<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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)
Pennsylvania 23-2668356
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 April 30, 1997, there were 33,074,251 shares of UGI Corporation
Common Stock, without par value, outstanding.
<PAGE> 2
UGI CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1997,
September 30, 1996 and March 31, 1996 1
Condensed Consolidated Statements of Income for the three,
six and twelve months ended March 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows for the
six and twelve months ended March 31, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 26
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
</TABLE>
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<PAGE> 3
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1997 1996 1996
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 85.9 $ 74.0 $ 72.1
Short-term investments, at cost which approximates market value 67.8 23.1 23.0
Accounts receivable (less allowances for doubtful accounts of
$13.6, $10.6 and $11.9, respectively) 205.0 113.3 214.2
Accrued utility revenues 18.2 8.6 17.9
Inventories 56.7 113.2 70.0
Deferred income taxes 22.9 17.4 24.3
Prepaid expenses and other current assets 23.7 32.0 13.3
-------- -------- --------
Total current assets 480.2 381.6 434.8
Property, plant and equipment, at cost (less accumulated depreciation
and amortization of $395.1, $368.2 and $343.0, respectively) 977.4 974.6 963.3
Intangible assets (less accumulated amortization of $104.5, $94.9 and
$86.7, respectively) 682.6 692.5 694.5
Regulatory income tax asset 43.3 42.9 39.3
Other assets 48.5 53.3 65.5
-------- -------- --------
Total assets $2,232.0 $2,144.9 $2,197.4
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt - Propane $ 9.8 $ 5.2 $ 5.5
Current maturities of long-term debt - Utilities 17.1 25.5 25.5
Current maturities of long-term debt - other 0.4 0.4 0.3
Bank loans - Propane -- 15.0 --
Bank loans - Utilities 95.0 50.5 25.5
Accounts payable 81.3 94.7 89.0
Other current liabilities 197.3 177.9 191.8
-------- -------- --------
Total current liabilities 400.9 369.2 337.6
Long-term debt - Propane 687.8 687.3 665.7
Long-term debt - Utilities 139.3 149.3 156.4
Long-term debt - other 8.4 8.6 8.8
Deferred income taxes 152.4 148.6 139.4
Other noncurrent liabilities 86.8 84.7 110.3
Minority interest in AmeriGas Partners 304.7 284.4 328.2
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 - 33,198,731, 33,198,731, and 33,058,839 shares, respectively) 392.3 391.9 391.6
Retained earnings (accumulated deficit) 26.7 (12.8) 27.1
-------- -------- --------
419.0 379.1 418.7
Less treasury stock, at cost 2.5 1.5 2.9
-------- -------- --------
Total common stockholders' equity 416.5 377.6 415.8
-------- -------- --------
Total liabilities and stockholders' equity $2,232.0 $2,144.9 $2,197.4
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------------ ------------------------ ------------------------
1997 1996(a) 1997 1996(a) 1997 1996(a)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Propane $ 371.2 $ 374.8 $ 731.3 $ 660.6 $ 1,083.9 $ 955.9
Utilities 173.2 181.3 307.4 303.6 464.3 423.7
Energy marketing 32.0 26.5 67.3 45.3 105.9 53.8
---------- ---------- ---------- ---------- ---------- ----------
576.4 582.6 1,106.0 1,009.5 1,654.1 1,433.4
---------- ---------- ---------- ---------- ---------- ----------
Costs and expenses:
Propane cost of sales 215.8 209.3 420.5 372.0 618.2 525.9
Utilities - gas, fuel and purchased power 94.3 100.5 163.6 160.4 242.9 210.8
Other cost of sales 31.3 22.9 65.4 40.6 102.5 48.6
Operating and administrative expenses 113.9 119.1 227.1 225.3 439.3 417.4
Depreciation and amortization 22.0 21.6 43.7 43.0 86.7 82.0
Petrolane fee income -- -- -- -- -- (2.8)
Miscellaneous income, net (8.6) (2.5) (11.6) (6.2) (18.1) (12.7)
---------- ---------- ---------- ---------- ---------- ----------
468.7 470.9 908.7 835.1 1,471.5 1,269.2
---------- ---------- ---------- ---------- ---------- ----------
Operating income 107.7 111.7 197.3 174.4 182.6 164.2
Interest charges (21.4) (19.9) (42.5) (39.8) (82.2) (77.4)
Minority interest in AmeriGas Partners (20.2) (21.4) (36.9) (28.7) (12.5) (9.0)
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes, subsidiary
preferred stock dividends and
Equity in Petrolane 66.1 70.4 117.9 105.9 87.9 77.8
Income taxes (29.6) (32.1) (52.8) (48.7) (37.7) (42.7)
Dividends on UGI Utilities Series
Preferred Stock (0.7) (0.7) (1.4) (1.4) (2.8) (2.8)
Equity in Petrolane -- -- -- -- -- (6.6)
---------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary loss 35.8 37.6 63.7 55.8 47.4 25.7
Extraordinary loss - propane debt
restructuring -- -- -- -- -- (13.2)
---------- ---------- ---------- ---------- ---------- ----------
Net income $ 35.8 $ 37.6 $ 63.7 $ 55.8 $ 47.4 $ 12.5
========== ========== ========== ========== ========== ==========
Earnings per common and common equivalent share:
Earnings before extraordinary loss $ 1.08 $ 1.13 $ 1.92 $ 1.69 $ 1.43 $ 0.78
Extraordinary loss - propane debt
restructuring -- -- -- -- -- (0.40)
---------- ---------- ---------- ---------- ---------- ----------
Net earnings $ 1.08 $ 1.13 $ 1.92 $ 1.69 $ 1.43 $ 0.38
========== ========== ========== ========== ========== ==========
Dividends declared per share $ 0.355 $ 0.35 $ 0.71 $ 0.70 $ 1.415 $ 1.40
========== ========== ========== ========== ========== ==========
Average common and common
equivalent shares outstanding 33.3 33.1 33.2 33.1 33.2 33.0
========== ========== ========== ========== ========== ==========
</TABLE>
(a) Revenues (and related cost of sales) have been reclassified to reflect
revenues from certain Gas Utility sales on a total, rather than net,
basis.
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
UGI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Millions of dollars)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
March 31, March 31,
---------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 63.7 $ 55.8 $ 47.4 $ 12.5
Reconcile to net cash provided by
operating activities:
Depreciation and amortization 43.7 43.0 86.7 82.0
Minority interest in AmeriGas Partners 36.9 28.7 12.5 9.0
Deferred income taxes, net (2.9) 0.7 8.4 10.1
Equity in loss of Petrolane -- -- -- 6.6
Extraordinary loss -- -- -- 13.2
Other, net (0.4) 1.3 (5.2) 3.6
------- ------- ------- -------
141.0 129.5 149.8 137.0
Net change in:
Accounts receivable and accrued utility revenues (107.0) (143.4) (0.7) (96.6)
Inventories 56.8 32.7 13.9 (6.2)
Deferred fuel adjustments 13.9 6.2 (3.0) (9.7)
Pipeline transition costs and producer settlements, net (1.4) (0.7) 0.4 (4.8)
Accounts payable (13.4) 19.5 (7.8) 29.0
Other current assets and liabilities 20.1 30.0 (5.2) 40.3
------- ------- ------- -------
Net cash provided by operating activities 110.0 73.8 147.4 89.0
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (31.8) (31.6) (62.9) (73.7)
Net proceeds from disposals of assets 8.1 2.0 10.3 2.6
Acquisitions of businesses, net of cash acquired (2.7) (8.6) (22.1) (11.9)
Short-term investments increase (44.6) (12.0) (44.7) (23.0)
Other, net 0.5 (0.3) 0.5 3.3
------- ------- ------- -------
Net cash used by investing activities (70.5) (50.5) (118.9) (102.7)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on Common Stock (23.5) (23.1) (46.8) (45.9)
Distributions on Partnership public Common Units (19.4) (19.4) (38.7) (27.3)
Issuance of long-term debt 7.7 34.1 30.7 82.1
Repayment of long-term debt (20.3) (50.8) (29.2) (60.6)
Propane bank loans decrease (15.0) -- -- --
UGI Utilities bank loans increase (decrease) 44.5 (16.5) 69.5 (12.0)
Issuance of Common Stock 6.2 6.6 10.9 11.9
Repurchases of Common Stock (7.8) (3.8) (11.1) (3.8)
------- ------- ------- -------
Net cash used by financing activities (27.6) (72.9) (14.7) (55.6)
------- ------- ------- -------
AMERIGAS PARTNERS FORMATION TRANSACTIONS:
Acquisition of Petrolane Class B shares -- -- -- (90.9)
Issuance of AmeriGas Partners Common Units -- -- -- 349.7
Issuance of long-term debt -- -- -- 208.5
Repayment of long-term debt and related interest -- -- -- (408.9)
Other fees and expenses -- -- -- (19.6)
------- ------- ------- -------
Net cash provided by AmeriGas Partners
formation transactions -- -- -- 38.8
------- ------- ------- -------
Cash and cash equivalents increase (decrease) $ 11.9 $ (49.6) $ 13.8 $ (30.5)
======= ======= ======= =======
CASH AND CASH EQUIVALENTS:
End of period $ 85.9 $ 72.1 $ 85.9 $ 72.1
Beginning of period 74.0 121.7 72.1 102.6
------- ------- ------- -------
Increase (decrease) $ 11.9 $ (49.6) $ 13.8 $ (30.5)
======= ======= ======= =======
</TABLE>
During the twelve months ended March 31, 1997 and 1996, UGI Utilities, Inc. paid
cash dividends to UGI of $45.4 and $11.6, respectively. During the twelve months
ended March 31, 1997 and 1996, AmeriGas, Inc. paid cash dividends to UGI of
$49.0 and $43.3, respectively. During those same periods, UGI paid cash
dividends to holders of Common Stock of $46.8 and $45.9, 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.
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<PAGE> 6
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Million 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"). 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. UGI
also conducts an energy marketing business through its wholly owned
subsidiary, UGI Enterprises, Inc. (UGI Enterprises).
At March 31, 1997, UGI, through wholly owned subsidiaries, holds an
effective 2% general partner interest and a 56.5% 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 41.5% effective interest in the Operating
Partnership is publicly held. AmeriGas Partners and the Operating
Partnership are collectively referred to herein as the Partnership. A
second-tier subsidiary of UGI serves as the general partner of AmeriGas
Partners and the Operating Partnership.
The condensed 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 35% investment in Petrolane
Incorporated (Petrolane) through April 19, 1995 was accounted for by
the equity method. On April 19, 1995, the Company acquired the 65% of
Petrolane common shares outstanding not already owned and combined the
propane distribution businesses of Petrolane and its wholly owned
subsidiaries AmeriGas Propane, Inc. (AmeriGas Propane) and AmeriGas
Propane-2, Inc. (AGP-2) into the Operating Partnership (the
"Partnership Formation").
The accompanying condensed consolidated financial statements are
unaudited and have been prepared in accordance with the rules and
regulations of the U.S. Securities and Exchange Commission. They
include all adjustments which 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
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<PAGE> 7
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Million of dollars, except per share amounts)
financial statements should be read 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, 1996. 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and revenues and expenses during the
reporting period. Actual results could differ from these estimates.
2. EQUITY IN PETROLANE
Prior to the Partnership Formation, UGI's AmeriGas, Inc. subsidiary
conducted its national propane distribution business principally
through its wholly owned subsidiaries AmeriGas Propane and AGP-2, and
its equity investee Petrolane. The following table includes summarized
condensed consolidated results of operations of Petrolane for the
period March 24, 1995 to April 19, 1995:
<TABLE>
<CAPTION>
March 24,
1995 to
April 19,
1995
---------
<S> <C>
Revenues $ 37.5
Cost of sales (20.4)
Depreciation and amortization (4.0)
Other costs and expenses (11.9)
---------
Operating income 1.2
Interest expense (3.9)
Income tax benefit (.3)
---------
Net loss $ (2.4)
=========
</TABLE>
As a result of the Partnership Formation, in April 1995 the Company
wrote-off $5.8 million of net deferred tax benefits of Petrolane which
amount is reflected in "Equity in Petrolane" and represents the
Company's share of such tax benefits no longer realizable as a result
of the public's interest in the Partnership.
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<PAGE> 8
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
3. 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 Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
-------------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Propane $ 371.2 $ 374.8 $ 731.3 $ 660.6 $1,083.9 $ 955.9
Gas utility 153.3 162.1 269.1 267.3 392.8 355.7
Electric utility 19.9 19.2 38.3 36.3 71.5 68.0
Energy marketing (a) 32.0 26.5 67.3 45.3 105.9 53.8
-------- -------- -------- -------- -------- --------
Total consolidated operations $ 576.4 $ 582.6 $1,106.0 $1,009.5 $1,654.1 $1,433.4
======== ======== ======== ======== ======== ========
Petrolane (b) $ -- $ -- $ -- $ -- $ -- $ 37.5
======== ======== ======== ======== ======== ========
OPERATING INCOME (LOSS)
Propane $ 67.7 $ 69.7 $ 126.9 $ 105.3 $ 102.4 $ 91.2
Gas utility 38.9 39.2 67.5 66.2 74.2 71.1
Electric utility 3.3 2.7 6.3 4.9 10.0 8.6
Energy marketing 0.3 3.0 1.1 3.9 1.6 4.8
Petrolane management fee -- -- -- -- -- 0.9
Corporate general and other (2.5) (2.9) (4.5) (5.9) (5.6) (12.4)
-------- -------- -------- -------- -------- --------
Total consolidated operations $ 107.7 $ 111.7 $ 197.3 $ 174.4 $ 182.6 $ 164.2
======== ======== ======== ======== ======== ========
Petrolane (b) $ -- $ -- $ -- $ -- $ -- $ 1.3
======== ======== ======== ======== ======== ========
DEPRECIATION AND AMORTIZATION
Propane - depreciation $ 9.7 $ 9.7 $ 19.3 $ 19.1 $ 38.5 $ 36.3
Propane - amortization 6.5 6.4 12.9 13.0 25.7 24.8
Gas utility 4.6 4.4 9.2 8.7 18.1 16.8
Electric utility 1.1 1.0 2.1 2.0 4.1 3.8
Corporate general and other 0.1 0.1 0.2 0.2 0.3 0.3
-------- -------- -------- -------- -------- --------
Total consolidated operations $ 22.0 $ 21.6 $ 43.7 $ 43.0 $ 86.7 $ 82.0
======== ======== ======== ======== ======== ========
Petrolane - depreciation (b) $ -- $ -- $ -- $ -- $ -- $ 1.9
======== ======== ======== ======== ======== ========
Petrolane - amortization (b) $ -- $ -- $ -- $ -- $ -- $ 2.1
======== ======== ======== ======== ======== ========
IDENTIFIABLE ASSETS
(at period end)
Propane $1,405.3 $1,444.8 $1,405.3 $1,444.8 $1,405.3 $1,444.8
Gas utility 605.7 583.3 605.7 583.3 605.7 583.3
Electric utility 88.2 85.4 88.2 85.4 88.2 85.4
Energy marketing 9.5 15.5 9.5 15.5 9.5 15.5
Corporate general and other 123.3 68.4 123.3 68.4 123.3 68.4
-------- -------- -------- -------- -------- --------
Total consolidated operations $2,232.0 $2,197.4 $2,232.0 $2,197.4 $2,232.0 $2,197.4
======== ======== ======== ======== ======== ========
OPERATING STATISTICS
Propane sales - millions of gallons:
AmeriGas Partners (subsequent to April 19, 1995) -
Retail 267.6 315.3 519.3 559.6 815.1 803.2
Wholesale 73.5 96.0 142.1 215.2 236.6 280.8
AmeriGas (through April 19, 1995) -
Retail -- -- -- -- -- 24.7
Wholesale -- -- -- -- -- 3.0
Petrolane (through April 19, 1995) -
Retail (b) -- -- -- -- -- 33.5
Wholesale (b) -- -- -- -- -- 10.0
Natural gas system throughput -
billions of cubic feet 27.9 30.3 52.5 55.4 82.5 85.4
Electric sales - millions of kilowatt hours 248.6 260.9 472.3 485.6 871.4 884.9
</TABLE>
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<PAGE> 9
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
NOTES TO SEGMENT INFORMATION:
(a) Subsequent to July 31, 1995, the Company's energy marketing
business records separately the revenues and related cost of
sales associated with its billed volumes. Prior to August 1,
1995, net margin from the Company's energy marketing business
was reflected as a component of miscellaneous income.
(b) Includes 100% of amounts for Petrolane through April 19, 1995.
4. 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. These leases are
currently estimated to aggregate approximately $85 million (subject to
reduction in certain circumstances). The leases expire through 2010 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.
-7-
<PAGE> 10
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
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.
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.
-8-
<PAGE> 11
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
Under the terms of the August 31, 1995 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.
5. RECENTLY ISSUED ACCOUNTING PRINCIPLES NOT YET ADOPTED
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128 "Earnings
Per Share" (SFAS 128). SFAS 128 establishes standards for computing and
presenting earnings per share and simplifies the standards for
computing earnings per share previously found in Accounting Principles
Board Opinion No. 15 (APB 15). It requires a dual presentation of basic
and diluted earnings per share on the face of the income statement for
all entities with complex capital structures and a reconciliation of
the numerator and denominator of the basic earnings per share
computation to the numerator and denominator of the fully diluted
earnings per share computation.
The computation of basic earnings per share excludes the dilutive
effect of common stock equivalents currently required under the
calculation of primary earnings per share and is computed by dividing
income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted earnings per share
under SFAS 128 is computed similarly to fully diluted earnings per
share under APB No. 15.
SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997; earlier application is not permitted.
When adopted, restatement of all prior-period earnings per share data
is required.
The adoption of SFAS 128 is currently not expected to have a material
effect on the Company's computation of earnings per share because the
Company has a relatively small number of dilutive potential common
shares outstanding. The effect of the adoption of
-9-
<PAGE> 12
UGI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Millions of dollars, except per share amounts)
SFAS 128 on the calculation of earnings per share in future periods
will depend principally on the amount and terms of dilutive potential
common shares then outstanding.
-10-
<PAGE> 13
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 3 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.
THREE MONTHS ENDED MARCH 31, 1997 (1997 THREE-MONTH PERIOD) COMPARED WITH THREE
MONTHS ENDED MARCH 31, 1996 (1996 THREE-MONTH PERIOD)
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Three Months Ended March 31, 1997 1996 Decrease
- ---------------------------------------------------------------------------------------
(Millions of dollars, except per share)
<S> <C> <C> <C> <C>
Revenues $576.4 $582.6 $ (6.2) (1.1)%
Total margin $227.7 $242.4 $(14.7) (6.1)%
Operating income $107.7 $111.7 $ (4.0) (3.6)%
Net income $ 35.8 $ 37.6 $ (1.8) (4.8)%
Net income per share $ 1.08 $ 1.13 $ (.05) (4.4)%
- ---------------------------------------------------------------------------------------
</TABLE>
The Company's net income in the 1997 three-month period decreased due
principally to warmer weather across AmeriGas Partners' and Gas Utility's
service territories which resulted in lower volumes of propane and natural gas
sold.
PROPANE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Three Months Ended March 31, 1997 1996 Decrease
- -------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Retail gallons sold - millions 267.6 315.3 (47.7) (15.1)%
Degree days - % colder (warmer)
than normal (13.1) 0.8 -- --
Revenues $371.2 $374.8 $ (3.6) (1.0)%
Total margin $155.4 $165.5 $(10.1) (6.1)%
Operating income $ 67.7 $ 69.7 $ (2.0) (2.9)%
EBITDA(a) $ 83.9 $ 85.8 $ (1.9) (2.2)%
- -------------------------------------------------------------------------
</TABLE>
-11-
<PAGE> 14
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(a) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative
to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition
under generally accepted accounting principles.
PROPANE. Retail volumes of propane sold decreased in the three months ended
March 31, 1997 due in large part to the effects of weather that was 14.4% warmer
than in the prior-year period. In addition, higher propane market prices
resulted in customer conservation efforts which further reduced retail volumes.
Wholesale volumes of propane sold decreased 22.4 million gallons to 73.5 million
gallons in the three months ended March 31, 1997 principally reflecting reduced
low-margin sales of storage inventories.
Total revenues from retail propane sales increased $3.3 million to $308.5
million reflecting a $49.5 million increase as a result of higher average retail
propane selling prices substantially offset by a $46.2 million decrease in
retail propane revenues resulting from the lower volumes sold. The higher
average selling prices reflect higher propane product costs which resulted
principally from higher supply costs experienced early in the quarter as well as
the seasonal liquidation of higher cost propane inventories purchased earlier in
the fiscal year. The spot price of propane at Mont Belvieu, Texas, a major U.S.
storage and distribution hub, increased dramatically during much of the first
fiscal quarter of 1997 rising to a high of 70.5 cents per gallon on December 16,
1996. Propane spot market prices began to decline in late December 1996. The
general trend of declining spot market prices continued into the second quarter
of fiscal 1997 to a price of 36.75 cents per gallon on March 31, 1997. Wholesale
propane revenues decreased $3.1 million to $44.1 million reflecting the lower
wholesale volumes at higher average selling prices. Other revenues decreased
$3.8 million to $18.6 million as a result of lower hauling and appliance
revenues.
Total propane margin decreased in the 1997 three-month period principally
reflecting the impact of lower volumes of propane sold partially offset by the
effects of higher average unit margins.
The decrease in operating income and EBITDA during the three months ended March
31, 1997 reflects the impact of the lower total margin partially offset by lower
operating expenses and an increase in miscellaneous income. Total operating
expenses of the Partnership were $81.1 million in the 1997 three-month period
compared with $84.5 million in the prior-year period. Operating expenses in the
prior-year period are net of $4.4 million from a refund of insurance premium
deposits made in prior years and $3.3 million from a reduction in accrued
environmental costs. Miscellaneous income of the Partnership in the three months
ended March 31, 1997 was $5.4 million greater than in the prior-year period
principally due to $4.7 million of income from the sale of the Partnership's 50%
interest in Atlantic Energy, Inc. (Atlantic Energy), a refrigerated
-12-
<PAGE> 15
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
liquefied petroleum gas storage terminal in Chesapeake, Virginia. The
Partnership sold its interest in Atlantic Energy after determining that it was
not a strategic asset.
UTILITIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 1997 1996 (Decrease)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
GAS UTILITY:
Natural gas system throughput - bcf 27.9 30.3 (2.4) (7.9)%
Degree days - % colder (warmer)
than normal (10.0) 4.7 -- --
Revenues $153.3 $162.1 $ (8.8) (5.4)%
Total margin (a) $ 62.2 $ 64.5 $ (2.3) (3.6)%
Operating income $ 38.9 $ 39.2 $ (.3) (.8)%
ELECTRIC UTILITY:
Electric sales - gwh 248.6 260.9 (12.3) (4.7)%
Degree days - % colder (warmer)
than normal (4.2) 6.8 -- --
Revenues $ 19.9 $ 19.2 $ .7 3.6%
Total margin (a) $ 9.4 $ 8.8 $ .6 6.8%
Operating income $ 3.3 $ 2.7 $ .6 22.2%
- ------------------------------------------------------------------------------------------------
</TABLE>
bcf - billions of cubic feet. gwh - millions of kilowatt hours.
(a) Gas and Electric utilities' total margin represents total revenues less
cost of sales and revenue-related taxes.
GAS UTILITY. Weather in the Gas Utility service area during the three months
ended March 31, 1997 was 10.0% warmer than normal compared with weather that was
4.7% colder than normal in the prior-year period. As a result, total system
throughput decreased 7.9% during the 1997 three-month period principally
reflecting the warmer weather's effect on firm-residential, firm-commercial and
firm-industrial (collectively, "core market") sales.
The decrease in Gas Utility's total revenues during the 1997 three-month period
principally reflects a $14.8 million decrease from lower throughput to core
market customers and a $4.7 million decrease in revenues from sales to customers
outside Gas Utility's distribution system (off-system sales). These decreases
were partially offset by an $11.1 million increase from the effects
-13-
<PAGE> 16
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
of higher purchased gas cost (PGC) rates. Cost of gas sold by the Gas Utility
was $84.6 million during the 1997 three-month period, a decrease of $6.4 million
over the prior-year period, reflecting lower costs associated with the lower
volumes sold to core market customers and the decrease in off-system sales
partially offset by the effects of higher PGC rates.
The decrease in Gas Utility total margin is principally a result of a $4.8
million decrease in total margin from core market customers reflecting the
effects of warmer weather on volumes sold. The decrease in total margin from
core market customers was partially offset by higher total margin from
interruptible customers.
Gas Utility operating income during the 1997 three-month period decreased $.3
million principally reflecting the decrease in total margin. Operating and
administrative expenses during the 1997 three-month period decreased $2.1
million principally due to a $.9 million decrease in distribution system expense
due in part to the milder 1997 three-month period weather and lower general and
administrative expenses.
ELECTRIC UTILITY. Electric Utility sales decreased during the 1997 three-month
period reflecting weather which was 10.3% warmer than last year. Electric
Utility revenues increased $.7 million, notwithstanding the lower sales,
reflecting a $.5 million increase in energy cost (EC) rate revenues and the
effects of an increase in base rates effective July 19, 1996. Cost of sales
increased $.2 million in the 1997 three-month period reflecting the higher EC
rate partially offset by the lower sales.
Electric Utility total margin and operating income increased during the 1997
three-month period principally as a result of the higher base rates effective
July 19, 1996. Electric Utility operating and administrative expenses in the
1997 three-month period were virtually unchanged from the prior-year period.
Pursuant to the provisions of the Electricity Generation Customer Choice and
Competition Act (Customer Choice Act), Electric Utility's rates have been capped
at levels existing as of January 1, 1997 (see "Electricity Generation Customer
Choice and Competition Act").
ENERGY MARKETING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 1997 1996 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
Revenues $32.0 $26.5 $ 5.5 20.8%
Total margin $ .7 $ 3.6 $(2.9) (80.6)%
Operating income $ .3 $ 3.0 $(2.7) (90.0)%
- --------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE> 17
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ENERGY MARKETING. Total revenues from energy marketing in the 1997 three-month
period increased from the prior-year period as a result of higher billed volumes
and higher natural gas prices. The increase in billed volumes is principally a
result of significant growth in customers outside the Gas Utility's service
territory. Notwithstanding the increase in billed volumes, total margin for the
1997 three-month period decreased $2.9 million due to the warmer weather's
effects on gas prices and the value of pipeline capacity. Operating income from
energy marketing was $.3 million in the 1997 three-month period compared with
$3.0 million in the prior-year period principally reflecting the lower total
margin.
CORPORATE GENERAL AND OTHER
Operating loss from corporate general and other, net, consisting of expenses
incurred by UGI corporate headquarters net of other miscellaneous income, was
$(2.5) million in the 1997 three-month period compared with $(2.9) million in
the prior-year period reflecting lower UGI corporate administrative expenses and
higher interest income on temporary cash investments.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $21.4 million in the 1997 three-month period from
$19.9 million in the prior-year period principally as a result of higher levels
of debt outstanding under the Partnership's Revolving Credit and Acquisition
facilities. The effective income tax rate on pre-tax income for the three months
ended March 31, 1997 was 44.8% compared with 45.6% for the three months ended
March 31, 1996 principally as a result of a lower effective income tax rate on
propane operations.
SIX MONTHS ENDED MARCH 31, 1997 (1997 SIX-MONTH PERIOD) COMPARED WITH SIX MONTHS
ENDED MARCH 31, 1996 (1996 SIX-MONTH PERIOD)
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Six Months Ended March 31, 1997 1996 Increase
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars,
except per share)
Revenues $1,106.0 $1,009.5 $96.5 9.6%
Total margin $ 443.7 $ 423.9 $19.8 4.7%
Operating income $ 197.3 $ 174.4 $22.9 13.1%
Net income $ 63.7 $ 55.8 $ 7.9 14.2%
Net income per share $ 1.92 $ 1.69 $ .23 13.6%
- ---------------------------------------------------------------------
</TABLE>
-15-
<PAGE> 18
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The increase in the Company's results in the 1997 six-month period reflects a
significant improvement in the operating results of AmeriGas Partners. The
improvement in the Partnership's results is principally due to higher average
retail unit margins.
PROPANE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Increase
Six Months Ended March 31, 1997 1996 (Decrease)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
Retail gallons sold - millions 519.3 559.6 (40.3) (7.2)%
Revenues $731.3 $660.6 $ 70.7 10.7%
Total margin $310.8 $288.6 $ 22.2 7.7%
Operating income $126.9 $105.3 $ 21.6 20.5%
EBITDA (a) $159.1 $137.4 $ 21.7 15.8%
- ----------------------------------------------------------------------------
</TABLE>
(a) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative
to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition
under generally accepted accounting principles.
PROPANE. Retail volumes of propane sold decreased in the six months ended March
31, 1997 reflecting the effects of warmer heating-season weather and
price-induced customer conservation efforts. Wholesale volumes of propane sold
decreased 73.1 million gallons to 142.1 million gallons in the six months ended
March 31, 1997 principally due to reduced low-margin sales of storage
inventories.
Total revenues from retail propane sales increased $79.3 million to $594.4
million reflecting a $116.4 million increase as a result of higher average
retail propane selling prices partially offset by a $37.1 million decrease in
retail propane revenues resulting from the lower volumes sold. The higher prices
resulted principally from higher propane product costs experienced by the
Partnership particularly during the first quarter of fiscal 1997. Wholesale
propane revenues decreased $3.9 million to $90.1 million reflecting the lower
wholesale volumes. Other revenues decreased $4.7 million to $46.8 million as a
result of lower hauling and appliance revenues.
Total propane margin was significantly greater in the 1997 six-month period
reflecting the impact of higher average retail unit margins partially offset by
reduced volumes of propane sold. Although the Partnership's propane product
costs increased significantly, they were partially
-16-
<PAGE> 19
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
mitigated by favorable fixed-price supply commitments and financial contracts
entered into by the Partnership as part of its overall propane supply strategy.
In addition, the higher 1997 six-month period average retail unit margin
reflects the fact that retail unit margins in the prior-year period were
adversely impacted by the effects of certain sales and marketing programs.
The increase in operating income and EBITDA during the six months ended March
31, 1997 reflects the impact of the higher total margin and an increase in
miscellaneous income. Total operating expenses of the Partnership were $164.7
million in the six months ended March 31, 1997 compared with $161.4 million in
the six months ended March 31,1996. The 1996 operating expenses are net of $4.4
million from a refund of insurance premium deposits made in prior years and $3.3
million from a reduction in accrued environmental costs. Miscellaneous income of
the Partnership increased $4.0 million in the six months ended March 31, 1997
primarily from $4.7 million of income from the sale of the Partnership's 50%
interest in Atlantic Energy.
UTILITIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 1997 1996 (Decrease)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
GAS UTILITY:
Natural gas system throughput - bcf 52.5 55.4 (2.9) (5.2)%
Degree days - % colder (warmer)
than normal (7.2) 5.0 -- --
Revenues $269.1 $267.3 $ 1.8 .7%
Total margin $112.8 $113.7 $ (.9) (.8)%
Operating income $ 67.5 $ 66.2 $ 1.3 2.0%
ELECTRIC UTILITY:
Electric sales - gwh 472.3 485.6 (13.3) (2.7)%
Degree days - % colder (warmer)
than normal (1.3) 7.8 -- --
Revenues $ 38.3 $ 36.3 $ 2.0 5.5%
Total margin $ 18.2 $ 16.9 $ 1.3 7.7%
Operating income $ 6.3 $ 4.9 $ 1.4 28.6%
- ------------------------------------------------------------------------------------------------
</TABLE>
GAS UTILITY. Weather in Gas Utility's service territory in the 1997 six-month
period was 7.2% warmer than normal and 11.6% warmer than the 1996 six-month
period. Total system throughput decreased 5.2% during the 1997 six-month period
principally reflecting the effect of the warmer weather on core market sales.
-17-
<PAGE> 20
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The increase in Gas Utility's total revenues reflects a $20.0 million increase
from higher average PGC rates in effect during the 1997 six-month period
partially offset by a $16.9 million decrease from lower sales to core market
customers and slightly lower off-system sales. Notwithstanding the lower core
market and off-system sales, cost of gas sold by Gas Utility increased $2.5
million to $145.1 million during the 1997 six-month period reflecting the higher
average PGC rates.
The decrease in Gas Utility total margin principally reflects a $5.4 million
decrease from core market customers resulting from the warmer weather partially
offset by an increase in total margin from interruptible customers.
Although total margin was lower in the 1997 six-month period, Gas Utility
operating income increased $1.3 million principally as a result of lower
operating expenses. Operating and administrative expenses during the 1997
six-month period decreased $2.3 million principally as a result of a $1.1
million decrease in distribution system expenses and lower general and
administrative expenses.
ELECTRIC UTILITY. Electric Utility sales decreased during the 1997 six-month
period reflecting weather which was 8.5% warmer than in the 1996 six-month
period. Electric Utility revenues increased $2.1 million, notwithstanding the
lower sales, reflecting a $1.1 million increase in EC rate revenues and a $.9
million increase in base rate revenues resulting from the July 19, 1996 base
rate increase. Cost of sales increased to $18.5 million in the 1997 six-month
period from $17.8 million in the prior-year period as a result of a higher EC
rate partially offset by the lower sales.
Electric Utility total margin and operating income increased during the six
months ended March 31, 1997 principally as a result of the higher base rates.
Electric Utility operating and administrative expenses in the 1997 six-month
period were essentially unchanged from the prior-year period.
ENERGY MARKETING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 1997 1996 (Decrease)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
Revenues $67.3 $45.3 $22.0 48.6%
Total margin $ 1.9 $ 4.7 $(2.8) (59.6)%
Operating income $ 1.1 $ 3.9 $(2.8) (71.8)%
- --------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE> 21
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ENERGY MARKETING. Total revenues from energy marketing in the 1997 six-month
period increased significantly compared with revenues during the prior-year
period as a result of higher billed volumes principally from increased sales
outside the Gas Utility's service territory and higher natural gas prices.
Notwithstanding the increase in billed volumes, total margin for the 1997
six-month period was lower than in the prior-year period due to the warmer
weather's effects on gas prices and the value of pipeline capacity. Operating
income from energy marketing was $1.1 million in the 1997 six-month period
compared with $3.9 million in the prior-year period principally as a result of
the lower total margin.
CORPORATE GENERAL AND OTHER
Operating loss from corporate general and other, net, was $(4.5) million in the
1997 six-month period compared with $(5.9) million in the 1996 six-month period.
The decrease in corporate general and other expenses principally reflects lower
levels of UGI corporate expenses and higher interest income on temporary cash
investments.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $42.5 million in the 1997 six-month period from
$39.8 million in the 1996 six-month period principally as a result of higher
levels of debt outstanding under the Partnership's Revolving Credit and
Acquisition facilities. The effective income tax rate on pre-tax income for the
six months ended March 31, 1997 was 44.8% compared with 46.0% for the six months
ended March 31, 1996 principally as a result of a lower effective income tax
rate on propane operations.
TWELVE MONTHS ENDED MARCH 31, 1997 (1997 TWELVE-MONTH PERIOD) COMPARED WITH
TWELVE MONTHS ENDED MARCH 31, 1996 (1996 TWELVE-MONTH PERIOD)
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Twelve Months Ended March 31, 1997 1996 Increase
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars, except per share)
Revenues $1,654.1 $1,433.4 $220.7 15.4%
Total margin $ 672.2 $ 630.9 $ 41.3 6.5%
Operating income $ 182.6 $ 164.2 $ 18.4 11.2%
Income before extraordinary loss $ 47.4 $ 25.7 $ 21.7 84.4%
Net income $ 47.4 $ 12.5 $ 34.9 279.2%
Net income per share $ 1.43 $ .38 $ 1.05 276.3%
- ----------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE> 22
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The increase in the Company's results in the 1997 twelve-month period is
principally a result of a number of factors including improved propane results,
the full-year impact of Gas Utility's 1995 base rate increase, the effect of
Electric Utility's July 1996 base rate increase, and lower net corporate
expenses. Results in the 1996 twelve-month period include after-tax charges of
$24.9 million, or $.76 a share, associated with the formation of AmeriGas
Partners.
PROPANE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 1997 1996 (Decrease)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
Retail gallons sold - millions 815.1 827.9 (12.8) (1.5)%
Revenues $1,083.9 $955.9 $128.0 13.4%
Total margin $ 465.7 $430.0 $ 35.7 8.3%
Operating income $ 102.4 $ 91.2 $ 11.2 12.3%
EBITDA (a) $ 166.6 $152.3 $ 14.3 9.4%
- ----------------------------------------------------------------------------
</TABLE>
(a) EBITDA (earnings before interest expense, income taxes, depreciation
and amortization) should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative
to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition
under generally accepted accounting principles.
PROPANE. Retail volumes of propane sold by consolidated propane operations
during the 1997 twelve-month period decreased principally as a result of warmer
winter weather and, to a much lesser extent, price-induced customer conservation
efforts during the heating season. The increase in consolidated propane revenues
reflects higher average retail selling prices principally during the six-month
period ended March 31, 1997 as a result of higher propane product costs. Total
consolidated propane margin in the 1997 twelve-month period reflects higher
average retail unit margins primarily during the six-month period ended March
31, 1997. Consolidated propane operating income and EBITDA increased in the 1997
twelve-month period reflecting the greater consolidated propane total margin
partially offset by higher consolidated propane operating expenses due in large
part to higher customer equipment repairs and maintenance expenses and
incremental expenses associated with acquisitions and new district locations.
-20-
<PAGE> 23
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
UTILITIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 1997 1996 (Decrease)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
GAS UTILITY:
Natural gas system throughput - bcf 82.5 85.4 (2.9) (3.4)%
Degree days - % colder (warmer) than
normal (6.0) 5.2 -- --
Revenues $392.8 $355.7 $ 37.1 10.4%
Total margin $168.8 $163.1 $ 5.7 3.5%
Operating income $ 74.2 $ 71.1 $ 3.1 4.5%
ELECTRIC UTILITY:
Electric sales - gwh 871.4 884.9 (13.5) (1.5)%
Degree days - % colder than normal .4 5.0 -- --
Revenues $ 71.5 $ 68.0 $ 3.5 5.1%
Total margin $ 34.3 $ 32.6 $ 1.7 5.2%
Operating income $ 10.0 $ 8.6 $ 1.4 16.3%
- --------------------------------------------------------------------------------------------------------
</TABLE>
GAS UTILITY. Weather in Gas Utility's service territory in the 1997 twelve-month
period was 11.1% warmer than in the 1996 twelve-month period. Total system
throughput declined principally as a result of the warmer weather.
The increase in Gas Utility total revenues reflects a $25.6 million increase
from higher average PGC rates, a $13.8 million increase in off-system sales and
the full-year effect of Gas Utility's $19.5 million annual base rate increase
effective August 31, 1995. These increases were partially offset by the effects
of the lower system throughput. Cost of gas sold was $208.7 million during the
1997 twelve-month period, an increase of $30.4 million from the same period in
1996, reflecting the effects of higher average PGC rates and greater off-system
sales partially offset by the lower system throughput.
The increase in Gas Utility total margin in the twelve months ended March 31,
1997 reflects a $2.9 million increase in total margin from core market
customers, principally from the full-year effect of the increase in base rates,
and higher total margin from interruptible customers.
Gas Utility operating income during the 1997 twelve-month period benefited from
the increase in total margin. However, the benefit was partially offset by
slightly higher operating expenses and higher charges for depreciation.
-21-
<PAGE> 24
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ELECTRIC UTILITY. Electric Utility sales were lower during the twelve months
ended March 31, 1997 than in the prior-year period principally as a result of
warmer 1997 winter weather. The increase in Electric Utility revenues reflects a
$2.1 million increase in EC rate revenues and the impact of higher base rates
subsequent to July 19, 1996. Electric Utility cost of sales was $34.1 million,
an increase of $1.6 million from the prior-year period. The increase in cost of
sales principally reflects a higher average EC rate.
Electric Utility total margin during the twelve months ended March 31, 1997
increased principally as a result of the higher base rates effective in July
1996. Electric Utility operating income benefited from the increase in total
margin, however the benefit was partially offset principally by higher charges
for depreciation.
ENERGY MARKETING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Twelve Months Ended March 31, 1997 1996 Decrease
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Millions of dollars)
Total margin $3.4 $5.2 $(1.8) (34.6)%
Operating income $1.6 $4.8 $(3.2) (66.7)%
- --------------------------------------------------------------------------
</TABLE>
ENERGY MARKETING. Total margin and operating income were lower in the 1997
twelve-month period compared with the 1996 twelve-month period, notwithstanding
an increase in billed volumes, principally due to lower average unit margins.
The lower unit margins reflect in large part the warmer weather's effects on
natural gas prices and the value of pipeline capacity.
CORPORATE GENERAL AND OTHER
Operating loss of corporate general and other, net, was significantly lower in
the 1997 twelve-month period reflecting lower UGI corporate expenses, due in
large part to adjustments of incentive compensation accruals in September 1996,
and higher interest income.
INTEREST EXPENSE AND INCOME TAXES
Interest expense increased to $82.2 million in the 1997 twelve-month period from
$77.4 million in the 1996 twelve-month period principally as a result of higher
levels of debt outstanding under the Partnership's Bank Credit facilities. The
Company's effective income tax rate in the 1997 twelve-month period was 42.9%
compared with 54.9% in the same period last year. As a result of a significant
increase in consolidated propane pre-tax income, the impact of nondeductible
-22-
<PAGE> 25
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
amortization expense on the consolidated propane effective tax rate was less in
the 1997 twelve-month period than in the prior-year period.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Company's consolidated debt-to-total-capitalization ratio was 55.9% at March
31, 1997 compared to a ratio of 57.5% at September 30, 1996. The decrease in the
ratio is principally a result of an increase in retained earnings.
Effective October 28, 1996, the Operating Partnership has a revolving credit
agreement with the General Partner under which it may borrow up to $20 million
to fund working capital, capital expenditures, and interest and distribution
payments. This agreement is coterminous with, and generally comparable to, the
Operating Partnership's Revolving Credit Facility. Borrowings under the General
Partner Facility are unsecured and subordinated to all senior debt of the
Partnership. Interest rates on borrowings are based upon one-month offshore
interbank borrowing rates. Facility fees are determined in the same manner as
fees under the Revolving Credit Facility. UGI has agreed to contribute on an as
needed basis through its subsidiaries up to $20 million to the General Partner
to fund such borrowings. Also effective October 28, 1996, the Operating
Partnership's Bank Credit Agreement was amended to include a revolving $15
million sublimit under its Special Purpose Facility which can be used to fund
working capital, capital expenditures, and interest and distribution payments.
This sublimit is scheduled to expire April 12, 1998. At March 31, 1997, there
were no borrowings under the General Partner Facility or the sublimit under the
Special Purpose Facility.
During the six months ended March 31, 1997, the Partnership declared and paid
the MQD on all units and the general partner interests for the quarters ended
September 30, 1996 and December 31, 1996 totaling $46.9 million, $19.4 million
of which was paid to public unitholders and $27.5 million to the Company. The
Partnership's MQD for the quarter ended March 31, 1997 will be made on May 18,
1997 to holders of record on May 9, 1997.
On April 29, 1997, the Company's Board of Directors increased the quarterly
dividend on the Common Stock to 36 cents a share from 35.5 cents a share,
effective for the dividend payable July 1, 1997.
CASH FLOWS
Cash and cash equivalents totaled $85.9 million at March 31, 1997 compared with
$74.0 million at September 30, 1996. Included in these amounts are cash and cash
equivalents at UGI of $27.0 million and $51.4 million, respectively. In
addition, at March 31, 1997 and September 30, 1996, UGI also had
-23-
<PAGE> 26
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
short-term investments of $67.8 million and $23.1 million, respectively. 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 and are typically at their lowest levels during the first and fourth
fiscal quarters. Accordingly, cash flows from operations during the six months
ended March 31, 1997 are not necessarily indicative of the cash flows to be
expected for a full year.
OPERATING ACTIVITIES. Cash flows from operating activities during the six months
ended March 31, 1997 totaled $110.0 million compared with $73.8 million in the
comparable prior-year period. Cash flows from operations before changes in
operating working capital increased to $141.0 million in the six months ended
March 31, 1997 from $129.5 million in the prior-year period. The increase
principally reflects a significant improvement in the Partnership's operating
performance. Changes in operating working capital during the six months ended
March 31, 1997 required $31.0 million of operating cash flow principally from a
$107.0 million seasonal increase in customer accounts receivable and accrued
utility revenues and a $13.4 million decrease in accounts payable partially
offset by a $56.8 million decrease in inventories; $13.9 million in purchased
gas and power cost overcollections; and $18.7 million in cash from changes in
other working capital accounts. Changes in operating working capital during the
six months ended March 31, 1996 required $55.7 million of operating cash flow.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $31.8 million in the six months ended March 31, 1997 compared with $31.6
million in the same period in 1996. The increase reflects higher Gas Utility
expenditures offset by slightly lower Partnership capital expenditures. During
the six months ended March 31, 1997, the Company increased its balance of
short-term investments by $44.6 million compared with $12.0 million in the
prior-year period. Net proceeds from disposals of assets increased $6.1 million
in the six months ended March 31, 1997 due in large part to the sale of the
Partnership's interest in Atlantic Energy.
FINANCING ACTIVITIES. During the six months ended March 31, 1997, the Company
paid cash dividends on Common Stock of $23.5 million compared with $23.1 million
of cash dividends in the prior-year period. Also during each of the six-month
periods ended March 31, 1997 and 1996, the Partnership paid distributions of
$19.4 million to public unitholders (and $27.5 million to the General Partner)
representing the MQD on all limited partner units and the general partner
interests.
During the six months ended March 31, 1997, the Partnership made $15 million of
net repayments under its Revolving Credit Facility. The maximum amount of
seasonal borrowings under the Partnership's working capital facilities during
the six months ended March 31, 1997 was $73 million compared with $25 million of
such borrowings during the six months ended March 31, 1996. The Partnership's
seasonal borrowing requirements in the prior-year period were lower due to
significant cash balances at the beginning of such period. During the six months
ended March 31, 1997, UGI Utilities borrowed $44.5 million under its revolving
credit agreements compared with net repayments
-24-
<PAGE> 27
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
of $16.5 million in the prior-year period. UGI Utilities currently expects to
reduce its bank loans outstanding through the issuance of debt under its
Medium-Term Note program.
During the six months ended March 31, 1997, the Company issued $7.7 million of
long-term debt including $7 million under the Partnership's Acquisition Facility
relating to acquisitions made prior to fiscal 1997. During the comparable
prior-year period, the Company issued $34.1 million of long-term debt including
UGI Utilities' issuance of $20 million of notes under its Medium-Term Note
program and borrowings of $5 million under the Partnership's Acquisition
Facility and $9 million under its Special Purpose Facility. During the six
months ended March 31, 1997, the Company repaid $20.3 million of long-term debt
which includes UGI Utilities' repayment of $8.4 million of its 7.85% Series
First Mortgage Bonds and $10.0 million of its 8.70% Notes. In the prior-year
six-month period, the Company made long-term debt repayments of $50.8 million
which includes UGI Utilities' redemption of $45.9 million of its 9% Series and
9% Series B First Mortgage Bonds at a redemption price of 104% of the principal
amount outstanding.
ELECTRICITY GENERATION CUSTOMER CHOICE AND COMPETITION ACT
On January 1, 1997, the Customer Choice Act became effective. The Customer
Choice Act permits all Pennsylvania retail electric customers to choose their
electric generation supplier. One-third of the peak load of each customer class
of an electric utility will have the opportunity for direct access to generation
suppliers by January 1, 1999, two-thirds of the peak load of each customer class
by January 1, 2000, and all customers will have direct access by January 1,
2001, subject to certain exceptions.
The Customer Choice Act establishes rate caps that are designed to prevent a
customer's total electric service costs from increasing above levels existing as
of January 1, 1997 during the transition to full competition. The Pennsylvania
Public Utility Commission (PUC) may grant exceptions to the rate caps in limited
situations where a utility's costs have increased above current levels due to
circumstances beyond its control. Under the Customer Choice Act, Electric
Utility will continue to be the only regulated electric utility having the
right, granted by the PUC or by law, to transmit and distribute electric energy
in its service territory. The Customer Choice Act requires all electric
utilities to file restructuring plans with the PUC which, among other things,
include unbundled prices for electric generation, transmission and distribution
and a proposed competitive transition charge (CTC) for the recovery of stranded
costs. Stranded costs are defined as electric generation-related costs that
traditionally would be recoverable in a regulated environment but may not be
recoverable in a competitive electric generation market. The PUC has directed
Electric Utility to file its restructuring plan by August 1, 1997. The Customer
Choice Act also requires all electric utilities to submit proposed Retail Access
Pilot Programs (Pilot Programs) with the PUC. The PUC may order electric
utilities to begin such programs as early as April 1, 1997. Such pilot programs
shall be available to approximately 5
-25-
<PAGE> 28
UGI CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
percent of the utility's peak load for each customer class. Electric Utility
filed its proposed Pilot Program with the PUC on April 1, 1997 to be effective
for a one-year period beginning January 1, 1998.
As permitted by the Customer Choice Act, on February 28, 1997, Electric Utility
filed with the PUC Supplement No. 50 to its Electric Service Tariff to roll the
current ECR rate of 1.058 cents per kilowatt-hour into its base rates. On April
24, 1997, the PUC conditionally approved Electric Utility's Supplement No. 50
but reserved final consideration of its reasonableness and appropriateness for
Electric Utility's Customer Choice Act restructuring proceeding.
Based upon a current evaluation of the various factors and conditions affecting
future cost recovery, the Company does not expect the Customer Choice Act to
have a material adverse effect on its financial condition or results of
operations. The Company will continue to monitor regulatory proceedings in this
area.
On March 27, 1997, proposed customer choice legislation was introduced in the
Pennsylvania General Assembly that would, among other things, extend the
availability of gas transportation service to residential and small commercial
customers of local gas distribution companies. It would permit all customers of
natural gas distribution utilities to transport their natural gas supplies
through the distribution systems of Pennsylvania gas utilities by April 1, 1999
and would also require Pennsylvania gas utilities to exit the merchant function
of selling natural gas. Public hearings on the proposed legislation are
scheduled to commence in May 1997. The Company will continue to monitor
developments with regard to the proposed legislation.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 25, 1997, the Annual Meeting of Shareholders of UGI was
held. The shareholders reelected the nine nominees from the existing Board of
Directors to another term, approved two new compensation plans, the UGI
Corporation Directors' Equity Compensation Plan and the UGI Corporation 1997
Stock Option and Dividend Equivalent Plan, and ratified the appointment of
Coopers & Lybrand L.L.P. as independent public accountants. No other matters
were considered at the meeting.
The number of votes cast for and withheld from election of each nominee
is set forth below. There were no votes against, abstentions or broker non-votes
in the election of directors.
-26-
<PAGE> 29
UGI CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Election of Directors:
For Withheld
--- --------
<S> <C> <C>
James W. Stratton 28,341,206 689,127
Robert C. Forney 28,323,173 707,160
David I. J. Wang 28,342,602 687,731
Richard C. Gozon 28,351,667 678,666
Cyrus H. Holley 28,355,147 675,186
Quentin I. Smith, Jr. 28,314,737 715,596
Stephen D. Ban 28,358,478 671,855
Anne Pol 28,353,977 676,356
Lon R. Greenberg 28,331,559 698,774
</TABLE>
The number of votes cast for and against, and the number of abstentions
in the approval of the UGI Corporation Directors' Equity Compensation Plan is as
follows: For, 26,820,038; Against, 1,407,154; Abstain, 803,141. There were no
broker non-votes.
The number of votes cast for and against, and the number of abstentions
in the approval of the UGI Corporation 1997 Stock Option and Dividend Equivalent
Plan is as follows: For, 25,334,831; Against, 1,326,263; Abstain, 2,369,239.
There were no broker non-votes. The number of votes cast for and against, and
the number of abstentions in the ratification of the appointment of Coopers &
Lybrand L.L.P. is as follows: For, 28,758,319; Against, 134,964; Abstain,
137,050. There were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
10.1 UGI Corporation Directors' Equity Compensation Plan
10.2 UGI Corporation 1997 Stock Option and Dividend
Equivalent Plan
11 Statement re: computation of per share earnings
27 Financial Data Schedule
(b) The Company did not file any Current Reports on Form 8-K
during the fiscal quarter ended March 31, 1997.
-27-
<PAGE> 30
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: May 14, 1997 By: C.L. Ladner
- ------------------- ------------------------------------------------
C. L. Ladner, Senior Vice President - Finance
Date: May 14, 1997 By: M. J. Cuzzolina
- ------------------- ------------------------------------------------
M. J. Cuzzolina, Vice President - Accounting and
Financial Control (Principal Accounting Officer)
-28-
<PAGE> 31
UGI CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
10.1 UGI Corporation Directors' Equity Compensation Plan
10.2 UGI Corporation 1997 Stock Option and Dividend Equivalent Plan
11 Statement re: computation of per share earnings
27 Financial Data Schedule
<PAGE> 1
ANNEX A
UGI CORPORATION
DIRECTORS' EQUITY COMPENSATION PLAN
1. PURPOSE
The purpose of the UGI Corporation Directors' Equity Compensation Plan is to
provide a means whereby UGI Corporation (the "Company") may, through the grant
of common stock of the Company ("Common Stock") or deferred units ("Units")
relating to such stock, offer a reward and an incentive to the members of the
board of directors of the Company, motivate such directors to exert their best
efforts on behalf of the Company and further to align the economic interest of
such individuals with those of the Company's shareholders. This Plan is intended
to constitute, in part, a non-qualified deferred compensation plan.
2. DEFINITIONS
Whenever used in this Plan, the following terms will have the respective
meanings set forth below:
2.01 "Account" means the Company's record established pursuant to Section 5
which reflects the number of Units and the amount of Dividend Equivalents
standing to the credit of a Participant under the Plan.
2.02 "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
2.03 "Beneficial Owner" means that a person shall be deemed the "Beneficial
Owner" of any securities: (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 (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 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.
A-1
<PAGE> 2
2.04 "Beneficiary" means the person(s) designated by a Participant to receive
any benefits payable under this Plan subsequent to the Participant's death. The
Committee shall provide a form for this purpose. In the event a Participant has
not filed a Beneficiary designation with the Company, the Beneficiary shall be
the Participant's estate.
2.05 "Board" means the Board of Directors of the Company.
2.06 "Change of Control" of the Company means (i) any person (except the
Director, 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 (A) the then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (B) 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 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 Change of
Control provisions of this Plan; or (ii) 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 shareholders 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 (iii) 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 Committee in office immediately
prior to such Business Combination determine at the time of such Business
Combination that the circumstances do not warrant the implementation of the
Change of Control provisions of this Plan; or (iv) (A) Consummation of a
complete liquidation or dissolution of the Company or (B) 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
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 Change of Control provisions of this Plan.
A-2
<PAGE> 3
2.07 "Committee" means the Compensation and Management Development Committee
of the Board and any successor thereto.
2.08 "Common Stock" means the common stock of the Company.
2.09 "Company" means UGI Corporation and any successor thereto.
2.10 "Director" means a member of the Board who is not an employee of the
Company or any of its Affiliates.
2.11 "Dividend Equivalent" means an amount determined by multiplying the
number of Units credited to a Participant's Account by the per share cash
dividend, or the per share fair market value (as determined by the Committee) of
any dividend in consideration other than cash, paid by the Company on its stock
on a dividend payment date.
2.12 "Effective Date" means January 1, 1997.
2.13 "Exchange Act" means Securities Exchange Act of 1934, as amended.
2.14 "Fair Market Value" of Common Stock means the average, rounded to the
next highest one-eighth of a point (.125), of the highest and lowest sales
prices thereof on the New York Stock Exchange on the day on which Fair Market
Value is being determined, as reported on the Composite Tape for transactions on
the New York Stock Exchange. In the event that there are no Common Stock
transactions on the New York Stock Exchange on such day, the Fair Market Value
will be determined as of the immediately preceding day on which there were
Common Stock transactions on that exchange.
2.15 "Participant" means any Director who is eligible to participate in the
Plan under Section 4. In the event of the death or incompetency of a
Participant, the term shall mean his personal representative or guardian. An
individual shall remain a Participant until that individual has received full
distribution of any amount credited to the Participant's Account.
2.16 "Plan" means the UGI Corporation Directors' Equity Compensation Plan as
the same is set forth herein, and as it may be amended from time to time.
2.17 "Plan Year" means the calendar year.
2.18 "Separates from Service" means the Director's termination of service as a
member of the Board for any reason other than death. Except as otherwise
provided herein, a Separation from Service shall be deemed to have occurred on
the last day of the month during which the Director's service to the Company
ceases and shall be determined without reference to any compensation
continuation arrangement that may be applicable.
2.19 "Unit" means a single unit granted to a Participant which represents a
phantom interest equivalent to one share of Common Stock.
2.20 "Unit Value" means, at any time, unless otherwise specified in the Plan,
the value of each Unit issued under the Plan, which value shall be equal to the
Fair Market Value of the Common Stock on such date.
3. ADMINISTRATION
The Plan shall be administered by the Committee which shall have full power
and authority to interpret the Plan, to prescribe, amend and rescind any rules,
forms and procedures as it deems necessary or appropriate for the proper
administration of the Plan and to make any other
A-3
<PAGE> 4
determinations, including factual determinations, and take such other actions as
it deems necessary or advisable in carrying out its duties under the Plan. All
decisions and determinations by the Committee shall be final and binding on the
Company, Participants, Directors, Beneficiaries and any other persons having or
claiming an interest hereunder. Any other provisions of the Plan
notwithstanding, the Board may perform any function of the Committee under the
Plan, including without limitation for the purpose of ensuring that transactions
under the Plan by Participants who are subject to Section 16 of the Exchange Act
in respect of the Company are exempt under Rule 16b-3. In any case in which the
Board is performing a function of the Committee under the Plan, each reference
to the Committee herein shall be deemed to refer to the Board (unless the
context shall otherwise require).
4. PARTICIPATION
Each Director of the Company shall become a Participant of the Plan on the
later of (i) the Effective Date or (ii) the date such individual first becomes a
Director.
5. AWARD OF UNITS
5.01 Initial Award of Units. On the Effective Date, each Director who is a
Participant on January 1, 1997 shall be awarded the number of Units equal to the
present value of benefits accrued by that Director through December 31, 1996
under the UGI Corporation Retirement Plan for Outside Directors, as determined
by an actuary appointed by the Committee. The value of each Unit to be credited
to a Participant's Account pursuant to this section shall be equal to the
average of the closing sales prices for the Common Stock as reported on the New
York Stock Exchange Composite Tape for each trading day in the period October 1,
1996 through December 31, 1996.
5.02 Annual Award of Units. On the first day of each Plan Year, each
Participant shall receive an award of 630 Units. Such awarded Units shall be
credited to each Participant's Account as specified in Section 5.04 below. Any
Participant who was not a Participant on the first day of the Plan Year shall
receive, on the date such individual becomes a Participant, a pro-rata share of
the annual award of Units determined based on the number of calendar quarters
during the Plan Year that such Participant is expected to serve as a Director. A
Director will be deemed to serve the entire quarter during which he is a
Director at least one day.
5.03 Dividend Equivalents
(a) Dividend Equivalent to be Credited. From the date of grant of each Unit
to a Participant until the Participant's Account has been fully distributed,
the Company shall credit to each Participant's Account on each record date for
the payment of a dividend by the Company on its Common Stock, an amount equal
to the Dividend Equivalent associated with the Units in the Account.
(b) Conversion to Units. On the last day of each Plan Year, the amount of
the Dividend Equivalents credited to the Participant's Account during that
Plan Year shall be converted to a number of Units, based on the Unit Value on
that day. Notwithstanding the foregoing, in the event of a Change of Control
or in the event the Participant dies or Separates from Service prior to the
last day of the Plan Year, as soon as practicable following such event and in
no event later than the date on which Units are redeemed in accordance with
Section 6, the Company shall convert the amount of the Dividend Equivalents
credited to the Participant's Account as of the date of the Change of Control,
death or Separation from Service (the "Conversion Date") to the number of
Units based on the Unit Value on the Conversion Date.
5.04 Accounts. The Company shall keep records to reflect the number of Units
and Dividend Equivalents credited to each Participant hereunder; provided,
however, that no Participant or any other person shall under any circumstances
acquire any property interest in any specific assets of the
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Company. Fractional Units shall accumulate in the Participant's Account and
shall be added to fractional Units held in such Account to create whole Units.
Nothing contained in this Plan and no action taken pursuant hereto shall create
or be construed to create a fiduciary relationship between the Company and any
Participant or any other person. To the extent that any person acquires a right
to receive payment from the Company hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company.
6. EVENTS REQUIRING REDEMPTION OF UNITS
The Company shall redeem Units credited to a Participant's Account only at the
times and in the manner prescribed by the further terms of this Section 6. To
determine the total amount to be paid, all redemptions shall be made by
providing a number of shares of Common Stock equal to the number of Units being
redeemed; provided, however, that any fractional Units credited to a
Participant's Account shall be paid in cash in an amount equal to the Unit Value
of such fractional Unit.
6.01 Death. In the event a Participant dies, the Company shall redeem all of
the Units then credited to the Participant's Account. Any such redemption shall
be paid to the Participant's Beneficiary in the form of Common Stock.
6.02 Separation from Service. In the event a Participant Separates from
Service, the Company shall redeem all of the Units then credited to the
Participant's Account as soon as practicable following such Separation from
Service. Any such redemption shall be paid in the form of Common Stock. A
Participant may elect to defer receipt of such payment until such Participant
attains a specified age, not to exceed age sixty-five (65). In addition, a
Participant may elect to receive such payment in (i) a single distribution or
(ii) annual or quarterly installments over a period not to exceed ten (10)
years. Both such elections made hereunder must be made no later than September
30th of the calendar year preceding the year of Separation from Service.
Dividend Equivalents will be credited to such Participant's Account in
accordance with Section 5 until the full amount of the Participant's Account has
been distributed. Each installment payment shall be calculated by dividing the
Participant's total Account balance as of such payment date by the number of
payments remaining in the installment period.
6.03 Change of Control. Unless otherwise provided by the Committee, in the
event of a Change of Control of the Company, the Company shall redeem all of the
Units then credited to the Participant's Account. Any such redemption shall be
made in the form of cash. The amount paid shall equal the product of the number
of Units being redeemed multiplied by the then Unit Value. A Participant may
elect to defer receipt of such payment until such Participant attains a
specified age, not to exceed age sixty-five (65). In addition, a Participant may
elect to receive such payment in (i) a single distribution or (ii) annual or
quarterly installments over a period not to exceed ten (10) years. Both such
elections made hereunder must be made no later than September 30th of the
calendar year preceding the year of the Change of Control.
7. RETAINER AWARDS
7.01 Annual Grants. The Committee is authorized, subject to limitations under
applicable law, to grant to any Participant awards of Common Stock in lieu of a
portion of their annual retainer. Unless otherwise determined by the Committee,
the number of shares of Common Stock to be paid to Directors annually under this
Section 7.01 will be equal to (i) the amount by which the annual retainer at the
rates then in effect exceeds $18,500 divided by (ii) the Fair Market Value of
the Common Stock as of the first day of the Plan Year. The shares of Common
Stock to be paid pursuant to this section will become due on the date of the
first meeting of the Board of Directors during the Plan Year. No fractional
shares of Common Stock will be granted; instead, the amount remaining will be
paid to the Participant in cash. As promptly as practicable, the Company will
issue to the Participant shares of Common Stock registered in the name of the
Participant (or, if directed by the Participant, in joint
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names of the Participant and his or her spouse). Any Participant who commences
service during the Plan Year shall receive a pro-rata share of the annual
retainer, the same proportion of which will be paid in Common Stock as was paid
to a Director serving a full Plan Year, determined based on the number of
calendar quarters during the Plan Year that the Participant is expected to serve
as a Director.
7.02 Deferral of Retainers and Meeting Attendance Fees. A Participant may
elect, no later than the end of the calendar year preceding the calendar year of
payment to convert all or any part of (i) the cash portion of the annual
retainer, (ii) Committee Chair annual retainer, and (iii) meeting attendance
fees, into Units under this Plan, payable in accordance with the terms of the
Plan. Dividend Equivalents will be credited and Units will be awarded to such
Participant's Account in accordance with the provisions of Section 5.03 during
such deferral period.
8. MISCELLANEOUS
8.01 Transferability. No Unit awarded under this Plan shall be transferred,
assigned, pledged or encumbered by the Participant, and a Unit may be redeemed
during the lifetime of a Participant only from such Participant.
8.02 No Rights as Shareholder. No Participant shall have any rights as a
shareholder of the Company, including the right to any cash dividends, or the
right to vote, as a result of the grant to the Participant, or the Participant's
holding of, any Units.
8.03 Adjustment Upon Acquisitions, Dispositions or other Events not in the
Ordinary Course of Business. Notwithstanding anything herein to the contrary, if
the Company's financial performance is affected by any event that is of a
non-recurring nature including an acquisition or disposition of the assets or
stock of a business, the Committee, in its sole discretion, may make such
adjustments in the number of Units or the Unit Value of each Unit for the then
current Plan Year as it shall determine to be equitable and appropriate in order
to make the value of each Unit, as nearly as may be practicable, equivalent to
the value of the Unit immediately prior to such event.
8.04 No Rights to Service. Nothing in this Plan, and no action taken
pursuant hereto, shall affect the Participant's term of service as a Director.
8.05 Notices. Any notice hereunder to be given to the Company shall be in
writing and shall be delivered in person to the Secretary of the Company, or
shall be sent by registered mail, return receipt requested, to the Secretary of
the Company at the Company's executive offices, and any notice hereunder to be
given to the Participant shall be in writing and shall be delivered in person to
the Participant, or shall be sent by registered mail, return receipt requested,
to the Participant at his last address as shown in the employment records of the
Company. Any notice duly mailed in accordance with the preceding sentence shall
be deemed given on the date postmarked.
8.06 Termination and Amendment of the Plan/Modification of Units. The Plan may
be terminated, modified or amended by the Committee at any time, except with
respect to any Units then outstanding under the Plan; provided, however, that
the Committee may accelerate the redemption of any Units then outstanding as if
a redemption were then being made under Section 6.
8.07 Miscellaneous.
(a) If the Company shall find that any person to whom any payment is payable
under this Plan is unable to care for his affairs because of illness or
accident, or is a minor, any payment due (unless a prior claim therefor shall
have been made by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, a parent, or a brother or
sister, or to any person deemed by the Company to have incurred expense for
such person otherwise entitled
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to payment, in such manner and proportions as the Company may determine. Any
such payment shall be a complete discharge of the liabilities of the Company
under this Plan.
(b) This Plan shall be binding upon and inure to the benefit of the Company,
its successors and assigns and the Participant and his heirs, executors,
administrators and legal representatives.
(c) This Plan shall be construed in accordance with, and governed by, the
law of the Commonwealth of Pennsylvania.
8.08 Shareholder Approval. This Plan shall be effective on the Effective
Date, subject to the approval by a majority of the shareholders of the Company
at the next annual meeting following the Effective Date.
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<PAGE> 1
ANNEX B
UGI CORPORATION
1997 STOCK OPTION AND DIVIDEND EQUIVALENT PLAN
1. PURPOSE AND DESIGN
The purpose of this Plan is to assist the Company in securing and retaining
key corporate executives of outstanding ability, who are in a position to
significantly participate in the development and implementation of the Company's
strategic plans and thereby contribute materially to the long-term growth,
development and profitability of the Company, by affording them an opportunity
to purchase its Stock under options. The Plan is designed to align directly
long-term executive compensation with tangible, direct and identifiable benefits
realized by the Company's shareholders.
2. DEFINITIONS
Whenever used in this Plan, the following terms will have the respective
meanings set forth below:
2.01 "Board" means UGI's Board of Directors as constituted from time to time,
provided that whenever in this Plan Board approval is required, such approval
shall require the affirmative vote of a majority of members of the Board who are
not participants in the Plan.
2.02 "Committee" means the Compensation and Management Development Committee
of the Board or its successor.
2.03 "Company" means UGI Corporation, a Pennsylvania corporation, any
successor thereto and any Subsidiary which adopts this plan, with the approval
of the Committee, by executing a participation and joinder agreement.
2.04 "Comparison Group" means the group determined by the Committee (no later
than ninety (90) days after the commencement of the Performance Period)
consisting of the Company and such other companies deemed by the Committee (in
its sole discretion) to be reasonably comparable to the Company and set forth in
Exhibit 1.
2.05 "Date of Grant" means the date the Committee makes an Option grant.
2.06 "Dividend Equivalent" means an amount determined by multiplying the
number of shares of Stock subject to an Option on the Date of Grant (whether or
not the Option is ever exercised with respect to any or all shares of Stock
subject thereto) by the per-share cash dividend, or the per-share fair market
value (as determined by the Committee) of any dividend in consideration other
than cash, paid by the Company on its Stock on a dividend payment date.
2.07 "Employee" means a regular full-time salaried employee (including
officers and directors who are also employees) of the Company.
2.08 "Fair Market Value" of Stock means the average, rounded to the next
highest one-eighth of a point (.125), of the highest and lowest sales prices
thereof on the New York Stock Exchange on the day on which Fair Market Value is
being determined, as reported on the Composite Tape for transactions on the New
York Stock Exchange; provided, however, in the case of a cashless exercise
pursuant to Section 7.4(iv), the Fair Market Value shall be the actual sale
price of the shares issued upon exercise of the Option. In the event that there
are no Stock transactions on the New York Stock Exchange on such day, the Fair
Market Value will be determined as of the immediately preceding day on which
there were Stock transactions on that exchange.
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2.09 "Option" means the right to purchase Stock pursuant to the relevant
provisions of this Plan at the Option Price for a specified period of time, not
to exceed ten years from the Date of Grant, which period of time shall be
subject to earlier termination prior to exercise in accordance with Sections 11,
12 and 13 of this Plan.
2.10 "Option Price" means an amount per share of Stock purchasable under an
Option designated by the Committee on the Date of Grant of an Option to be
payable upon exercise of such Option. The Option Price shall not be less than
100% of the Fair Market Value of the Stock determined on the Date of Grant.
2.11 "Participant" means an Employee designated by the Committee to
participate in the Plan; provided, however, that no Employee who is not then a
Participant in the Plan may be designated by the Committee to participate in the
Plan at any time during the last full year of a Performance Period.
2.12 "Performance Period" means a period selected by the Committee over which
the total return realizable by a shareholder of the Company on a share of Stock
is compared to that realizable by shareholders of companies in the Comparison
Group in accordance with Section 8.2 of the Plan in order to determine whether
Dividend Equivalents associated with an Option will be payable to a Participant.
2.13 "Stock" means the Common Stock of UGI or such other securities of UGI as
may be substituted for Stock or such other securities pursuant to Section 14.
2.14 "Subsidiary" means any corporation or partnership, at least 20% of the
outstanding voting stock, voting power or partnership interest of which is owned
respectively, directly or indirectly, by the Company.
2.15 "Termination without Cause" means termination for the convenience of the
Company for any reason other than (i) misappropriation of funds, (ii) habitual
insobriety or substance abuse, (iii) conviction of a crime involving moral
turpitude, or (iv) 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.
2.16 "UGI" means UGI Corporation, a Pennsylvania corporation or any
successor thereto.
3. NUMBER AND SOURCE OF SHARES AVAILABLE FOR OPTIONS--MAXIMUM ALLOTMENT
The number of shares of Stock which may be made the subject of Options under
this Plan at any one time may not exceed 1,500,000 in the aggregate, including
shares acquired by Participants through exercise of Options under this Plan,
subject, however, to the adjustment provisions of Section 14 below. The maximum
number of shares of Stock which may be the subject of grants to any one
individual in any calendar year shall be 300,000. If any Option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares subject to the Option will again be available for the purposes of the
Plan. Shares which are the subject of Options may be previously issued and
outstanding shares of the Stock reacquired by the Company and held in its
treasury, or may be authorized but unissued shares of Stock, or may be partly of
each.
4. DURATION OF THE PLAN
The Plan will remain in effect until all Stock subject to it has been
purchased pursuant to the exercise of Options or all such Options have
terminated without exercise. Notwithstanding the foregoing, no Option may be
granted after December 31, 2006.
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5. ADMINISTRATION
The Plan will be administered by the Committee. Subject to the express
provisions of the Plan, the Committee will have authority, in its complete
discretion, to determine the Employees to whom, and the time or times at which,
Options will be granted, the number of shares to be subject to each Option, the
Option Price to be paid for the shares upon the exercise of each Option, and the
period within which each Option may be exercised. In making such determinations,
the Committee may take into account the nature of the services rendered by an
Employee, the present and potential contributions of the Employee to the
Company's success and such other factors as the Committee in its discretion
deems relevant. Subject to the express provisions of the Plan, the Committee
will also have authority to construe and interpret the Plan, to prescribe, amend
and rescind rules and regulations relating to it, to determine the terms and
provisions of the respective stock option agreements required by Section 7.2 of
the Plan (which need not be identical), and to make all other determinations
(including factual determinations) necessary or advisable for the orderly
administration of the Plan. It is the intent of the Company that the Plan should
comply in all applicable respects with Rule 16b-3 under the Exchange Act so that
transactions relating to any Option and Dividend Equivalents granted to a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3. Accordingly, if any provision of the Plan or any agreement
relating to an Option does not comply with the requirements of Rule 16b-3 as
then applicable to any such Participant, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements with
respect to such Participant. Any other provision of the Plan notwithstanding,
the Board may perform any function of the Committee under the Plan, including
without limitation for the purpose of ensuring that transactions under the Plan
by Participants who are subject to Section 16 of the Exchange Act in respect of
the Company are exempt under Rule 16b-3. In any case in which the Board is
performing a function of the Committee under the Plan, each reference to the
Committee herein shall be deemed to refer to the Board (unless the context shall
otherwise require).
6. ELIGIBILITY
Options may be granted only to Employees (including directors who are also
Employees of the Company) who, in the sole judgment of the Committee, are
designated by the Committee as individuals who are in a position to
significantly participate in the development and implementation of the Company's
strategic plans and thereby contribute materially to the continued growth and
development of the Company and to its future financial success.
7. OPTIONS
7.1 Grant of Options. Subject to the provisions of Sections 2.11 and 3,
Options may be granted to Participants at any time and from time to time as may
be determined by the Committee. The Committee will have complete discretion in
determining the number of Options granted to each Participant and the number of
shares of Stock subject to such Options.
7.2 Option Agreement. As determined by the Committee on the Date of Grant,
each Option will be evidenced by a stock option agreement (substantially in the
form included in Exhibit 2 attached hereto) that shall, among other things,
specify the Date of Grant, the Option Price, the duration of the Option and the
number of shares of Stock to which the Option pertains.
7.3 Exercise and Vesting.
(a) Except as otherwise specified by the Committee, an Option shall be fully
and immediately exercisable on the Date of Grant. Notwithstanding the
foregoing, in the event that any such Options are not by their terms
immediately exercisable, the Committee may accelerate the exercisability of
any or all outstanding Options at any time for any reason. No Option shall be
exercisable on or after the tenth anniversary of the Date of Grant.
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(b) Except as otherwise specified by the Committee, in the event that a
Participant holding an Option ceases to be an Employee, the Option held by
such Participant shall be exercisable only with respect to that number of
shares of Stock with respect to which it is already exercisable on the date
such Participant ceases to be an Employee. However, if a Participant holding
an Option ceases to be an Employee by reason of (i) a retirement under the
Company's retirement plan, (ii) Termination without Cause, (iii) disability,
or (iv) death, the Option held by any such Participant shall thereafter become
immediately exercisable with respect to the total number of shares of Stock
available under such Option and shall remain exercisable until the earlier of
the expiration date of the Option or the expiration of the thirteen (13) month
period following the date of such cessation of employment.
(c) Notwithstanding the foregoing, in the event of any merger or
consolidation of any other corporation with or into UGI, or the sale of all or
substantially all of the assets of UGI or an offer to purchase made by a party
other than UGI to all shareholders of UGI for all or any substantial portion
of the outstanding Stock, a Participant shall be permitted to exercise all
outstanding Options (to the extent not otherwise exercisable by their terms)
prior to the effective date of any such merger, consolidation or sale or the
expiration of any such offer to purchase, unless otherwise determined by the
Committee, no later than thirty (30) days prior to the effective date of such
transaction or the expiration of such offer.
(d) Notwithstanding anything contained in this Section 7.3 with respect to
the number of shares of Stock subject to an Option with respect to which such
Option is or is to become exercisable, no Option, to the extent that it has
not previously been exercised, shall be exercisable after it has terminated,
including without limitation, after any termination of such Option pursuant to
Sections 11, 12 and 13 hereof.
7.4 Payment. The Option Price upon exercise of any Option shall be payable to
the Company in full (i) in cash or its equivalent, (ii) by tendering shares of
previously acquired Stock already beneficially owned by the Participant for more
than one year and having a Fair Market Value at the time of exercise equal to
the total Option Price, (iii) by applying Dividend Equivalents payable to the
Participant in accordance with Section 8 of the Plan in an amount equal to the
total Option Price, (iv) by payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board, (v) by such
other method as the Committee may approve, or (vi) by a combination of (i),
(ii), (iii), (iv) and/or (v). The cash proceeds from such payment will be added
to the general funds of the Company and shall be used for its general corporate
purposes. Any shares of Stock tendered to UGI in payment of the Option Price
will be added by UGI to its Treasury Stock to be used for its general corporate
purposes.
8. DIVIDEND EQUIVALENTS
8.1 Amount of Dividend Equivalents Credited. From the Date of Grant of an
Option to a Participant (or, in the case of an Option granted after the date of
commencement of a Performance Period to a new Participant or to a Participant
with changed responsibilities, in which event, from such date not earlier than
the date of commencement of the Performance Period as is designated by the
Committee) until the earlier of (i) the end of the applicable Performance Period
or (ii) the date of disability, death or termination of employment for any
reason (including retirement), of a Participant, the Company shall keep records
for such Participant ("Account") and shall credit on each payment date for the
payment of a dividend made by UGI on its Stock an amount equal to the Dividend
Equivalent associated with such Option. Notwithstanding the foregoing, a
Participant may not accrue during any calendar year Dividend Equivalents in
excess of $1,000,000. Except as set forth in Section 8.5 below, no interest
shall be credited to any such Account.
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8.2 Payment of Credited Dividend Equivalents. The Committee will determine (no
later than ninety (90) days after the commencement of the Performance Period)
and set forth on Exhibit 1 measurable criteria pursuant to which the total
return realizable by a shareholder of the Company on a share of Stock over the
applicable Performance Period can be compared to that realizable over the same
Performance Period by shareholders of the Comparison Group. The extent to which
a Participant receives payment of the Dividend Equivalents associated with an
Option and recorded in his Account during any particular Performance Period
shall be determined by comparing (through use of the selected measurable
criteria) the aforementioned total return realizable by a shareholder of the
Company to that realizable by shareholders of the Comparison Group. Payments
shall be made after the end of the applicable Performance Period according to
the following table (with results falling between table values being
interpolated):
<TABLE>
<CAPTION>
PERCENT OF COMPANIES IN COMPARISON GROUP
HAVING TOTAL RETURN TO SHAREHOLDERS PERCENT OF DIVIDEND
LESS THAN THAT TO COMPANY'S SHAREHOLDERS EQUIVALENTS PAYABLE
---------------------------------------- -------------------
<S> <C>
100................................................. 200
75.................................................. 150
50.................................................. 75
less than 50........................................ 0
</TABLE>
8.3 Timing of Payment of Dividend Equivalents.
(a) Except as otherwise determined by the Committee, in the event of the (i)
termination of an Option prior to exercise pursuant to Sections 11, 12 or 13
hereof, or (ii) acceleration of the exercise date of an Option pursuant to
Section 7.3 hereof, in either case prior to the end of the applicable
Performance Period, no payments of Dividend Equivalents associated with any
Option shall be made (A) prior to the end of the applicable Performance Period
and (B) to any Participant whose employment by the Company terminates prior to
the end of the applicable Performance Period for any reason other than
retirement under the Company's retirement plan, death, disability or
Termination without Cause. As soon as practicable after the end of such
Performance Period, the Committee will certify and announce the results for
each Performance Period prior to any payment of Dividend Equivalents and
unless a Participant shall have made an election under Section 8.6 to defer
receipt of any portion of such amount, a Participant shall receive the
aggregate amount of Dividend Equivalents payable to him.
(b) Notwithstanding anything to the contrary in this Section 8.3, unless a
payment of Dividend Equivalents associated with an Option is being made upon
full exercise or termination of such Option, no Dividend Equivalents shall be
paid (either at the end of the applicable Performance Period or on a date such
Dividend Equivalents are scheduled to be paid pursuant to a deferral election)
if the average Fair Market Value of Stock for a period of thirty (30)
consecutive business days immediately preceding the end of the applicable
Performance Period or the date such deferred payment is scheduled to be made
(as the case may be) is less than the exercise price of the Option to which
such Dividend Equivalents were associated, and such payment shall instead be
made at the earlier of (i) such time as the average Fair Market Value of Stock
over a period of ninety (90) consecutive business days thereafter exceeds the
exercise price of such Option, or (ii) the termination or expiration date of
such Option.
8.4 Form of Payment for Dividend Equivalents. The Committee shall have the
sole discretion to determine whether the Company's obligation in respect of
payment of Dividend Equivalents shall be paid solely in credits to be applied
toward payment of the Option Price, solely in cash or partly in such credits and
partly in cash.
8.5 Interest on Dividend Equivalents. From a date which is thirty (30) days
after the end of the applicable Performance Period until the date that all
Dividend Equivalents associated with such
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Option and payable to a Participant are paid to such Participant, the Account
maintained by the Company in its books and records with respect to such Dividend
Equivalents shall be credited with interest at a market rate determined by the
Committee.
8.6 Deferral of Dividend Equivalents. A Participant shall have the right to
defer receipt of any Dividend Equivalent payments associated with an Option if
he shall elect to do so on or prior to December 31 of the year preceding the
beginning of the last full year of the applicable Performance Period (or such
other time as the Committee shall determine is appropriate to make such deferral
effective under the applicable requirements of federal tax laws). The terms and
conditions of any such deferral (including the period of time thereof) shall be
subject to approval by the Committee and all deferrals shall be made on a form
provided a Participant for this purpose.
9. WRITTEN NOTICE, ISSUANCE OF STOCK, SHAREHOLDER PRIVILEGES AND PARTIAL
EXERCISE
9.1 Written Notice. A Participant wishing to exercise an Option must give
written notice to the Company in the form and manner prescribed by the
Committee, indicating the date of award, the number of shares as to which the
Option is being exercised, and such other information as may be required by the
Committee. Full payment for the shares pursuant to the Option must be received
by the close of business on the day the Option is exercised. Except as provided
in Sections 11, 12 and 13, no Option may be exercised at any time unless the
Participant is then an Employee of the Company.
9.2 Issuance of Stock. As soon as practicable after the receipt of written
notice and payment, the Company will, without stock transfer taxes to the
Participant or to any other person entitled to exercise an Option pursuant to
this Plan, deliver to, or credit electronically on behalf of, the Participant,
the Participant's designee or such other person the requisite number of shares
of Stock.
9.3 Privileges of a Shareholder. A Participant or any other person entitled to
exercise an Option under this Plan will have no rights as a shareholder with
respect to any Stock covered by the Option until the due exercise of the Option
and issuance of such Stock.
9.4 Partial Exercise. An Option granted under this Plan may be exercised as to
any lesser number of shares than the full amount for which it could be
exercised. Such a partial exercise of an Option will not affect the right to
exercise the Option from time to time in accordance with this Plan as to the
remaining shares subject to the Option.
10. NON-TRANSFERABILITY OF OPTIONS
No Option, rights to Dividend Equivalents or other rights granted under the
Plan shall be transferable otherwise than by will or the laws of descent and
distribution, and an Option may be exercised, during the lifetime of the
Participant, only by the Participant. Notwithstanding the foregoing, the
Committee may provide that a Participant may transfer Options to family members
or other persons or entities according to such terms as the Committee may
determine; provided that the Participant receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.
11. TERMINATION OF EMPLOYMENT (OTHER THAN BY REASON OF DEATH OR DISABILITY)
Each Option, to the extent that it has not previously been exercised, will
terminate when the Participant holding such Option (while living) ceases to be
an Employee of the Company, unless such cessation of employment is (i) on
account of a Termination without Cause, or (ii) a retirement under the Company's
retirement plan, in either of which events the Option shall be fully and
immediately exercisable (to the extent not otherwise exercisable by its terms)
and will terminate upon the earlier of the expiration date of the Option or the
expiration of the thirteen (13) month period following the date
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of such cessation of employment. The Committee will have authority to determine
whether an authorized leave of absence or absence on military or governmental
service will constitute a termination of employment for the purposes of this
Plan. The Committee shall have sole discretion to determine the effect of any
change in the duties and responsibilities of a Participant while that
Participant continues to be an Employee of the Company on Options granted under
this Plan which are not then exercisable and on Dividend Equivalents not then
payable under Section 8.3 of the Plan.
12. DISABILITY
If a Participant is determined to be "disabled" (as defined under the
Company's long-term disability plan), the Option theretofore granted to such
Participant shall be fully and immediately exercisable (to the extent not
otherwise exercisable by its terms) at any time prior to the earlier of the
expiration date of the Option or the expiration of the thirteen (13) month
period following the date of such determination.
13. DEATH OF PARTICIPANT
In the event of the death of a Participant while employed by the Company, the
Option theretofore granted to such Participant shall be fully and immediately
exercisable (to the extent not otherwise exercisable by its terms) at any time
prior to the earlier of the expiration date of the Option or the expiration of
the thirteen (13) month period following the Participant's death. Death of a
Participant after such Participant has ceased to be employed by the Company will
not affect the otherwise applicable period for exercise of the Option determined
pursuant to Section 11 or 12. Such Option may be exercised by the estate of the
Participant or by any person to whom the Participant may have bequeathed the
Option or whom the Participant may have designated to exercise the same under
the Participant's last will, or by the Participant's personal representatives if
the Participant has died intestate.
14. ADJUSTMENT OF NUMBER AND PRICE OF SHARES, ETC.
Notwithstanding anything to the contrary in this Plan, in the event any
recapitalization, reorganization, merger, consolidation, spin-off, combination,
repurchase, exchange of shares or other securities of UGI, stock split or
reverse split, extraordinary dividend, liquidation, dissolution, significant
corporate transaction (whether relating to assets or stock) involving UGI, or
other extraordinary transaction or event affects Stock such that an adjustment
is determined by the Committee to be appropriate in order to prevent dilution or
enlargement of Participants' rights under the Plan, then the Committee may, in a
manner that is equitable, adjust (i) any or all of the number or kind of shares
of Stock reserved for issuance under the Plan, (ii) the maximum number of shares
of Stock which may be the subject of grants to any one individual in any
calendar year, (iii) the number or kind of shares of Stock to be subject to
Options thereafter granted under the Plan, (iv) the number and kind of shares of
Stock issuable upon exercise of outstanding Options, (v) the Option Price per
share thereof, and/or (vi) the terms and conditions applicable to Dividend
Equivalents, provided that the number of shares subject to any Option will
always be a whole number. Any such determination of adjustments by the Committee
will be conclusive for all purposes of the Plan and of each Option, whether a
stock option agreement with respect to a particular Option has been theretofore
or is thereafter executed.
15. LIMITATION OF RIGHTS
Nothing contained in this Plan shall be construed to give an Employee any
right to be granted an Option except as may be authorized in the discretion of
the Committee. The granting of an Option under this Plan shall not constitute or
be evidence of any agreement or understanding, expressed or
B-7
<PAGE> 8
implied, that the Company will employ a Participant for any specified period of
time, in any specific position or at any particular rate of remuneration.
16. AMENDMENT OR TERMINATION OF PLAN
Subject to Board approval, the Committee may at any time, and from time to
time, alter, amend, suspend or terminate this Plan without the consent of the
Company's shareholders or Participants, except that any such alteration,
amendment, suspension or termination shall be subject to the approval of the
Company's shareholders within one year after such Committee and Board action if
such shareholder approval is required by any federal or state law or regulation
or the rules of any stock exchange or automated quotation system on which the
Stock is then listed or quoted, or if the Committee in its discretion determines
that obtaining such shareholder approval is for any reason advisable. No
termination or amendment of this Plan may, without the consent of the
Participant to whom any Option has previously been granted, adversely affect the
rights of such Participant under such Option, including the Dividend Equivalents
associated with such Option. Notwithstanding the foregoing, the Committee may
make minor amendments to this Plan which do not materially affect the rights of
Participants or significantly increase the cost to the Company.
17. TAX WITHHOLDING
Upon exercise of any Option under this Plan, the Company will require the
recipient of the Stock to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements. However, to the extent
authorized by rules and regulations of the Committee, the Company may withhold
or receive Stock and make cash payments in respect thereof in satisfaction of a
recipient's tax obligations, including tax obligations in excess of mandatory
withholding requirements.
18. GOVERNMENTAL APPROVAL
Each Option will be subject to the requirement that if at any time the
listing, registration or qualification of the shares covered thereby upon any
securities exchange, or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with the granting of such Option or the purchase
of shares thereunder, no such Option may be exercised in whole or in part unless
and until such listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions not acceptable to the Board.
19. EFFECTIVE DATE OF PLAN
This Plan will become effective as of December 10, 1996, subject to
ratification by the Company's shareholders prior to December 10, 1997.
20. SUCCESSORS
This Plan shall be binding upon and inure to the benefit of the Company, its
successors and assigns and the Participant and his heirs, executors,
administrators and legal representatives.
21. GOVERNING LAW
The validity, construction, interpretation and effect of the Plan and option
agreements issued under the Plan shall be governed exclusively by and determined
in accordance with the law of the Commonwealth of Pennsylvania.
B-8
<PAGE> 9
EXHIBIT 1
1. PERFORMANCE PERIOD
January 1, 1997 to December 31, 1999.
2. COMPARISON GROUP
American Electric Power Company, Inc. NICOR, Inc.
Baltimore Gas & Electric Company Noram Energy Corporation
Carolina Power & Light Company Northern States Power Company
Central & South West Corporation Ohio Edison Company
Cinergy Corporation ONEOK, Inc.
Coastal Corporation Pacific Enterprises
Columbia Gas System, Inc. Pacific Gas & Electric Company
Consolidated Edison Co. of N.Y., Inc. Pacificorp
Consolidated Natural Gas Company PanEnergy Corp.
Dominion Resources, Inc. PECO Energy Company
DTE Energy Company Peoples Energy Corporation
Duke Power Company PP&L Resources, Inc.
Eastern Enterprises Public Service Enterprise Group,
Edison International Inc.
Enron Corporation Sonat, Inc.
Entergy Corporation Southern Company
FPL Group, Inc. Texas Utilities Company
GPU, Inc. Unicom Corporation
Houston Industries, Inc. Union Electric Company
Niagara Mohawk Power Corporation The Williams Companies, Inc.
3. COMPARISON CRITERIA
For purposes of the Plan, "Total Return" is the change in the market value of
one share of common stock of each company in the Comparison Group over the
Performance Period, plus the amount of dividends paid or the value of other
distributions made with respect to such stock, reinvested in the stock, over the
same period.
The initial market value of each share of common stock to be measured during
the Performance Period (January 1, 1997 through December 31, 1999) will be the
average of the closing prices of each such stock on the New York Stock Exchange
Composite Tape for all trading days during the three calendar months prior to
the commencement of the Performance Period.
The final market value of each share of common stock to be measured will be
the average of the closing prices for such stock on the New York Stock Exchange
Composite Tape for all trading days during the final three months of the
Performance Period.
<PAGE> 10
EXHIBIT 2
UGI CORPORATION
1997 STOCK OPTION AND DIVIDEND EQUIVALENT PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement is dated as of [date of grant]. The
parties are UGI Corporation, a Pennsylvania corporation ("UGI"), and
("Employee"), an employee of UGI or a Subsidiary of UGI (collectively referred
to as the "Company"), residing at .
In consideration of the mutual agreements set forth below and other good
and valuable consideration the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound by this Agreement, the Company
and Employee agree as follows:
1. Incorporation of Plan by Reference. This Stock Option Agreement
evidences the grant of an Option to Employee under the Company's 1997 Stock
Option and Dividend Equivalent Plan (the "Plan"), a copy of which is attached
hereto. All of the terms, conditions, and other provisions of the Plan are
hereby incorporated by reference into this Stock Option Agreement (the
"Agreement"). Capitalized terms used in this Agreement but not defined herein
shall have the same meanings as in the Plan. If there is any conflict between
the provisions of this Agreement and the provisions of the Plan, the provisions
of the Plan shall govern.
2. Grant of Option and Dividend Equivalents.
(a) Option. UGI hereby confirms the grant to Employee as of the date
hereof of a non-qualified stock option to purchase all or any part of an
aggregate of shares of its Stock at the Option Price of $
per share, subject to all the terms and conditions set forth in this
Agreement and in the Plan (the "Option"). The Option granted hereunder is not
intended to constitute an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended. The terms of the Option
are subject to adjustment in certain circumstances, as provided in the Plan. The
Employee shall be required to pay no consideration for the grant of the Option,
except for his or her other agreements set forth herein.
(b) Dividend Equivalents. UGI hereby confirms that, in connection with the
grant of the Option, Employee is entitled to the crediting of Dividend
<PAGE> 11
Equivalents in accordance with Section 8 of the Plan (subject to all conditions,
including the risk of forfeiture, set forth in Section 8 of the Plan). The
Performance Period with respect to such Dividend Equivalents shall begin on
, 19 and end on , 19 . The exercise of any
portion of the Option prior to expiration of the Performance Period will not
result in the forfeiture of Dividend Equivalents credited with respect to such
portion of the Option.
<PAGE> 12
3. Vesting and Termination of Option.
(a) Vesting Schedule. The Option shall be exercisable with respect to of
the total number of shares of Stock subject to the Option on . The
Option may be exercised in whole or in part and from time to time, and any
partial exercise of the Option for less than the full number of shares
underlying the Option or as to which the Option is then exercisable will not
affect Employee's right to exercise the Option from time to time in accordance
with this Agreement as to the remaining shares.
(b) Acceleration of Vesting. The provisions of Section 3(a) above
notwithstanding, the exercisability of the Option may accelerate in accordance
with Section 7.3 of the Plan.
(c) Expiration of Option. The Option, to the extent it has not been
previously exercised, shall expire at 5:00 p.m. (Eastern Time) on ,
20 , unless earlier terminated in accordance with the terms of the Plan.
4. Exercise and Payment.
(a) Notice of Exercise and Payment of Purchase Price. The Option shall be
exercised by the giving of written notice of exercise, in the form attached as
Exhibit A-1 (or with appropriate changes if notice is given by a person other
than Employee), to the Secretary of UGI, signed by the Employee or other person
entitled to exercise the Option (the "Notice") specifying the number of shares
to be purchased, the Date of Grant of the Option and the method of payment. The
notice shall be accompanied by payment in full of the aggregate Option Price for
all such shares being purchased and shall be received by 5:00 p.m. on the day
the Notice is delivered to the Secretary of UGI. The Option Price shall be
payable to UGI either (i) in cash or its equivalent, (ii) by tendering shares of
previously acquired Stock already beneficially owned by Employee for more than
one year and having an aggregate Fair Market Value at the time of exercise equal
to the Option Price being paid thereby, (iii) by applying Dividend Equivalents
payable to the Participant in accordance with Section 8 of the Plan in an amount
equal to the Option Price being paid thereby (if and to the extent such Dividend
Equivalents have become payable in the form of credits to be applied toward
payment of the Option Price), (iv) by payment through a broker in accordance
with procedures permitted by Regulation T of the Federal Reserve Board, (v) by
such other method as the Committee may approve, or (vi) by a combination of (i),
(ii), (iii), (iv) and/or (v). Certificates for any shares of Stock so tendered
in payment of the Option Price shall be delivered by Employee to UGI in
negotiable form,
<PAGE> 13
duly endorsed in blank or with separate stock powers attached, and shall be
delivered free and clear of all liens, encumbrances, claims and any other
charges thereon of any kind.
(b) Issuance of Stock. Subject to the provisions of Section 6 below, such
exercise shall be effective upon receipt by the Secretary of UGI of such written
notice and payment, following which the Treasurer shall deliver to, or credit
electronically on behalf of, Employee or such other person as may be entitled
thereto, within an administratively reasonable
<PAGE> 14
time, the purchased shares. UGI agrees to pay all original issue or stock
transfer taxes, if any, on the exercise of the Option and all other fees and
expenses (other than broker fees) necessarily incurred by it in connection
therewith.
(c) Other Methods of Exercise and Payment. In addition to the method of
exercise and payment set forth in Section 4(a) and (b) hereof, the Option may be
exercised and payment to UGI made in accordance with any other procedures
specified in Plan rules and regulations as may be adopted from time to time by
the Committee.
5. Termination of Employment. The Option will terminate in accordance with
the provisions of the Plan.
6. Governmental and Other Approvals. If at any time the listing,
registration or qualification of the shares covered hereby upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body or other person, is necessary or desirable as a
condition of or in connection with the purchase of shares hereunder, the Option
shall not be exercised in whole or in part unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to UGI. UGI agrees to use
reasonable diligence to obtain any such listing, registration, qualification,
consent or approval. If the Option is exercised at a time that the offer and
sale of shares to be delivered to Employee is not covered by an effective
registration statement under the Securities Act of 1933, as amended, or any
applicable state securities law, Employee shall deliver such investment
representations as UGI may reasonably require, and certificates representing the
shares delivered upon such exercise will bear an appropriate legend and be
subject to such stop-transfer orders and other restrictions as may be applicable
under such laws and regulations.
7. Non-Transferability of Option. The Option and rights to Dividend
Equivalents shall not be transferable otherwise than by will or the laws of
descent and distribution, and the Option may be exercised during the lifetime of
the Employee only by the Employee.
8. Tax Withholding. Employee hereby agrees that, upon exercise of the
Option, the Company shall be entitled to withhold from Employee's regular salary
payments, or to separately receive payment from Employee, of an amount
sufficient to satisfy federal, state and local withholding tax requirements. If
and to the extent authorized under rules and regulations adopted by the
Committee and in effect at the time of the exercise of the Option, Employee may
elect to have the Company withhold from the shares to be delivered upon
<PAGE> 15
the exercise of the Option, or to deliver to the Company from shares of Stock
owned separately by the Employee, a sufficient number of such shares to satisfy
the Employee's federal, state, and local withholding tax obligations relating to
the Option exercise. In such case, the shares withheld or the shares surrendered
will be valued at their Fair Market Value at the time of the exercise of the
Option.
9. Miscellaneous.
<PAGE> 16
(a) No Right to Employment. The granting or the exercise of the Option
shall not constitute or be evidence of any agreement or understanding, expressed
or implied, that the Company will employ the Employee for any specific period of
time, in any specific position or at any particular rate of remuneration.
Nothing herein contained shall affect (i) the Company's right to terminate
Employee's services at any time for any reason whatsoever; or (ii) the right of
Employee to participate or receive benefits under and in accordance with the
provisions of any pension, retirement, insurance or other employee welfare
benefit plan or program of the Company.
(b) Governing Law. The validity, construction, interpretation and effect
of this Agreement shall exclusively be governed by and determined in accordance
with the laws of the Commonwealth of Pennsylvania. All section headings are for
convenience only and shall in no way modify or restrict any of the terms or
provisions of this Agreement.
(c) Binding Effect; Integration. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and any successors to the business of
the Company, but neither this Agreement nor any rights hereunder shall be
assignable by Employee. This Agreement (including Plan provisions incorporated
by reference herein) constitutes the entire agreement between the parties with
respect to the Option, and supersedes any prior agreements or documents (other
than the Plan) with respect to such Option. Any amendment, alteration,
suspension, discontinuation, or termination of this Agreement must be expressed
in a written instrument duly executed in the name and on behalf of the Company
and by the Employee.
IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement as
of the date first above written.
UGI Corporation
Employee
By:
Title:
<PAGE> 17
EXHIBIT A-1
Corporate Secretary
UGI Corporation
460 North Gulph Road
King of Prussia, PA 19406
Telephone: 610-337-1000
Fax: 610-992-3258
Notice of Exercise of Stock Option-
UGI Corporation 1997 Stock Option and Dividend Equivalent Plan
I hereby elect to purchase shares of Common Stock of UGI
Corporation (the "Shares") at the Option Price of $ per share, in
accordance with the Stock Option Agreement dated as of , 19 ,
evidencing the grant to me of an Option on that date.
I hereby elect to pay for the Shares as follows (check method(s)):
in cash; I enclose herewith my check to the order of UGI Corporation
in the amount of $ ;
by surrender of shares of UGI Common Stock owned by me for more
than one year prior to the date of exercise; I hereby deliver my stock
certificate(s), numbered , , and , together with
stock powers duly executed by me, in accordance with Section 4 of the Stock
Option Agreement, in payment for the Shares;
by surrender of credits of Dividend Equivalents accrued under the
Plan and applicable toward payment of the Option Price, in the
amount of $ and/or
by payment through the following broker
Address
Telephone
This notice of exercise shall be valid only if the tendered consideration
<PAGE> 18
is sufficient to pay the entire Option Price for the purchase of the Shares.
I hereby agree to remit to UGI payment in cash of the full amount of any
federal, state and local withholding taxes due in connection with my exercise of
the Option.
<PAGE> 19
Complete Section A or Section B as applicable and sign Section C below:
A. Certificates to be registered as follows:
Name(s)
Social Security Number(s)
Number of Shares
B. I hereby authorize the Company to issue certificates or effect a book
entry to:
DTC Participant No.
Company to Complete the Following:
Received by:
UGI Corporation
By:
Name:
Title:
(Date)
Fair Market Value of UGI Common Stock on date received: $ .
* * * *
<PAGE> 20
C. Signature:
(Signature of Employee)
(Street address)
<PAGE> 21
(City) (State) (Zip)
(Date)
<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 Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Primary earnings per share:
Actual average common shares outstanding 33.1 33.0 33.1 33.0 33.1 32.9
Incremental shares issuable upon
exercise of stock options outstanding 0.2 0.1 0.1 0.1 0.1 0.1
-------- -------- -------- -------- -------- --------
Total average common and common
equivalent shares outstanding 33.3 33.1 33.2 33.1 33.2 33.0
======== ======== ======== ======== ======== ========
Earnings applicable to common and common equivalent shares:
Earnings before extraordinary loss $ 35.8 $ 37.6 $ 63.7 $ 55.8 $ 47.4 $ 25.7
Extraordinary loss - propane debt restructuring -- -- -- -- -- (13.2)
-------- -------- -------- -------- -------- --------
Net earnings $ 35.8 $ 37.6 $ 63.7 $ 55.8 $ 47.4 $ 12.5
======== ======== ======== ======== ======== ========
Primary earnings per common and common equivalent share:
Earnings before extraordinary loss $ 1.08 $ 1.13 $ 1.92 $ 1.69 $ 1.43 $ 0.78
Extraordinary loss - propane debt restructuring -- -- -- -- -- (0.40)
-------- -------- -------- -------- -------- --------
Net earnings $ 1.08 $ 1.13 $ 1.92 $ 1.69 $ 1.43 $ 0.38
======== ======== ======== ======== ======== ========
</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 Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------- ------------------- -------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Fully diluted earnings per share:
Actual average common shares outstanding 33.1 33.0 33.1 33.0 33.1 32.9
Incremental shares issuable upon
exercise of stock options outstanding 0.2 0.1 0.2 0.1 0.2 0.1
-------- -------- -------- -------- -------- --------
Total shares for fully diluted computation 33.3 33.1 33.3 33.1 33.3 33.0
======== ======== ======== ======== ======== ========
Earnings applicable to common stock:
Earnings before extraordinary loss $ 35.8 $ 37.6 $ 63.7 $ 55.8 $ 47.4 $ 25.7
Extraordinary loss - propane debt restructuring -- -- -- -- -- (13.2)
-------- -------- -------- -------- -------- --------
Net earnings $ 35.8 $ 37.6 $ 63.7 $ 55.8 $ 47.4 $ 12.5
======== ======== ======== ======== ======== ========
Fully diluted earnings per common share:
Earnings before extraordinary loss $ 1.08 $ 1.13 $ 1.91 $ 1.69 $ 1.43 $ 0.78
Extraordinary loss - propane debt restructuring -- -- -- -- -- (0.40)
-------- -------- -------- -------- -------- --------
Net earnings $ 1.08 $ 1.13 $ 1.91 $ 1.69 $ 1.43 $ 0.38
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONDENSED CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT OF UGI CORPORATION AND
SUBSIDIARIES AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS INCLUDED IN UGI
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31,
1997.
</LEGEND>
<RESTATED>
<CIK> 0000884614
<NAME> UGI CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 85,900
<SECURITIES> 67,800
<RECEIVABLES> 236,800
<ALLOWANCES> 13,600
<INVENTORY> 56,700
<CURRENT-ASSETS> 480,200
<PP&E> 1,372,500
<DEPRECIATION> 395,100
<TOTAL-ASSETS> 2,232,000
<CURRENT-LIABILITIES> 400,900
<BONDS> 835,500
35,200
0
<COMMON> 392,300
<OTHER-SE> 24,200
<TOTAL-LIABILITY-AND-EQUITY> 2,232,000
<SALES> 1,106,000
<TOTAL-REVENUES> 1,106,000
<CGS> 649,500
<TOTAL-COSTS> 649,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,500
<INCOME-PRETAX> 117,900
<INCOME-TAX> 52,800
<INCOME-CONTINUING> 63,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,700
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 1.92
</TABLE>
