll and
employee compensation expenses associated with the Partnership's management
reorganization activities.
UTILITY OPERATIONS
GAS UTILITY. Weather in the Gas Utility service area during the three months
ended June 30, 1996 was 2.4% colder than normal compared to weather that was
9.8% colder than normal in the prior-year period. Notwithstanding the warmer
weather, total system throughput increased 6.3% reflecting growth in
firm-residential, firm-commercial and firm-industrial (collectively, "core
market") sales and higher volumes transported for interruptible customers.
Total Gas Utility revenues increased principally as a result of higher base
rates, higher sales to core market customers and higher purchased gas cost
(PGC) rates in effect during the 1996 three-month period. Cost of gas sold by
the Gas Utility was $30.4 million during the 1996 three-month period, an
increase of $8.2 million over the prior-year period, reflecting higher average
PGC rates and the increase in core market sales.
The increase in Gas Utility total margin reflects an increase in margin from
core market customers partially offset by lower total margin from interruptible
and firm delivery service customers. The increase in core market total margin
reflects the effect of higher base rates and volumes sold. The decrease in
total margin from interruptible and firm delivery service customers reflects
lower average interruptible margins as a result of higher gas costs. In
addition, firm delivery service throughput was lower due in large part to
customer switching to interruptible delivery service. Gas Utility operating
income increased $3.3 million reflecting the increase in total margin partially
offset by higher system maintenance, customer accounts and depreciation
expenses in the 1996 three-month period.
ELECTRIC UTILITY. Electric Utility sales increased 4.2% during the 1996
three-month period reflecting colder late heating-season weather. Electric
Utility revenues increased $1.2 million reflecting the higher sales as well as
a greater 1996 three-month period Energy Cost Rate (ECR). Cost of sales
increased to $7.7 million in the 1996 three-month period from $7.0 million in
the prior-year period as a result of higher sales and a higher ECR.
The increase in Electric Utility total margin principally reflects the benefit
of the higher sales. Despite
- 17 -
<PAGE> 20
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
the increase in total margin, increases in operating, administrative and
depreciation expenses resulted in a $.3 million decrease in Electric Utility
operating income.
ENERGY MARKETING AND OTHER
Total revenues and margin from energy marketing in the 1996 three-month period
represents total revenues and margin from the energy marketing operations of
UGI Energy Services, Inc. (UGI Energy Services), a wholly owned subsidiary of
UGI Enterprises. Prior to August 1, 1995, energy marketing was conducted by
GASMARK, a division of UGI Utilities' wholly owned subsidiary UGI Development
Company. Total margin from the gas marketing operations of GASMARK in the 1995
three-month period is reflected in miscellaneous income in the Condensed
Consolidated Statements of Income. Operating income from energy marketing was
$.5 million in the 1996 three-month period compared with $.3 million in the
prior-year period reflecting an increase in 1996 three-month period unit
margins and volumes. Operating loss from corporate general and other, net,
consisting of expenses incurred by UGI corporate headquarters net of other
miscellaneous income, was $(2.4) million in the 1996 three-month period
compared with $(3.1) million in the prior-year period reflecting lower UGI
corporate administrative expenses.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $19.8 million in the 1996 three-month period from
$17.8 million in the prior-year period reflecting the effect of higher levels
of consolidated debt outstanding subsequent to the Petrolane Merger and the
Partnership Formation. On a pro forma basis, interest expense for the 1995
three-month period is $21.1 million. The effective income tax rate on pre-tax
loss for the three months ended June 30, 1996 was 55.2% reflecting the impact
of a slight decrease in the estimated annual effective income tax rate during
the three months ended June 30, 1996. Income tax expense for the three months
ended June 30, 1995 includes the write-off of $5.9 million in deferred tax
benefits of AmeriGas Propane no longer realizable by the Company as a result of
the sale of Common Units of AmeriGas Partners to the public.
- 18 -
<PAGE> 21
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS:
NINE MONTHS ENDED JUNE 30, 1996 (1996 NINE-MONTH PERIOD) COMPARED WITH NINE
MONTHS ENDED JUNE 30, 1995 (1995 NINE-MONTH PERIOD)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Increase
Nine Months Ended June 30, 1996 1995 (Decrease)
- ----------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
REVENUES
Consolidated propane (a) $836.1 $355.8 N.M. N.M.
Gas utility 320.2 254.1 $ 66.1 26.0%
Electric utility 52.5 49.4 3.1 6.3
Energy marketing 64.8 - N.M. N.M.
Petrolane (b) 372.1 N.M. N.M.
Pro forma propane 836.1 722.7 113.4 15.7
TOTAL MARGIN (c)
Consolidated propane (a) $367.9 $177.7 N.M. N.M.
Gas utility 146.0 118.5 $ 27.5 23.2%
Electric utility 24.6 23.8 .8 3.4
Energy marketing 5.8 - N.M. N.M.
Petrolane (b) 168.9 N.M. N.M.
Pro forma propane 367.9 346.6 21.3 6.1
OPERATING INCOME (LOSS)
Consolidated propane (a) $100.4 $ 31.3 N.M. N.M.
Gas utility 75.3 52.8 $ 22.5 42.6%
Electric utility 6.4 7.2 (.8) (11.1)
Energy marketing 4.4 1.2 3.2 266.7
Petrolane management fee 6.8 N.M. N.M.
Corporate general and other (8.3) (9.7) (1.4) (14.4)
Petrolane (b) 41.5 N.M. N.M.
Pro forma propane 100.4 83.2 17.2 20.7
OPERATING DATA
Propane-retail sales (million of gallons)-
Consolidated propane (a) 706.1 325.8 N.M. N.M.
Petrolane (b) 319.4 N.M. N.M.
Pro forma propane 706.1 645.2 60.9 9.4%
Natural gas throughput-bcf 72.3 68.2 4.1 6.0
Electric sales-gwh 683.8 651.7 32.1 4.9
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- 19 -
<PAGE> 22
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
bcf - billions of cubic feet. gwh - millions of kilowatt hours.
(a) Consolidated propane includes the results of the operations of
AmeriGas Partners (successor to AmeriGas Propane and Petrolane) in the
1996 nine-month period and AmeriGas Propane prior to, and AmeriGas
Partners subsequent to, the Partnership Formation in the 1995 nine-
month period. As a result, comparisons of consolidated propane
amounts are not meaningful (N.M.).
(b) Reflects 100% of Petrolane results in the 1995 nine-month period.
Accordingly, comparisons of Petrolane amounts are not meaningful
(N.M.). The results of operations of Petrolane in the 1995 nine-month
period are reflected in the Condensed Consolidated Financial
Statements of the Company on the equity method of accounting.
(c) Consolidated propane and Petrolane total margin represents total
revenues less cost of sales. Gas and Electric utilities' total margin
represents total revenues less cost of sales and revenue-related
taxes. Energy marketing total margin, which represents margin from
the Company's gas marketing activities for periods subsequent to July
31, 1995, represents total revenues less cost of sales. For periods
prior to August 1, 1995, total margin from energy marketing activities
was reflected in miscellaneous income on the Condensed Consolidated
Statements of Income. Accordingly, comparisons of energy marketing
revenues and total margin are not meaningful (N.M.).
PROPANE OPERATIONS
CONSOLIDATED PROPANE. Consolidated propane revenues increased $480.3 million
in the 1996 nine-month period reflecting principally the previously mentioned
full-period consolidation of Petrolane's operations, the effect of
significantly colder weather on retail propane sales, higher average retail
propane prices and higher sales of low margin excess storage inventories.
Total consolidated propane cost of sales increased $290.1 million reflecting
the higher volumes of consolidated propane sold and higher average propane
product costs. Consolidated propane total margin increased $190.2 million
principally due to the full-period consolidation of Petrolane's operations, the
volume effects of the colder weather and, to a lesser extent, higher wholesale
sales. Consolidated propane operating income increased $69.1 million
reflecting the higher consolidated margin partially offset by higher
consolidated propane operating expenses and charges for depreciation and
amortization resulting principally from the consolidation of the operations of
Petrolane.
PRO FORMA CONSOLIDATED PROPANE. Although the comparison of the Partnership's
results for the nine month periods is impacted by an additional week of
operations (September 24 to September 30, 1994) in the prior-year period
resulting from the difference in AmeriGas Partners' and the predecessor
companies fiscal month end, the impact of the additional week is not
material to an understanding of the overall results of operations and,
therefore, is not included as part of the following analysis.
Retail volumes of propane sold increased 60.9 million gallons in the 1996
nine-month period reflecting the effects of colder weather, acquisitions, and
other non weather-related volume growth. Weather across the U.S. markets
served by the Partnership was, on average, 1.3% colder than normal in the 1996
nine-month period compared with weather that was, on average, 17.0% warmer than
normal in the 1995 pro
- 20 -
<PAGE> 23
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
forma nine-month period. Regional temperature variations in the 1996
nine-month period were significantly different with the western U.S.
experiencing substantially warmer than normal temperatures and the eastern and
midwestern U.S. experiencing colder than normal temperatures. Wholesale
volumes of propane sold were significantly higher reflecting the effects of the
colder weather and an increase in sales of low margin excess storage
inventories.
Total propane revenues increased during the 1996 nine-month period reflecting
the increased sales as well as higher average retail selling prices. Total
propane cost of sales increased $92.2 million as a result of the higher volumes
of propane sold and higher average propane product costs.
Total propane margin was $21.3 million higher in the 1996 nine-month period as
a result of the greater volumes of propane sold partially offset by lower
average retail unit margins. Average retail unit margins in the 1996
nine-month period were slightly lower than in the pro forma 1995 nine-month
period, despite increased average retail selling prices, reflecting the impact
of higher average propane product costs. Total margin from other sales and
services during the 1996 nine-month period was virtually unchanged from the
prior-year period.
The increase in 1996 nine-month period operating income reflects principally
the increase in total propane margin offset by higher operating and
administrative expenses. The 1996 nine-month period propane operating expenses
are net of $4.4 million from an expected refund of insurance premium deposits
made in prior years and $3.3 million from reductions to reserves for potential
liabilities for environmental matters. Operating expenses, exclusive of these
items, increased $12.8 million reflecting higher payroll and employee
compensation expenses, higher vehicle expenses and higher expenses associated
with sales and marketing programs.
UTILITY OPERATIONS
GAS UTILITY. Weather in Gas Utility's service territory in the 1996 nine-month
period was 4.7% colder than normal compared with weather that was 5.3% warmer
than normal in the 1995 nine-month period. Total system throughput increased
6.0% due in large part to the colder weather's effect on core market sales
which increased 5.4 bcf in the 1996 nine-month period. Partially offsetting
the increase in total throughput from core market sales was a decrease in firm
delivery service volumes as a result of customer switching from firm delivery
service to interruptible delivery service. In addition, volumes of gas sold to
interruptible retail customers declined reflecting the impact of more frequent
interruptions of gas sold to these customers caused by the colder weather. The
increase in Gas Utility's total revenues reflects higher sales to core market
customers, higher base rates and lower refunds of prior-period gas cost
overcollections. Cost of gas sold was $160.7 million during the 1996
nine-month period, an increase of $35.6 million from the 1995 nine-month
period, reflecting principally the greater sales to the core market and lower
refunds of prior-period gas cost overcollections.
The increase in Gas Utility total margin for the 1996 nine-month period
reflects a $32.2 million increase in total margin from the core market
partially offset by lower total margin from interruptible customers and firm
delivery service customers. The higher total margin from the core market
reflects the effects of the higher volumes sold and higher base rates. Total
margin from interruptible customers declined principally as a result of higher
1996 nine-month period gas costs associated with sales to interruptible-
- 21 -
<PAGE> 24
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
retail customers. Firm delivery service total margin also declined due in
large part to customers switching to interruptible delivery service. Although
Gas Utility operating income benefitted from the higher total margin, the
benefit was partially offset by higher operating and administrative expenses
and higher charges for depreciation.
ELECTRIC UTILITY. Electric Utility sales increased 4.9% during the 1996
nine-month period principally from colder heating-season weather. The increase
in Electric Utility revenues reflects the impact of the higher sales as well as
higher ECR revenues. Electric Utility cost of sales was $25.5 million, an
increase of $2.1 million from the prior-year period. The increase in the cost
of sales resulted from higher sales and a higher ECR.
Electric Utility total margin increased as a result of the increase in sales.
However, operating income decreased as the increase in Electric Utility total
margin was more than offset by higher distribution system maintenance expenses,
higher general and administrative expenses, and higher depreciation expense.
ENERGY MARKETING AND OTHER
Total revenues and margin from energy marketing in the 1996 nine-month period
represent revenues and total margin of UGI Energy Services. In the prior-year
period, energy marketing activities were conducted by GASMARK which reflected
margin from its gas marketing activities as miscellaneous income. Operating
income from energy marketing was $4.4 million in the 1996 nine-month period
compared with $1.2 million in the 1995 nine-month period reflecting
significantly higher average unit margins and greater volumes. Operating loss
from corporate general and other, net, was $(8.3) million in the 1996
nine-month period compared with $(9.7) million in the 1995 nine-month period
reflecting lower UGI corporate administrative expenses.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $59.6 million in the 1996 nine-month period from
$39.5 million in the 1995 nine-month period reflecting higher levels of
consolidated propane debt outstanding subsequent to the Petrolane Merger and
Partnership Formation. On a pro forma basis, interest expense for the 1995
nine-month period is $60.4 million. The effective income tax rate for the 1996
nine-month period is 45.4% compared with a rate of 55.9% in the prior-year.
Income tax expense in the prior-year period reflects the write-off of $5.9
million in deferred tax benefits of AmeriGas Propane no longer realizable by
the Company as a result of the sale of Common Units of AmeriGas Partners to the
public.
- 22 -
<PAGE> 25
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS:
TWELVE MONTHS ENDED JUNE 30, 1996 (1996 TWELVE-MONTH PERIOD) COMPARED WITH
TWELVE MONTHS ENDED JUNE 30, 1995 (1995 TWELVE-MONTH PERIOD)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended June 30, 1996 1995 (Decrease)
- ----------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
REVENUES
Consolidated propane (a) $992.0 $418.7 N.M. N.M.
Gas utility 357.4 292.0 $65.4 22.4%
Electric utility 69.2 65.0 4.2 6.5
Energy marketing 73.3 - N.M. N.M.
Petrolane (b) 473.9 N.M. N.M.
TOTAL MARGIN (c)
Consolidated propane (a) $440.9 $209.3 N.M. N.M.
Gas utility 168.4 138.7 $29.7 21.4%
Electric utility 32.9 31.6 1.3 4.1
Energy marketing 6.3 - N.M. N.M.
Petrolane (b) 213.0 N.M. N.M.
OPERATING INCOME (LOSS)
Consolidated propane (a) $ 90.9 $ 32.3 N.M. N.M.
Gas utility 74.4 50.7 $23.7 46.7%
Electric utility 8.3 8.8 (.5) (5.7)
Energy marketing 5.0 1.4 3.6 257.1
Petrolane management fee 9.8 N.M. N.M.
Corporate general and other (11.7) (13.2) (1.5) (11.4)
Petrolane (b) 40.7 N.M. N.M.
OPERATING DATA
Propane-retail sales (million of gallons)-
Consolidated propane (a) 848.9 381.3 N.M. N.M.
Petrolane (b) 407.2 N.M. N.M.
Natural gas throughput-bcf 86.5 82.2 4.3 5.2%
Electric sales-gwh 892.9 851.2 41.7 4.9
- ----------------------------------------------------------------------------------------------------------
</TABLE>
bcf - billions of cubic feet. gwh - millions of kilowatt hours.
(a) Consolidated propane includes the results of the operations of
AmeriGas Propane prior to the Partnership Formation and AmeriGas
Partners (successor to AmeriGas Propane and Petrolane) subsequent to
the Partnership Formation. As a result, comparisons of consolidated
propane amounts are not meaningful (N.M.).
- 23 -
<PAGE> 26
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(b) Reflects 100% of Petrolane results through April 19, 1995.
Accordingly, comparisons of Petrolane amounts are not meaningful
(N.M.). The results of operations of Petrolane are reflected in the
Condensed Consolidated Financial Statements of the Company on the
equity method of accounting through April 19, 1995.
(c) Consolidated propane and Petrolane total margin represents total
revenues less cost of sales. Gas and Electric utilities' total margin
represents total revenues less cost of sales and revenue-related
taxes. Energy marketing total margin, which represents margin from
the Company's gas marketing activities subsequent to July 31, 1995,
represents total revenues less cost of sales. Prior to August 1,
1995, total margin from energy marketing activities was reflected in
miscellaneous income on the Condensed Consolidated Statements of
Income. Accordingly, comparisons of energy marketing revenues and
total margin are not meaningful (N.M.).
PROPANE OPERATIONS
CONSOLIDATED PROPANE. Retail volumes of propane sold from consolidated propane
operations during the 1996 twelve-month period increased to 848.9 million
gallons from 381.3 million gallons sold during the 1995 twelve-month period.
The increase in retail gallons sold is principally a result of the full-period
consolidation of the operations of Petrolane subsequent to April 19, 1995 as
well as colder 1996 twelve-month period weather. Consolidated propane
revenues, cost of sales and total margin were higher as a result of the
consolidation of the operations of Petrolane and the volume effects of the
colder weather. Additionally, consolidated propane revenues, cost of sales and
total margin increased as a result of higher sales of low margin excess storage
inventories. Total consolidated propane margin in the 1996 twelve-month period
was negatively impacted by lower average retail unit margins resulting from
higher propane product costs and sales and marketing programs. Consolidated
propane operating income increased $58.6 million reflecting the greater
consolidated propane total margin partially offset by higher consolidated
propane operating expenses due in large part to the consolidation of Petrolane.
UTILITY OPERATIONS
GAS UTILITY. Weather in Gas Utility's service territory, as measured by degree
days for heating, was 4.4% colder than normal in the 1996 twelve-month period
compared with weather which was 4.9% warmer than normal in the 1995
twelve-month period. The increase in total system throughput reflects the
impact of the colder weather on core market sales.
The increase in Gas Utility revenues in the 1996 twelve-month period reflects
higher sales to core market customers and higher base rates in effect since
August 31, 1995 and lower refunds of prior-period PGC and other gas cost
overcollections. These increases in revenues were partially offset by the
recovery of lower average purchased gas costs through PGC rates. Cost of gas
sold was $174.2 million in the 1996 twelve-month period compared with $141.5
million in the 1995 twelve-month period. The higher cost of gas reflects the
higher core market sales and lower 1996-period refunds of prior-year PGC
overcollections partially offset by the recovery of lower average purchased gas
costs through PGC rates.
The increase in Gas Utility total margin reflects a significant increase in
core market total margin as a result of greater sales and higher base rates
commencing August 31, 1995. Partially offsetting the
- 24 -
<PAGE> 27
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
increase in core market total margin was a decrease in total margin from
interruptible-retail customers as a result of lower volumes sold and the impact
of higher 1996-period gas costs. Firm delivery service volumes and margins
decreased as a result of lower volumes transported for these customers, due
largely to customer switching to interruptible delivery service, and slightly
lower average margins. Gas Utility operating income increased reflecting the
higher total margin partially offset by higher operating and administrative
expenses and higher charges for depreciation from fixed asset additions.
ELECTRIC UTILITY. Electric Utility sales increased 4.9% in the 1996
twelve-month period as heating-related sales benefitted from colder
heating-season weather and air conditioning related sales benefitted from
record setting temperatures in July and August 1995. Electric Utility revenues
increased as a result of these greater sales and higher ECR revenues. Cost of
sales increased $2.6 million as a result of the higher sales and a higher ECR
rate.
The increase in Electric Utility total margin reflects the benefit of the
higher sales. The higher total margin was more than offset by higher operating
and administrative expenses and higher charges for depreciation.
ENERGY MARKETING AND OTHER
Total revenues and margin from energy marketing represents revenues and margin
from the energy marketing operations of UGI Energy Services commencing August
1, 1995. Prior to August 1, 1995, this business was conducted by GASMARK which
reflected margin from its energy marketing activities in miscellaneous income.
Combined operating income from energy marketing activities (including both UGI
Energy Services and GASMARK) was higher in the 1996 twelve-month period
reflecting higher unit margin and greater volumes. Operating loss of corporate
general and other, net, was lower in the 1996 twelve-month period reflecting
lower UGI corporate expenses.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $79.4 million in the 1996 twelve-month period
from $49.6 million in the 1995 twelve-month period reflecting the full-period
effect of higher levels of consolidated propane debt outstanding subsequent to
the April 19, 1995 Petrolane Merger and Partnership Formation. Income tax
expense for the 1996 twelve-month period includes the benefit of $4.3 million
adjustment to deferred state income taxes. Income tax expense in the 1995
twelve-month period includes the write-off of $5.9 million of net deferred tax
benefits of AmeriGas Propane representing the Company's share of such tax
benefits no longer realizable by the Company as a result of the sale of
AmeriGas Partners' Common Units to the public.
FINANCIAL CONDITION AND LIQUIDITY
The Company's consolidated debt-to-total-capitalization ratio was 53.9% at June
30, 1996 compared to a ratio of 55.5% at September 30, 1995. The decrease in
the ratio is principally a result of an increase in common stockholders' equity
and a net decrease in UGI Utilities' total debt outstanding.
In October 1995, UGI Utilities redeemed $45.9 million face value of 9% Series
and 9% Series B First Mortgage Bonds at a redemption price of 104% of the
principal amount outstanding. The redemption
- 25 -
<PAGE> 28
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
was paid principally from the proceeds of UGI Utilities' issuance of $48
million of notes under its Medium-Term Note program on September 29, 1995. On
November 16, 1995, UGI Utilities issued $20 million of notes due May 15, 2005
under its Medium-Term Note program bearing interest at a rate of 6.62% the
proceeds of which were used to reduce UGI Utilities' bank loans. In May 1996,
UGI Utilities filed, and the SEC declared effective, a registration statement
for the issuance from time to time of up to $75 million of debt securities,
none of which has been issued.
In February 1996 the General Partner completed AmeriGas Partners' and the
Operating Partnership's federal income tax returns for the Partnership's
initial period of operation. As a part of this process, a final determination
was made as to how to allocate the tax basis of certain of the assets
contributed to the Partnership by the General Partner and Petrolane. The
completion of the allocation process resulted in reductions in the deferred
income tax liabilities of the General Partner and Petrolane existing at the
date of the Partnership Formation, which had been recorded in connection with
the Petrolane Merger and the Partnership Formation. As a result, during the
three months ended March 31, 1996, the Company recorded a $37.0 million
reduction in deferred income tax liabilities and a corresponding reduction in
goodwill which adjustments are reflected in the accompanying Condensed
Consolidated Balance Sheet at June 30, 1996.
AmeriGas Partners makes distributions of its Available Cash approximately 45
days after the end of each fiscal quarter. The Minimum Quarterly Distribution
of 55 cents per unit for each of the quarters ended March 31, 1996, December
31, 1995 and September 30, 1995, and a pro rata distribution of 44.6 cents per
limited partner unit for the period commencing with the Partnership Formation
through June 30, 1995, was made approximately 45 days after the end of each
quarter. The Minimum Quarterly Distribution for the quarter ended June 30,
1996 will be made on August 16, 1996 to holders of record on August 9, 1996 of
all Common and Subordinated units.
On April 30, 1996, the Company's Board of Directors increased the quarterly
dividend on the Common Stock to 35.5 cents a share from 35 cents a share,
effective for the dividend payable July 1, 1996.
The Company is required to adopt the provisions of SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" no
later than fiscal 1997. The Company has determined that the adoption of SFAS
121 will not have a material effect on its nonpropane operations. However, the
Company is in the process of completing its evaluation of the impact of SFAS
121 on its propane operations. The Company expects to complete its evaluation
in the fourth quarter of fiscal 1996 (see Note 8 to Condensed Consolidated
Financial Statements).
UTILITY REGULATORY MATTERS
On January 26, 1996, Electric Utility filed with the PUC for a $6.2 million
increase in its base rates to be effective March 26, 1996. In accordance with
its normal practice, the effective date was suspended by the PUC for up to an
additional seven months from the proposed effective date for investigation and
public hearings. On July 18, 1996, the PUC approved a settlement of this
proceeding authorizing a $3.1 million increase in annual revenues. The
increase in base rates became effective on July 19, 1996. Under the terms of
the settlement, Electric Utility agreed not to file for another base rate
increase before July 1, 1997.
- 26 -
<PAGE> 29
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
On June 22, 1993, the PUC entered an order permitting Gas Utility to record a
regulatory asset for the difference between the costs incurred under SFAS 106,
"Employers Accounting for Postretirement Benefits Other Than Pensions" and
costs incurred on a pay-as-you-go basis. Under the terms of the order, the
regulatory asset resulting from the deferral of SFAS 106 costs was allowable
for ratemaking purposes subject to prior review in a base rate proceeding. As
part of the Gas Utility Base Rate Settlement with the PUC, Gas Utility was
permitted the recovery over 17.25 years of the approximately $4.0 million in
deferred excess SFAS 106 costs, comprising principally deferred transition
obligation amortization, for the period January 1, 1993 (the date Gas Utility
adopted SFAS 106) through August 31, 1995. The Gas Utility Base Rate
Settlement, however, reserved the right of any party to challenge the
prospective recovery of these deferred excess SFAS 106 costs in future rate
proceedings. Under the terms of Electric Utility's July 18, 1996 base rate
order, Electric Utility was permitted the recovery of its deferred SFAS 106
transition obligation amortization.
In a proceeding involving an unaffiliated Pennsylvania utility, PP&L, the
Commonwealth Court reversed a PUC declaratory order outside a full base rate
proceeding permitting PP&L to defer excess SFAS 106 costs pending its next base
rate order. PP&L and the PUC appealed the Commonwealth Court decision to the
Pennsylvania Supreme Court which, on March 12, 1996, declined to review the
matter. The Company will continue to monitor administrative and judicial
proceedings involving deferred excess SFAS 106 costs and recognizes that, based
on applicable law, it is possible that in future base rate proceedings
Utilities could prospectively be denied recovery of some or all of its deferred
excess SFAS 106 costs.
CASH FLOWS
Cash and cash equivalents totaled $40.7 million at June 30, 1996 compared with
$121.7 million at September 30, 1995. The Company's cash flows are seasonal
and are generally greatest during the second and third fiscal quarters when
customers pay bills incurred during the heating season. Conversely, cash flows
from operating activities during the first and fourth fiscal quarters are
typically at their lowest levels as the Company purchases propane and natural
gas inventories and finances increases in other working capital in advance of
the heating season. Cash flows from operations during the nine months ended
June 30, 1996 therefore, are not necessarily indicative of cash flows to be
expected for a full year.
OPERATING ACTIVITIES. Cash flow from operating activities was $113.4 million
during the nine months ended June 30, 1996 compared with $86.9 million during
the nine months ended June 30, 1995. Cash flow from operating activities
before changes in operating working capital totaled $143.5 million in the 1996
nine-month period compared with $68.3 million in the prior-year period. The
significant increase in operating cash flows before changes in working capital
reflects increased Gas Utility and propane results and the full period
consolidation of the operations of Petrolane subsequent to the Partnership
Formation. Changes in operating working capital in the current-year period
reflect a net use of cash of $30.1 million principally from a seasonal increase
in accounts receivable partially offset by a seasonal decrease in inventories.
In the prior-year period, changes in operating working capital provided $18.6
million in operating cash flow.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $43.5 million in the 1996 nine-month period compared with $43.7 million
in the prior-year period. The slight decrease in
- 27 -
<PAGE> 30
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
capital expenditures reflects lower Gas Utility capital expenditures offset by
higher propane operations' capital expenditures resulting from the full-period
consolidation of the operations of Petrolane. In the prior-year period, the
operations of Petrolane were consolidated commencing April 19, 1995. During
the nine months ended June 30, 1996, the Company made several propane business
acquisitions for total net cash consideration of $9.2 million.
FINANCING ACTIVITIES. During the nine months ended June 30, 1996, the Company
paid cash dividends on Common Stock of $34.6 million compared with $33.6
million of cash dividends in the prior-year period. Also during the nine
months ended June 30, 1996, AmeriGas Partners paid distributions of $29.1
million to public unitholders (and $41.3 million to the General Partner)
representing the Minimum Quarterly Distribution on all limited partner units
for the quarters ended March 31, 1996, December 31, 1995 and September 30,
1995. UGI Utilities repaid $32.0 million of borrowings under its revolving
credit agreements during the nine months ended June 30, 1996, compared with net
borrowings of $18.5 million in the prior-year period. In addition, UGI
Utilities redeemed $45.9 million face value of its 9% Series and 9% Series B
First Mortgage Bonds at a redemption price of 104% of the principal amount
outstanding and issued $20 million of notes under its Medium-Term Note program.
During the nine months ended June 30, 1996, the Partnership borrowed $9 million
under its acquisition facility and $5 million under its special purpose
facility.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
MATEEL ENVIRONMENTAL JUSTICE FOUNDATION V. AMERIGAS PROPANE, L.P. ET AL. On
July 29, 1996, Mateel Environmental Justice Foundation ("Mateel") filed a
complaint in the Superior Court of the State of California, County of San
Francisco, alleging that AmeriGas Propane, L.P. ("APLP"), and several other
major propane gas distributors, are in violation of Proposition 65, "The Safe
Drinking Water and Toxic Enforcement Act of 1986" (commonly referred to as
"Prop 65"). APLP is a wholly owned subsidiary of the Partnership. The
Complaint alleges that APLP and its co-defendants are required to provide
warnings that the use of liquid propane would result in exposure to chemicals
known to cause cancer and birth defects, and that the burning of liquid propane
in heaters and other appliances causes exposure to carbon monoxide, benzene,
formaldehyde and acetaldehyde. The maximum penalty under Prop 65 is $2,500 per
day, per person exposed. In addition to the maximum penalty, Mateel is seeking
attorney's fees and costs, together with an Order mandating compliance with
Prop 65. Management believes that APLP has substantial defenses to this claim.
COMMERCIAL ROW CASES, JUDICIAL COUNCIL OF CALIFORNIA, COORDINATION PROCEEDING
NO. 3096. Beginning in June 1994, twenty-one complaints were filed against
AmeriGas Propane, Inc, a Delaware corporation ("API"), a predecessor of
AmeriGas Propane, L.P., in the Superior Court of California, arising from an
explosion which occurred in Truckee, California on November 30, 1993. The
explosion occurred apparently as the result of propane gas which escaped from a
fractured fitting in an underground supply line. The complaints sought relief
for alleged personal injuries and/or property damage, and named as defendants
the manufacturer and distributor of the fitting, in addition to API. The cases
have been
- 28 -
<PAGE> 31
UGI CORPORATION AND SUBSIDIARIES
consolidated by the Judicial Council of California as the Commercial Row Cases,
Judicial Council Coordination Proceeding No. 3096. All of the complaints
requested damages in unspecified amounts; some of the complaints sought
punitive damages as well as compensatory damages. During pretrial discovery,
the claimants have asserted demands which in the aggregate now exceed $25
million. With the exception of claims for punitive damages, the claims
asserted in the complaints are fully insured, subject to a $500,000
self-insured retention. Trial currently is scheduled to begin on September 30,
1996.
ITEM 5. OTHER INFORMATION
On July 30, 1996, Lon R. Greenberg was elected Chairman of the Board
of UGI Corporation, effective August 1, 1996, succeeding James A. Sutton. Mr.
Sutton retired as Chief Executive Officer of the Company on August 1, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
10.1 Change of Control Agreement between UGI Corporation
and Lon R. Greenberg.
10.2 Form of Change of Control Agreement between UGI
Corporation and each of Messrs. Bunn, Ladner, Mauch
and Westerman.
10.3 Form of Change of Control Agreement between UGI
Corporation and each of Messrs. Bovaird, Cuzzolina,
Hall and Katz.
10.4 UGI Corporation Annual Bonus Plan dated March 8, 1996.
11. Statement re: computation of per share earnings.
27. Financial Data Schedule
(b) The Company filed a Current Report on Form 8-K dated April 17,
1996, to report an amendment to the Company's Rights Agreement.
- 29 -
<PAGE> 32
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 Corporation
----------------------------
(Registrant)
Date: August 13, 1996 By: C.L. Ladner
----------------------------------
C. L. Ladner, Senior Vice President - Finance
Date: August 13, 1996 By: M. J. Cuzzolina
---------------------------------
M. J. Cuzzolina, Vice President - Accounting and
Financial Control (Principal Accounting Officer)
- 30 -
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Change of Control Agreement between UGI Corporation and Lon R. Greenberg.
10.2 Form of Change of Control Agreement between UGI Corporation and each of Messrs. Bunn, Ladner, Mauch and Westerman.
10.3 Form of Change of Control Agreement between UGI Corporation and each of Messrs. Bovaird, Cuzzolina, Hall and Katz.
10.4 UGI Corporation Annual Bonus Plan dated March 8, 1996.
11 Statement re: computation of per share earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 10.1
AGREEMENT
Agreement made as of the ____ day of June, 1996, between
UGI Corporation, a Pennsylvania corporation (the "Company"), and Lon R.
Greenberg (the "Employee").
WHEREAS, the Employee is presently employed by the Company,
as its President and Chief Executive Officer; and
WHEREAS, the Company considers it essential to foster the
employment of well qualified key management personnel, and, in this regard, the
board of directors of the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control of the
Company may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the board of directors of the Company has
determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of key members of the Company's
management to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change
in control of the Company, although no such change is now contemplated; and
WHEREAS, in order to induce the Employee to remain in the
employ of the Company, the Company agrees that the Employee shall receive the
compensation set forth in this Agreement in the event his employment with the
Company is terminated subsequent to a "Change of Control" (as defined in
Section 1 hereof) of the Company as a cushion against the financial and career
impact on the Employee of any such Change of Control;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings specified in this Section unless
the context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) "Base Compensation" shall mean the average of the
total cash remuneration received by the Employee in all capacities with the
Company, and its Subsidiaries or Affiliates, as reported for Federal income tax
purposes on Form W-2, together with any amounts the payment of which has been
deferred by the Employee under any deferred compensation plan of the Company,
and its Subsidiaries or Affiliates, or otherwise and any and all salary
reduction authorized amounts under any of the benefit plans or programs of the
Company, and its Subsidiaries or Affiliates, but excluding any amounts
attributable to the exercise of stock options granted to the Employee under the
Company's Stock Option and Dividend Equivalent Plan or its successor, for the
five calendar years (or such number of actual full calendar years of
employment, if less than five) immediately preceding the calendar year in which
occurs a Change of Control or the Employee's Termination Date, whichever period
produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of
any securities:
-2-
<PAGE> 3
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for payment, purchase or exchange; (ii) that
such Person or any of such Person's Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including without limitation pursuant to any
agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of any
security under this clause (ii) as a result of an oral or written agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring,
holding, voting
-3-
<PAGE> 4
(except pursuant to a revocable proxy as described in the proviso to clause
(ii) above) or disposing of any voting securities of the Company; provided,
however, that nothing in this Section 1(c) shall cause a Person engaged in
business as an underwriter of securities to be the "Beneficial Owner" of any
securities acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the date of
such acquisition.
(d) "Board" shall mean the board of directors of the
Company.
(e) "Change of Control" shall mean:
a. Any Person (except the Employee, his Affiliates and
Associates, the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such employee benefit plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner in the aggregate of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Company Voting Securities"), in
either case unless the members of the Company's Executive Committee in office
immediately prior to such acquisition determine within five business days of
the receipt of actual notice of such acquisition that the circumstances do not
warrant the implementation of the provisions of this Agreement; or
-4-
<PAGE> 5
b. Individuals who, as of the beginning of any twenty-four
month period, constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the beginning of such period whose election
or nomination for election by the Company's stockholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);
or
c. Consummation by the Company of a reorganization, merger
or consolidation (a "Business Combination"), in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective Beneficial Owners of the Outstanding Company Common Stock and
Company Voting Securities immediately prior to such Business Combination do
not, following such Business Combination, Beneficially Own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, in any such case unless the members of the
Company's Executive Committee in office
-5-
<PAGE> 6
immediately prior to such Business Combination determine at the time of such
Business Combination that the circumstances do not warrant the implementation
of the provisions of this Agreement; or
d. (i) Consummation of a complete liquidation or
dissolution of the Company or (ii) sale or other disposition of all or
substantially all of the assets of the Company other than to a corporation with
respect to which, following such sale or disposition, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, immediately prior to such sale or disposition, in any such case unless the
members of the Company's Executive Committee in office immediately prior to
such sale or disposition determine at the time of such sale or disposition that
the circumstances do not warrant the implementation of the provisions of this
Agreement.
(f) "Cause" shall mean 1) misappropriation of funds,
2) habitual insobriety or substance abuse, 3) conviction of a crime involving
moral turpitude, or 4) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
-6-
<PAGE> 7
(g) "Good Reason Termination" shall mean a Termination of
Employment initiated by the Employee upon one or more of the following
occurrences:
(i) any failure of the Company to comply with
and satisfy any of the terms of this the Agreement;
(ii) any significant involuntary reduction of
the authority, duties or responsibilities held by the
Employee immediately prior to the Change of Control;
(iii) any involuntary removal of the Employee
from the employment grade, compensation level or officer
positions which the Employee holds with the Company or, if
the Employee is employed by a Subsidiary, with a
Subsidiary, held by him immediately prior to the Change of
Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the
Employee's target level of annual and long-term
compensation as in effect immediately prior to the Change
of Control;
(v) any transfer of the Employee, without his
express written consent, to a location which is outside the
King of Prussia, Pennsylvania area (or the general area in
which his principal place of business immediately preceding
the Change of Control may be located at such time if other
than King of Prussia, Pennsylvania) by more than fifty
miles, other than on a temporary basis (less than 12
months); and
(vi) the Employee being required to undertake
business travel to
-7-
<PAGE> 8
an extent substantially greater than the Employee's
business travel obligations immediately prior to the
Change of Control.
(h) "Normal Retirement Date" shall mean the first day
of the calendar month coincident with or next following the Employee's 62nd
birthday.
(i) "Subsidiary" shall mean any corporation in which
the Company, directly or indirectly, owns at least a 50% interest or an
unincorporated entity of which the Company, directly or indirectly, owns at
least 50% of the profits or capital interests.
(j) "Termination Date" shall mean the date of receipt
of the Notice of Termination described in Section 2 hereof or any later date
specified therein, as the case may be.
(k) "Termination of Employment" shall mean the
termination of the Employee's actual employment relationship with the Company.
2. Notice of Termination. Any Termination of
Employment following a Change of Control shall be communicated by a Notice of
Termination to the other party hereto given in accordance with Section 14
hereof. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific provision in this Agreement
relied upon, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for the Employee's Termination of Employment under the
provision so indicated, and (iii) if the Termination Date is other than the
date of receipt of such notice, specifies the Termination Date (which date
shall not be more than 15 days after the giving of such notice).
3. Severance Compensation upon Termination.
-8-
<PAGE> 9
(a) Subject to the provisions of Section 11 hereof, in
the event of the Employee's involuntary Termination of Employment for any
reason other than Cause or in the event of a Good Reason Termination, in either
event within three years after a Change of Control, the Company shall pay to
the Employee, upon the execution of a release, in the form required by the
Company of its terminating executives prior to the Change of Control, within 15
days after the Termination Date (or as soon as possible thereafter in the event
that the procedures set forth in Section 11(b) hereof cannot be completed
within 15 days), an amount in cash equal to 2.5 times the Employee's Base
Compensation, subject to customary employment taxes and deductions.
(b) In the event the Employee's Normal Retirement Date
would occur prior to 30 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator
of which shall be 913 days.
4. Other Payments. The payment due under Section 3
hereof shall be in addition to and not in lieu of any payments or benefits due
to the Employee under any other plan, policy or program of the Company, and its
Subsidiaries or Affiliates.
5. Trust Fund. The Company sponsors an irrevocable
trust fund pursuant to a trust agreement to hold assets to satisfy its
obligations to employees under this Agreement. Funding of such trust fund
shall be subject to the discretion of the Company's Executive Committee, as set
forth in the agreement pursuant to which the fund has been
-9-
<PAGE> 10
established.
6. Enforcement.
(a) In the event that the Company shall fail or refuse
to make payment of any amounts due the Employee under Sections 3 and 4 hereof
within the respective time periods provided therein, the Company shall pay to
the Employee, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid from the
date payment is required under Section 3 or 4, as appropriate, until paid to
the Employee, at the rate from time to time announced by Mellon Bank, N.A. as
its "prime rate" plus 1%, each change in such rate to take effect on the
effective date of the change in such prime rate.
(b) It is the intent of the parties that the Employee
not be required to incur any expenses associated with the enforcement of his
rights under this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all reasonable expenses (including all attorneys' fees and
legal expenses) incurred by the Employee in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Employee shall not be required
to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
-10-
<PAGE> 11
8. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Employee's continuing or future
participation in or rights under any benefit, bonus, incentive or other plan or
program provided by the Company, or any of its Subsidiaries or Affiliates, and
for which the Employee may qualify.
9. No Set-Off. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Employee or others.
10. Taxes. Any payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable
or distributable to or for the benefit of the Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as
-11-
<PAGE> 12
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the taxation under Section 4999 of the
Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section
11 shall be made by Coopers & Lybrand (or the Company's independent public
accountant immediately prior to the Change of Control if other than Coopers &
Lybrand (the "Accounting Firm")), which firm shall provide its determinations
and any supporting calculations both to the Company and the Employee within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Employee. The Employee shall then
have the right to determine which of the Agreement Payments shall be eliminated
or reduced in order to produce the Reduced Amount in accordance with the
requirements of this Section. Within five days after this determination, the
Company shall pay (or cause to be paid) or distribute (or cause to be
distributed) to or for the benefit of the Employee such amounts as are then due
to the Employee under this Agreement.
(c) As a result of the uncertainty in the application
of Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made
-12-
<PAGE> 13
hereunder. Within two years after the Termination of Employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph and the Company shall cooperate and provide all information
necessary for such review. In the event that the Accounting Firm determines
that an Overpayment has been made, any such Overpayment shall be treated for
all purposes as a loan to the Employee which the Employee shall repay to the
Company together with interest from the date of payment under this Agreement at
the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the
"Federal Rate"); provided, however, that no amount shall be payable by the
Employee to the Company if and to the extent such payment would not reduce the
amount which is subject to taxation under Section 4999 of the Code. In the
event that the Accounting Firm determines that an Underpayment has occurred,
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Employee together with interest from the date of payment under
this Agreement at the Federal Rate.
(d) All of the fees and expenses of the Accounting
Firm in performing the determinations referred to in subsections (b) and (c)
above shall be borne solely by the Company. The Company agrees to indemnify
and hold harmless the Accounting Firm of and from any and all claims, damages
and expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement
shall be for five years from the date hereof and shall be automatically renewed
for successive one-year periods unless the Company notifies the Employee in
writing that this Agreement will not
-13-
<PAGE> 14
be renewed at least sixty days prior to the end of the current term; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Employee with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason.
13. Successor Company. The Company shall require any
successor or successors (whether direct or indirect, by purchase, merger or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
notify the Employee in writing as to such successorship, to provide the
Employee the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this
Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
14. Notice. All notices and other communications
required or permitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall
-14-
<PAGE> 15
be delivered personally or mailed by registered or certified mail, return
receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
UGI Corporation
460 North Gulph Road
King of Prussia, PA 19406
Attention: Corporate Secretary
If to the Employee, to:
9147 Green Tree Road
Philadelphia, PA 19118
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given
by the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 13 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of
registered or certified mail, or on the next business day in the case of
overnight express courier service.
15 Governing Law. This Agreement shall be governed
by and interpreted under the laws of the Commonwealth of Pennsylvania without
giving effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment.
This Agreement supersedes all prior agreements, sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified,
-15-
<PAGE> 16
extended or terminated except upon written amendment executed by the Employee
and the Company's Chair of the Executive Committee. The provisions of this
Agreement may require a variance from the terms and conditions of certain
compensation or bonus plans under circumstances where such plans would not
provide for payment thereof in order to obtain the maximum benefits for the
Employee. It is the specific intention of the parties that the provisions of
this Agreement shall supersede any provisions to the contrary in such plans,
and such plans shall be deemed to have been amended to correspond with this
Agreement without further action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this
Agreement shall be construed as giving the Employee any right to be retained in
the employ of the Company.
18. Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
the Employee and the Company hereunder shall not be assignable in whole or in
part.
19. Severability. If any provision of this Agreement
or application thereof to anyone or under any circumstances shall be determined
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be
given effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right
conferred upon the Employee by this Agreement is intended to be exclusive of
any other right or remedy, and
-16-
<PAGE> 17
each and every such right or remedy shall be cumulative and shall be in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
22. Arbitration. In the event of any dispute under
the provisions of this Agreement other than a dispute in which the sole relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by arbitration in
King of Prussia, Pennsylvania, in accordance with the commercial arbitration
rules then in effect of the American Arbitration Association, before one
arbitrator who shall be an executive officer or former executive officer of a
publicly traded corporation, selected by the parties. Any award entered by the
arbitrator shall be final, binding and nonappealable and judgment may be
entered thereon by either party in accordance with applicable law in any court
of competent jurisdiction. This arbitration provision shall be specifically
enforceable. The arbitrator shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this Agreement
other than a benefit specifically provided under or by virtue of the Agreement.
The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
-17-
<PAGE> 18
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, have executed this Agreement as of the date first above written.
ATTEST:
[Seal] UGI CORPORATION
By
- ------------------------ ------------------------
Secretary
- ------------------------ ---------------------------
Witness Lon R. Greenberg
-18-
<PAGE> 1
Exhibit 10.2
AGREEMENT
Agreement made as of the ____ day of June, 1996, between
UGI Corporation, a Pennsylvania corporation (the "Company"), and [ ]
(the "Employee").
WHEREAS, the Employee is presently employed by the Company,
as its Senior Vice President Finance; and
WHEREAS, the Company considers it essential to foster the
employment of well qualified key management personnel, and, in this regard, the
board of directors of the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control of the
Company may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the board of directors of the Company has
determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of key members of the Company's
management to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change
in control of the Company, although no such change is now contemplated; and
WHEREAS, in order to induce the Employee to remain in the
employ of the Company, the Company agrees that the Employee shall receive the
compensation set forth in this Agreement in the event his employment with the
Company is terminated subsequent to a "Change of Control" (as defined in
Section 1 hereof) of the Company as a cushion against the financial and career
impact on the Employee of any such Change of Control;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings specified in this Section unless
the context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) "Base Compensation" shall mean the average of the
total cash remuneration received by the Employee in all capacities with the
Company, and its Subsidiaries or Affiliates, as reported for Federal income tax
purposes on Form W-2, together with any amounts the payment of which has been
deferred by the Employee under any deferred compensation plan of the Company,
and its Subsidiaries or Affiliates, or otherwise and any and all salary
reduction authorized amounts under any of the benefit plans or programs of the
Company, and its Subsidiaries or Affiliates, but excluding any amounts
attributable to the exercise of stock options granted to the Employee under the
Company's Stock Option and Dividend Equivalent Plan or its successor, for the
five calendar years (or such number of actual full calendar years of
employment, if less than five) immediately preceding the calendar year in which
occurs a Change of Control or the Employee's Termination Date, whichever period
produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of
any securities:
-2-
<PAGE> 3
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for payment, purchase or exchange; (ii) that
such Person or any of such Person's Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including without limitation pursuant to any
agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of any
security under this clause (ii) as a result of an oral or written agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring,
holding, voting
-3-
<PAGE> 4
(except pursuant to a revocable proxy as described in the proviso to clause
(ii) above) or disposing of any voting securities of the Company; provided,
however, that nothing in this Section 1(c) shall cause a Person engaged in
business as an underwriter of securities to be the "Beneficial Owner" of any
securities acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the date of
such acquisition.
(d) "Board" shall mean the board of directors of the
Company.
(e) "Change of Control" shall mean:
a. Any Person (except the Employee, his Affiliates and
Associates, the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such employee benefit plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner in the aggregate of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Company Voting Securities"), in
either case unless the members of the Company's Executive Committee in office
immediately prior to such acquisition determine within five business days of
the receipt of actual notice of such acquisition that the circumstances do not
warrant the implementation of the provisions of this Agreement; or
-4-
<PAGE> 5
b. Individuals who, as of the beginning of any twenty-four
month period, constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the beginning of such period whose election
or nomination for election by the Company's stockholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);
or
c. Consummation by the Company of a reorganization, merger
or consolidation (a "Business Combination"), in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective Beneficial Owners of the Outstanding Company Common Stock and
Company Voting Securities immediately prior to such Business Combination do
not, following such Business Combination, Beneficially Own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, in any such case unless the members of the
Company's Executive Committee in office
-5-
<PAGE> 6
immediately prior to such Business Combination determine at the time of such
Business Combination that the circumstances do not warrant the implementation
of the provisions of this Agreement; or
d. (i) Consummation of a complete liquidation or
dissolution of the Company or (ii) sale or other disposition of all or
substantially all of the assets of the Company other than to a corporation with
respect to which, following such sale or disposition, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, immediately prior to such sale or disposition, in any such case unless the
members of the Company's Executive Committee in office immediately prior to
such sale or disposition determine at the time of such sale or disposition that
the circumstances do not warrant the implementation of the provisions of this
Agreement.
(f) "Cause" shall mean 1) misappropriation of funds,
2) habitual insobriety or substance abuse, 3) conviction of a crime involving
moral turpitude, or 4) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
-6-
<PAGE> 7
(g) "Good Reason Termination" shall mean a Termination of
Employment initiated by the Employee upon one or more of the following
occurrences:
(i) any failure of the Company to comply with
and satisfy any of the terms of this the Agreement;
(ii) any significant involuntary reduction of
the authority, duties or responsibilities held by the
Employee immediately prior to the Change of Control;
(iii) any involuntary removal of the Employee
from the employment grade, compensation level or officer
positions which the Employee holds with the Company or, if
the Employee is employed by a Subsidiary, with a
Subsidiary, held by him immediately prior to the Change of
Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the
Employee's target level of annual and long-term
compensation as in effect immediately prior to the Change
of Control;
(v) any transfer of the Employee, without his
express written consent, to a location which is outside the
King of Prussia, Pennsylvania area (or the general area in
which his principal place of business immediately preceding
the Change of Control may be located at such time if other
than King of Prussia, Pennsylvania) by more than fifty
miles, other than on a temporary basis (less than 12
months); and
(vi) the Employee being required to undertake
business travel to
-7-
<PAGE> 8
an extent substantially greater than the Employee's
business travel obligations immediately prior to the
Change of Control.
(h) "Normal Retirement Date" shall mean the first day
of the calendar month coincident with or next following the Employee's 62nd
birthday.
(i) "Subsidiary" shall mean any corporation in which
the Company, directly or indirectly, owns at least a 50% interest or an
unincorporated entity of which the Company, directly or indirectly, owns at
least 50% of the profits or capital interests.
(j) "Termination Date" shall mean the date of receipt
of the Notice of Termination described in Section 2 hereof or any later date
specified therein, as the case may be.
(k) "Termination of Employment" shall mean the
termination of the Employee's actual employment relationship with the Company.
2. Notice of Termination. Any Termination of
Employment following a Change of Control shall be communicated by a Notice of
Termination to the other party hereto given in accordance with Section 14
hereof. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific provision in this Agreement
relied upon, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for the Employee's Termination of Employment under the
provision so indicated, and (iii) if the Termination Date is other than the
date of receipt of such notice, specifies the Termination Date (which date
shall not be more than 15 days after the giving of such notice).
3. Severance Compensation upon Termination.
-8-
<PAGE> 9
(a) Subject to the provisions of Section 11 hereof, in
the event of the Employee's involuntary Termination of Employment for any
reason other than Cause or in the event of a Good Reason Termination, in either
event within three years after a Change of Control, the Company shall pay to
the Employee, upon the execution of a release, in the form required by the
Company of its terminating executives prior to the Change of Control, within 15
days after the Termination Date (or as soon as possible thereafter in the event
that the procedures set forth in Section 11(b) hereof cannot be completed
within 15 days), an amount in cash equal to 1.5 times the Employee's Base
Compensation, subject to customary employment taxes and deductions.
(b) In the event the Employee's Normal Retirement Date
would occur prior to 18 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator
of which shall be 548 days.
4. Other Payments. The payment due under Section 3
hereof shall be in addition to and not in lieu of any payments or benefits due
to the Employee under any other plan, policy or program of the Company, and its
Subsidiaries or Affiliates.
5. Trust Fund. The Company sponsors an irrevocable
trust fund pursuant to a trust agreement to hold assets to satisfy its
obligations to employees under this Agreement. Funding of such trust fund
shall be subject to the discretion of the Company's Executive Committee, as set
forth in the agreement pursuant to which the fund has been
-9-
<PAGE> 10
established.
6. Enforcement.
(a) In the event that the Company shall fail or refuse
to make payment of any amounts due the Employee under Sections 3 and 4 hereof
within the respective time periods provided therein, the Company shall pay to
the Employee, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid from the
date payment is required under Section 3 or 4, as appropriate, until paid to
the Employee, at the rate from time to time announced by Mellon Bank, N.A. as
its "prime rate" plus 1%, each change in such rate to take effect on the
effective date of the change in such prime rate.
(b) It is the intent of the parties that the Employee
not be required to incur any expenses associated with the enforcement of his
rights under this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all reasonable expenses (including all attorneys' fees and
legal expenses) incurred by the Employee in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Employee shall not be required
to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
-10-
<PAGE> 11
8. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Employee's continuing or future
participation in or rights under any benefit, bonus, incentive or other plan or
program provided by the Company, or any of its Subsidiaries or Affiliates, and
for which the Employee may qualify.
9. No Set-Off. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Employee or others.
10. Taxes. Any payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable
or distributable to or for the benefit of the Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as
-11-
<PAGE> 12
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the taxation under Section 4999 of the
Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section
11 shall be made by Coopers & Lybrand (or the Company's independent public
accountant immediately prior to the Change of Control if other than Coopers &
Lybrand (the "Accounting Firm")), which firm shall provide its determinations
and any supporting calculations both to the Company and the Employee within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Employee. The Employee shall then
have the right to determine which of the Agreement Payments shall be eliminated
or reduced in order to produce the Reduced Amount in accordance with the
requirements of this Section. Within five days after this determination, the
Company shall pay (or cause to be paid) or distribute (or cause to be
distributed) to or for the benefit of the Employee such amounts as are then due
to the Employee under this Agreement.
(c) As a result of the uncertainty in the application
of Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made
-12-
<PAGE> 13
hereunder. Within two years after the Termination of Employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph and the Company shall cooperate and provide all information
necessary for such review. In the event that the Accounting Firm determines
that an Overpayment has been made, any such Overpayment shall be treated for
all purposes as a loan to the Employee which the Employee shall repay to the
Company together with interest from the date of payment under this Agreement at
the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the
"Federal Rate"); provided, however, that no amount shall be payable by the
Employee to the Company if and to the extent such payment would not reduce the
amount which is subject to taxation under Section 4999 of the Code. In the
event that the Accounting Firm determines that an Underpayment has occurred,
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Employee together with interest from the date of payment under
this Agreement at the Federal Rate.
(d) All of the fees and expenses of the Accounting
Firm in performing the determinations referred to in subsections (b) and (c)
above shall be borne solely by the Company. The Company agrees to indemnify
and hold harmless the Accounting Firm of and from any and all claims, damages
and expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement
shall be for five years from the date hereof and shall be automatically renewed
for successive one-year periods unless the Company notifies the Employee in
writing that this Agreement will not
-13-
<PAGE> 14
be renewed at least sixty days prior to the end of the current term; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Employee with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason.
13. Successor Company. The Company shall require any
successor or successors (whether direct or indirect, by purchase, merger or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
notify the Employee in writing as to such successorship, to provide the
Employee the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this
Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
14. Notice. All notices and other communications
required or permitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall
-14-
<PAGE> 15
be delivered personally or mailed by registered or certified mail, return
receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
UGI Corporation
460 North Gulph Road
King of Prussia, PA 19406
Attention: Corporate Secretary
If to the Employee, to:
182 Beaumont Road
Devon, PA 19333
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given
by the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 13 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of
registered or certified mail, or on the next business day in the case of
overnight express courier service.
15 Governing Law. This Agreement shall be governed
by and interpreted under the laws of the Commonwealth of Pennsylvania without
giving effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment.
This Agreement supersedes all prior agreements, sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified,
-15-
<PAGE> 16
extended or terminated except upon written amendment executed by the Employee
and the Company's Chief Executive Officer. The provisions of this Agreement
may require a variance from the terms and conditions of certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof in order to obtain the maximum benefits for the Employee. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this
Agreement shall be construed as giving the Employee any right to be retained in
the employ of the Company.
18. Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
the Employee and the Company hereunder shall not be assignable in whole or in
part.
19. Severability. If any provision of this Agreement
or application thereof to anyone or under any circumstances shall be determined
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be
given effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right
conferred upon the Employee by this Agreement is intended to be exclusive of
any other right or remedy, and
-16-
<PAGE> 17
each and every such right or remedy shall be cumulative and shall be in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
22. Arbitration. In the event of any dispute under
the provisions of this Agreement other than a dispute in which the sole relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by arbitration in
King of Prussia, Pennsylvania, in accordance with the commercial arbitration
rules then in effect of the American Arbitration Association, before one
arbitrator who shall be an executive officer or former executive officer of a
publicly traded corporation, selected by the parties. Any award entered by the
arbitrator shall be final, binding and nonappealable and judgment may be
entered thereon by either party in accordance with applicable law in any court
of competent jurisdiction. This arbitration provision shall be specifically
enforceable. The arbitrator shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this Agreement
other than a benefit specifically provided under or by virtue of the Agreement.
The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
-17-
<PAGE> 18
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, have executed this Agreement as of the date first above written.
ATTEST:
[Seal] UGI CORPORATION
- ---------------------------- By
Secretary ------------------------
- ---------------------------- ---------------------------
Witness [ ]
-18-
<PAGE> 1
Exhibit 10.3
AGREEMENT
Agreement made as of the ____ day of June, 1996, between
UGI Corporation, a Pennsylvania corporation (the "Company"), and [ ]
(the "Employee").
WHEREAS, the Employee is presently employed by the Company,
as its Vice President and General Counsel; and
WHEREAS, the Company considers it essential to foster the
employment of well qualified key management personnel, and, in this regard, the
board of directors of the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control of the
Company may exist and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company;
WHEREAS, the board of directors of the Company has
determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of key members of the Company's
management to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change
in control of the Company, although no such change is now contemplated; and
WHEREAS, in order to induce the Employee to remain in the
employ of the Company, the Company agrees that the Employee shall receive the
compensation set forth in this Agreement in the event his employment with the
Company is terminated subsequent to a "Change of Control" (as defined in
Section 1 hereof) of the Company as a cushion against the financial and career
impact on the Employee of any such Change of Control;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings specified in this Section unless
the context clearly otherwise requires:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) "Base Compensation" shall mean the average of the
total cash remuneration received by the Employee in all capacities with the
Company, and its Subsidiaries or Affiliates, as reported for Federal income tax
purposes on Form W-2, together with any amounts the payment of which has been
deferred by the Employee under any deferred compensation plan of the Company,
and its Subsidiaries or Affiliates, or otherwise and any and all salary
reduction authorized amounts under any of the benefit plans or programs of the
Company, and its Subsidiaries or Affiliates, but excluding any amounts
attributable to the exercise of stock options granted to the Employee under the
Company's Stock Option and Dividend Equivalent Plan or its successor, for the
five calendar years (or such number of actual full calendar years of
employment, if less than five) immediately preceding the calendar year in which
occurs a Change of Control or the Employee's Termination Date, whichever period
produces the higher amount.
(c) A Person shall be deemed the "Beneficial Owner" of
any securities:
-2-
<PAGE> 3
(i) that such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for payment, purchase or exchange; (ii) that
such Person or any of such Person's Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has "beneficial ownership"
of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including without limitation pursuant to any
agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of any
security under this clause (ii) as a result of an oral or written agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) that are beneficially owned, directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring,
holding, voting
-3-
<PAGE> 4
(except pursuant to a revocable proxy as described in the proviso to clause
(ii) above) or disposing of any voting securities of the Company; provided,
however, that nothing in this Section 1(c) shall cause a Person engaged in
business as an underwriter of securities to be the "Beneficial Owner" of any
securities acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the date of
such acquisition.
(d) "Board" shall mean the board of directors of the
Company.
(e) "Change of Control" shall mean:
a. Any Person (except the Employee, his Affiliates and
Associates, the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such employee benefit plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner in the aggregate of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Company Voting Securities"), in
either case unless the members of the Company's Executive Committee in office
immediately prior to such acquisition determine within five business days of
the receipt of actual notice of such acquisition that the circumstances do not
warrant the implementation of the provisions of this Agreement; or
-4-
<PAGE> 5
b. Individuals who, as of the beginning of any twenty-four
month period, constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any individual
becoming a director subsequent to the beginning of such period whose election
or nomination for election by the Company's stockholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);
or
c. Consummation by the Company of a reorganization, merger
or consolidation (a "Business Combination"), in each case, with respect to
which all or substantially all of the individuals and entities who were the
respective Beneficial Owners of the Outstanding Company Common Stock and
Company Voting Securities immediately prior to such Business Combination do
not, following such Business Combination, Beneficially Own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and Company Voting
Securities, as the case may be, in any such case unless the members of the
Company's Executive Committee in office
-5-
<PAGE> 6
immediately prior to such Business Combination determine at the time of such
Business Combination that the circumstances do not warrant the implementation
of the provisions of this Agreement; or
d. (i) Consummation of a complete liquidation or
dissolution of the Company or (ii) sale or other disposition of all or
substantially all of the assets of the Company other than to a corporation with
respect to which, following such sale or disposition, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and entities who
were the Beneficial Owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Company Common Stock and Company Voting Securities, as the case may
be, immediately prior to such sale or disposition, in any such case unless the
members of the Company's Executive Committee in office immediately prior to
such sale or disposition determine at the time of such sale or disposition that
the circumstances do not warrant the implementation of the provisions of this
Agreement.
(f) "Cause" shall mean 1) misappropriation of funds,
2) habitual insobriety or substance abuse, 3) conviction of a crime involving
moral turpitude, or 4) gross negligence in the performance of duties, which
gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company.
-6-
<PAGE> 7
(g) "Good Reason Termination" shall mean a Termination of
Employment initiated by the Employee upon one or more of the following
occurrences:
(i) any failure of the Company to comply with
and satisfy any of the terms of this the Agreement;
(ii) any significant involuntary reduction of
the authority, duties or responsibilities held by the
Employee immediately prior to the Change of Control;
(iii) any involuntary removal of the Employee
from the employment grade, compensation level or officer
positions which the Employee holds with the Company or, if
the Employee is employed by a Subsidiary, with a
Subsidiary, held by him immediately prior to the Change of
Control, except in connection with promotions to higher
office;
(iv) any involuntary reduction in the
Employee's target level of annual and long-term
compensation as in effect immediately prior to the Change
of Control;
(v) any transfer of the Employee, without his
express written consent, to a location which is outside the
King of Prussia, Pennsylvania area (or the general area in
which his principal place of business immediately preceding
the Change of Control may be located at such time if other
than King of Prussia, Pennsylvania) by more than fifty
miles, other than on a temporary basis (less than 12
months); and
(vi) the Employee being required to undertake
business travel to
-7-
<PAGE> 8
an extent substantially greater than the Employee's
business travel obligations immediately prior to the
Change of Control.
(h) "Normal Retirement Date" shall mean the first day
of the calendar month coincident with or next following the Employee's 62nd
birthday.
(i) "Subsidiary" shall mean any corporation in which
the Company, directly or indirectly, owns at least a 50% interest or an
unincorporated entity of which the Company, directly or indirectly, owns at
least 50% of the profits or capital interests.
(j) "Termination Date" shall mean the date of receipt
of the Notice of Termination described in Section 2 hereof or any later date
specified therein, as the case may be.
(k) "Termination of Employment" shall mean the
termination of the Employee's actual employment relationship with the Company.
2. Notice of Termination. Any Termination of
Employment following a Change of Control shall be communicated by a Notice of
Termination to the other party hereto given in accordance with Section 14
hereof. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific provision in this Agreement
relied upon, (ii) briefly summarizes the facts and circumstances deemed to
provide a basis for the Employee's Termination of Employment under the
provision so indicated, and (iii) if the Termination Date is other than the
date of receipt of such notice, specifies the Termination Date (which date
shall not be more than 15 days after the giving of such notice).
3. Severance Compensation upon Termination.
-8-
<PAGE> 9
(a) Subject to the provisions of Section 11 hereof, in
the event of the Employee's involuntary Termination of Employment for any
reason other than Cause or in the event of a Good Reason Termination, in either
event within three years after a Change of Control, the Company shall pay to
the Employee, upon the execution of a release, in the form required by the
Company of its terminating executives prior to the Change of Control, within 15
days after the Termination Date (or as soon as possible thereafter in the event
that the procedures set forth in Section 11(b) hereof cannot be completed
within 15 days), an amount in cash equal to 1.0 times the Employee's Base
Compensation, subject to customary employment taxes and deductions.
(b) In the event the Employee's Normal Retirement Date
would occur prior to 12 months after the Termination Date, the aggregate cash
amount determined as set forth in (a) above shall be reduced by multiplying it
by a fraction, the numerator of which shall be the number of days from the
Termination Date to the Employee's Normal Retirement Date and the denominator
of which shall be 365 days.
4. Other Payments. The payment due under Section 3
hereof shall be in addition to and not in lieu of any payments or benefits due
to the Employee under any other plan, policy or program of the Company, and its
Subsidiaries or Affiliates.
5. Trust Fund. The Company sponsors an irrevocable
trust fund pursuant to a trust agreement to hold assets to satisfy its
obligations to employees under this Agreement. Funding of such trust fund
shall be subject to the discretion of the Company's Executive Committee, as set
forth in the agreement pursuant to which the fund has been
-9-
<PAGE> 10
established.
6. Enforcement.
(a) In the event that the Company shall fail or refuse
to make payment of any amounts due the Employee under Sections 3 and 4 hereof
within the respective time periods provided therein, the Company shall pay to
the Employee, in addition to the payment of any other sums provided in this
Agreement, interest, compounded daily, on any amount remaining unpaid from the
date payment is required under Section 3 or 4, as appropriate, until paid to
the Employee, at the rate from time to time announced by Mellon Bank, N.A. as
its "prime rate" plus 1%, each change in such rate to take effect on the
effective date of the change in such prime rate.
(b) It is the intent of the parties that the Employee
not be required to incur any expenses associated with the enforcement of his
rights under this Agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Employee hereunder. Accordingly, the
Company shall pay the Employee on demand the amount necessary to reimburse the
Employee in full for all reasonable expenses (including all attorneys' fees and
legal expenses) incurred by the Employee in enforcing any of the obligations of
the Company under this Agreement.
7. No Mitigation. The Employee shall not be required
to mitigate the amount of any payment or benefit provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
or benefit provided for herein be reduced by any compensation earned by other
employment or otherwise.
-10-
<PAGE> 11
8. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Employee's continuing or future
participation in or rights under any benefit, bonus, incentive or other plan or
program provided by the Company, or any of its Subsidiaries or Affiliates, and
for which the Employee may qualify.
9. No Set-Off. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against the Employee or others.
10. Taxes. Any payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
11. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that it shall be determined that any payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), the aggregate present value of amounts payable
or distributable to or for the benefit of the Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as
-11-
<PAGE> 12
"Agreement Payments") shall be reduced (but not below zero) to the Reduced
Amount. The "Reduced Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be subject to the taxation under Section 4999 of the
Code. For purposes of this Section 11, present value shall be determined in
accordance with Section 280G(d)(4) of the Code.
(b) All determinations to be made under this Section
11 shall be made by Coopers & Lybrand (or the Company's independent public
accountant immediately prior to the Change of Control if other than Coopers &
Lybrand (the "Accounting Firm")), which firm shall provide its determinations
and any supporting calculations both to the Company and the Employee within 10
days of the Termination Date. Any such determination by the Accounting Firm
shall be binding upon the Company and the Employee. The Employee shall then
have the right to determine which of the Agreement Payments shall be eliminated
or reduced in order to produce the Reduced Amount in accordance with the
requirements of this Section. Within five days after this determination, the
Company shall pay (or cause to be paid) or distribute (or cause to be
distributed) to or for the benefit of the Employee such amounts as are then due
to the Employee under this Agreement.
(c) As a result of the uncertainty in the application
of Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Agreement Payments, as the case
may be, will have been made by the Company which should not have been made
("Overpayment") or that additional Agreement Payments which have not been made
by the Company could have been made ("Underpayment"), in each case, consistent
with the calculations required to be made
-12-
<PAGE> 13
hereunder. Within two years after the Termination of Employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph and the Company shall cooperate and provide all information
necessary for such review. In the event that the Accounting Firm determines
that an Overpayment has been made, any such Overpayment shall be treated for
all purposes as a loan to the Employee which the Employee shall repay to the
Company together with interest from the date of payment under this Agreement at
the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the
"Federal Rate"); provided, however, that no amount shall be payable by the
Employee to the Company if and to the extent such payment would not reduce the
amount which is subject to taxation under Section 4999 of the Code. In the
event that the Accounting Firm determines that an Underpayment has occurred,
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Employee together with interest from the date of payment under
this Agreement at the Federal Rate.
(d) All of the fees and expenses of the Accounting
Firm in performing the determinations referred to in subsections (b) and (c)
above shall be borne solely by the Company. The Company agrees to indemnify
and hold harmless the Accounting Firm of and from any and all claims, damages
and expenses resulting from or relating to its determinations pursuant to
subsections (b) and (c) above, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the Accounting Firm.
12. Term of Agreement. The term of this Agreement
shall be for five years from the date hereof and shall be automatically renewed
for successive one-year periods unless the Company notifies the Employee in
writing that this Agreement will not
-13-
<PAGE> 14
be renewed at least sixty days prior to the end of the current term; provided,
however, that (i) after a Change of Control during the term of this Agreement,
this Agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied or have expired, and (ii) this Agreement shall
terminate if, prior to a Change of Control, the employment of the Employee with
the Company or any of its Subsidiaries, as the case may be, shall terminate for
any reason.
13. Successor Company. The Company shall require any
successor or successors (whether direct or indirect, by purchase, merger or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
notify the Employee in writing as to such successorship, to provide the
Employee the opportunity to review and agree to the successor's assumption of
this Agreement or to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement. As used in this
Agreement, the Company shall mean the Company as hereinbefore defined and any
such successor or successors to its business and/or assets, jointly and
severally.
14. Notice. All notices and other communications
required or permitted hereunder or necessary or convenient in connection
herewith shall be in writing and shall
-14-
<PAGE> 15
be delivered personally or mailed by registered or certified mail, return
receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
UGI Corporation
460 North Gulph Road
King of Prussia, PA 19406
Attention: Corporate Secretary
If to the Employee, to:
637 Dodda Lane
Gladwyne, PA 19035
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given
by the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 13 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of
registered or certified mail, or on the next business day in the case of
overnight express courier service.
15 Governing Law. This Agreement shall be governed
by and interpreted under the laws of the Commonwealth of Pennsylvania without
giving effect to any conflict of laws provisions.
16. Contents of Agreement, Amendment and Assignment.
This Agreement supersedes all prior agreements, sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified,
-15-
<PAGE> 16
extended or terminated except upon written amendment executed by the Employee
and the Company's Chief Executive Officer. The provisions of this Agreement
may require a variance from the terms and conditions of certain compensation or
bonus plans under circumstances where such plans would not provide for payment
thereof in order to obtain the maximum benefits for the Employee. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17. No Right to Continued Employment. Nothing in this
Agreement shall be construed as giving the Employee any right to be retained in
the employ of the Company.
18. Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective heirs, representatives, successors and
assigns of the parties hereto, except that the duties and responsibilities of
the Employee and the Company hereunder shall not be assignable in whole or in
part.
19. Severability. If any provision of this Agreement
or application thereof to anyone or under any circumstances shall be determined
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be
given effect without the invalid or unenforceable provision or application.
20. Remedies Cumulative; No Waiver. No right
conferred upon the Employee by this Agreement is intended to be exclusive of
any other right or remedy, and
-16-
<PAGE> 17
each and every such right or remedy shall be cumulative and shall be in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by the Employee in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof.
21. Miscellaneous. All section headings are for
convenience only. This Agreement may be executed in several counterparts, each
of which is an original. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
22. Arbitration. In the event of any dispute under
the provisions of this Agreement other than a dispute in which the sole relief
sought is an equitable remedy such as an injunction, the parties shall be
required to have the dispute, controversy or claim settled by arbitration in
King of Prussia, Pennsylvania, in accordance with the commercial arbitration
rules then in effect of the American Arbitration Association, before one
arbitrator who shall be an executive officer or former executive officer of a
publicly traded corporation, selected by the parties. Any award entered by the
arbitrator shall be final, binding and nonappealable and judgment may be
entered thereon by either party in accordance with applicable law in any court
of competent jurisdiction. This arbitration provision shall be specifically
enforceable. The arbitrator shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this Agreement
other than a benefit specifically provided under or by virtue of the Agreement.
The Company shall be responsible for all of the fees of the American
Arbitration Association and the arbitrator and any expenses relating to the
conduct of the arbitration (including reasonable attorneys' fees and expenses).
-17-
<PAGE> 18
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, have executed this Agreement as of the date first above written.
ATTEST:
[Seal] UGI CORPORATION
- ------------------------- By
Secretary ------------------------
- ------------------------- ---------------------------
Witness Brendan P. Bovaird
-18-
<PAGE> 19
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, have executed this Agreement as of the date first above written.
ATTEST:
[Seal] UGI CORPORATION
- ------------------------- By
Secretary ------------------------
- ------------------------- ---------------------------
Witness [ ]
-18-
<PAGE> 1
EXHIBIT 10
March 8, 1996
FINAL
UGI Corporation
ANNUAL BONUS PLAN
Revised 10/1/95
The UGI Corporation Annual Bonus Plan is designed to effectively
motivate key executives with broad decision-making responsibility to achieve
high-level predetermined business/financial performance objectives and to
accomplish significant predetermined individual performance objectives which
support business plans and goals. It will provide annual cash bonuses
contingent upon the achievement of these objectives.
Goal Administration
Overall goal administration responsibility (including the
establishment of the individual performance goals) for all participants other
than the President and CEO-UGI and designated Corporate Officers rests with the
President and CEO-UGI. Approvals of the UGI Compensation and Management
Development Committee and Board of Directors are required for (i) the
establishment of the annual business/financial goal, and (ii) matters
pertaining to the President and CEO-UGI and designated Corporate Officers.
Plan Administration
The President and CEO-UGI will appoint the necessary administrative,
financial accounting and audit advisors to ensure accuracy and consistency in
the administrative and financial management of the Plan. All decisions made
are final and binding on all parties.
Participation
Participation in the UGI Annual Bonus Plan is limited to key
executives having an on-going opportunity to significantly influence
profitability or strategic direction and who are approved for participation in
the Plan. Required approvals for participation in the Plan include the
President and CEO-UGI (and the UGI Corporation Compensation and Management
Development Committee and Board in cases involving designated Corporate
Officers).
Base Salary and Annual Bonus Targets
Base salary levels (or base salary grade ranges) for all positions
included in the UGI Annual Bonus Plan are set at fiftieth percentile
competitive measures to reflect competitive
1
<PAGE> 2
base salary pay practices in the specific businesses and industries in which
UGI and its business units compete, as well as in general industry.
Base salary levels (salary grade ranges) will be reviewed and updated
annually in accordance with changes in competitive pay levels. Actual base
salaries for executives covered by the Plan will be administered within the
base salary grade range established for the position in a manner consistent
with UGI salary administration policies taking into account individual
performance, position within the range, and length of time in job.
Annual Bonus targets (expressed as a percentage of base salary) are set
at the seventy-fifth percentile of competitive practice. Target percents are
separately established for each position and will vary according to level of
management. These Annual Bonus targets recognize competitive industry annual
bonus pay practices and the varying risk/return aspects of UGI's business units
and the potential contributions to bottom-line results among Plan participants.
Annual Bonus targets as established for each position will be reviewed
and approved annually by the President and CEO-UGI (and the UGI Corporation
Compensation and Management Development Committee and Board for designated
Corporate Officers). Bonus targets as established for each position will
generally range between l5% and 55% of base salary.
An individual participant's Annual Bonus Plan target percentage will
be established annually as approved by the President and CEO-UGI (and the UGI
Corporation Compensation and Management Development Committee and Board for
designated Corporate Officers) and may be less than but not greater than the
Annual Bonus target percentage established for the position. Generally, it is
expected that a participant in the position for two years or more will have an
Annual Bonus target percentage equal to that established for the position.
Actual bonuses paid, however, will vary up and down from a
participant's Annual Bonus target percentage depending on business/financial
and individual performance.
Performance Measures and Weighting
The determination of Annual Bonus amounts will be based on the
achievement of business/financial goals and on the achievement of individual
MBO goals. The weighting applied to business/financial performance goals and
individual MBO goals for payment determination will be 75%/25% respectively for
all participants, except the President and CEO-UGI and designated senior-most
Corporate Officers. To reflect the direct
2
<PAGE> 3
identification of the President and CEO-UGI and the designated senior-most
Corporate Officers with the Company's financial performance, 100% weighting is
given to achievement of the business/financial goal (no weighting to individual
goal achievement).
Business/Financial Performance
Business/financial performance for UGI Corporation will be
measured in terms of the achievement of the business/financial
performance goals of the two principal subsidiaries (UGI
Utilities, Inc. and AmeriGas Partners, L.P.) for the Plan
fiscal year. Thus, business/financial performance bonus
payouts for UGI Corporation participants will be linked to the
Company's overall performance and consistent with business
unit operating results. Subsidiary business/financial
performance goals will be established at "stretch" levels and
will represent significant results. To determine the level of
business/financial bonus payout, UGI Utilities, Inc. financial
performance will be weighted at 25% and AmeriGas Partners,
L.P. financial performance will be weighted at 75%. This
blended performance can be modified by +/- 10% based upon the
Corporate Contribution Factor. This factor provides a
qualitative assessment of the positive or negative
contribution from UGI Corporation on overall Company financial
performance.
The percentage of a participant's business/financial annual
bonus target amount is payable as stated above according to
the degree of achievement as follows:
CORPORATE FINANCIAL PERFORMANCE
AMERIGAS FINANCIAL ADJUSTMENT FACTOR
(75% of Corporate Financial Payout)
<TABLE>
<CAPTION>
0% 50% 100% 150% 200%
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
150% 38% 75% 113% 150% 188%
- --------------------------------------------------------------------
125% 31% 69% 106% 144% 181%
- --------------------------------------------------------------------
100% 25% 63% 100% 138% 175%
- --------------------------------------------------------------------
50% 13% 50% 88% 125% 163%
- --------------------------------------------------------------------
0% 0% 38% 75% 113% 150%
- --------------------------------------------------------------------
</TABLE>
+
CORPORATE CONTRIBUTION FACTOR = plus or minus 10%
3
<PAGE> 4
The President and CEO-UGI and the Compensation and Management
Development Committee have the discretion to make an adjustment of
+/- 15% to any participant with Annual Bonus weighting of 100%
Business/Financial Performance (President and CEO-UGI and designated
senior-most Corporate Officers) based on individual contribution with
significant impact on Company performance.
Individual Performance
Individual performance will be measured in terms of each
participant's achievement of, generally, two or more key
individual MBO objectives mutually determined in advance with
the participant's immediate superior, subject to final review
and approval by higher levels of management including the
President and CEO-UGI (and the UGI Corporation Compensation and
Management Development Committee and Board for designated
Corporate Officers). Individual MBO goals will be established
to reflect truly significant accomplishments which support
business plans and goals. As determined by the participant's
immediate superior, subject to final review and approval of the
President and CEO-UGI (and the UGI Corporation Compensation and
Management Development Committee and Board for designated
Corporate Officers), adjustments may be made to individual MBO
goals to reflect major unplanned contributions/achievements in
order to more fully recognize significant individual results
during the Plan fiscal year.
The full amount of the target bonus attributable to individual
performance is payable only if the business/financial goal (the
blended goals for each of the subsidiaries - UGI Utilities,
Inc. and AmeriGas Partners, L.P.) is achieved at the threshold
level of performance. If neither subsidiary achieves this
threshold level of financial performance, no bonus will be
paid. If one subsidiary achieves the threshold and one does
not, the target bonus amount attributable to individual
performance for each participant is reduced according to the
same weighting as described under Business/Financial
Performance (25% of individual target for Utility achievement;
75% of individual target for AmeriGas achievement). Actual
individual performance bonus payments will be made for
individual goal achievement at the 50% level of performance and
above and will be capped at the 150% level. Individual
performance bonus payments will be calculated as follows:
4
<PAGE> 5
- Individual Target Bonus = Total Target Bonus X Individual
Performance Weighting (25% for all participants with
individual MBO goals).
- Multiply the Individual Target Bonus times the appropriate
percent as determined by business/financial goal results
(100% for threshold achievement by both subsidiaries; 75%
for threshold achievement by AmeriGas, but not Utilities;
25% for threshold achievement by Utilities, but not
AmeriGas) to arrive at actual target amount subject to
leverage and payout based on individual MBO goal
achievement.
- Multiply the Individual MBO Goal achievement rating (from
50% to 150% in increments of 5%) times the target amount
subject to leverage as determined above to arrive at the
final payout amount for individual performance.
INDIVIDUAL PERFORMANCE LEVERAGE TABLE
=======================================================================
Individual Performance Goals (MBOs)*
-----------------------------------------------------------------------
% of Individual Target Bonus Payable When Financial
Performance Threshold Met By:
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
% of UGI Utilities AmeriGas Only
Individual UGI Utilities Only (Not (not UGI
Goal Achieved and AmeriGas AmeriGas) Utilities)
------------------------------------------------------------------------
<S> <C> <C> <C>
less than 50 0 0 0
-----------------------------------------------------------------------
50 50 12.5 37.5
-----------------------------------------------------------------------
75 75 18.75 56.25
-----------------------------------------------------------------------
100 100 25 75
-----------------------------------------------------------------------
125 125 31.25 93.75
-----------------------------------------------------------------------
150 150 37.5 112.5
-----------------------------------------------------------------------
greater than
150 150 37.5 112.5
-----------------------------------------------------------------------
</TABLE>
* Payouts to be prorated for intermediate levels of performance in 5%
increments.
Final determination of both business/financial and individual goal
achievement for all Plan participants will be made by the President
and CEO-UGI (and the UGI Corporation Compensation and Management
Development Committee and Board for designated Corporate Officers).
As such, the President and CEO-UGI (and the UGI Corporation
Compensation and Management Development Committee and Board for
designated Corporate Officers) shall have sole discretion under this
Plan to give consideration to the overall financial
5
<PAGE> 6
performance of the Company and/or its business units in making final
determinations of the achievement of business/financial and individual
goals for bonus payments for any Plan fiscal year.
Annual Bonus Payments
Except for the amounts deferred as provided for in the following
paragraph, annual bonus payments will be paid in cash to each participant as
close as possible to within 90 days following the end of the Plan fiscal year.
Optional Deferral
To provide participants with the flexibility to tailor annual bonus
payouts to individual needs, participants may elect to defer all or part
(subject to a minimum of 50%) of their payout until retirement or termination
of employment. Deferred amounts will earn interest annually during the
deferral period at a market rate determined in accordance with a procedure
determined by the UGI Compensation and Management Development Committee. The
procedure governing optional deferral is contained in Attachment 1 hereto.
Plan Amendment
The Annual Bonus Plan may at any time or from time to time be amended,
modified, suspended or terminated by the UGI Corporation Compensation and
Management Development Committee and Board of Directors, except that no
amendment, modification or termination may (i) adversely affect the balance in
a participant's Deferred Compensation Account without the participant's consent
or (ii) permit payment of such balance prior to the earliest permitted date as
described in the optional deferral provisions of the Annual Bonus Plan.
Other Provisions:
Treatment of New Hires and Promotions
New hires and individuals promoted or transferred into a
position eligible for the Plan (or into a position with a
different annual bonus target %) during the fiscal year will
receive a prorated award based on the relative time spent in
the new position during the fiscal year.
Treatment of Retirement, Death and Permanent Disability
Participants who retire or are permanently disabled during the
fiscal year may receive all or part of their payout, based on
the discretion of the President and CEO (and the Compensation
and Management Development
6
<PAGE> 7
Committee in cases involving designated Corporate Officers).
The same consideration will be granted to the heirs or assigns
of a deceased participant.
Treatment of Other Terminations
A participant who terminates employment for any reason other
than retirement, death or permanent disability during the
fiscal year will forfeit the entire annual bonus payment for
that year, unless determined otherwise by the President and
CEO (and the Compensation and Management Development Committee
in cases involving designated Corporate Officers).
7
<PAGE> 8
ATTACHMENT 1
Procedure Optional Deferral of Annual Bonus Payments
An election to defer an annual bonus payout for a particular fiscal
year must be made in writing on a Form of Notice (Exhibit "A") available from
the UGI Human Resources Department. In order for an election to defer to be
effective for any particular year, the signed Notice must be received by the
UGI Human Resources Department prior to October 1 of the year for which it is
to be effective. The Notice must include the exact percentage of the annual
bonus payout which is to be deferred. Once a Notice is submitted to the UGI
Human Resources Department, the election to defer is irreversible for that
year, except in certain cases, as determined at the sole discretion of the
President and CEO - UGI, of severe financial hardship occasioned by an
unforeseeable emergency as referred to below.
The election to defer will be effective starting on October 1 of the
year indicated on the Notice and will remain in effect only for that fiscal
year.
A participant may elect to defer the receipt of all or a specified
portion (but not less than 50%) of the annual bonus payment otherwise payable
pursuant to the Plan. All deferred amounts will be paid out in cash.
An unfunded Deferred Compensation Account will be established for each
participant who elects deferment, and the portion of the annual bonus payment
that a participant elects to defer will be credited to that Account. Each such
credit will be made to the Account as of the date payment of the annual bonus
payment would otherwise have been made to the participant, had the participant
not elected to defer payment of all or part of the payout.
Deferred payouts are assumed to earn interest at a market rate
determined by the Compensation and Management Development Committee for each
year during the period in which compensation is deferred. Each participant
will be notified of this rate annually. The Company may at any time or from
time to time change or otherwise modify the basis or the method for calculating
and crediting such interest, but any such change or modification will not
adversely affect the balance in any participant's Account at the time of the
change or modification.
Each deferring participant will receive a statement of the balance in
the participant's Account at the end of each fiscal year as promptly as
practicable after the end of that year.
8
<PAGE> 9
Unless a Notice (Exhibit "B") prescribing the method of payment
selected by a participant within the guidelines set forth below is given to the
UGI Human Resources Department during the fiscal year immediately preceding a
participant's retirement under the Company's or a subsidiary's retirement plan
and no less than 30 days prior to the participant's retirement date, upon the
termination of a participant's services as an employee of UGI or any of its
subsidiaries or affiliates, the balance in a participant's Account will be paid
out to the participant in a lump sum distribution, or, at the option of the
Company, in any of the methods of payment which might have been selected by the
participant had a Notice prescribing a method of payment been given.
During the fiscal year immediately preceding a participant's
retirement under the Company's or a subsidiary's retirement plan and no less
than 30 days prior to the participant's retirement date, a participant may
elect any method of payment of the balance in the participant's Account,
including periodic payments over a specified period of years or a lump sum
distribution, except that (i) no payment may be made prior to October of the
fiscal year following the fiscal year during which the participant's services
as an employee of UGI or any of its subsidiaries or affiliates terminate,
unless the payment is made as set forth in the next two paragraphs; (ii) a lump
sum payment must be made or installment payments must commence no later than
October of the fiscal year following the participant's attainment of age 70, or
October of the fiscal year following the termination of the participant's
services as an employee of UGI or any of its subsidiaries or affiliates,
whichever is later; and (iii) installment payments must be made at least
annually and not more frequently than monthly for a period of 5, 10, 15 or 20
years.
If UGI's President and CEO determines, after consideration of a
participant's application, that, due to an unforeseeable emergency occasioned
by extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the participant which results in a severe financial
hardship to the participant which cannot be relieved (i) through reimbursement
or compensation by insurance or otherwise, (ii) by liquidation of the
participant's assets, to the extent the liquidation of such assets would not
itself cause severe financial hardship, or (iii) by cessation of deferrals of
earned awards, the participant has a financial need of such a substantial
nature that a contemporaneous payment of earned awards previously deferred is
warranted, the President and CEO may, at his sole and absolute discretion,
direct that all or a portion of the balance in the participant's Account be
paid to the participant, but only to the extent of the amount of the particular
financial need which cannot be relieved as set forth above. Any such payment
will be made in the manner and at the time specified by the President and CEO.
In any case
9
<PAGE> 10
involving a request for payment by the President and CEO, any decisions will
instead be made by the Compensation and Management Development Committee
without the participation of the President and CEO.
In the event of a participant's death before the balance in the
participant's Account is fully paid out:
(a) Payment of such balance will be made to the beneficiary or
beneficiaries designated by the participant in the Notice
(Exhibit "A") given to the UGI Human Resources Department, or,
if the participant has not designated a beneficiary, to the
beneficiary indicated on the participant's group life
insurance policy through the Company or a Subsidiary, or if no
beneficiary survives, to the participant's estate. In any
case, the payment will be made in a lump sum distribution no
later than October of the fiscal year following the
participant's death, unless the participant has given a Notice
to the UGI Human Resources Department during the fiscal year
immediately preceding the participant's retirement under the
Company's or a subsidiary's retirement plan and no less than
30 days prior to the participant's retirement date electing
that payment of the balance in the participant's Account in
the event of the participant's death be made to the
participant's beneficiary or beneficiaries in periodic
payments as indicated in the Notice, provided that any such
installment payments to a beneficiary or beneficiaries must
commence no later than October of the fiscal year following
the participant's death.
(b) If the balance in the Account is to be paid to the estate of
the participant in installments, the President and CEO may, at
his sole and absolute discretion and upon receipt of an
application from the duly appointed Administrator or Executor
of such estate, direct that the balance in the deceased
participant's Deferred Compensation Account be paid to the
estate in a single payment at such time as is specified by the
President and CEO.
The right of any participant, beneficiary or estate to receive payment
of any unpaid balance in a participant's Account will be an unsecured claim
against the general assets of the Company.
During a participant's lifetime, any deferred payment will be made
only to the participant. No sum in a participant's Account or other interest
in a deferred award shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any attempt by a
participant or
10
<PAGE> 11
any beneficiary to do so shall be void. No balance in a participant's Account
or interest in a deferred award shall in any manner be liable for or subject to
the debts, contracts, liabilities, engagements or torts of a participant or
beneficiary who is entitled to it.
Except as otherwise described above or within the Annual Bonus Plan,
all provisions of the Annual Bonus Plan relating to optional deferral of annual
bonus payments will be administered by the President and CEO who will have the
authority, except as may be otherwise provided above, to adopt, amend and
rescind rules and regulations relating to the optional deferral provisions, and
to interpret, construe and implement those provisions. All decisions made are
final and binding on all parties.
11
<PAGE> 1
UGI CORPORATION AND SUBSIDIARIES
Exhibit (11)
(Page 1 of 2)
COMPUTATION OF EARNINGS PER SHARE
(Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Primary earnings per share:
Actual average common shares outstanding 33.1 32.8 33.0 32.6 33.0 32.6
Incremental shares issuable upon
exercise of stock options outstanding - - 0.1 - 0.1 -
Total average common and common ------ ------ ------ ------ ------ ----
equivalent shares outstanding 33.1 32.8 33.1 32.6 33.1 32.6
====== ====== ====== ====== ====== ====
Earnings (loss) applicable to common
and common equivalent shares:
Earnings (loss) before extraordinary loss
and change in accounting $ (3.7) $(19.5) $ 52.1 $18.5 $41.5 $15.2
Extraordinary loss-propane debt restructuring - (13.2) - (13.2) - (13.2)
Change in accounting for
postemployment benefits - - - (3.1) - (3.1)
------ ------ ------- ----- ------ -----
Net earnings (loss) $ (3.7) $(32.7) $ 52.1 $ 2.2 $41.5 $(1.1)
====== ====== ======= ===== ====== =====
Primary earnings (loss) per common
and common equivalent share:
Earnings (loss) before extraordinary loss
and change in accounting $ (.11) $(.60) $ 1.57 $ .57 $ 1.26 $ .46
Extraordinary loss-propane debt restructuring - (.40) - (.41) - (.41)
Change in accounting for
postemployment benefits - - - (.09) - (.09)
------ ------ ------- ------ ------ ------
Net earnings (loss) $ (.11) $(1.00) $ 1.57 $ .07 $ 1.26 $ (.04)
====== ====== ======= ====== ====== ======
</TABLE>
<PAGE> 2
UGI CORPORATION AND SUBSIDIARIES
Exhibit (11)
(Page 2 of 2)
COMPUTATION OF EARNINGS PER SHARE
(Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fully diluted earnings per share:
Actual average common shares outstanding 33.1 32.8 33.0 32.6 33.0 32.6
Incremental shares issuable upon
exercise of stock options outstanding - - 0.1 0.1 0.1 -
------- -------- -------- ------ -------- -------
Total shares for fully diluted computation 33.1 32.8 33.1 32.7 33.1 32.6
======= ======== ======== ====== ======== =======
Earnings (loss) applicable to common stock:
Earnings (loss) before extraordinary loss
and change in accounting $ (3.7) $ (19.5) $ 52.1 $ 18.5 $ 41.5 $ 15.2
Extraordinary loss-propane debt restructuring - (13.2) - (13.2) - (13.2)
Change in accounting for
postemployment benefits - - - (3.1) - (3.1)
------- -------- -------- ------ -------- -------
Net earnings (loss) $ (3.7) $ (32.7) $ 52.1 $ 2.2 $ 41.5 $ (1.1)
======= ======== ======== ====== ======== =======
Fully diluted earnings (loss) per common share:
Earnings (loss) before extraordinary loss
and change in accounting $(.11) $ (.60) $ 1.57 $.56 $ 1.26 $ .46
Extraordinary loss-propane debt restructuring - (.40) - (.40) - (.41)
Change in accounting for
postemployment benefits - - - (.09) - (.09)
------- -------- -------- ------ -------- -------
Net earnings (loss) $(.11) $(1.00) $ 1.57 $.07 $ 1.26 $(.04)
======= ======== ======== ====== ======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT OF UGI CORPORATION AS
OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN UGI CORPORATION'S
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 40,700
<SECURITIES> 45,200
<RECEIVABLES> 145,900
<ALLOWANCES> 12,200
<INVENTORY> 83,200
<CURRENT-ASSETS> 336,000
<PP&E> 1,316,000
<DEPRECIATION> 356,100
<TOTAL-ASSETS> 2,091,000
<CURRENT-LIABILITIES> 262,100
<BONDS> 829,200
35,200
0
<COMMON> 391,700
<OTHER-SE> 9,200
<TOTAL-LIABILITY-AND-EQUITY> 2,091,000
<SALES> 1,273,600
<TOTAL-REVENUES> 1,273,600
<CGS> 713,400
<TOTAL-COSTS> 713,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,600
<INCOME-PRETAX> 99,200
<INCOME-TAX> 45,000
<INCOME-CONTINUING> 52,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,100
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
</TABLE>
